Value And Indexed Proper... Share Discussion Threads

[ygor705] 03/4/2024 15:28

Topvest.... I agree with your thought process here. In my view, VIP is a well diversified, high yielding tiddler which could easily get swallowed up by a bigger property fish if interest rates and sentiment starts to turn. I note that buybacks have dried up over the last couple of weeks so management are clearly being canny about how many they buy and when. The only thing that disappoints me here is share price performance!

[topvest] 03/4/2024 10:03

I've added a few more. Rationale for me is a possible £2 floor on net asset value and an 8% dividend yield whilst you wait. Asset base is high quality and probably conservatively valued. There is the promise of an exit at just below NAV in a couple of years time. Relative cost base is high, but property management skills are top class.

Just a thought, but there is always the chance this trust could roll-over into SAINTS at some point given they have a property portfolio also managed by OLIM. What happens when the current major holder retires or wants an exit is the key question for both SAINTS and VIP, I suppose.

[topvest] 02/4/2024 15:04

I'd expect the net initial yield here to be higher than SUPR, given SUPRs larger, higher quality and often longer WAULTs. The running yield is still lower than 2009-2017, so could increase by another 0.5-1% in my view.

On infrastructure 3IN and Pantheon Infra have much higher discount rates as they go for much higher risk assets. The infrastructure discount rates are reasonably close, like for like, in my view.

[fabius1] 02/4/2024 13:42

Ran the slide rule over what is a fairly straightforward business. The more direct hands on property management is certainly a step in the right direction compared with the former fund management model which was always going to be difficult in view of their small cap and scale headwind. As always, it hinges on interest rate levels. Will wait to see how things look at @150.

[jellypbean] 02/4/2024 13:34

Portfolio valued at a net initial yield of 6.6% vs SUPR on 5.8% (311223). Is the valuation of VIP more conservative, or does the type of property / lease justify the difference.

I've noticed this in some of the infra trusts too; 3IN is valued using at a substantially higher discount rate than many if the others.

Is the UK commercial property market functioning 'properly' yet, or do we still have instutes such as DB funds selling for regulatory reasons (in favour on bonds etc).

[topvest] 02/4/2024 11:41

Hi SpectoAcc. No, they are probably not the best property play, but I like it for dividend, exit opportunity in a couple of years, reliable owner/management with aligned interests. Unfortunately, they switched to property 2 years too early, so have suffered a decline in valuation on pretty much everything acquired in the last 2/3 years. I was attracted to the Hollywood Bowl additions 8.5% from May...that's quite good. Much better than Stonegate Pubs that they have been exiting probably due to the weaker covenant. There is another pub sale at a lower yield due to complete in July above book value.

The debt is well fixed. I am not convinced that interest rates are going to stay "high" to be honest, but they will hopefully not get back to the zirp stupidity. I still think a global recession is coming and then the pivot will be well and truly on. They are out-performing the index most years and in the long-term. Matthew Oakeshott has out-performed the IPD Index 2 years out of every 3 on average. I like it, but am underwater so far!

[spectoacc] 02/4/2024 10:57

"...Index-related income". Hope the others adopt similar wording, but really - the latest acquisitions are capped at 3% pa, collared at 2% pa, at a time when we've just had 11%. Either there's an heroic belief in the BoE hitting a consistent 2%, or the different between 2% and 3% barely qualifies even as "-related".

VIP's problem is surely its scale - £73m market cap, at a time when even larger ITs are getting abandoned by wealth managers.

They've bought at 7.8%, sold at 7.5%, but agree the purchases are much better than the sales.


"VIP has no empty properties and no offices. 29% of the portfolio is in supermarkets, 28% is in warehouses/industrials, 27% in bowling, a health club and a caravan park, and 15% in hotels and pubs.

The average interest rate payable on VIP's debt is 4.0% (93% fixed), with an average maturity of 6.9 years and a 36% Loan to Value ratio."


If I was going to quibble, I'd say that for all the good dealing/lack of voids/strong tenants/fake inflation linkage, they're still seeing valuation declines and failing to outperform the index.

And that any IT with low debt cost is going to eventually hit a bump as debt costs ratchet up - ZIRP is over. Income rises at the same time, but EPS may not.

They're not expensive - but are they the best property pick out there currently?

[topvest] 02/4/2024 10:38

Update out today. Fairly positive overall. About another £4-5m off the valuation. I think that makes net asset value about 217p. I would guess that c200p (c7-7.3% yield, maybe versus the current 6.6%) will be a cyclical low, before recovery. What do others think? The portfolio is certainly very well positioned now and the dividend is fully covered. Some nice Hollywood Bowl acquisitions - look at the yield on what they have bought versus what they have sold!

[ygor705] 21/3/2024 08:36

Be interesting to see the next property valuation here. 31st March 2024? Ours is not an unmanaged portfolio and interest rates are looking more likely to turn down after last night's announcement by the Fed. Not the most fashionable of property stocks, but it has a solid high yield and I would expect it to follow any change in sentiment towards the property sector............eventually!

[jellypbean] 15/3/2024 14:08

I had though that about REIT status too. However I'm not sure that this will have been that important so far, as rising rates will have reduced property values. Looking at the accounts this reduced property capital values have been offset against the income, so no tax was paid last year, and there is also a substantial deferred tax asset. Capital losses cannot be offset it a REIT AFAIK. At some point this might become important though (hopefully). There is a continuation vote in 2026.

[2wild] 11/3/2024 08:08

Really should convert to REIT and save paying corporation tax.
Just distribute 90% or more of property income net of interest and other related expenses to qualify.

[ygor705] 22/2/2024 10:07

This one has been bouncing about a bit of late, although the underlying trend still seems to be very gently down. With both property prices and interest rates possibly on the turn, that trend should start to change. The high coupon debentures have now gone which should help cash flow. A good and reliable dividend plus the possibility of redemption at par should also be supporting the shares.

[coolen] 06/2/2024 15:42

Do any research analysts cover this one, in a form that is accessible to PIs ?

[lindowcross] 29/11/2023 18:13

Yes thanks jellybean, your post is much appreciated

[skyship] 29/11/2023 08:25

Totally transparent; & thnx for yr post Jellybean.

[jellypbean] 28/11/2023 17:52

In summary, it's not remotely opaque.

[jellypbean] 28/11/2023 17:37

You can see in the numbers in the annual report.

However basically it's 0.6% of gross assets that go to the investment manager (OLIM), via a company that is a subsidiary of VIP (required for regulatory reasons (AFAIK).

On top of that there are expenses at the VIP company level that come to a bit less than the management charges. These include fees for the board, secretariat etc. I'll admit there is a reasonably sized 'other' in there as far as I can remember.

Of course for management fees, gross assets are 40-50% higher than net assets, so that 0.6% becomes 0.8-0.9% of NAV.

The above is consistent with the KID published on HL which says management costs 0.88% and other costs 0.6%.

Then the KID will also include interest costs. I think they've got about 7 years fixed debt at 3.5% ish. To me this is a big positive, so why it would be included as a cost I don't know.

There is also portfolio transaction costs on the KID. There have been quite a lot of these recently as the trust had restructured to property only, so I expect these might reduce going forward?

I also noted that the NAV is given with debt at par, though you can see somewhere in the report that if it's valued at fair it will be a bit higher (I tend to look at fair for ITs, though most normally show both).

Any how, these numbers are from memory, so check annual report for details, and compared to KID to see how one becomes the other.

Main thing I don't really get with this is the tax treatment, as this isn't a REIT (I have it in an ISA).

Chair is Prof. John Kay, who was instrumental in tranforming the finances of one of the richest Oxford Uni colleges (with a large property portfolio) whilst he was chair of economics there. So that seems a positive to me.

Oh yes, there is a mandate to return investors cash at NAV minus costs in 2026, if they want FWIW.

[lindowcross] 28/11/2023 13:33

Does anyone actually know what charges are being taken or is the position so opaque that it's a mystery?

[skyship] 17/11/2023 16:36

Exactly; and too many newbies to the investment game get totally the wrong idea.

Happily, things are afoot to remedy the EU-inspired over-caution. Well done Baroness Altmann. MIFID & the crass KID statements next...
==========================================================

A bill to overhaul the cost disclosure regulation for UK investment companies is set to be discussed in the House of Lords today (13 November) and will receive its first reading on 22 November.

A private members' bill tabled by former pensions minister Baroness Altmann, which urged the government to remove investment companies from the Alternative Investment Fund Managers Directive (AIFMD) regulation, was selected in the ballot last week.

Altmann, supported by fellow House of Lords peer Baroness Bowles, have repeatedly called for the removal of the current EU cost disclosure rules, known as PRIIPS, which have caused investment trust charges to appear artificially expensive.

[jellypbean] 17/11/2023 11:14

So, charges shown in a KIID, which I suspect is what hl etc. cites, will include finance costs. Which personally I think is daft (or at least not useful in this context).

Also there are all the costs of running the actual properties. If you I vested in a trust that then bought another company, all hose costs of doing business would not be included in the costs of the trust.

[lindowcross] 16/11/2023 17:28

so the trust appoints "Value and Indexed Property Income Services Limited" VIS for "portfolio management and risk management of the assets of the Company"

And then VIS "does delegate some of
its portfolio management responsibilities to a third party portfolio manager."

So various levels, but to be fair, it would be hefty job managing all these properties, but agree with Spec that the "fund management industry are great at picking pockets, via small-sounding charges that are actually large and cumulative. REITs are no different."

[lindowcross] 16/11/2023 17:21

and a VIP disclosure document, explains clearly and succintly! ;

The AIFM is Value and Indexed Property Income Services Limited (“VIS” or the “AIFM”), a
private limited company incorporated in Scotland with registered number SC467598, whose
registered office is c/o Maven Capital Partners UK LLP, Kintyre House, 205 West George
Street, Glasgow, G2 2LW. VIS is authorised and regulated by the FCA.
The Company has appointed VIS as its AIFM with responsibility, inter alia, for portfolio
management and risk management of the assets of the Company. VIS does delegate some of
its portfolio management responsibilities to a third party portfolio manager.
The AIFM is also responsible for ensuring compliance with the AIFMD. As described
elsewhere in this document, the AIFM has delegated certain functions with respect to its
duties to third parties in accordance with the delegation requirements of AIFMD.
Notwithstanding any delegation the AIFM shall remain liable to the Company for the proper
performance of the portfolio management and risk management.
Delegated management functions
The AIFM has delegated the responsibility for the management of the equity and property
portfolios to OLIM Property Limited (the “Investment Manager”). The Investment Manager
will be responsible to the AIFM in regard to the management of the investment of the assets
of the Company in accordance with its investment objectives and policies, subject always to
the supervision and direction of the AIFM.
6
Fees
The AIFM receives a fee for the provision of its services as agreed by the parties

[lindowcross] 16/11/2023 17:19

on the Key Informaion sheet it states:

Composition of costs
The table below shows:
• the impact each year of the different types of costs on the investment return you might get at the end of the recommended
holding period;
• the meaning of the different cost categories.
This table shows the impact on return per year
One–off costs Entry costs 0.00% This product does not have any entry costs.
Exit costs 0.00% This product does not have any exit costs.
Ongoing costs Portfolio
transaction costs
1.82% The impact of the costs of the fund buying and selling underlying investments
for the product.
Other ongoing
costs
4.72% The impact of the costs taken by the fund each year for managing your
investments. This figure breaks down as follows: Management costs 0.88%; Other
expenses 0.66%; and Finance costs 3.18%.
Incidental costs Performance fees 0.00% This product does not charge any performance fees.
Carried interests 0.00% This product does not charge any carried interest.

[lindowcross] 16/11/2023 17:01

Thanks for responses and yes, I am new to this sector. I had a feeling there must be significant amount of expenses being taken, is it:

OLIM Trust management Fees 990k/annum - is this for management of the over-arching trust who in turn instruct property managers??

What's the name given to monies deducted from rent, is this a property management fee, for the managers sitting below the Trust?

presumably as with fund managers, all the other out of pocket fees, surveyors, solicitors, stamp duty,etc are deducted before calculation of the trust fee/management percentage fee?

I wonder if HL gets its 5% odd, from the total of all the above?