Aew Uk Long Lease Reit Share Discussion Threads

[spectoacc] 26/10/2019 16:22

@JH27 - thanks for reply. Yes, the Biffa site has some breaks, but like you, I can't see DSA going anywhere. I've no idea on the "industrial group" tho.

Meridian have been bought out by a stronger competitor so should be a better covenant now. I'd worry more if it was just same directors buying them back. Even then tho, the large loan that did for them is largely gone.

For the yields they're getting, a few future breaks/even Meridian is probably to be expected. I'd worry about a Labour govnt and the care homes mind.

The price is way too low on the current discount, with no retail exposure, plenty of industrial, RPI/CPI uplifts on the whole, and 7% divi yield on the shares. LXI yield 4.2% in comparison, on a c.12% premium, and altho I accept are a much larger and generally better quality, it would point to par being more suitable for AEWL.

I note LXI have both care homes and automotive too, and actually a very similar portfolio:


(They also have "retail" but it's mainly Aldi/Lidl, tho there's a couple tucked in elsewhere. And of course there's far more in LXI so they're much less affected if a client goes pop. Which is more relevant than possible breaks IMO).

[jh27] 26/10/2019 16:05

@SpectoAcc

From the annual report for 2019: There are two breaks in the next three years on the Biffa Asset - Biffa is there for the long term but the DSA has a break in 2023 and the industrial group who leases another part of the site has a break next year. Together, these two tenants account for more passing rent than Biffa (£297k combined v £267k). This property cost £9.0m and is the second highest purchase cost in the portfolio and is, effectively, a multi-let industrial asset albeit anchored by a long lease to Biffa. I have no reason to believe it won't be fine in the long term but it is not a core long lease asset as is.

You mentioned the Audi(expires in 2025) and the Meridian Steel properties where they took the hit on a year's rent to get the phoenix company back in occupation post-admin. And who is to say that the Meridian business's problem has been solved with visibility for the remainder of the new lease term (2027)?

I'm not questioning the properties themselves, just that their inclusion in a long lease portfolio surely dilutes the quality income that they get from Premier Inn and the other high quality assets.

I can see the question marks over the lower quality assets weighing down on valuation over the next 2-3 years while the asset management required to smooth them over is yet to come.

So the price is probably fair and the discount justified.

[spectoacc] 26/10/2019 13:59

Just to pick one - Premier Inn, Camberley:

PROPERTY CHARACTERISTICS

Property Name
Premier Inn, Camberley

Property Type
Hotel

Area
43,468 sq ft

Purchase Price
£8.5m

Purchase Yield
5.0%

Constructed
2012

INVESTMENT SUMMARY

43,468 sq ft property comprising a 95 bed hotel constructed in 2012
Centrally located within the affluent Surrey town of Camberley
Fully let to Premier Inn
5 yearly rent uplifts linked to CPI
Unexpired lease term of 15 years to breaks and 20 years to expiry
Value significantly underpinned by residential alternative use"


Suspect that's one of the better ones in fairness, but 15 years to break, 5 yearly CPI rent uplifts, resi use if they break in 15 years. 5% yield on purchase, only likely to improve, interest rates going nowhere.


Or (and from the picture, taking the "resi use" comment with a pinch of salt):

PROPERTY CHARACTERISTICS

Property Name
Travelodge and Salvation Army

Property Type
Hotel

Area
35,000 sq ft

Purchase Price
£6.3m

Purchase Yield
5.5%

Constructed
2016 refurb

INVESTMENT SUMMARY

35,000 sq ft property comprising an 82 bed Travelodge hotel and Salvation Army retail store
95% of the income received from the Travelodge providing 5 yearly rental uplifts linked to RPI
WAULT of 23 years to break and expiry
Value significantly under pinned by residential alternative use


23 years to break, 95% of the rent at RPI uplift.

The market is underpricing AEWL IMO. Happy to be very long.

[williamcooper104] 26/10/2019 13:57

Genuinely long leased property is 2- 3 percent NIY - only makes sense for annuity/pension funds to buy

[spectoacc] 26/10/2019 13:20

@JH27 - can you back up your comments? I've not seen many cliff-edge breaks?

I do think some of the assets are slightly iffy - the two care homes in particular. Also the Audi garage, and Motorpoint, though noteworthy that MOTR are, ahem, motoring, and Audi have spent a lot on their site.



AEWU has performed much better, not far off NAV, divi fully covered - seems unfair to tar them with the same brush.

AEWL has had a seller for a while - still going IMO - just as AEWU has had on a couple of occasions, which have been great entry points.

There's a fair bit of index-linkage with AEWL, which justifies a lower yield and smaller discount than it's currently on IMO. It's being rated as if the "L" wasn't there.

(Meridian was a shocker, and Alex Short rightly going to get the boot from managering AEWL, but "demise" is too strong a word - got bought out, and the rent will resume at the same level after the rent-free period. Not the disaster it at first seemed).

Edit - LXI, good co, absolutely no interest in it at a premium tho.

One thing we do agree on - AEWL are unlikely to be able to raise more money anytime soon.

[jh27] 26/10/2019 12:53

The problem with AEW LL is that it isn’t a pure enough portfolio of Long Lease assets. In such a hurry to deploy capital and avoid cash drag they’ve bought some very iffy properties with cliff-edge breaks in the short term. Assets like these are better suited to AEW’s other REIT, which they are also struggling to raise new capital in.

The demise of this portfolio’s top tenant by rental income earlier this year is possibly a taste of things to come here.

The discount to NAV here reflects a likely fall in property value over the coming quarters as market uncertainty and a flight to quality in property take their toll on this mediocre portfolio.

If you want good quality “long income” then you’re better buying LXI REIT which trades at a premium to NAV but has better quality control on asset purchases and a focused management team.

And at 72p there doesn’t seem to be any evidence of the institutions who subscribed at 100p “averaging down” to take advantage of the current dividend yield. So they are trapped with no liquidity and a REIT that’s got nowhere to go, an exiting manager and no capital to deploy.

[spectoacc] 25/10/2019 16:24

Seller still around in AEWL I fancy. And not just the 83k that dumped half a p below the bid first thing.

[cwa1] 25/10/2019 15:42

Afternoon

As I have a holding in Stenprop myself-and I suppose it is a little bit off-topic for here-I decided to set up a shiny new board for them. Here:-



Please feel free to drop in and say hello :-)

I don't expect it to be the busiest board in the world but useful to keep tabs on things

Cheers

[nimbo1] 25/10/2019 15:31

haha he'll have bought in about a week ago i expect..

[spectoacc] 25/10/2019 15:13

This "MLI" stuff sounds interesting, can't work out if a recession is good for them (people downsizing, wanting more flexibility etc) or bad. I'm going bad :)

Industrial certainly the place to be atm but I've got SHED for that.

If I assume I need to sell a propco to buy STP, I'm not sure STP are appealing enough - in divi, NAV discount, or growth terms - to justify it. Not saying they're not a buy tho.

Buys still pouring in on illiquid AEWL.. Wonder when ST bought his?

[nimbo1] 25/10/2019 14:54

Stenprop are selling everything other than industrial and converting into an industrial UK focussed reit. All their german / swiss stuff will go. A bit like hasteen their industrial stuff going great funds with rents increasing even if not much yield compression left.

[spectoacc] 25/10/2019 14:48

Good old Simon Thompson, always said how much I liked him and how good he was (NOT! But great when he tips one of mine - I'd usually sell into it, but plenty more upside in AEWL IMO).

@nimbo1 - Stenprop - I did once, and didn't buy, and now remember next to nothing about it. May not have bought simply because far too heavily weighted to propco already - AEWL, WHR, AEWU, NRR etc..

NAV looks usefully higher than s/p, divi looks OK & covered, & they seem very active. LTV seems reasonable. But struggling to see a "gimme" like there is at AEWL (discount/security/yield/due a Brexit dcb)..

[chucko1] 25/10/2019 14:46

Hmmmm. Concerted buying for the past hour. All at offered side, with bid moving 1.5 points higher. Biggest move in a long time.

[nimbo1] 25/10/2019 14:17

simon thompson from the IC just wrote about this opportunity in his alpha report. Should attract a few more buyers - i was one of them just now.

his conclusion it is cheap with 20% upside and hopefully limited downside risk.

Specto have you looked at Stenprop ( just out of interest as I know you are a fellow reit connoisseur ; ). Ive been examining it today and think its a buy - would be interested in your view!) It doesn't even seem to have a proper message board...

[edinandy] 21/10/2019 20:41

It still looks good value at this share price. With a fully covered divi by by June 2021 (?) this could be ok. I don't see where the growth comes from as share price unlikely to grow over 25% for a while

[vinceelliott] 21/10/2019 17:55

Good to see this moving in the right direction.
Will be interesting to watch the steps taken by management to get the share price in line with the NAV. big discrepancy.

The management also perceives that a GAV in the range of £250M is optimum. Only another £130M ish to generate.

Hands are tied in respect of taking on, or extending, loans.
Share issue will be to the detriment of current shareholders.
Not sure if AEWL is allowed to issue a bond, and what the impact that would have on loan conditions.
Churning the portfolio of assets will not generate sufficient funds.

Winding the company up seems to have been ruled out?

Surely if AEWL is to continue the loan has to be renegotiated asap and extended for at least 10 years.

Loan falls due in 2025 and there is currently no obvious way of repaying this without a fire sale.

[hugepants] 17/10/2019 12:04

Hope that wasn't too technical.

[hugepants] 17/10/2019 12:04

Its stopped going down. Almost looks like its going up now.

[spectoacc] 09/10/2019 06:45

I'm only a buyer of AEWL atm - cheap cheap cheap.

....and I would say that :_)

[petewy] 08/10/2019 19:17

Sorry lads. In both stocks and thinking of selling them

[chucko1] 08/10/2019 15:46

Pull yourself together, lad.

[cwa1] 08/10/2019 15:21

Teensy bit confused petewy but possibly my age :-(

[spectoacc] 08/10/2019 15:01

Wrong thread :)