- REITs are trusts that invest in a portfolio of properties
- In NZ, REITs invest only in commercial property
- These can be looked at as good investment options as housing prices move down
The New Zealand stock exchange has many Real Estate Investment Trusts (REITs) listed.
REITs invest in a number of commercial properties, like office buildings for government and private offices, retail shopping malls, and large-format retail stores. REITs also deal in industrial properties like factories and warehouses. They are a good investment option for Kiwis, especially when house prices are decreasing. According to the latest figures, house prices will probably fall about 20% from their peak in November 2021. As per ASB, it will be 25%, ANZ 22%, Kiwibank 21%, and Reserve Bank about 20%.
In this context, let’s look at how some prominent REITs perform on the NZX.
Kiwi Property Group Limited (NZX: KPG)
KPG owns and manages a mixed portfolio of properties worth NZ$3.2 billion. On 28 November 2022, Kiwi Property announced its six-month results till 30 September 2022.
The company reported a record operational delivery despite challenging macroeconomic conditions in 1HFY23. Net rental income was up by 6.3% to NZ$100 million, driven by sustained growth in Sylvie Park. It reported an operating profit before tax of NZ$65.1 million, up 4.2%.
The company reported an increase in rental and new leasing by 5.2 and 4%, respectively, due to its active leasing and remixing programme. Even the sales performance across KPG’s asset-based business was good, as it increased 9.6% from the prior comparable period (PCP). As per the update, the company is likely to grow further as the pedestrian count at Sylvia Park is growing and is on par with pre-pandemic levels.
The company also said that it had been engaging in large-scale strategic funding and capital management. It sold non-core properties and recycled the funds that were freed up as a result of the sale. As per the company, the proceeds from these transactions will be used to repay debt and develop other projects.
On 4 January 2023, the stock was up 2.20% at NZ$0.930 at the time of writing.
Goodman Property Trust (NZX: GMT)
GMT is a REIT that provides warehouse and logistics space. It has a client base across NZ, and its portfolio was worth NZ$4.9 billion as on 30 September 2022. The Trust has a market capitalisation of around NZ$2.8 billion and holds an investment-grade credit rating of BBB from S&P Global Ratings.
In its first-half results for FY23 announced on 10 November 2022, GMT announced that its underlying operating performance was good. It reported a 7.4% increase in cash earnings to NZ$49.4 million, reflecting on its investment strategy and the quality of customer relationships.
The company also said that it continued to benefit from growth in e-commerce and sustained demand for well-located warehouses and logistics spaces.
John Dakin, Chief Executive Officer of GMT, said that the portfolio was expected to deliver a similar operating performance in the second half of FY23.
Further, the company expects 6.9 cents per unit, with cash distributions totaling 5.9 cents per unit.
On 4 January 2023, the stock was trading up 1.49% at NZ$2.050, at the time of writing.
Precinct Properties New Zealand Limited (NZX: PCT)
The precinct is a developer and promoter of commercial business districts. On 20 December 2022, PCT announced that it would enter into a multi-unit residential development market in partnership with Auckland-based private equity real estate developer Lamont & Company.
The new business will be jointly owned by Precinct and Lamont & Co. Scott Pritchard, Precinct’s Chief Executive, said that entering into the residential market was a natural extension for Precinct. With commercial property already in its portfolio, the development of multi-unit residential complexes will complement the company’s existing portfolio and provide strategic direction.
Earlier, at the beginning of last year, it focused on the third stage of the Wynyard Quarter Innovation project. The building was likely to generate a yield of 5.75%.
Chief Executive, Scott Pritchard, said that the Company would continue to look for new locations and businesses in areas that can help organisations attract talent.
On 4 January 2023, the stock was trading down 0.40% at NZ$1.260 at the time of writing.
Property for Industry Limited (NZX:PFI)
PFI primarily deals in industrial property. In a market update, the company announced that its tenant, Fisher & Paykel Appliances, is committed to the first stage of a significant redevelopment at the Company’s Spring’s Road property in East Tamaki. PFI’s CEO, Simon Woodhams, said that the company was delighted to extend its relationship with Fisher & Paykel Appliances. As per the company’s interim results, it has been planning to redevelop its Springs Road property. The site in East Tamaki has huge warehousing and refurbishment options.
Earlier in 2022, it also announced the acquisition of a 5,000 sq meter at 318 Neilson Street, Penrose, for NZ$6.825 million.
On 4 January 2023, the stock was trading down by 1.09% at NZ$2.27 at the time of writing.
Argosy Property Limited (NZX:ARG)
Argosy was resilient last year despite the COVID-19 pandemic. It delivered strong earnings, cash flows, and dividends to its shareholders for the six months ended 30 September 2022. It reported an NPAT of NZ$127 million, a high occupancy of 99%, and an increase of 5.1% in net property income. The Company also rewarded its shareholders with an attractive dividend of 1.6375 cps for the second quarter of FY22.
On 4 January 2023, the stock was up 0.86%, at 1.175% at the time of