Abrdn Property Income Share Discussion Threads

[williamcooper104] 01/4/2024 13:23

Thanks - that's useful colour I did wonder if the values were deliberately kept a little low to make the take over look more appealing

[williamcooper104] 01/4/2024 13:22

Can't see the wind up vote not being passed Management have admitted that the portfolio is to small And the economics of it are too compelling

[williamcooper104] 01/4/2024 13:21

Yep other way is to look at what's an acceptable return and then see what needs to go wrong to still be able to get that return

[nickrl] 01/4/2024 13:21

Be great to know what Baggley thinks about the shenanigans of the BoD but like EPICs Calum Bruce we will never know.

[dr biotech] 01/4/2024 12:12

What sort of returns are you looking for Riverman and where/how are you aiming to achieve it?

I have a mixed portfolio of higher risk and dull but income producing stocks (of which API is one).

[pavey ark] 01/4/2024 11:26

Yes always taken by the "opportunity cost"..."better value elsewhere"...I often wonder why people bother to post as they obviously spend their time (money) stepping effortlessly from one stalled lift to the adjacent, rapidly rising one.

Here a few statistics/percentages

Windup to pass c. 80% ("activist investors" voted against merger)

Windup to produce 70p / share over say two years c. 80%( 20% compound)

No windup: API continues with greatly reduced debt( very low LTV) , quality portfolio, excellent management and high yield.

" but certainly unlikely to deliver the sort of returns I'm looking for"
You were chasing CREI !!???

API has a very reasonable chance of returning 20% / year for two years ???!!!

As I always say "you pays your money and you takes your chance"

[riverman77] 01/4/2024 10:16

All the analysis here looks perfectly reasonable, but surely there has to be a reasonable chance that the vote to wind this down won't succeed. Just to be clear, I think this is a perfectly good fund and should do OK if it carries on, but certainly unlikely to deliver the sort of returns I'm looking for. I personally sold out early on the day when it was announced the CREI deal had fallen through - I held this purely as a cheap way into CREI but not really interested in a realisation type situation - just think there are better opportunities elsewhere, but might revisit if it falls a bit further.

[pavey ark] 01/4/2024 09:44

The recently raised cash must surely go to reducing the RCF.

As far as office values go it is obviously easy to apply broad strokes when doing estimates of value (sometimes the only option) but obviously not all properties are the same.

The current office values are c £58m (company recently gave this as 13% of portfolio)

Within this we have the strange tale of Hagley Rd.
This office building was bought for c.£24m over five years ago then £2m was spent on a refurb then the new tram line opened with a stop directly outside the building.
Bought for position, ample parking, transport links and the ability to undercut city centre offices with £20/ft Vs c. £40/ft.

Covid caused pain but in the last year a number of lets to very good clients has produced an occupancy of over 90%. ......this is a 141k sq ft building.
The rental could/should be £2.5m ???

In the latest update this property was shown in the £15m to £20m bracket where it had previously been £20m to £25m...???!!!

I really can't see this being sold at anything other than a premium (substantial premium ?)

Given the obvious quality of the assets I'm leaning towards a very full realisation figure .....(I see the windup vote being passed)

[skyship] 31/3/2024 14:08

Well, I bow to your better knowledge as an actual property man, so will gladfully accept your extremely positive view.

Personally I will just view it as a worse case 15%GRY, with the distinct possibility of that moving up 50% to 22.5% - maybe even more as the property market moves in our direction.

I also just hope that Jason Baggaley & his assistant are suitably incentivised; and that Clifton-Brown falls on his sword. He has no right to remain as Chairman after so badly reading everything wrong - AGAIN!

[williamcooper104] 31/3/2024 11:30

Funny - about 30 GRY is by best guess

[williamcooper104] 31/3/2024 11:30

Hence don't think 18 months average period is unrealistic - or high 20s/low 30s IRRs

[williamcooper104] 31/3/2024 11:29

Cash from recent sales almost 9% of current market capThat should be returned very quickly which clearly helps on the weighted average return period

[williamcooper104] 31/3/2024 11:27

Interesting I whacked the office values by 40% and increased the industrial by 5% - which takes 5% of gross assets Assumed 2% realisation costs, and epra earnings adding to NAV for one year of 3.2p Getting to 24 IRR assuming 2 year realisation and 52 assuming 1 year - those work as averages two - eg the 2 years could be 3-3.5 years being an average of 2 My best guess is an average of 18 months with 2.5 years to totally wind up

[skyship] 31/3/2024 11:00

Thnx micvog - just idle ponderings...

As to the effect of early part redemptions; say:

# 35% 31/03/25
# 25% 30/09/25
# 37% 30/06/26
# 3% 30/09/26

That would deliver an average of cOct'25. EPS slightly less, so say total payout 74p rather than 75p. GRY would be a startling 29.2%!

All guesswork; but there is certainly considerable upside to play for; which makes a vote for a wind-down an obvious choice.

[pavey ark] 31/3/2024 09:52

Couple of points:
If the recently vacated industrial unit could keep the vacancy rate at 7.6% from the expected 4.4% then it is rather substantial.
This industrial unit is now under offer at 10% above the year end valuation.

There is interest in the moorland at a premium to year end valuation.

If these two sales go through and you have c. £25m of disposals at c. 10% premium
then the wind down vote becomes a foregone conclusion.

I would be okay with the vote going either way and not suggesting that these sales would be typical but they would certainly sway the vote.

API does have a number of very good assets and an overall very sound portfolio.

Regarding the vote we have "activist" investors who voted against the CREI deal and they want the assets sold.

[micvog] 30/3/2024 21:22

Just wanted to say thank you skyship for your insightful comments!

[skyship] 30/3/2024 21:03

Just re-read this excellent article:

[skyship] 30/3/2024 16:56

One other positive factor I didn't elucidate upon. An early part redemption serves to increase the GRY as the average maturity date is reduced. Will try to run some numbers on that tomorrow/Monday.

[skyship] 30/3/2024 16:37

Been running some numbers:

# Q4'23 NAV = 78.5p

# Disc. by, say, 2% for Q1'24 NAV = 76.9p

# Disc by, say, 7% for portfolio liquidation = 71.5p

Add back reducing EPRA earnings over the liquidation timetable, say, 3.5p (pretty conservative figure that!)

# That would deliver 75p in, say 2yrs

That delivers a GRY from Thursday's close of 49.3p of 23.33% pa

IMO the worst possible outcome might be 70p in 2.5yrs for a GRY of a still acceptable 15% pa

Now, one has to accept what the BoD stated c10days ago when trying to persuade shareholders to accept the CREI bid:

"The API Board expects that the net disposal values that would be realised in a Managed Wind-Down would be lower than those achievable on carefully selected individual assets marketed by API in the ordinary course of business - such as API's current programme of disposals to reduce floating rate debt. The API Board's expectations have the benefit of input from API's investment manager and API's independent advisers."

But IMO that was a load of fluff. Perhaps some truth in it; but my 7% discount, ie c£20m write off from accelerated sales, should be quite enough for Jason Baggaley to improve upon!

Makes API a very attractive proposition down at these levels.

Interested to read others' sliderule/back-of-envelope meanderings over the long weekend...

[stockstockham] 30/3/2024 16:34

A good deal of uncertainty ahead. The board have failed in their preferred option of merger, and should really go.

They may well fail in winning the winding-up vote too.

They made it clear future sales will likely, in sum, be below NAV, a view shared by the investment manager.

'..Input from API's investment manager as well as the API Board's financial, tax, legal and property advisers.'

'The API Board has reviewed a range of detailed disposal scenarios over an illustrative aggregate disposal period for the whole portfolio of 18-30 months, with capital being returned to API Shareholders from Q3 2024. The API Board has also considered the impact of: direct disposal costs (estimated to be 1.25-1.5% of proceeds); management fees...; certain fixed ongoing corporate costs (which would gradually increase as a proportion of NTA); the gradual pay down of the existing debt facility maturing in April 2026; and costs associated with the review and implementation of strategic options...

During the Managed Wind-Down, API Shareholders would continue to receive dividend income, but this income would diminish over time and would be materially lower than that received in the context of a merger..'.


Expect these words to change when pitching for the wind-down vote.

[skyship] 30/3/2024 14:14

Well, as the old SL thread said, many good examples from liquidating PE trusts a few years back - NRI being a stand-out at the time I recall.

They usually made capital returns via compulsory redemptions at close to NAV. JPEL still doing it.

Advantage being costs to the company practically zilch. Every-time a few assets sold, cash builds up and triggers another redemption.

Hoping that is what we will see here.

[skyship] 30/3/2024 12:02

Pavey - absolutely. I think API is now going to be a great 2yr play, underwritten by quality assets which will readily find buyers. Personally I love wind-downs, wind-ups, voluntary liquidations, self liquidations - even started a thread on then a long time back "SL".

[dr biotech] 30/3/2024 10:42

Assuming that the vote passes to wind down the company the dividend will become largely irrelevant as the return of capital will come to dominate. Sell the assets, pay off the debt first (assuming no redemption penalties) then return the cash.

[pavey ark] 30/3/2024 09:35

The portfolio yield is c.5.8% the RCF is at 6.8% so these sales of £45m will reduce the RCF to c £11m .....at a rather obvious financial gain.

The sales were achieved at £1.1 (2.5%)over book value and included two office buildings.

The LTV fell from 31% to 24%.....to fall further with additional(imminent?)sale.

Large logistics unit under offer to sell which would bring vacancy rate down from a reasonable 7.6% to a low 4.4%
( this looks a fairly large unit and it is being sold (?) at 10% above book.)

1/2/24: "The Board has provided guidance of its intention to maintain the current dividend level."