CT Property Share Discussion Threads

[skyship] 04/10/2020 09:25

Certainly not happy with the 4.7% yield; but then I don't expect them to adhere to a mere 0.625p/Qtr (2.5p/annum). Substantial cover at that level so my working hypothesis is for 3.25p/annum - a reduction from this year's 3.75p.

That would deliver a yield of 6.13% @ 53p.

A stupid mistake near the bottom of the Annual Report RNS.

They try to be oh so helpful in explaining the seeming mystery of an NAV DISCOUNT.

In doing so - they get it totally wrong. Hilarious - see below:
===============================================================

Discount or Premium - The share price of an Investment Company is derived from
buyers and sellers trading their shares on the stock market. If the share price
is lower than the NAV per share, the shares are trading at a discount. This
usually indicates that there are more sellers than buyers. Shares trading at a
price above the NAV per share, are said to be at a premium.

2020 2019
pence pence

Net Asset Value per share (a) 96.6 104.8

Share price per share (b) 56.0 80.0

Discount (c = (b-a)/a) (c) -42.0% -23.7%

[nickrl] 03/10/2020 19:17

BREI isnt as transparent as others with detail (there stable mate BCPT as far more info) even now reading through the Annual Report there is no explanation why NRI is down from 18.6 to 17m. Subsequently noted in Interim report 0.8m is from sale of Rotherham Retail Pk and some from other subsequent sales will be part of it but not all. Vacancy levels are static so not that either. Costs are up but further examination is partly due to 0.4m bad debt provision. One positive is they've dropped performance fee from current FY and the inv mgt was generous enough to waive half the performance fee due to them so only took 266k.

The reduced divi needs 6m pa so with interest costs fixed at c3.5m, 2m on inv mgt fee admin costs around c2m its easily covered out of 17m NRI (or 15mish at collection level) if your happy with 4.7% yield.

[hindsight] 03/10/2020 17:11

Wow, that would be a rather uber-bearish NAV scenario. A further 22% fall!

Maybe, maybe not Skyship. Seems to me there are two sides at present, one is REIT sellers and other is the economic forecasts. Suspect the truth will be inbetween

This is what the gilt market thinks

[skyship] 03/10/2020 16:41

Wow, that would be a rather uber-bearish NAV scenario. A further 22% fall!

Fortunately a very unlikely scenario considering their well-positioned portfolio.

A very detailed Annual Report, of which these extracts highly relevant:

“Cash and Borrowings
The Group has approximately GBP13.7 million of available cash and an undrawn revolving credit facility of GBP20 million.”
…….

“The Manager has been engaging with tenants given the challenges faced by many to meet quarterly rental commitments at this time. The trading restrictions put in place by the Government resulted in the closure of many of our retail units, although the vast majority have now commenced trading, albeit with social distancing measures in place. Collection rates for the last two quarters are ahead of expectations and currently stand at 94.1 per cent for the March to June quarter and 90.0 per cent for the June to September quarter.

Both the office assets and the industrial, logistics and distribution assets delivered positive returns over the year of 6.1 per cent and 4.0 per cent respectively, with capital returns of 1.1 per cent for offices and -0.6 per cent for industrials, logistics and distribution. These two sectors now make up 73.2 per cent of the portfolio by value.”
…….

“The Manager considers that while there is no pressure to invest the remaining cash reserves immediately, opportunities may reveal themselves from stressed or forced sellers in due course. Opportunistic sales from the retail portfolio remain under consideration, although very much subject to pricing.”

[hindsight] 03/10/2020 16:21

I accept an allowance for cash has to be made in discounts to NAV. But with a 25.6% LTV at June 20, I would rather they sit tight and get across the valley of death and hopefully end up with a 75p NAV vs 96.6p June 20. Producing 3.5p dividend. In the world of 0% base that would be quite popular when confidence returns.

[essentialinvestor] 03/10/2020 15:28

One potential headwind for BREI is a lack for cash for acquisitions
(a marked difference between this REIT and SREI).

With the shares trading so far below NAV there is no chance of issuing

shares, so that only leaves asset sales as an option.

[spectoacc] 29/9/2020 15:46

Yes it's separate to the moratorium really - sticking leases into a co that you then wind up is a low trick, but technically legal & many will try it.

Interesting how the sharp rally in REITs yesterday off (probably) the back of KKR/GPOR is being rapidly given back - or in the case of eg AIRE, barely a dcb to begin with.

Paid to wait.

[essentialinvestor] 29/9/2020 14:37

Nick,quality post. Very well put.

[nickrl] 29/9/2020 12:57

With IWG basically abusing the system but getting a competitive advantage from doing so others will have to in that sector and thats before all the grey space ends up on the market.

I repeat again that there is good evidence in listed sector of agreements being made and ive no reason not to believe the trust fund sector isn't doing the same given property mgrs span both open and closed funds. What are the pension funds doing im not clear on but I would have thought the same as many are part of same groups. We've seen evidence of big private landlords doing the same so that leaves small private owners as maybe the unknown and i dont how much ownership they have.

So we have a reasonable body of evidence that property companies have responded to the situation in a fair and equitable way and at considerable cost to the owners so pain is being shared as per governments code of practice. Yet the likes of IWG, Boots, JD Sports etc are abusing / gaming the system now and that is unlikely to benefit UK PLC given the ownership structure of many of these.

Moratorium needs to end but courts need to be guided that business that will fail if winding up orders are presented for unpaid rents cannot be pursued so will be thrown out. This will then bring the can pay but wont pay to heel. BoE must surely see the risk emerging here if this behaviour becomes the norm.

EDIT: I see Greggs say in there trading update today that they continue to pay there rents in full on a monthly basis but for how long when the likes of Cafe Nero are looking at CVA and no doubt Starbucks will be able engineer one as well it will bring on the need to do the same just to survive.

[essentialinvestor] 29/9/2020 11:34

...through to 2024

Would hope that's not in prospect, but never say never etc.

BREI, SLI, SREI look the most interesting atm.

On SREI, it may be The Tower Manchester that is holding the price back, possibly.
Their largest asset.


Bought a small amount of MCKS back yesterday, but can't really make a strong buy case atm.

[spectoacc] 29/9/2020 11:23

IWG don't plan to pay, and won't be alone. Think we're due a reset of rents that won't look pretty through the recession.

The future may be surplus space, empty rate liabilities, and turnover rents, so NAVs falling perhaps through to 2024. Retails, obviously, but office & secondary space too.

If that sounds unduly negative - the economy is now not forecast to get back to previous size until 2023. That's with the existing lockdown but without eg the mooted 2 week total lockdown in October, or any further Covid measures in the months ahead, or Brexit disruption (last-minute deal still possible).

However - I'm not in any REITs I think won't get through that. Nothing too retail, nothing high-LTV, all on big discounts already, few with much in the way of debt rescheduling.

[essentialinvestor] 29/9/2020 10:55

Consensus for the sector appear to be NAV falls in to early 2021, some
stabilisation/trough in NAV Q1/2 2021.


A muted recovery starting possibly Q3/4 2021.


Would anyone disagree with that, have a different view?.


A second half 2021 recovery does depend imv on the moritorium ending.

I note UKCM also made the point that well capitalised companies who
continued to trade through the lockdown have not honoured their rental commitments.

The longer this goes on, the more tempting it is not to pay,
particularly when observing other companies getting away rent free.

[essentialinvestor] 28/9/2020 13:30

We wish our shareholders well during the coming difficult months...


That's a dose of optimism!, Not.

[nickrl] 28/9/2020 10:58

Couple of other nuggets i picked out:

collected 94% of retail rents in Q2 disappointed though that they didn't give more detail in Q3 and and at what date is the overall 90& figure based on. No mention how much of the shortfall is driven by wont pay brigade?

receivables up 900k or 25% over reporting period and i noted under 'Credit Risk' the following

"The maximum credit risk from the rent receivables of the Group at 30 June 2020 is £2,264,000 (2019: £802,000). The maximum credit risk is stated after deducting an impairment provision of £421,000 (2019: £9,000). Of this amount £nil was subsequently written off and £111,000 has been recovered"

Not sure how to read this as whether its inferring risk of reversing income in future or relates to what hasn't been paid that was due at period end?

rebased divi is well covered at 90% rent with potential for a special payout in 12 months.

[hugepants] 28/9/2020 10:56

Yes Id think the quarterly dividend should rise from 0.625p per quarter given the collection rates. Even if they only pay the 90% minimum they should be able to afford at least 3.5p per annum.

The covenant headroom looks strong;.

From Kepler Research


BREI has net gearing of 25% on an LTV basis, or 33% on an NAV basis. The company has structural debt of £90m, maturing in November 2026. This is offset by £13.4m of cash. The debt covenants require the LTV to be below 55%, so the portfolio could withstand a 40% decline to its valuation before the covenants were breached. In our view this level of decline is unlikely given the weightings of the portfolio and quality characteristics. The loans also require the interest cover to be 2.3 times on any calculation date. The rate on the loan is 0.9% per quarter, which implies interest of £810,000. Given quarterly income of c£3.0m for the security pool, by our calculations the covenant would only be breached if the rent collected fell by c.70%, which seems unlikely given the >40% weighting to industrials.

[spectoacc] 28/9/2020 08:28

Presumably this will improve:
"Dividend cover decreased to 84.3 per cent for the year from 89.4 per cent"


And a lot of honesty here, particularly the last line!

"Although the next few months may see positive economic data as some restrictions ease, and growth resumes from a low base, we expect the recovery to be slow. There is likely to be increased unemployment as the furlough scheme ends, which could delay recovery, and further waves of infection and lockdowns cannot be ruled out. It looks probable that there will be a permanent shift in the property market, particularly in retail where online shopping has accelerated and in the office sector where there are and will be increasing numbers working from home.

Although the lockdown measures began to be eased towards the end of our financial year, the economic outlook remains highly uncertain and the trading position of many occupiers is extremely challenged. It will take time for output to return to pre Covid-19 levels and for many businesses the new economic reality will look very different to that prior to the outbreak.

......


We wish our shareholders well during the coming difficult months."

[hugepants] 28/9/2020 08:25

Final results out


"Collection rates for the last two quarters are ahead of expectations and currently stand at 94.1 per cent for the March to June quarter and 90.0 per cent for the June to September quarter."


The portfolio mix here is better than most imo

43.4% Industrial & Logistics
29.8% Offices
16.2% Retail Warehousing
10.4% High Street Retail

They have no leisure assets ie. hotels, gyms, cinemas etc and they say they are collecting 90% of rent from their retail warehouses.

[nickrl] 26/9/2020 21:45

Another one i avoided because it wasn't covering the dividend for a number of years so with a divi reset makes it more viable. Still has nigh on 30% retail albeit no shopping centres but showing reasonable rental collection especially on retail parks. Also they publish receivables at qtrly NAV updates which show minimal drag unlike some other propcos recent updates so have cash to cover reduced dividend with ease.

Final results should be imminent so will get a clearer picture.

[skyship] 26/9/2020 14:59

HP - I agree with yr comment on the BCPT thread, these look a far better proposition in every respect. Also looking rather oversold; but then most do!

[essentialinvestor] 16/9/2020 22:49

It looks like a series of higher lows since Mid March,

TA not my area though.

[hugepants] 16/9/2020 22:45

This is a classic Loch Ness Monster chart formation.

[essentialinvestor] 14/9/2020 16:36

Bought some DLN today and GPOR on Friday.

Below £5.50 Great Portland starts to look more attractive.

That being said the March low under 5.30 may well be tested.

If that goes then around 4.75-4.95 type area.

[spectoacc] 14/9/2020 16:27

Good luck - I may be too over-loaded with REITs already, but will be keeping an eye :)

[essentialinvestor] 14/9/2020 16:16

Around 55 pence, if available, looks a safer buy point.

I bought a small amount on Friday as mentioned.