The Local Shopping Reit Share Discussion Threads

[redhill9] 10/11/2016 17:13

orinocor, that's my thinking too. It's still possible to buy sub 28p and even if the Thal initiative comes to nothing there must be a good chance of the share price reacting favourably to the speculative possibilities while the fun and games evolve.

Anyone any idea what the time limits are for announcing the EGM? Presumably LSR have to arrange a date fairly quickly.

Edit: It was possible to buy sub 28p around 4pm when I bought some but I see the share price got perky before the close.

[orinocor] 10/11/2016 17:09

Soukup bought his shares at 33.5p so he must be expecting to realise his shares at 40p or over to make this all worth the risk and his time.

[skyship] 10/11/2016 17:04

Now we wait for the response - they're surely going to have to make a good case or they'll lose out for sure.

[8w] 10/11/2016 16:48

Certainly a damning analysis by Thal. Interesting that Simon Thompson flagged up costs, fees and incentives but did not express concern when recommending LSR as a buy.

[ntv] 10/11/2016 15:38

certainly voting for change but i suspect this lot will walk away with golden handshakes that are written into their contacts

[orinocor] 10/11/2016 14:58

Dear Shareholder,



Thalassa Holdings Ltd (Thalassa) (through two different nominees) recently acquired 23.48% of The Local Shopping REIT plc (LSR). We have a successful track record of unlocking value in underperforming assets and believe that with owner management, shareholder value could be realised more efficiently and faster than by third-party managers with no vested interest.






Why we seek to replace the current Board



Ÿ LSR's cost structure must be cut to reflect a company undertaking asset liquidation.



Ÿ LSR's performance since admission has been disastrous and the Board must take substantial responsibility.



Ÿ The management agreement between LSR and INTERNOS Global Investors Limited (Internos) (Internos Agreement) appears inequitable and not in shareholders' best interests:



Ÿ since its appointment on 22 July 2013, Internos has been paid a total of £3.187m. Total administrative and property costs during this time of £18.5m while the return to shareholders has been £zero;



Ÿ the Internos Agreement is excessive in comparison to LSR's revenue and profit and is not performance related (in 2015 Internos' fee was £1,016,461, while profit before tax a paltry £20,000);



Ÿ on 7 August 2014 LSR announced the sale of 235 properties for £79.3m. Under the Internos Agreement, Internos was due a 0.5% fee on sales in excess of £50m (even though the property portfolio was worth £173.9m prior to Internos' appointment) and, by our calculations, have been paid £396,500 (£79.3m x 0.5%) notwithstanding the fact that LSR has incurred cumulative losses in excess of £92m; and



Ÿ the Internos Agreement is on significantly worse terms than those entered into by Internos with other clients, such as Invista European Real Estate Trust (Invista). Invista paid a management fee of 1.25% on net assets whereas LSR are paying 0.7% on gross assets, subject to a minimum of £1m in years 1 and 2 and £950,000 in year 3. We estimate that this equates to more than twice what Internos would earn if the Invista formula were applied to LSR.



Ÿ We are told that the Internos Agreement is not only in the best interests of shareholders but that it was entered into following a full and transparent process. In fact the appointment was made with no shareholder consultation - Steve Faber was appointed to the board before shareholders were informed about the Internos Agreement. The 2013 circular states Internos' appointment was not conditional on shareholder approval of the New Investment Policy - we conclude that Internos' appointment was clearly not something the Board wanted shareholders to vote on.



Ÿ Why does the Internos Agreement include bonus terms for their core function - which is selling assets - without consideration to profit or loss and includes a terminal fee of 5.7% cash returned to shareholders in excess of 36.1p which was below NAV per share of 46p when they were appointed and is below current NAV per share of 43p.



· Since admission, LSR has incurred cumulative losses totalling £92.023m, including total administrative and property operating expenses of £49.931m. By our calculations, the NAV per share was 164.86p at admission and has fallen 74% to 43p. Based upon the share price of 28.25p on 7 September 2016 (the day before Thalassa's first purchase) LSR's share price has declined 72.6% in that period, even when taking into account net dividends paid between 2008 and 2012 of 19.42p

What would Thalassa do?



If elected, Thalassa would:



· review all contractual arrangements with a view to cutting costs, eliminating duplication, reducing property vacancies, whilst accelerating asset liquidation and substantially reducing debt;



· meet shareholders to discuss representation on the Board, which the current Board has informed us they have in the past (in the case of Damille Investments Ltd, who requested two seats) rejected; and



· improve corporate governance - the current Board is in breach of the LSR's articles of association which requires a minimum of three directors. It has therefore been operating in contravention of the Company's Act 2006 since April 2016. This on-going failure is worrisome and indicative of potential wider disregard of proper corporate governance by the current Board. We will be considering operations during this period and will seek redress on behalf of LSR, as appropriate.



We are acutely conscious of the sensitivity of key relationships with other stakeholders in LSR and, as the company's largest shareholder, we have no interest in destabilising any of them.



Sincerely



Duncan Soukup

[orinocor] 10/11/2016 14:57

Duncan Soukup, Chairman of Thalassa, stated: "The board of Thalassa is of the firm view that the ill-advised comments made on its proposals by the board of LSR, before receipt of our official requisition letter or under any circumstances, is a poor attempt to mask LSR's disastrous performance since inception. "

[orinocor] 10/11/2016 14:46

The THAL news release today is way different from the LSR one. Read the THAL one for the real story.

[orinocor] 10/11/2016 14:43

OK Im in. EGM requisition. Soukup's on the warpath. He's gonna shake things up.

[hillofwad] 10/11/2016 13:27

eeza I think you nailed it drawing this out Cant see Vetch spending much of his time got better things to do

[onwego] 10/11/2016 11:48

My issue with LSR is the nature of the assets. Lots of small, disparate family shops are admin intensive and will need to be sold in a block. I'm not sure who's going to buy this stuff. Especially with the difficulties on the highstreet, and changes to business rates (although that could be helpful outside of London). Internos are also extracting value from shareholders, with no end in sight, in my opinion.

Compare for example with APT which had a small number of fairly large CRE assets, whereby sales could be conducted piecemeal allowing regular returns to the owners.

Maybe LSR should just be run as an income producing REIT from here on in..?

I keep re-looking at this one due to the discount to NAV and diminished gearing, but can't get past the low quality asset base.

[hillofwad] 10/11/2016 07:41

Orinocor If you have a small inhouse property team this portfolio could be easily absorbed stripping out a whole layer of excecutive costs and Mayfair offices in one fel swoop producing a healthy yield. The portfolio has been devalued and as the upperparts above shops in tertiary area are often more valubale than the retail element plenty to sweat

[tiltonboy] 09/11/2016 19:27

Please expand!

[orinocor] 09/11/2016 19:01

Soukup has bought a pup here. What was he thinking?

[tiltonboy] 28/10/2016 13:17

I would be more interested in why!

They have certainly shifted a few over the last three days.

[catswhiskas] 28/10/2016 13:12

Wonder who's selling ?

[badtime] 28/10/2016 12:41

Plenty of stock around

[hillofwad] 27/10/2016 18:02

Its a portfolio which could easily be hived off to one of the large west end practices for half that with in house sales teams to boot

[onwego] 27/10/2016 17:52

Hi. Aren't Internos IM on a minimum annual mgmt fee of £900k for this year alone, before any potential additional performance fees? Effectively they are on "3 and 20" given approx NAV of £35mio.

Not much incentive to get a move-on, is there?!