Join our investing community

Is it time to buy - LPT

Discussion in 'Real Estate Investment Trusts (A-REIT / LPT)' started by Alwayslooking, 11th Aug, 2008.

  1. Alwayslooking

    Alwayslooking Well-Known Member

    Joined:
    11th Jun, 2006
    Posts:
    79
    Location:
    My World
    Hi All

    Have been watching Listed Property Trusts recently and some seem to be on an upward trend, with very attractive yields, tempting to jump in.

    MOF
    MCW
    GPT
    IIF

    Would like your thoughts on LPT and what you think in general.

    Cheers, AL
     
  2. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
    “.....recently and some seem to be on an upward trend....”

    Are you sure ??

    I would check charts ASAP if I were you...:rolleyes:

    Below is GPT weekly.:D
     

    Attached Files:

  3. voigtstr

    voigtstr Well-Known Member

    Joined:
    24th Jan, 2007
    Posts:
    679
    Location:
    Hobart
    Are these the same kind of bunny as "Colonial First State WS Prop sec fund"?
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    Property Securities funds like that CFS fund, invest in a range of Listed (and sometimes Unlisted) Property Trusts.

    So, not exactly the same kind of bunny - more like buying a rabbit farm than buying a single rabbit :cool:
     
  5. c-unit

    c-unit New Member

    Joined:
    31st Oct, 2008
    Posts:
    3
    Location:
    Melbourne, VIC
    One has to wonder how much of the leverage in some of these funds will need to be unwound in the coming months. LPTs are obviously going through a correction right now, some with enticing yields, but the questions remains whether there is still more 'correcting' in order. It seems to be harder to access good information on LPTs than on common stocks.
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    Information such as the amount of debt they are carrying should be available in their annual reports.
     
  7. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    The trick is to pick out the quality LPT's from the bad ones. Do some research, and check LVR's etc.

    I have been buying up LPT's as 20%+ yields are great! but I have been careful in selection. since growth prospects are limited in other stocks, why not invest for yield! Plus buying normal stock, also has debt, its not only LPT's with debt.

    the other saying, buy when there is blood in the streets certainly comes to mind here..

    Westfield is probably considered the best quality run company, but its yield/price also reflect this view by the market.
     
  8. c-unit

    c-unit New Member

    Joined:
    31st Oct, 2008
    Posts:
    3
    Location:
    Melbourne, VIC
    crc,

    When doing your own research on LPTs, what things do you think at?

    The make-up of its property portfolio ie proportions in retail, industrial, commercial? Geographic diversification? Management and board? Balance sheet strength and cash flow situation?

    And which, if any, of those above factors would you put the most emphasis on in your research?

    cheers
     
  9. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    Hi C-unit, I look at debt level, how are the dividends paid, ie could be from rent only, developments, or capatilizing interest, I look at the tenants, lease terms, type/length of finance.

    The main aspect I look at is how the dividends are paid, and are they likely to fall, or will they be maintained. I also need to be able to understand what they do, so I will stay away from developments, as income to me is un predictable. I want to collect rent only!

    Basically I treat it like I was buying a real commercial property. If the numbers stack up, I will buy it.
     
  10. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    also regarding Geographic diversification, I don't necessary need this, but I want to understand the areas where they are invested in.

    For example IIF is invested in Australia, and overseas like canada, now I don't understand the or know whats happening in Canada. So this stock wont be one I will buy up big. I do own some of these, but my preferance has been for OIF. IIF also has a few billion in developments on the go, so if these dont go to plan, this could add further risk to me as the investor. But IIF is paying like 45% yield!

    Most of OIF properties are in melbourne, with addresses actually where I work! So I know whats going on around the area. Are business closing up? Are there emply dwellings? No. Plus OIF tenant base is 60% woolworths, so I consider this tenant very secure. Wollies is not about to fold up and default on rent payments. Infact woolworths announced record profits. Average lease term for this fund is 10 years which is another bonus.

    OIF is also industrial property, so again, I consider this lower risk than say shopping centres which relies on retail, which currently may slow. Harvey Norman predicted hundreds of retail outlets to close, this would not be good for landlords!

    OIF LVR is a bit higher than some, at 60%, but the loans are fixed for 5 years, so they should not have any issues with finance. One risk here is that property values fall, and the LVR goes up, hence like a margin loan, the bank will ask OIF to produce some cash to lower LVR, or they will charge a higher interest rate, hence lower dividends! However commercial property is valued by its lease income, so unless we see rentals go down, then the property values are unlikely to plummet. OIF is also offloading some non-core properties in order to reduce some debt.

    I think the current price does factor in worst case situations, so if the dividend would to fall, then the yield is still very attractive.

    today its trading at 25c and has a 5c annual dividend paid every quater. so thats a 20% yield.

    I don't see our economy tanking, like in the US, so I think my tenants ability to continue to pay is fairly secure.
     
  11. c-unit

    c-unit New Member

    Joined:
    31st Oct, 2008
    Posts:
    3
    Location:
    Melbourne, VIC
    wow thanks for that, very helpful indeed.
     
  12. rambada

    rambada Well-Known Member

    Joined:
    5th Sep, 2005
    Posts:
    58
    crc - do you stick to listed property trusts only?

    And excuse my ignorance but for clarification - listed property trusts are on the ASX?

    Do you margin in the current climate & if so at what level?

    Sorry if these are a bit personal but I've always been interested in LPTs but chicken s...t to go in - all due to lack of knowledge.

    I take it all the info you refer to is in the companies PDS?
     
  13. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    I'm only buying two LPT's at the moment, OIF and IIF, only because they both have their dividends paid by rents collected. So to me this income stream is more secure than most other business's.

    A bank for example only needs a slow down in business or property, and defaulting customers will kill their bottom line, so to accept their 8% yield compared to LPT 20% yield is a no brainer to me.

    I'm not saying all LPT's are good, I just like those which invest into commercial property and rent the properties out. Not developments etc.

    IIF is currently paying 34% PA, so even if we see a significant reduction in rents recieved, and the dividend 1/2's, then we are still getting a great return on investment.

    OIF is paying about 18%PA at todays price. I prefer this one cause its a smaller fund, 27 properties, mostly woolworths, so I feel the tenents are very secure. Plus I believe they have tenent insurance, so if the tenant defaults, they get 2 years rent.

    IIF is higher risk, due to their overseas property holdings and developments.

    I actually have geared both these stocks, currently sitting at 55%. I do have money in redraw should I get margined called. paying 9% interest when you get 18%+ sounds like a good deal to me! Although today comsec capped lending on OIF,, not happy.

    I also hold a smaller amount of ungeared money accross 6 managed funds, but currently most my money is in OIF and to a lesser extent IIF..

    cashflow is king!
     
  14. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    another thing you will note, that IIF and OIF were both steady today, even though the rest of the market fell 6%.

    I think these two stocks are already cained, so their potential to fall further is limited. Although banks, resources, etc could fall allot further should the economy fall and growth prospects slow even more..

    westfield also did well today, they are another quality LPT, but their yield is allot lower..
     
  15. Hunter

    Hunter New Member

    Joined:
    5th Dec, 2008
    Posts:
    1
    Location:
    New York, New York
    Check out "ASX Listed Property Roadshow 2008 - Is this the best value in 30 years? "

    Hi,

    New to InvestEd, so this is my first post.

    I have been buying all 3 ASX ETF (SLF, SFY, STW) on a dollar cost average basis for the last 6mths. Of particular interest to me at the moment is SLF, which is trading at near historic lows.

    Suggest readers check out the ASC podcast "ASX Listed Property Roadshow 2008 - Is this the best value in 30 years? " []ASX LMI Podcasts and presentations - Australian Securities Exchange The presentation makes compelling arguments, including a compound return for the sector of 15% [includes WDC] for the next few years.