Empiric Student Property Share Discussion Threads

[hannath] 21/12/2017 16:22

No Brainer "Hold"

NAV (£820 mill) = 109p a share

Sell (£600 mill) = 99p a share

Hold for 5p / 6% income even at this level and let them sort the issues out !

Merry Xmas everyone

[stemis] 21/12/2017 16:05

As FD she'll have as good a view as anyone if the numbers are moving their way...

I'd have thought Brenda Dean's days were numbered surely?

[jonwig] 21/12/2017 15:52

Still, very reasonable encouragement. Stabilisation and success with the business plan would deliver more than a take-out at 100p, I guess.

[spectoacc] 21/12/2017 15:32

Blast - so no sale process then.

[speedsgh] 21/12/2017 15:21

CFO Lynne Fennah buys 55,400 @ 89.5p = £49,583

Director/PDMR Shareholding -

[spectoacc] 21/12/2017 14:44

Perhaps a slow burner..

[belgraviaboy] 18/12/2017 09:40

Given the current 86p price it does not look like anyone is buying the prospects of the 99p take out story

[riskvsreward] 16/12/2017 09:22

Any chance of a merger with digs or a take over by utg. That would remove this useless board andmanagement and reduce the cost, benefit from synergy and give the existing shareholder an exit if they so wish.

[jonwig] 16/12/2017 07:50

@ arichardwilson - the 23 Nov RNS was styled "business review". The fact that Tim Attlee is described as "acting CEO" suggests they have given themselves some flexibility as to their next step.

The key person is, of course, the Chairman. She should come to a decision about the conflicting interests here which include the aggrieved large shareholders (they hold a big chunk), the existing executives and potential buyers.

Selling the whole company for 100p might not get shareholder approval if a new CEO from outside could convince them that the prospects are viable. However, nothing has been said about the "search for a new CEO", which I found a bit unusual.

Current LTV is 36%, and their ceiling is 40%. This is actually quite comfortable if their debt covenants specify 40% (it would be higher in practice), as it would take a 10% fall in their property values to break that. Even so, I imagine the sale of some properties is part of the strategy.

[arichardwilson] 15/12/2017 16:42

I have had confirmation from somebody in the student digs sector that the Property Week article is correct. The board of ESP have finally realised they do not have the management to run this portfolio so would be better off selling to someone who can do a better job. Strange that the directors have said nothing to shareholders about a strategic review or considering options when the property market is aware of their plans.Some big shareholders are apparently incandescent at being misled in the July share placing.

[spectoacc] 15/12/2017 16:28

DIGS certainly seems the best comparison; could argue ESP has done more on the development side?

[jombaston] 15/12/2017 16:08

Interesting discussion. I too sold out some time back and anticipated re-entering at some point. However, I have since done more analysis across the REIT sector and what stands out is the breathtakingly high costs at ESP.

Part of this is the high property operating expenses that come with running these student properties. While the yields on student rooms might look good these are not really comparable with industrial property yields. Commercial tenants might pay many costs themselves or might be charged for extra services. They certainly don't get free utilities and staff to look after you.

When ESP say they are looking for a 60% operating margin moving toward 70% over time, this means they are paying 40% in property operating expenses hopefully reducing to 30%. This doesn't include admin costs which were running at over 30% of rents in the latest numbers. Add in finance costs and there isn't really much income left.

Compare this with DIGS where operating margins are 79% (21% costs) and admin expenses a little over 20% of rents. This is presumably where ESP would like to be. If they can get there it might not look too bad. But I wonder if they can with a much more diverse portfolio geographically and (to date) more aggressive expansion.
So I agree with the suggestion that they might want to look at a more focused portfolio.

I won't start comparing these op & admin costs with other REITs as you won't want to be in the student sector at all! And the infrastructure REITs are looking cheaper now Labour have got rid of the premiums for HICL and JLIF.

[clausentum] 14/12/2017 13:43

Something is not right, it does not make sense, we must be missing some vital information. You don't just sell off the whole company cheap because some buildings are not cost-effective, you sell the ones which are in the wrong location and tighten up cost controls on the others. It shouldn't be that difficult to find a suitable executive to shrink the company a bit down to concentrated groups of profitable buildings. Even if shareholders are likely to make a small return by buying now many will be selling up because the shares have lost their purpose, which was to provide safe steady increasing income over the long term.
I sold up in August expecting to buy back at a slightly lower price, but every time I was tempted to buy again I felt there was more bad news to come, and even now more bad news would not surprise me.

[stemis] 14/12/2017 12:11

Who says they can't rent them?

[wskill] 14/12/2017 11:51

Not seen the reason for selling surely renting students rooms cannot be so difficult that even this shower could achieve a profitable outcome. What are they not telling us is there anything wrong with the assets why are they not able to rent them and make a profit remove this management team and put another capable team.

[stemis] 14/12/2017 11:28

I'd much rather they completed the roll out of their development pipeline and then see where we are...

[scallywagkid] 14/12/2017 08:56

Touting a low ball initial price should encourage an auction. Final settlement somewhat nearer to NAV".

[riverman77] 14/12/2017 08:40

Great find. Although a 600m sale for the 820m portfolio would be a discount of around 27%, ie some way lower than the current discount,which doesn't quite make sense.

[spectoacc] 14/12/2017 08:11

Very interesting, thanks - I'd actually be disappointed with that, despite being a bearish holder. Average buy price is lower but there's a long-term dividend stream there if they can sort themselves out (my bearishness is based on them having failed to sort themselves so far).

[hannath] 14/12/2017 07:58

interesting ! ...lets see how it reacts today

[jonwig] 14/12/2017 07:27

"Empiric Student Property is considering putting itself up for sale for around £600m, Property Week can reveal."



That would be 99.5p a share. Recent buyers would be happy enough, but not those who subscribed in the last fundraising.

[riskvsreward] 13/12/2017 18:32

Exactly, if like me you attended Uni. about 20 years ago, then the rent for a on campus room was about £125 a month all included, now you have to pay over £600 to £800. So that is both growth in income/rent and capital value in the long term.

Currently if they don't overpay and be cautious with development cost, they can buy property with initial yield in the 5 to 8% and if they take on debt, it will be costing around 3 to 4% so how cannot they make money?

[belgraviaboy] 13/12/2017 09:17

It is now sufficiently hated for me to be interested.

Positive steps include the divi cut and management changes.

This is not rocket science. Fill the rooms, cut costs - don't be greedy. The rest will follow.

Small long position taken.

[spectoacc] 13/12/2017 07:18

@riskvs - or unless they overpaid in the first place.

Thanks @Jonwig, Numis target says it all. Just them & me!