Abrdn Property Income Share Discussion Threads

[rambutan2] 22/8/2022 14:13

A £237k uplift on a £950k investment. A no brainer. imho

[spoole5] 22/8/2022 07:06

This is some chunky buyback.

[spectoacc] 04/8/2022 16:23

@nickrl - yes, fair point, the sales we're seeing now were agreed at least a month ago, and API are amongst the first to say things have now finally slowed (albeit it is August). SREI cautious too.

Still - to base their outlook on aRI's guesses seems a bit much - they've no particularly insight that I can divine. Interest rates have just gone to 1.75% today, are they really saying we're only going to get another +0.5% in total? They've absolutely no idea. 3% has always felt the top in this cycle, but Truss's tax cuts may yet change that - Minford said 5% - 7%! That'd certainly put the cat amongst the pigeons - "here's your tax cuts, now pay 3x that on your mortgage payments, whilst watching your house price tank".

If API believe aRI, they ought to be selling more properties, and not buying back their shares, even at this discount. Doubt either will come to pass.

10% vacancy rate is too high, but at least they go on to explain it.

@spoole5 - agree re divi for time being. However, what API/aRI seem to be ignoring is that if the value of money is falling this fast, rents could have some nice uplifts in time.

[spoole5] 04/8/2022 16:06

So the discount had widened. Keep buying back then.

[nickrl] 04/8/2022 09:40

Specto many sales of course had an agreement on price several months although im not sure the economic outlook has materially changed in that time to have not been influencing buyers assessments. Now with many forward looking indicators turning down now it must start having some bearing on property pricing.

I concur that aRi way off on forecasting inflation but my take is BoE will remain cautious on rate rises. £/$ has recovered 0.04 off its recent low which BoE will potentially see as a positive and part contribution to supressing inflation. Ultimately they don't want to (or can't risk if truth be told) blowing up the housing market although with majority on fixed rates it will have slower impact than previous cycles.

Edit: got IR one wrong this month! aRi inflation forecast way out of line with BoE!!

Anyhow back to API and what we see at individual asset class level a different set of metrics to others so im never convinced there is that much read across to other REITs outturns on their NAVs.

I like the way in the headlines they tell us this positive news

"Lease renewed on logistics unit with a 40% increase in rent passing, to £448,454pa"

Then later on qualify it with

"We also completed a lease regear on a logistics unit where a new ten year lease was signed at a rent 40% above the previous rent. As part of the new letting the Company made a financial contribution to the cost of the building upgrades to achieve an EPC A rating"

How much of future rent have they given away though??

All in all steady as she goes and not feeling they will upping the divi anytime soon.

[spectoacc] 04/8/2022 08:21

It's aa interesting read. The "aRI" has no more of a crystal ball than anyone else - their 2.25% rate peak is off IMO, particularly if Truss follows through on tax cuts - as are their inflation calls going out years, and US recession date way out in 2023.

But good to see them put it in writing, and the comments on the property market starting to slow I'd be more inclined to believe, in spite of some recent stonking sales across all sectors:

That & much more is arguably in the discount already of course.



"Executive summary
•The UK economy is now facing multiple headwinds and a US led recession towards the end of 2023 is now the abrdn Research Institute's ("aRI") base case. With an increased risk of a UK recession in late 2022 in response to the cost of living crisis and tightening monetary policy by the Bank of England aRI are forecasting a peak-to-trough decline in the level of GDP of around 1.4%, although the growth in GDP in May reversed the declines seen in March and April this year.

•The UK Consumer Price Index (CPI) rose from 9.1% in May to 9.4% in June, a level last seen in 1982. Inflation is likely to move higher from here as rising food and energy prices take hold, before falling thereafter as challenging base effects and slowing economic growth weigh on headline inflation. aRI are currently forecasting UK CPI to end the year at 8.5%, before falling to 5.2% and 1.7% in 2023 and 2024 respectively.

•aRI expects the Bank of England to continue to hike interest rates over the next few meetings, with the terminal interest rate reaching 2.25%, despite the predicted slowdown in activity. The BoE is then likely to pause its hiking cycle, and reverse the hikes with a cutting cycle starting in Q4 2023. Rising interest rates have had a material impact on the cost of debt, with very volatile swap rates. This is beginning to feed through to the investment market.

•In the first half of 2022, UK real estate recorded the strongest H1 investment volume since 2015. According to Real Capital Analytics, a total of £31.2 billion was transacted over this period. However, approximately two thirds of the activity occurred in Q1'22. In Q2'22 investment volumes totalled £10.2 billion, down on the Q2 10 year average of £13.5 billion.

•Whilst the UK commercial real estate market had positive performance in H1 2022, the abrdn market outlook for the next 12-18 months has been revised downwards. We expect an impact on pricing and capital values across all UK real estate sectors, driven by a rate revaluation, the increased cost of capital and a narrowing margin over other asset classes. The extent and duration of this price correction is unclear, however API has a portfolio that has focused on affordable assets that meet the needs of tenants, and we believe that will help mitigate against the initial yield shift being seen on the prime low yielding assets currently."

[spectoacc] 04/8/2022 07:23

"The Company exchanged contracts on an office sale after the quarter end. The single let office on the outskirts of Oxford, sold for £8.033m, 14.8% above the end March valuation."

Not sure why they couldn't tell us that before.

Not ploughed through all of today's RNS yet. Another good NAV rise, but an outlook somewhere between cautious & grim.

[nexusltd] 03/8/2022 15:44

@ SpectoAcc. Granted we do not know if it sold @ a premium or discount wrt. March 2022 valuation. From CBRE data we do know that office prices are on a very shallow uptrend.

BUT, my understanding of 14.4% annualised return is that the SALE price = 1.144^7 * BUY price (including costs) = 2.56 * BUY. So it was originally bought for £3.138mn including costs. I think that considering recent events its pretty damn good.

[jonwig] 03/8/2022 14:35

Spec - suspicious? There are many grounds for suspicion in some sectors.

Basically, if you own an asset it helps to give it a low valuation (simple - just up the discount rate a bit). Then when you sell it, you're certain to get above valuation - "Well done me!"

It also means that investors price the company above its published NAV. So if it wants to raise more capital, that can be done easily.

This is working well in some sectors such as renewables, infrastructure and some property areas, but things like API are left out.That sounds like a positive signal for API.

[spectoacc] 03/8/2022 13:02

Looks good, seems there's even a market for offices. Always a bit suspicious when the price is given in relation to the price paid tho, rather than what it was in the last NAV at. Is that a premium, discount, or sold at par?

"It will also provide us
with funds to take advantage of potential buying opportunities in the
short-medium term." "

Guess that could mean their own shares! But looks like they intend to reinvest.

[nexusltd] 03/8/2022 12:28

Good return on disposal.

“Office building in Kidlington for £8.033m, reflecting a net initial yield of 5.35%. Acquired in 2015, the investment has contributed a 14.4% annualised return over the hold period. "

Will the team buy a replacement asset, or utilise proceeds for buybacks?

[spectoacc] 19/7/2022 16:08

Thanks @nexusltd - no, I can't remember having seen.

[nexusltd] 19/7/2022 16:04

@ SpectoAcc. I don't know of a published target for the amount of capital allocated to share buybacks.

[spectoacc] 19/7/2022 09:45

Still purchasing own shares, & looks pretty shrewd at these levels. Haven't been keeping track tho, anyone know how much still to go?

[spectoacc] 11/7/2022 06:56

Thanks @nexusltd.

[nexusltd] 10/7/2022 21:16

Applying the CBRE Q2 stats to API’s March 2022 portfolio mix.
- Capital growth, end June NAV estimate: 109.8p + Net Revenue before quarter dividend 1.3p + Share buyback 0.54p
- Discount on 78.1p closing 09 July offer a) Capital growth only: 28.9%, b) All; 30.0%,
- Yield 5.1%

[spoole5] 28/6/2022 21:30

Buybacks are a no brainer at these levels

[nexusltd] 27/6/2022 23:08

Cumulatively applying the CBRE April and May stats to API’s March 2022 portfolio mix in my model.
- May NAV estimate: 109.9 (not including accrued income) + NAV enhancement due to buybacks of 0.4p = 110.3
- Discount on 78.5 closing 27th offer to May NAV estimate: 28.6%

[spectoacc] 27/6/2022 15:57

API continuing to buy back in decent size.

[spectoacc] 16/6/2022 19:51

That's tomorrow's open in these markets @Jonwig ;)

[jonwig] 16/6/2022 17:43

It looks like all the old news and financials has been transferred from SLI to API.

Website hasn't changed from SLIPIT.

Chart looks screwed!

[jonwig] 16/6/2022 17:42

. .



Abrdn Property Income Trust (API) is an actively managed UK REIT targeting high yield and capital growth.

API is a “generalist” fund and intends to achieve the investment objective by investing in a diversified portfolio of UK commercial properties in the industrial, office, retail and ‘other’ sectors, where ‘other’ includes leisure, data centres, student housing, hotels and healthcare. As at Mar’23 the sector allocations are:

Industrial: 53.4%; Office: 19.5%; R/W: 14.8%; Other: 10.5%; Retail: 1.8%

As at 31 March 2023, API had a Loan to Value (LTV) of 28.7%, calculated as debt less all cash divided by investment portfolio value. Debt with RBSI totals £165m from Apr’23 & is capped at 5.5% - full details in the links below

Dividends:
Following the dividend being maintained at an annualised rate of 4p per share since December 2021, the dividend cover for Q1 2023 is 88.6%. The Board has provided guidance of its intention to maintain the current dividend level which it believes will be substantially covered in 2023 and 2024.

24/04/23: Annual Results to Dec’22:


13/06/23: Latest corporate presentation:

[garbetklb] 06/3/2015 21:51

As the Board have now advised accepance and we have heard nothing from Crystal Amber, does anyone see any realistic alternative to the offer going through?

I'm mindful of the timetable to accept the offer.