- 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 up.
Many Real Estate Investment Trusts (REITs) are listed on the NZX. These invest in a number of commercial properties typically three office buildings that have government and private offices, retail shopping malls and large-format retail stores and industrial, including factories and warehouses. REITs are a good investment option for Kiwis, especially when housing prices are soaring and becoming difficult for them to invest in.
Let’s look at some of the prominent REITs listed on the NZX:
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Kiwi Property Group Limited (NZX:KPG)
KPG owns and manages a mixed portfolio of properties worth NZ$3.2 billion. Recently, KPG reached a pact with IKEA to sell the 3.2 hectares of land at Sylvia Park. This will enhance its portfolio and according to the chief executive, Clive Mackenzie, the pact will add to Kiwi property’s ambition of having IKEA presence at Sylvia Park. This would make the shopping centre more attractive for shoppers.
For the half year ended 30 September 2021, the Company reported an uplift in all its key metrics, including income, profitability and asset value. It clocked an NPAT of NZ$143 million, up 164% over pcp. Operating profit before tax was up by 8% to NZ$62.5 million driven by rental income. Office space remained the highest performing asset in 1HFY22.
On 14 January 2022, the stock was down by 0.84% at NZ$1,180, 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 is to the tune of NZ$3.3 billion. Of late, GMT announced that it had acquired an infill site of 3.2 hectares in Albany for development with NZ Post. This tie-up with NZ Post will give a boost to its property portfolio as NZ Post is continuing to develop its parcel delivery network.
The new parcel processing centre is close to large consumer catchments in the north and west of Albany. 1HFY22 was positive for GMT, with strong customer demand continuing despite the reintroduction of COVID-19 Alert Level lockdowns.
On 14 January, the stock was trading down by 2.46% at NZ$2,580, at the time of writing.
Precinct Properties New Zealand Limited (NZX:PCT)
Precinct is a developer promoter of commercial business districts. Recently, PCT announced that it was going to develop a building as a part of the third-stage master-planned Wynyard Quarter Innovation project. The project is expected to cost around NZ$157 million and once the building is fully leased, it will generate a yield of 5.75%. Chief Executive, Scott Pritchard, said that the Company would continue to look for new locations and businesses in locations which can help organisations attract talent. Its key metrics stood at a total portfolio of NZ$ 3.1 billion, occupancy of 98%, a weighted average lease term of 7.5 years and market capitalisation of $2.7 billion.
On 14 January, the stock was trading flat at 1.625, at the time of writing.
Property for Industry Limited (NZX:PFI)
PFI primarily deals in industrial property. In a market update, the company reported that the expected increase in the value of its property portfolio till 31 December 2021 was to the tune of NZ$$150 million or 8%. When combined with earlier 1H figures of 14% increase, the total yearly uplift in the valuation comes to 22% to NZ$2.164 billion.
It also announced the acquisition of a huge site for NZ$6.825 million, at 318 Neilson Street, Penrose.
On 14 January, the stock was trading up by 0.17% at NZ$2.925, at the time of writing.
Argosy Property Limited (NZX:ARG)
Argosy was resilient during the 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 2021. It reported an NPAT of NZ$127 million, and 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. It plans to give 6.55 cps for FY22.
On 14 January, the stock was trading flat at 1.560%, at the time of writing.
Bottom Line: REIT stocks have bee n big gainers despite COVID-19 disruptions. The gains have come mainly from high valuations. However, going forward, when pitched against housing prices, some key issues to consider would be increasing mortgage interest rates, an increasing inventory of houses for sale, further lending curbs, and a prospective cooling off of the construction sector.