THe assets are discounted by about 30%, which is hefty.
Student development sold for a good price but no one seems interested in buying their non redevelopment offices at or close to book. UK Vacancy very high aswell at almost 20% demonstrating the clear mismatch between supply and demand.
IMV the risk /reward here is very good. THis is not a basket case like Rgl as there are higher quality assets in London and major cities, with LTV under control. |
True, & they were buying heavily in the 120's. But they'd need that well behind them to be able to pitch a low-ball bid I think.
Not saying CLI's not good value, but there's plenty I'd prefer ahead of it. |
@specto dont disagree but here the family own so much that always remains a possibility at depressed prices they will take the remainder. |
Don't see the appeal of a heavily indebted office REIT when there's eg FGEN at 10% growing yield, or NESF at 12%, or SEIT's spread of investments at 11.7%. All at large discounts if NAV's your thing (40%, in SEIT's case).
Opportunity Cost, with often contracted revenues & guaranteed uplifts in the latter 3's case.
The economic outlook's changed, particularly regarding rates, & whilst it might change back, I want to be (securely) paid to wait. |
Comparable office reits have fallen further over 3mths
free stock charts from uk.advfn.com |
The 30YR Gilt is hitting 5% - unfortunately it makes sense for these types of stocks to sell off. I'm not hugely surprised. I bought a few more. |
Seems crazy, good times will return but how long will we have to wait? |
Unbelievable - now at a 9.3% yield! |
Gap from 01/05 at 83.6p which I hadn't spotted before topping up only a few hours ago at just over 87.50p. Ouch
Suspect that gap will be closed in this little downturn. |
Yep what a mess |
Unbelievable
Snakes and ladders months to go up days to revert to the start |
4+ month low @86p. |
 Personally thought the update was disappointing as it again emphasised how badly senior management was caught out by the two recent office developments. The Artisan letting to MSF was included in the HY report so there haven't been any further lettings since, whilst The Coade doesn't even get a mention. I see that they have appealed against Tower Hamlets refusal to grant change of use for The Artisan, not sure how long these appeals take.
Looking at the proposed sales, and bearing in mind Berenberg's note (post 215) that 2nd half sales would exceed £160M, we have anticipated sales of £67.1M and therefore a further c£93M to come from the sale of the student property. As this was valued at £93.550M in the latest BS, and we were told that there was significant interest, a sale at that price would be disappointing. Alternatively, it could be that the other properties have been sold/ marketed below NAV and the shortfall covered by Spring Mews. We wait and see.
Finally I was interested in the comments regarding the Nomination committee as this is chaired by Anna Seeley (main shareholder via CVI). Whereas the Annual Report stated that, 'we are confident in our structure and operation of the Board together
with the balance of skills and experience of our directors in order to deliver on our strategy', they've now decided to pension one director off and appoint two new independent directors. Suggest we are likely to see more changes in due course. |
Indeed: Opportunity Cost. Is surprising how fast everything's fallen, on my watchlist that'd be eg FSFL, FGEN, SUPR, AGR, BSIF, TRIG, SEQI.. All similar charts, all presumably reacting badly to long-term interest rates. Not convinced the falls are justified, but I would say that. |
Vacancy level is a big drag and like RGL disposals slow to realise. I also detect a slowdown on getting debt refi done from their more bullish tone 6m back.Will get done but maybe not at such favourable rates.
Well below my 90 threshold but it’s now not the only one tripping the buy threshold making feel cautious about sentiment at the moment. |
"..We are experiencing longer decision timelines due to macro and political factors slowing progress."
"..Letting activity was slower than forecast. "
But I'd also pick out the 49.6% LTV, falling to 44.6% if they get all the disposals away.
In the price? Probably so. I prefer to spot the negatives tho. |
Update reads really well - yet here we languish at 89p on a 61% discount & an 8.9% yield! |
Could be getting the Q3 Update this week. (15/11 last year - see Header) |
Interesting piece SKY, thanks for posting.
D. |
Thanks for posting that ...sp is a tad frustrating eh |
Back down to 90p! NAV discount at 60%. Yield up to 8.8%.
Time to change the way we look at Reits
Changing market conditions call for changing valuation methodologies
IC - Published on November 6, 2024
by Natasha Voase
The property sector has always liked to do things differently. While other sectors debate price/earnings ratios and enterprise value to Ebitda, real estate investors wax lyrical about discounts to net asset value (NAV) and loan-to-value (LTV).
This approach made sense in the old world of declining yields and interest rates, says Tim Leckie, an analyst at Panmure Liberum. Falling rates meant shifts in portfolio valuation were a large component of returns. But now that rates are higher and valuations unsteady, Leckie says the focus must be on cash flow generation. Reits need to be able to generate enough cash to pay down increased interest costs and grow. For the low-yielding, low-risk portfolios of times gone by, this is a problem.
Yet for Reits, just as when it comes to valuing companies more generally, no valuation metric should be taken in isolation.
Harm Meijer, managing director and co-founder of real estate fund manager ICAMAP, says that this is why investors need to look at multiple valuation metrics, including net debt to Ebitda, funds from operations (FFO) yields and price/earnings ratios. "Every ratio metric has its drawbacks," Meijer says. "Because if [for example] you only look at the cash flow... the problem is you can really increase your FFO by just taking on more leverage, by buying assets."
Analysts at Panmure Liberum have created what they call the Medium Term Sustainable Earnings (MTSE) metric, a seven-year figure encapsulating reversionary potential, administration costs and refinancing drag. The MTSE total return blends yield plus growth to give investors an idea of what their medium-term cash earnings per share might be. The chart below shows the result of those calculations, albeit outliers such as Grainger's estimated growth rate should be treated with caution. With that in mind, the stocks that stand out: Sirius Real Estate (SRE), Urban Logistics Reit (SHED), Segro (SGRO), CLS Holdings (CLI) and Life Science Reit (LABS).
Analysing Reits through the lens of cash flow throws up some new names that look mispriced. Discounts to NAV alone might encourage investors to buy giants such as British Land (BLND) and Land Securities (LAND), given their discounts sit at around 30 per cent. However, from a forward-looking price/earnings perspective, they trade at 13.6 and 12.1 times, respectively, implying earnings per share of 41p and 71p. Even if investors favour Epra EPS of 42p and 50p, respectively, these valuations look fair or potentially a little high. |
If IC says sell do the opposite 😂 |
Wouldn't that have to be RNS'd on completion though? Perhaps that the reason its risen. |
Just having a look back at this thread over the weekend and post 215 caught my eye regarding Berenberg's note. According to their analyst second half property sales will be over £160M which is somewhat higher than shown in the recent accounts where Assets Held For Sale (note 11) are £132.7M of which £96.7M is the Spring Mews Property. It could of course be that CLI are expecting to sell another property but on the face of it this suggests that the student property/business has sold for around £124m/£125M. |
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