Beagles are pretty good at sniffing out a feed or three ;)
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Beagle, your basic point that there has not been an impressive long term return over several decades is an interesting one that I will ponder. It does however assume a few things, such as whether a property company is trying to be impressive or instead reliable, and it also assumes that the management over all that time have been consistent in order for that to be a fair observation. In particular, it also depends on whether the post-covid environment is a fair comparison too - clearly the share price would be at least 1.60 if covid hadn't changed the sharemarket take on KPG, and the valuation of buildings including being conservative after WFH. And for example, the reduced dividend was a decision that got taken during lockdown and may be reversed later or may be a change to capital investment priority for the future, or a desire to manage leverage in uncertain times, and which may turn out to be wise in future.
My gut instinct is that it is not overly useful to compare a 30 year return to what will happen next given the constant change of management and market conditions over time. But I will definitely ponder your observations, thank you. Statistics though, as we all know, can be used to make many observations, and it is an interesting exercise to tease them apart - my favourite recently : Markets fall after England beats Germany at football.
Meanwhile, all specific information that is posted will be welcome, and to others beside myself I'm sure.
Don't forget Beagle was himself dining at the KPG food bowl until a week or so ago. The ingredients haven't suddenly changed. If you bought in recently then you've acquired at a discount to NTA which offers room for re rating and a better than bank return in the meantime.
ARG languished a few years back as did Goodman. Then for one reason or another they take off.
Always good to diversify across this sector and keep abreast of trends.
I've held ARG since the ING days. KPG more recently so not concerned at this early stage. I won't lose my money and nor will you.
Maybe the dog inherited some of those shares and it wasn't really a decision he made to buy in the first place.
..but maybe you did...your post of 21 June....
"Put my toe in the water in a very small way last year at $1.09...bought a few more last month @ $1.22. Average taking off the 2.95 cent divvy this week, they owe me net $1.15.33 incl brokerage on an ex divvy basis and just a very modest 2% portfolio position at this point."
Congrats on selling up! Although we shouldn’t be comparing anything to the NZ residential property market though, it is the most insane in the world and regardless of how well we did as investors with it over the last two decades, it is essentially impossible to be repeated in the near to medium future as fundamentals simply won’t allow it (there is no chance the average NZ property price is going to double again anytime soon from the current $900k level), and as such the long term returns over the next decade or two for NZ residential property are highly likely to be pathetic compared to other asset classes.
The circumstances in which I took an initial stake at $1.09 are to do with my Mum's estate and her family trust....not going to unpack it any more than that.
Yes, I agree with you that NZ residential property prices are insane. That's the main reason we are selling down. There is just too much downside risk now. However, I do remember Don Brash making much the same argument in the 1990's and that didn't age well did it! The long, long term I reckon you'd expect 2% over inflation. If that pans out in the future, we should be in for zero growth in real prices for quite a while to balance out the mad increases over the last couple of decades. But probably that rebalance will be achieved through very high general inflation rather than house price falls.
Has anybody found out where the cash for the missing dividend from last year ended up? It was only $40m/$50m
Big chunk of the dividend cash was offset by reduced revenue due to rent abatements (~$20m), aside from that the company was still allocating funds to property acquisitions etc for future growth (eg purchased another $5 million in property surrounding Sylvia park) and also was finishing capex projects / strengthening work on existing properties.
The dividend money wasn’t ringfenced or anything like that, so it was used for regular company activities instead of drawing down debt facilities, which is why the gearing ratio has remained quite low.
Depending on your viewpoint, the missing dividend was spent on capital expenditure (Mainly the Silvia park expansion) or it was spend on reducing borrowing.
From the 2021 accounts capital expenditure on property developments including capitalised interest was $112m. There was a $39m increase in borrowing so the difference that needed to be funded from somewhere was $73m.
Cashflow from operations was $107m. Dividends paid were $34m. This created a net difference available to fund capital, pay dividends or reduce borrowing of $73m
Everything else netted out to no change.
I have enjoyed the discussion regarding the long term performance of KPG.
One thing to keep in mind is that KPG did a large $200 capital raise in 2019, the purpose of which was to reduce gearing substantially and also for funds for capex projects and land acquisitions which are only now starting to generate revenue (or in the case of Drury will not generate revenue for another couple of years).
What this means is that in the near term the operation returns were worse on a per share basis (more shares were issued for the capital raise) but the company had less exposure to debt risk and more long term opportunities than it did previously.
As such, along with the unexpected Covid hit, the companies planned “trough” in per share financial
metrics seems worse than it at first appears.
I also have to add that dividend expectations for the coming year are set at 5.30cps, but the company has indicated that it could be significantly higher after Northlands & Plaza are sold.
And don't overlook the 2017/2018 capital raise (something like $160m)
Since March 2017 they have issued 270 million shares
Yes, you right in saying it affects 'financial metrics'
But NTA/share is less now than what it was at March 2017
This is while Beagle goes on about new capital being 'accretive' - ie putting the new capital to good use
And don't overlook the 2017/2018 capital raise (something like $160m)
Since March 2017 they have issued 270 million shares
Yes, you right in saying it affects 'financial metrics'
But NTA/share is less now than what it was at March 2017
This is while Beagle goes on about new capital being 'accretive' - ie putting the new capital to good use and actually creating real wealth
The expansion known as "the Galleria" opened in October 2020, 6 months into the FY so really a lot of the development cost had to have occurred in the prior two years capex spend. They have said its worth $277m (construction cost would be lower) so it sort of aligns with the ealier CR. At a 5 percent yield it in theory return $14m in net rents
Last 4 years KPG have generated $423m operating cash flow and paid $292m in divies (should have been $340m)
So they have retained $131m of cash flow. They have raised $352m of new capital and sold $233m of property
Incoming cash over the last 4 years has been $705m
They've acquired $130m of property and spent $565m on 'Expenditure on Investment Properties' - total spend of $695m
Haven't had to borrow any more over this time and debt remains just over $1 billion.
I don't really know what all this means but it seems share holders aren't really much better off than 4 years
But I'm told that the future is bright
Note - what's expected capex over the next few years?
Last week KPG were 'considering' a Green Bond issue -- its all go now (suppose thet have to say 'considering' even though they were always going to do it just in case the world fell apart)
Could be worthwhile trying to get some in the bun fight - if they start trading post issue in line with existing KPG bonds (1.5% to 2.0%) maybe a quick buck
The current longest KPG senior bond has a maturity of 12/11/25 and therefore has just over 4 years to run, which is a very different term to 7 years. This existing bond was trading as low as 1.6% when interest rates were lower but is now offered at 2%.
2.85% is for a long 7 year term. It could we worth a trade but investors looking to invest long term need to consider the prospects of interest rates going significantly higher in that timeframe. For many investors on a 33% tax rate 2.85% will give you a net return of just 1.9% after tax which in my opinion is unlikely to match inflation in the medium term.
Bond set at 2.85% minimum.
So. 2.85% most probably
Some good news here, the proceeds of this green bond will mostly go towards the maturing KPG010 bond in August, which currently has a 6.15% interest rate.
so dropping ~3.3% of interest on $125 million of debt, good for a $4 million saving per year in debt interest cost.
(although someone might want to correct me given I have no idea how the interest rate derivative positions would impact this)
Every man and his dog wanted KPG Bonds
So $150m at 2.85%
Bonds or shares?
When the KPG 6.15% 7 year bonds were issued in August 2014 the KPG share price was $1.17. Today it is $1.185
If the share price is still $1.185 on 20/8 then over 7 years capital gain is $0.005. In that period dividends have totaled $0.431 - giving a total return over 7 years of 4.72% pa from the shares
Compared to the bonds of 6.15% pa
Interesting eh
Just as well these days are different eh because you'd hope you would get more than 2.8% pa return from holding KPG shares for the next 7 years
Probably highlights how 'undervalued' KPG shares are today
Easy enough to predict and they would have estimated this this when they came up with this years surprisingly low forecast of not less than 5.3 cps. Some very hard questions need to be asked about what is their plan to get dividends back to pre covid level's of 6.95 cps.
Easy enough to predict and they would have estimated this cost saving when they came up with this years surprisingly low dividend forecast of ~ 5.3 cps. Some very hard questions need to be asked about what is their plan to get dividends back to pre covid level's of 6.95 cps. Listening into the last call I gathered the impression they really are not focused on this. Just sweep the problem regional malls under the carpet by selling them and build some new stuff and hope everything works out okay.
Shares v Bonds
Now is only one point in time but investing in KPG shares over the last few years has been a disaster compared to investing in their bonds
Table below shows the current KPG bonds on issue (shaded) and the returns (capital plus dividends) from the shares if one had bought on the date the bonds were issued. One column at current share price and the right hand column is if the share price was $1.50 today
In 3 cases there's been negative returns from the shares - that's not good is it. A reflection of KPG management maybe?
If one ascribes to the theory that returns from shares should be more than bonds than the KPG share price would have to be about $1.50 now.
Interesting and weird stuff eh
Hope future returns from shares in future beat the current 2.8% bond rate
As said earlier probably reflects how 'undervalued' KPG shares appear to be - and generally there is a reason for such undervaluation - what's the market telling us at the moment? Appears to be a complete lack of confidence in their strategy going forward and in particular doubting management's ability to execute that strategy
Now its stopped raining must go and cut the grass
"Perhaps more to the point investing in KPG over the last five years (and my biggest concern is this has happened when capitalization rates have fallen dramatically which is normally consistent with strongly rising share prices and NTA) has been a complete unmitigated disaster compared to any other form of property investment as the following comparative detail illustrates.Quote:
Now is only one point in time but investing in KPG shares over the last few years has been a disaster compared to investing in their bonds Winner69"
Share price 5 years ago - share price now, percentage change
ARG 114, 169 up 48%
GMT 132, 244 up 85%
VHP 214, 331 up 55%
PCT 125, 170 up 36%
PFI 160, 293 up 83%
KPG 153, 119 down 23%
Not a recent phenomenon either. As previously posted the share price of KPG was $1.18 on 31 March 1994, more than 27 years ago !
People invest for many reasons but a common theme with property investment is people generally invest hoping to get yield and capital gains. I don't think KPG's business model works other than for those investing just for yield.
Those numbers put KPG in bad light eh
There's a very strong correlation between NZ 10 year bond rate and Listed Property stocks - as interest rates fall share prices move uo
NPF is the Smartshares Property Fund ETF -- 5 years ago when 10 Bond rate was around 3% pa NPF was trading around $1.10
Now 10 year rates are about 1.5%/1.6% and NPF is $1.55
So NPF up 40% odd while interest rates have fallen. The 40% probably would have been higher if KPG had performed
So why is KPG so far out of wack with its peers?
Suppose every sector needs a dog and KPG sure is the dog of property stocks
ASM meeting Monday
Sure to be an upbeat affair with happy investors - last 12 months 20% plus returns and prospects of even more in the next months
And when progress on the new strategy is outlined that'll get the faithful salivating (especially when they put up some pictures of Drury)
I see it's online ..... weather forecast not too good so might tune in to see how it goes .....somebody might even ask where the cash for the missing dividend went
That's the $64,000 question. You have to seriously wonder about the caliber of management and whether retail is a very poor sector to invest in ? Perhaps the truth is we are oversupplied with retail already ?
With KPG I think its very easy to get dazzled with the quality of their Sylvia park property, (I know...I fell into that trap myself), with its excellent and very close proximity to on and off ramps in both directors on the Sothern motorway but there's far more to KPG than Sylvia Park !
The reality is some of their regional malls have fallen like a lead balloon in recent years and (not really discussed much before on here), discussed on the call was that subsequent to balance date some further valuation write-down's occurred with these problematic assets. Despite this it appears thus far no deal has been consummated on horribly performing (ghost malls ?) that management are so keen to dismiss.
They dress the sale of these up as a "change of direction and focus" but I hope some shareholders take them to task over why these regional malls have been such an abhorrent failure.
What were the drivers that pushed the KPG share price up to 170 in 2019
About 40% less now ….must be a story behind that as well.
But it’s been 170 before so cheap as now as it starts it rise up 170 again.
Jeez …that was a great race from JUSTASKPERCY ….great place divie but would have loved them win at 15’s as well …never mind KPG next start a certainty
They aren’t ghost malls - both the plaza (Palmerston North) and northlands (Christchurch) that are “to be disposed of” are near 100% occupancy and the most popular malls in their respective areas, so the write down in valuations is not due to custom, but I suspect more a combination if increased earthquake risk (and associated strengthening costs), increased insurance costs, anticipated “pandemic risk” leading to the general re-rating if retail you theorized about maybe.
Xxxxxxxxxxxxxxxx
Just logged into virtual meeting for the AGM - interesting to see you can ask questions via online meeting.
KPG management clearly wanting to scream “We are getting out of earthquake vulnerable geographies as soon as possible” but don’t want to scare away buyers for Plaza and northlands.
$100-150 million of spending of “non-return” spending recently (earthquake strengthening in Chch & Wlg) had negative impact on returns over last few years.
nice to hear them spell it out loud in an obvious way that they hadn’t previously.
Like I suspected the green bond is going to lead to a drop in interest costs
Interesting situation that the longer it takes to sell Northlands and plaza, the better the short term financial performance (because they are high yielding assets)
$1.36 Net Asset Backing vs $1.26 FY20. Fair margin of safety at current SP.
Happy with recent purchase to hold and enjoy the dividend.
IMO better than having my money in the bank maybe tied up on fixed term deposit or in a bond.
Small % of portfolio.
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Ha ha ha. Can't resist https://www.youtube.com/watch?v=vn1-YU8n_MU
Extract from today's address.Quote:
The disposal of our regional shopping centres, coupled with last year’s change to the
dividend policy will likely contribute to a re-basing of dividends in the short term.
Ultimately though, we expect these steps to contribute to a higher quality asset portfolio
and more stable income stream.
Beagle …that bit from AGM you quoted what does it really mean?
Quote:
The disposal of our regional shopping centres, coupled with last year’s change to the dividend policy will likely contribute to a re-basing of dividends in the short term.
Ultimately though, we expect these steps to contribute to a higher quality asset portfolio and more stable income stream.
Good question. Re-basing speaks of resetting of the base. From this we can infer that the forecast of 5.3 cps is the new base for the foreseeable future (a 24% reduction in dividends compared to pre-covid level's of 6.95 cps). A more stable income stream suggests they may not need to reset and rebase even lower in the foreseeable future subject to the numerous caveats that they mentioned which included no more lockdowns or untoward economic events, or words to that effect.
Overall gist of this is they are happy to give investors income a serious haircut under the auspices that the change of direction will be good for the company and their future development strategy will generate higher returns over time.
A cynic could very easily be forgiven for thinking that their main objective is to build more stuff to justify the ongoing strong growth in management salaries...(the only area of strong growth over the years).
I think its fair to say they need to try something new because what they have been doing isn't working.
Nuff barking from me otherwise RTM me ol mate will get the electric shock dog collar out :eek2:
yes it was interesting - I had assumed dividend would increase following successful completion of the disposal of Northlands and plaza malls, but given the answer to a shareholder question it appears the situation us in fact the opposite! By that I mean the longer they hold Northlands & Plaza, the higher the likely dividend, as management said these were “high yield” assets (but carried higher risk than the rest of the portfolio - by which I think they meant earthquake risk). So the longer they keep these two malls,the higher AFFO will be, and consequently the dividend calculation.
of course on disposal KPG will get a big chunk of cash, but sounds like that might be used to reduce gearing further and used for capex projects.
BR (Black Rock) starting to buy at this price.
Black Rock now SSH
Something to do with global ETFs? …rather than how great the company is?
Hope they need to buy heaps more …KPG needs something to get their share price as management have been abject failures in this respect
http://nzx-prod-s7fsd7f98s.s3-websit...532/350197.pdf
Nah...sure you are familiar with
https://www.investopedia.com/terms/i/in_specie.asp
comment removed.
for those who cant see depth throughout the day KPG finished with over 400,000 to buy at 118.
this stock is looking like a good trading stock going forward if you dont want to risk MR B's theme for future profits distributions.
1.1 predicted on the US 10 year.
Quite a few economists on CNBC are predicting 2.0% on the US ten year by Christmas. I think a lot depends upon whether they get another massive wave of Covid with the Delta variant or whether the immunization rates suppress that. Also it clearly depends upon how long the Fed keep suppressing bond rates with their bond buying program.
I reckon its flip a coin stuff and impossible to predict.
yes they are and some chartists on CNBC saying downward pressure might continue for a while down to 1.1
a certain ironman on fast money predicts long term deflation due to the impact of further investments in technology.
Economists.. remember when the NZ economists said house prices would fall 10-15% after covid. Then literally the opposite happened x2. I.e. house price increased 20-30% everywhere lol. Economists can interpret data well but cant predict the future and often get it horribly wrong.
Long term rates may go up but wont the central banks just control the short end of the yield curve? Companies should just keep rolling debt on short term rates.
When is KPG getting back to mid $1.20s so i can sell the lot?
"When is KPG getting back to mid $1.20s so i can sell the lot?"
keep your order in the queue now as others will also be lining up....
https://www.stuff.co.nz/waikato-time...-heads-skyhigh
More development for central hamilton.
Its a development storm.
http://nzx-prod-s7fsd7f98s.s3-websit...812/350515.pdf
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http://nzx-prod-s7fsd7f98s.s3-websit...812/350515.pdf
Chris jumped in a couple of days before me. Hope he knows what he is doing.
http://nzx-prod-s7fsd7f98s.s3-websit...812/350515.pdf
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Chris jumped in a couple of days before me. Hope he knows what he is doing. Some would say not.
Someone's dumping shares today. Over 10mil @$1.175
I've just got one more block to get rid of, average of $1.3
The numbers are up over ARG, GMT and KPG. GMT the highest by far.
Demographics plays a part and outside of (Tāmaki-makau-rau), Auckland the square meters per person is very high.
I think MR B is banking on the border controls being over whelmed by numbers.
Indeed, KPG has already announced future development for Hamilton CBD in partnership with Tainui:
Quote:
Tainui Group Holdings (TGH) and Kiwi Property (NZX:KPG) today announced the formation of a 50:50 joint venture over Centre Place North, paving the way to create a new heart for the Hamilton CBD, including refreshed retail experiences and a proposed office development.
The agreement is set to bring certainty and new energy to the revitalisation of Centre Place North, including exploring ways to reactivate one of the country’s first underground train stations, which sits mothballed beneath the centre.
Linda Te Aho, Chair of Te Arataura, the executive committee of Waikato-Tainui, said the iwi is pleased to play a key role in the rejuvenation of the Kirikiriroa CBD. “It’s pleasing to have reached a shared vision for how Centre Place North can contribute to a vibrant, modern and safe inner city. This is important whenua for us and it’s great to have the opportunity to shape the above ground presence for this property for generations to come,” Ms Te Aho said.
The Centre Place North joint venture extends the strong partnership between TGH and Kiwi Property, which dates back to May 2016, when Kiwi Property acquired a 50% share of The Base.
TGH CEO Chris Joblin: “We are excited by the potential of this extension of our relationship with Kiwi Property in Kirikiriroa-Hamilton. Building on our experience of working together as co-owners of The Base, we want to bring a 100-year view and some visionary thinking to create something vibrant and special to accelerate the ongoing transformation of the CBD,” Mr Joblin says.
Kiwi Property CEO, Clive Mackenzie added: “We’re delighted to be working with TGH to create an exciting new mixed-use destination for the people of the Waikato and beyond. With its pivotal location in the Hamilton CBD, Centre Place North has the potential to bring together an attractive retail, office and perhaps even residential offering. The joint venture with TGH will enable us to move more quickly to deliver this vision,” he said.
The new joint venture for Centre Place will take an initial pre-paid 100-year ground lease, with the underlying whenua (land) remaining in the ownership of Waikato-Tainui, including the land transferred to iwi ownership from beneath the existing carpark which was owned by Kiwi Property.
Blackrock reduce by 19,778,071 shares in the past two weeks. Still holding 83,745,944 shares. Points to the source of selling pressure and the higher than average trade volume recently. Wonder who was buying.
KPG centre place fighting back hard today and very busy foot traffic complete with piano player...
rebalanced most to retail sector but it will be a return hopefully sometime down the ticker tape.
apparently ANZ was…
http://nzx-prod-s7fsd7f98s.s3-websit...992/351872.pdf
centre place saturday was busy around midday and retail looked to having a good day at the tills.
HLG is also sited in a central position along with G opposite it. Two of the prime sites in the mall.
Serious investors looking to get out. I am pleased to be out. Reinvested proceeds from sales at average of $1.17 into WHS in the $3.30's and OCA in the $1.40's. Early days but it looks like a pretty good portfolio reallocation so far. Time will tell...
" Reinvested proceeds from sales at average of $1.17 into WHS in the $3.30's "
the hunt is fast in pursuit...that loud horn one can hear in the spring country side ..
KPG turn around a long way off.
Its cold and middle of winter...they can't even keep the lights on properly so the resident hound is absolutely determined to get a great feed with decisive actions like this https://www.bing.com/images/search?v...t=0&ajaxserp=0
No pussy footing around with all this be nice crap Cindy keeps talking about https://www.bing.com/images/search?v...t=0&ajaxserp=0
"KPG centre place fighting back hard today and very busy foot traffic complete with piano player..." Must admit I do love hearing the piano played well. That's a smart move. They usually have a pianist playing on the Earnslaw coming back across the lake from Walter Peak in Queenstown with a good old sing along. Very pleasant. https://www.queenstownnz.co.nz/listi...journeys/1255/
"Its cold and middle of winter.."
buying candles at the warehouse, batteries and extra lamps...
not upgrading the fleet yet.. and the Merc stays.
Still holding some KPG for the long term... so long one cant see the horizon..
Might make you feel like you're back in Europe, enjoy https://www.bing.com/videos/search?q...7CB5&FORM=VIRE
"Might make you feel like you're back in Europe"
Ancestry is half Irish English and there is a local copy of the "Defenders of New Zealand" handed down the generations on the book shelves..
Family is mentioned in despatches back too not far from Tipperary.
KPG will we are certain get back to the 1.30's one days.
A buy at .90-1.0 surely...
Covid shutdown, yet highly exposed retail property stock KPG up 1.6% to $1.14 on $354K.
Our local dancing Viking must be on a raid.
I wonder if he wears a horned helmet like Bruce Sheppard used to wear at the FBU meetings, or was it TWR to acknowledge Olaf?
some serious building going on in CBD hamilton and district.
https://www.stuff.co.nz/waikato-time...-hamiltons-cbd
The drift from auckland might see this city with some serious gardens attracting new residents escaping the congestion giving the likes of KPG some support.