Forum Archive Index - April 2000

["Mike Hudson" <mikehudson@clear.net.nz>]

Andrew

Listed property companies are as I know to my cost out of favour at the
moment however I would suggest that they do have advantages over the direct
purchase of a building principally the diversification of risk and access to
professional management. Lower priced commercial property may be able to be
bought on a better yield but that is cold comfort when the building is empty
after the previous tenant has gone broke owing six months rent. Another
problem with owning your own building is time it might take to sell if you
wanted to get your money out quickly. As far as tax deductions go the
company gets to claim the deductions so there should be nothing lost there.

Against listed property companies is the fact that they can follow the share
market rather than the property market which can be disconcerting to see the
value of your investment fluctuating day to day; with your own building you
are blissfully unaware of this until you come to sell. You also have to pay
management fees and you don’t have the satisfaction of being able to say
“That’s my building”

As for listed companies I would suggest a mix of sectors, APT, CPT, CNZCA
(which are looking particularly cheap at the moment pre the second
instalment) are in commercial, STL (very aggressively managed by Westfield)
are in retail, KIP are in both and PFI are in industrial. I am not sure of
the numbers but all of these would yield between 9% and 10%.

There is a third way which is to invest in several of the syndicates managed
by such companies as Waltus and Dominion. This would also give you
diversification and slightly more liquidity as there is a secondary market
for units.

However given the objective of the investment i.e. long term growth would
not the money be better invested in a range of NZ and overseas investments
of which property would be one component?









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