Cls Share Discussion Threads

[ammons] 12/3/2024 14:01:36

dated 7 March 2024, sell, FWIW

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CLS Holdings' office values continue their freefall

Investors waiting on a recovery in this property equity's fortunes should invest their time and money elsewhere

March 7, 2024

by Mitchell Labiak

Vacancy rate climbing

Earnings and dividend growth look weak

Pretty much any way you look at it, CLS Holdings (CLI) is headed in the wrong direction.

The landlord's portfolio of European office assets outside big city centres is nosediving in value even faster than last year as high interest rates and questions around post-Covid working continue. Its net asset value (NAV) has been slashed by 28.5 per cent from its 327p high point in 2021, while its shares have lost well over two-thirds of their value since a high of 311p in late 2019.

IFRS earnings per share (EPS) do not cover its flat dividend, but adjusted earnings per share (EPS) stripped of valuation changes does. However, that adjusted EPS fell from 11.6p to 10.3 because its net rental income growth failed to offset rising finance costs from its growing net debt mountain, which is now larger than its equity value. This enormous leverage makes it unique in the UK-listed property sector. Not in a good way.

Consensus forecasts are for adjusted EPS to nudge up to 10.6p by 2025 and for the dividend to hit 8.22p, but even this limited growth looks overly bullish. CLS' vacancy rate has climbed to 11 per cent from 7.4 per cent the year before, driven by its empty UK offices, where vacancy climbed from 10 per cent to 15.8 per cent. When there is so much space in your portfolio, it becomes hard to raise rents, something retail landlords know all too well. The discount to NAV might tempt some, but we believe this is a fair reflection of the strong possibility that CLS will need to offload its emptying assets into a depressed market to chip away at its debt. Sell.

[nickrl] 10/3/2024 20:23:04

Despite a near doubling of interest charges they can still cover the dividend adequately although the margin is closing as more loans need refi but pretty well done for 2024 so not too much more upside rate exposure. Also mainly Euro denominated loans refi over next few years so with rates there looking like turning very soon should minimise future increases in finance charges.

[strathroyal] 07/3/2024 16:41:29

Skyship - You would think so but here are a few of the comments submitted with the recent planning application for change of use. As the letter is in the public domain I presume that it could be shown here but nevertheless I have only detailed a few general comments:

• Aldgate and Whitechapel does not mirror the wider London market and has the highest Zone 1 vacancy rate.

• The main reason for discounting buildings in the submarket is location rather than quality of product.

• Leasing voids on best-in-class accommodation in Aldgate & Whitechapel are up to 55 months without buildings being fully-let.


Artesian falls within the Aldgate & Whitechapel submarket which, unlike the City Core and the more popular City Fringe submarkets such as Farringdon and Southbank, has not seen demand for office space recover following the Covid-19 pandemic.

• Total office take-up in the submarket for 2022 was just 70,800 sq ft, 56% down on the 5-year average

• Only 5,000 sq ft is under offer in the submarket, 93% down on the 5-year average.

- Aldgate & Whitechapel has the highest vacancy rate (16.2%) of any submarket in Central London outside of Canary Wharf.

- This is a best-in-class development, the quality of the product is unquestionable, the location is the problem and the most common reason for occupiers discounting the property or not viewing in the first instance.

- The occupier viewing levels for stock in the submarket are some of the lowest in London

- Actively marketing 9 Prescot Street since March 2020.

- The most common reason for discounting Artesian is location or not having educational use secured.

-We were unsuccessful in securing them despite offering very tenant-favourable terms.

[skyship] 07/3/2024 13:15:23

strath - did we view the same Presentation?

They said 21 enquiries, inc. 6 universities. Only went on the Market at the end of November; so far too early to write it off as a white elephant - especially when one considers its prime location.

[strathroyal] 07/3/2024 11:44:27

I've also remained largely positive and added to my holding recently but it's to be hoped that The Artesian is their only white elephant and it would be interesting to know if the recent NAV update includes valuing this one at it's revised standing.

[strathroyal] 06/3/2024 22:25:18

Obviously struggling to let The Artesian and an interesting reference to seeking alternative use for educational purposes per slide 18 of the presentation. There are a number of planning details under the London Borough of Tower Hamlets website of which the most interesting is the letter from Cushman's dated 02/01/24.

[strathroyal] 06/3/2024 18:49:13

ghhghh - That director bought a large number of shares after the tender offer, effectively using the money raised from the offer to increase her stake.

[nickrl] 06/3/2024 18:13:58

@Sky developments cost 50m in last 12mths and most unlet or have the comment we see from them all "we've had lots of interest"
Of course a portfolio of this size needs ple ty of capex i suggest they need to get pre lets before embarking on too much more.

[skyship] 06/3/2024 15:55:51

UK vacancy rate looks excessive because of recent developments and the loss of the Westminster Tower sale. Should look a whole lot better 6months down the track...

[ghhghh] 06/3/2024 12:20:28

Renewed director buying would help, Seely bought many millions at c.130p last September

[nickrl] 06/3/2024 11:48:15

They all talk themselves up on ERV but rarely realise it. UK vacancy at 15% isn't healthy heading towards RGL levels. Keeping on top of debt refi but you only ever get an aggregated position. Looks to me they are using extensions in the main and this is leading to bow wave in 2025. The disposal plan is thus mission critical to avoid those refis.

Good that NRI has grown despite vacancy creep. Got a tasty 11% at Spring Gdns
as RPIX linked.

SP decline may seem overdone but still enty of headwinds so don't see much progress just yet but this update should provide a floor with a fabulous yield.

[wshak] 06/3/2024 11:28:11

Very illiquid share, difficult to buy in any real size.

I'm not chasing it higher now, but there really wasn't much available sub 91p before today.

[skyship] 06/3/2024 11:02:44

Well, the Presentation certainly underlined the bizarre under-valuation here. Massive ERV upside and debt well under control; yet at the improving 94.5p the discount a staggering 62.6%. NAV perhaps rather irrelevant really, but the yield at 8.4% certainly is relevant, especially as the 7.95p dividend could well be set to increase in 24/25.

[strathroyal] 06/3/2024 07:47:43

Good to see that the student property/business is up for sale, would hope that goes for £100M+.

[dandanactionman] 06/3/2024 07:40:51

All imho dyor I am a holder of these shares and like the company but1) am I reading this correctly that Westminster tower sale fell through2) vacancy particularly in uk is high3) finance costs are going up as expectedDividend been held is good news

[skyship] 06/3/2024 07:40:19

Ditto! At 92p Discount is 63.6% & Yld 8.64% (very well covered).

[spectoacc] 06/3/2024 07:39:59

Mixed bag - vacancy rate 11% (temporarily, they say, 7.6% really, which still isn't small). £263m loss is all NAV-related, with values having fallen c.12%.

Sale at Albert Embankment fell through, but they keep the deposit. Two more sales totalling £70m have "strong" interest, but it's at below the revised NAV.

No increase to divi, more debt to refinance, more sales to make - but you'd be hard pressed to say it's not all in the price down here.

LTV up to 48.5% & debt cost overall up nearly 1% & will rise.

[wapping67] 06/3/2024 07:28:54

Encouraging results with dividend held at 5.35p and covered 1.3x. NTA 253p and NAV 233.8p. Confident statement and I suspect we may see a reasonable bounce and directors are now released from a closed period. Either way I still consider this to represent a solid opportunity/ investment at 92p

[shieldbug] 05/3/2024 10:40:55

Thanks for posting the article Strathroyal. Would have been interesting to have had a question on state of financing in Germany.

[flyer61] 05/3/2024 09:32:53

A little top up...excited for the morrow!

[dandanactionman] 02/3/2024 17:30:02

All imho dyorI am in 2 minds over CliAppears cheap but I am concerned occupancy and refinancing.

[skyship] 28/2/2024 20:25:27

strath - a very good find; an interesting article. Offices a very variegated market. CLI operate with prime offices in prime locations for prime tenants. Values will be hit; but IMO not too seriously.

All should be clarified on the 6th.

[strathroyal] 28/2/2024 20:13:29

Recent article on CLS Germany

hxxps://www.refire-online.com/guest-columns/interview-rolf-mensing-head-of-cls-germany/

[cwa1] 28/2/2024 12:40:42

CLS Holdings plc ("CLS")
Notice of Full Year Results


CLS will announce its Full Year Results for the 12 months ended 31 December 2023 on Wednesday, 6 March 2024.



The results presentation will be taking place in-person at The London Stock Exchange,10 Paternoster Square, London, EC4M 7LS at 08:30am on 6 March 2024.



Investors and analysts can also attend the meeting by joining a live webcast and conference call.



The details of the meeting, webcast and conference call will be included in the results statement.