Ct Property Share Discussion Threads

[alan pt] 26/1/2023 13:37

Rumours/leaks around the NAV due any day now maybe? I know it shouldn't happen, but...

Or maybe it's just that I finally gave up and sold in December, so my curse has been lifted from the price :)

[skyship] 26/1/2023 13:16

Hmm...what's prompting this I wonder. Highly welcome of course...

[killing_time] 26/1/2023 12:59

Looks like we are rising from the dead.

[spectoacc] 24/1/2023 07:27

@dip6666 - yes, if you think this is the last of the NAV falls.

It may turn out to be the worst of the falls, but the last? Consumer spending set to fall throughout both 2023 & 2024 (albeit is holding up better than expected so far).

The market looks ahead - it seems to be doing so correctly on CTPT, albeit income/cash generation/trading performance is ultimately what matters.

[nexusltd] 23/1/2023 23:33

@dip6666. In my view CTPT offers

Strengths:
FCF covered divi c.115%,
Low LV <20%,
Lowish borrowing costs 3.4% with weighted loan term of c. 3.5yrs.
Available cash 52mn c. 15% of gross asset value.

BUT weaknesses:
EPRA net Initial yield of 3.8% is low compared with SREI and API. The plan to address this is to sell the lower yielding estate in the SE and buy higher yield props. The new manager says he has successfully done this b4 on another REIT. I'm concerned that in current market conditions the yield gap between the two is narrowing, and not much property is moving. Investors have higher yield options and generally look for REIT yield = 10 yr gilt + 3/4%. Unless rental income leaps, or the manager's plan comes to fruition allowing divi to be increased the share price is likely to remain depressed.

EPC rating regulations will be extended from April 2023, to cover all existing tenancies for a minimum of EPC: E. A stricter EPC: C or above rating will apply in 2025 to all rental properties, new tenancies first, followed by all tenancies from 2028. Five of the 35 assets (14%) have an EPC rating of F or G. I don't know what the gross rental income is on these, nor do I have a handle on upgrade costs to EPC "E".

[dlp6666] 23/1/2023 22:48

@nexusltd

Since prior to the pandemic their widest discount was c.-20% (often much narrower), wouldn't that suggest that, at your projected discount of c.-32%, there'd actually be room for a share price *increase* of [at least] c.10% to bring back the discount level to pre-pandemic levels (assuming no further valuation shocks throughout 2023)?

Or am I missing something here?

[nexusltd] 23/1/2023 19:09

@nickrl. A good question ! The valuers will also have the same constraints. If they work to the same guidelines the published numbers will match.

If the CBRE's figures are correct then I calculate CTPT's NTV on 31st December 2022, accounting for its portfolio mix, to be c. 101p (+/- 1p). So we shall see in a few weeks. Discount to NTV at 69p/share c. -32%.

[nickrl] 23/1/2023 18:22

@nexus you have to wonder how much transaction evidence they've had for this though

[nexusltd] 23/1/2023 16:50

Indeed riverman77.
CBRE Q4 Industrial South-East = -23.5%
CBRE Q4 Industrial All-UK = -21.2%

CBRE Q3 Industrial All-UK = - 9.5%

[riverman77] 23/1/2023 15:36

According to CBRE data the Q4 falls in industrials were even worse than Q3, so probably big falls to come in next udpate, especially given their South East focus. I suspect this could take people off guard so not sure I'd want to hold these until next update is out of the way.
AEWU provided an early taster of what might be in store, NAV dropping around 10% in Q4 (despite holding up fairly well in Q3 and its focus on high yielding properties, which should in theory be less sensitive to rising yields).
in fact, most of the diversified REITs have large industrial exposure so my favoured property picks are now EPIC (100% retail parks, which is probably the best sector right now) and European property companies which seem to be holding up better (EBOX and SERE).

[skyship] 23/1/2023 14:00

Their Industrials portfolio is 100% SE, so, as discussed earlier, their NAV will partly reflect the sharp valuation fall in that sector. Still, I'm looking for c105p, at which level the discount will still be a generous 35.6%.

They are intent upon restoring the pre-Covid dividend level of 5p/share. May not do that in one year; but could well see 4.5p this year, delivering a prospective 6.6% yield.

Technically a very large gap opened up beneath the 200day SMA; and still well below the 50day. MACD trending up however; so could see a rally from this level.


free stock charts from uk.advfn.com

[nickrl] 23/1/2023 13:42

They took a hefty 9.5% on industrials at Q3 so would expect less aggressive at Q4. More needs to be judged on how well rental income is doing and the whether voids are increasing. SHEDs update earlier shows there is more life in the market than perhaps was expected although we are early days into the slowdown currently.

[hugepants] 23/1/2023 11:48

Yes hopefully they are ahead of the curve a little bit because they announced quite hefty Q3 writedowns. But if they match the CBRE Q4 forecasts then NAV is going to drop to about 100p for Q4 if you include the gearing.

[killing_time] 23/1/2023 11:41

They are currently on a -45% discount so you would think some of the news is priced in.

[riverman77] 23/1/2023 11:32

Is there any particular reason why you think it will be worse then other REITs? They have quite a large weighting to SE industrials so I guess that could work against it.

[hugepants] 23/1/2023 10:59

Should get a NAV update this week. It's not going to be pleasant.

[nexusltd] 09/1/2023 19:45

@nickrl and @skyship Thank you for your replies.

Indeed my question arose because, in my view, it is likely that UK-SE cap value % falls > RUK cap value % falls. Thus substantially narrowing the UK-SE to RUK yield differential; making the strategy difficult to implement. Of course as Sky rightly moots there may well arise unpredictable special situations / opportunities.

[skyship] 09/1/2023 14:08

nexus - yes, I believe so. The idea is to rotate out of some of their industrial allocation which is 100% SE. Buy in the NW at twice the yield so as to boost rental income and so boost dividends.

Problem is that they were 6months late with adopting the strategy. The next NAV return will show 10% falls in those SE valuations.

Still, there are always exceptions - a sitting tenant will come along and offer a generous price, a developer will have his eyes on a large car park etcetc. So, piecemeal they will surely make some progress with the strategy to better balance the portfolio with Southern sales and Northern acquisitions.

[nickrl] 08/1/2023 22:59

@nexus if you can sell high and find something with a good yield and prospects of course. I suspect they are sitting on the fence currently like many of the others.

[nexusltd] 08/1/2023 18:43

CTPT has an NIY that is c. 1.5% lower than that of API & SREI, and cash resources of c. GPB 32mn (c. 9% of gross asset value), ignoring the undrawn RCF.

In the September 2022 presentation Matthew Howard stated that he intends to make:

“Selective disposals to crystallise profits and recycle capital into higher yielding growth assets where we see value to enhance income yield.”

In view of market conditions is this strategy realistic?

[spectoacc] 23/12/2022 11:48

REITs will be a raging buy again eventually, but agree re survival. CTPT (assuming they don't do anything stupid) look pretty bomb-proof.

Only one I'm left in atm is a big box - EBOX - just isn't bouncing enough to sell. Probably a classic error, but agree boxes a lot easier to gauge.

[hindsight] 23/12/2022 10:34

Still hold mine here, flat inc income. For me key point is survival, so low LTV and not in weak sectors much. If believe gas curve, then in 2026 be different world, but need to get there
Personally think easier to guage reit value + or - vs bonds in big boxes as assets clearer

[spectoacc] 23/12/2022 10:00

You know my view ;)

I think we've had the falls on interest rate changes, and next to come is the fall on recession. Takes very few tenants going bust/stopping paying their rent to affect income, divi cover, NAVs.

You'd hope CTPT would be better placed than some, with industrial seemingly always in demand. But whether it's cheap here I'm not so sure.

What I do find interesting atm are the divergences - some REITs holding most of the dcb, some threatening to bounce off (or go through) recent lows, some already back down through them. OK, CTPT didn't tank as much as others initially, but if I were still a holder I'd be feeling slightly hard-done by to see it at new recent lows, when the likes of BCPT, AEWU, CREI, NRR are all well above.

The re-testers (eg RGL, AIRE, EPIC) will be interesting, tho ultimately I fancy all to go back through the Kwasi lows once the CVAs start.

But that's banging a familiar drum.

[nickrl] 23/12/2022 09:45

@specto they took a 9.5% hit on industrials at Q3 which was one of the higher markdowns across the reit peer group although their commentary at Q3 NAV update

" The capital value of the Company's industrial assets declined by 9.5 per cent
over the quarter which, while a meaningful adjustment, represents only a
partial offsetting of the 36.0 per cent capital growth the portfolio's
industrial assets generated in the 12 months to June 2022"

is not exactly giving much confidence that there isn't more to come. Mind you there is such a wide variation across all NAV updates im not sure you can draw any meaningful conclusion and i do wonder whether there is supposed to be a consistent methodology used across the industry!

Im still well under water here another i loaded up on before Kamikazes efforts and then couldn't bring myself to take more when it dropped back but happy with divi although i doubt it will be increased anytime soon.

[spectoacc] 23/12/2022 08:19

They are.

Agree CTPT will be one of the survivors, with their well-timed London sale.

But seeing how far Industrial got marked up, and the yields it went to, makes me think big downgrades to come.

Ignoring NAV - never a true figure at the best of times, particularly not atm - it comes down to gearing, debt cost, income, divi. Agree CTPT good on all of those. So then it's whether a 6% yield is enough when RPI inflation is 14%.

That depends on the alternatives, & whether the economy gets bad enough to threaten tenants' ability to pay.