 Dr. Freud, on the chart I beg to differ. Yes, to pull up the all year chart there does seem a huge H&S from about 2019 when it reached 310; so it has now fallen to just short of 25% of peak value, which is a decline, peak to low, that always perks my interest if there is a going concern. Now clearly you think that's a BIG IF, but others here disagree and for the time being I'm inclined to follow them. We know that large mortgages can be affordable dependent on cash flows, so debt is not so much the problem being able to service that debt, while, from our pov, still paying a dividend.
Incidentally, from a further chart perspective, the run under £1 can be scary, particularly from a great height, when the breaking of the big round number causes selling. That is also evident on the chart, where it failed to break back over the £1 level and instead, kept tumbling to its present 72p. Looking back along thee chart, this does seem to be another historic support level on two previous occasions, though you have to go back some way.
My feeling, taken together with the much more general market malaise on high value/income REITS and ITs is that this is oversold. they just have to show the dividend as sustainable and we could find some dramatic recovery in due course.
So I'm holding until the picture clarifies. I certainly wouldn't want to allow myself to be scared out of it.
;) |
No clear chart action other than oversold; so will wait for the mid-Feb Update to hopefully clarify matters.
free stock charts from uk.advfn.com |
There is one sentence in there that sticks out like a sore thumb (to me anyway)
there was a loss of £249M yet they say the dividend was covered 1.3x, what with?
You are confusing assets with cash/earnings. If I rent out a shop that I own for £5k a year, and the value of the shop itself drops by 20k, I still have the £5k to spend. I've made a £15k loss but that doesn't affect my ability to spend the paying out £3k to my shareholders.
Obviously if the value of the assets continues to fall then the LTV will rise (or vice versa). It seems that CP values are stabilising after a few years of falls, and if they don't fall then selling the assets will reduce the LTV by approx the predicted amount. |
my apologies for coming back to this. i am not wanting to cause misery.
personally i think there was a very large, well-proportioned head & shoulders above this fall. made over many years, increasing its power.
the saying is that if the H&S loses its head (decapitation), then the body loses the same amount.
i think the top of the head to the neckline was about 320p to 160p. so 160p less 160p is precisely nothing left. capitulation in action. i am not saying it will get to zero, but there is a lot of downward pressure.
lots of people on advfn poo poo charts. but if there is a pattern there, don't be tempted to fight it. only fight it if the pattern is broken. and so far, it isn't.
as far as i read (i am happy to be corrected) the last full year report spoke of the need to reduce the LTV. then it was 48.5%. the trading update in november said that the LTV had fallen to 49.6%. that sounds like LTV went up even though they sold properties. it is all there in black and white if you look. are you sure you can believe them when they say they are hoping that future sales will reduce LTV to 44.6%?
there was a loss of £249M yet they say the dividend was covered 1.3x, what with? the higher the LTV gets, the more this acts like a financing company and the less like a property company, hence me asking the finance questions.
and if you are PI, i have no problems you looking for high yield with things looking like they are at a discount. but a reit is not the same as an IT. most ITs are formed of shares which can be sold quickly at a market price and the funds distributed to shareholders via an mvl. svm emerging uk announced a vote on an mvl recently, with a nice spike of around 20%, which should go through quite quickly. that is really what you want from a discounted IT, nice quick profit which is aching to be realised.
reits, if you get to that point of liquidating assets, have to sell buildings. that can take a lot of time, and the sale price does not necessarily equate to the valuation price. it is more related to the income that can be got from letting it out. and that is not a rosy place atm. personal experience with asli, is that they had very attractive assets which did take a surprisingly long time to sell. the share price could languish at low levels for a very long time whilst admin costs build up, if a break up is what you are holding for. opportunity costs etc.
if i had money in CLI, i would accept the loss but transfer the cash into a different reit. many have also fallen a lot recently, so actually if you transfer you are not losing anywhere near as much as you think you are. but you might sleep easier at night. reits should be boring a bit like bonds. this one does not get a high rating from me. i would leave it to the big corporations. there was a nice bump up late in the day today, look to sell into any short term recovery. |
Thanks. Let’s hope that they have something positive to say. I’d would have thought that any large sale would be worthy of its own RNS though. |
Apparently we'll get an Update mid-Feb. Hopefully that will reassure.
Update ahead of the Prelims in early March. |
I think the tide us turning on people (particularly govt employees) returning to the office.
Its about the only thing Donald Trump got right!
We ll get news in a few weeks. |
but if LTV is going up when they are selling properties, they are struggling to cover their debt financing. LTV will get closer to 100% the more properties they sell. hoping for a distribution at the end is akin to hoping that LTV does not exceed 100% at the end. they are essentially in the market trying to get out. in this commercial office market, you want to be a tenant and not the landlord.
as the properties get sold, fixed costs as a % go up and any reduction in interest rates might be cancelled out by higher rates due LTV. the easiest assets to sell are likely to be the stronger ones. they won't have sold the rubbish ones, no one will buy at a price they want. valuations are likely based on completed sales that the valuer knows about which are based on predicted income from tenable buildings. in the current environment with office buildings that may be hopeful.
a signficant amount of tenancies are to government depts, but there is no sign of a return to the office there. upcoming uk budget cuts mean more and more of governemnt tenancies will end. same probably true in germany. the sub-company structure is designed to prevent one lousy asset bring down a whole company. the safety of that disappears if many of the sub-companies are in the same position.
some reits will thrive at the end of this period, but they will be the ones with the assets everyone wants. many of CLI's types of buildings are being converted to student lets in city centres. but the individual company nature means that none of them will be able to raise the cash to refurb on top of an empty tenancy. and if you are a student landlord, you buy at firesale prices (or should do).
don't look at this as you would at VOD halfing their dividend. in VOD's situation, you hope it will allow the share price to grow for a capital return. if CLI halves their dividend, it is a financial red flag and that you might not have a company to give you dividends in future. imho |
US evacuation of Kabul not the first thing that comes to mind with CLI :)
Mind you, neither is ASLI - is nothing like CLI.
As @ghhghh says, not going bust, they've silo'd the loans in groups of property SPVs. But it's sector & huge LTV vs interest rates, valuation, & divi. Surely a lot in the price down here, but not currently a holder. |
Careful what you wish for. If you're happy to receive a large dividend as a function of mis valuation, there are worse things. Vsl comes to mind: recalling the US evacuation of Kabul. |
Yes I am surprised a managed wind down hasn’t been mooted here as the market clearly doesn’t like the company. |
ASLI announced a couple of sales above NAV this morning. Shows that the market is still ok and that this lot need to pull their finger out. |
But aren't a significant number of assets (c.10 -15) ring fenced? So worst case, in default, they hand back the keys? Helps their negotiating position with the banks. |
last full report has the following comment:
Forecast cash flows – Severe but plausible case
A Severe but plausible case has been assessed
which has been produced by flexing key
assumptions further including: lower rents,
increased service charges, higher property and
administration expenses, falling property values,
higher interest rates and reduced achievements
of refinancings and disposals.
These flexed assumptions are more severe than
CLS experienced during the 2007-2009 global
financial crisis and other downturns such as that
experienced in 2020-2022 during the Covid-19
pandemic. A key assumption in this scenario
is a reduction in property values of 10% until
December 2024, impacting forecast refinancings,
sales and cash cures. This is in addition to the
reduction experienced of 12.5% in 2023 and 17.1%
since June 2022.
Assumptions around refinancing and investment
property disposals are adjusted to only include
those agreed or considered significantly advanced
by management. In addition, a reduction in
property values of 10% results in additional cure
payments of £12.1 million being necessary for the
Group to remain in compliance with its covenant
requirements.
Due to the severity of the assumptions used in
this scenario, which is severe but plausible and
therefore not remote, the liquidity of the Group is
exhausted even after putting in place controllable
mitigating actions as set out below.
Mitigating actions
In the Severe but plausible case, CLS is assumed
to take mitigating actions in terms of depositing
cash to equity cure some loans, scaling back
uncommitted capital expenditure (without
impacting revenue streams over the going
concern period) and reducing the dividend to
the Property Income Distribution required under
the UK REIT rules as well as drawing its existing
£50 million of currently unutilised facilities.
If needed, further disposals could be considered
as there are no sale restrictions on CLS’
£2.1 billion of properties, albeit the timing and
the amount of these potential disposals are not
in the Group’s control.
they are already disposing of properties currently to bring the LTV down from above 50%. although the more recent half year report said that although debt went down, the LTV went up (due to valuation reductions). oh dear. 2-3 * the amount of re-fi needing doing this year compared to last.
therefore if the divvy also gets cut, it is a sign of the company entering into significant financial risk management strategies.
about 40% of portfolio is in uk. those service charges and admin costs will go up with the NI changes. this reit seems much more vulnerable than others to rises in interest rates. i am pulling up a deckchair and watching this show. |
Unfortunately they geared up at just the wrong time. If you read past statements they had intended significant disposables and then the interest tate cycle rapidly turned.
Are we now saying the market wants a 6% yield on Grade A prine office in excellent locations..? - possible I suppose.
The last few years teaches that 'certainties' may be anything but.
Interesting times, etc. |
What were the terms of the refis? |
@sigmundfreud they have been able to refi without aggressive margins a fair amount of debt which suggests lenders don't share the same pessimistic view as the market. |
you might not like the look of this very long term chart.
i have a lot of reits but not this one, i wouldn't want to buy the underlying properties. LTV is problematic even if you trust the current property valuations. if true values of properties are lower, this may not be able to re-finance without large disposals in a hurry.
the price might just stabilise at where it is at, same as where it was at pre the 2007-8 financial crisis.
but the chart looks like it could go to around 50p, or possibly half the current price to around 34p.
staying clear regardless of the divvy
if you close in to today's prices, the chart doesn't look any rosier, relatively recent death cross which in this case might actually mean it. not trying to short, only want to protect advfn posters. take care
free stock charts from uk.advfn.com |
It’s brutal |
rimau EPRA EPS = 10.3p. You do the maths - now under 7x.
As I said a few posts ago - discount irrelevant; it is the yield which is more important. Now at 11%! |
What is the pe ratio Sky, there is little point building a buy case on discount to NAV for any property stock. Earnings is the key metric. |
Whether it's cheap, and the discount really is as big as claimed, entirely depends on whether you believe the NAV is real. It's one thing for Knight Frank or whoever to give valuations but if they can't sell at anything like those valuations, the valuations are wrong. Clearly some holder is selling with determination and maybe they know more than us? Time will tell - eventually! The danger is that it makes lenders increasingly nervous and perhaps results in covenant breaches? |
@sky shrieks buy but just keeps going down down deeper and down.....
a 6 in front will irresistible though but thats maybe too much of a stretch as surely the family will take it or one of the PE's |
Nothings going to change until they actually do something. Saying they are going to sell the student digs and refinance in december and not completing isn't going to boost confidence in the management. Have to hope that long term they will come good, but I thought these were cheap at 90. Proof that whatever's cheap can still lose value. |
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