Aew Uk Reit Share Discussion Threads

[spectoacc] 04/4/2020 08:05

I remember offices available on 25% yields, so I've no doubt capital values on some assets fell well in excess of 65%. This, of course, isn't 2008.

No NAV from any property co or IT is going to be worth the paper its written on - all will come with a RICS caveat equivalent to an auditor's "Going concern".

On the plus side - that means much lower chance of early covenant breaches. Also, banks unlikely to foreclose due to govnt pressure not to, and who'd want to foreclose anyhow, in this market.

So IMO NAVs aren't that important atm. Cashflow, being able to still pay interest on debt as it falls due, is - as is not having too much (any?) debt falling due in the next 12 months.

If Covid-19 goes on long enough, the assets will all still be there, but they won't have the same owners.

[essentialinvestor] 04/4/2020 00:23

The average % NAV fall for UK commercial property during the last financial crisis
was (from memory) somewhere in the region of 65% peak/trough?.

[nickrl] 03/4/2020 23:55

Waikenchan well the trend so far is all REITs are abandoning there dividends irrespective of financial strength due to uncertainty. I estimate 25-30% of NRI is retail/leisure derived so more at risk but any tenant except govt organisations could be after revised terms so 50-60% is upper end of my forecast based on other propco RNS's this week. They do have 7m in the bank from placing so given those shareholders are well under water they might be sympathetic and payout.

We'll know in about three weeks if they produce Q1 NAV report but they aren't obliged to but with low LTV they are better placed than others.

[stemis] 26/3/2020 10:35

Where do you get 35% from. The last reported LTV was 26%

The 35% is loan to net asset value whilst the 26% is loan to value of the properties

[spectoacc] 26/3/2020 10:29

@2wild - that £7m could be a lifeline.

[nickrl] 26/3/2020 10:25

SteMis the probably with detailed research is its dependant on historic data which has a high degree of reliability in it due to stability across the period. For now you can forecast with that data but you need to scenario test what might happen - lets be honest none of us really knows currently but what we can do on these boards is postulate our theories and debate them and support each other so we can make our decisions.

So your assessment is useful to all of us as its shows what worst case is and it saves me having to do it so thanks.

My concern is RNS's are going to dry up as there all putting out holding statements (i appreciate they cant do much else) and we will be even more unsighted as to whats happening but until we see light at the end of the tunnel this is the new norm. So as i see it volatility will settle down for a while and it will need a good or bad event to provide another trigger to either sell or buy.

[2wild] 26/3/2020 10:20

Where do you get 35% from. The last reported LTV was 26% and they since raised £7 million in cash with a placing at 97p.

[spectoacc] 26/3/2020 10:11

@SteMiS - you weren't here in 2008 if you think a 30% devaluation isn't possible!

And try asset value when tenants aren't paying rent, or are negotiating far lower to stay in business. Or when there isn't the cashflow to pay the interest.

Again - there's been a seismic shift happened right before our eyes, from the owners to the tenants, and coming partly from govnt diktat. How serious it is depends on: 1. How long Covid-19 disruption lasts/whether it returns later; 2. On consumer behaviour post-Covid & how long before everything returns to "normal".

This isn't AEWU-specific, it affects all REITs. AEWU are at least only c.25% retail/leisure, surely the hardest hit sector.

[stemis] 26/3/2020 09:30

AEWU's borrowing is a loan (from majority government owned) RBS expiring in October 2023. The loan to net asset value covenant is 55%. It is currently 34%. To breach covenant would need a 30% devaluation of property.

Does anybody not do detailed research anymore?

[brwo349] 26/3/2020 09:15

The banks are not charities and have a fudiciary duty to their own shareholders. If convenants are breached they'll want their pound of flesh.

[spectoacc] 26/3/2020 08:49

Landlords are stuck - no new tenants to take over. Even without the govnt intervention, is little choice but to sing for it. Exception is the under=£51k rateable value, where the tenant gets given - given! - £10k of taxpayer money, even if their rent is only £50/week. Altho that's so much cash for some, they may simply walk away.

Issue, of course, is whether the debt holders also sing for it. Banks have been told to be generous, and shareholders last in line, but what about bondholder payments?

Has the potential to become an almighty mess, & I don't see it remotely reflected in share prices yet.

[rcturner2] 26/3/2020 07:07

I am a tenant in a business centre and discussed with my landlord a possible rent deferment. I was quite surprised when the landlord came back and said several tenants are already in default and they are discussing what to do.

[spectoacc] 26/3/2020 07:01

Agreed. Also think many (most?) co's are going to try to raise cash from shareholders. Has begun already.

So no income for a while - fine - but only if the debt can still be serviced.

Otherwise, when all this is over, if it's not 3 months but more like 12, then the current asset owners won't be the future asset owners.

Of course, if Covid-19 dies out in the next 3 weeks or so.......

[nickrl] 25/3/2020 23:22

Lord Gnome anything retail, leisure and F&B is screwed during the shutdown with zero income so even if it bounces back quickly, which it wont, they wont have the cashflow to pay next quarters rent let alone paying back this quarters missed rent. This income is forgone and I dont believe industrial / offices offer much more resilience as this lockdown will seep into all business in some way. Tenants are in the ascendancy here and landlords will have no choice but to accept rent cuts but those over leveraged are clearly exposed. However, with so much liquidity in the market and the hunt for yield will see loans renegotiated as busting a propco isnt going to give the lender a valuable asset. So us shareholders are going to bare the brunt and be left with much lower yields and may be zero divis for a period of time.

[lord gnome] 25/3/2020 23:05

I agree SteMiS. The rent may be deferred, but that is just to ease cash flow for the tenants. It will not be a rent-free period courtesy of you and me.

[nickrl] 25/3/2020 22:12

INTU has done better than i expected given majority of its tenants have closed stores but in theory any tenant can opt not to pay under the govt concession provided to tenants this week and if your cash flow is stretched why wouldn't you. Be interesting to see how many propcos put out an RNS as technically its market sensitive information but given its been enabled by govt action i suspect many wont feel they have to.

[stemis] 25/3/2020 21:07

Retail industry sources said on Wednesday evening that Intu was preparing to disclose in a stock exchange announcement that it had received little more than 30% of the rent it was owed by tenants.

hxxps://news.sky.com/story/coronavirus-lakeside-owner-intu-to-lay-bare-scale-of-retail-rent-crisis-11963708

Even if this was the case for AEWU (extremely unlikely I'd have thought bearing in mind the profile of it's tenants) I don't think it would be a problem for AEWU. In H1 it's total expenses (inc. interest) were £2,255,000. A third of rent would be £2,926,000.

I suspect it'll defer it's dividend (or maybe pay a reduced level as required by a REIT) but I don't see it running out of cash.

A bit more concerning is that, at the 30.9.19, about 20% of it's rent related to properties coming to the end of their leases, although I suspect some of that will have already been renewed.

Of course not paying your rent is one thing, but I don't think anyone is suggesting that when this is all over, you won't eventually have to bring it up to date. So maybe the dividends will be deferred not entirely lost...

[spectoacc] 18/3/2020 15:26

"17.51 percent came from the manufacturing industry, and 71.04 percent from the services sector." (2018 figs)

But fair point, Germany not that much bigger. I'd suggest their car industry is more important to their prosperity than any individual UK manufacturing concern tho.

[tournesol] 18/3/2020 15:16

SpectoAcc

"At least we've only a small manufacturing base"

Common misperception. The UK is ranked 10th in the world for exports of goods (as opposed to services), That's smaller than Germany but it is not minimal.

[spectoacc] 18/3/2020 13:36

@Chucko1 - "Unless the entire economy collapses" - not sure what other outcome there is if countries everywhere go into total lockdown for months on end. 3 months seems to be everyone's expectation, but 12 not impossible.

1. At least we've only a small manufacturing base, compared to say Germany
2. Pity we can't manufacture the things we need to keep going - like ventilators. Or food.

[skyship] 18/3/2020 13:14

Which regional REIT is the worst performer - ANS: RGL, most likely due to its 40% LTV


free stock charts from uk.advfn.com

[chucko1] 18/3/2020 13:12

At 20% LTV, covenants will never be in play. That is last man standing territory before which more radical government measures will be in play. Unless the entire economy collapses, which we are close to pricing in in some companies and REITs. So be it.