Empiric Student Property Share Discussion Threads

[spectoacc] 03/4/2020 10:52

My view unchanged - they may well be seeing good sales for the September year, but I don't think there'll even be a September year.

[mattphillips940] 31/3/2020 08:00

hxxps://m.marketscreener.com/EMPIRIC-STUDENT-PROPERTY-16805114/news/Empiric-Student-Property-Business-portfolio-and-dividend-update-COVID-19-30279957/ Full statement if anybody wants to read it. sets out the potential impact on the company and what they are doing to try and offset any impact on the finances in the medium term. In my opinion a very reassuring and sensible approach that will protect the companies underlying assets over the course of the outbreak.

[spectoacc] 31/3/2020 07:38

RNS reads reasonably well this morning, even with: "Despite a strong contractual position under the Group's lease agreements, but given the unprecedented and unpredictable impact of COVID-19, the Group will look favourably upon requests on a case by case basis from its residents who are either no longer in occupation or, due to University closures, plan not to return to their accommodation, to be released from their rent and lease obligations from 25 April 2020 onwards. We also remain committed to supporting residents who want to continue to stay at the Group's properties. The Group has carefully considered the impact on all our key stakeholders and believes that this is the right thing to do in these extraordinary circumstances. The impact of this decision is expected to be a worst-case reduction in revenue of up to c.GBP21 million for the academic year 2019/20. " But my big concern would be their optimistic take on next September. I don't personally think we'll be more than halfway through Covid-19 by then. Won't have been enough transmission for herd immunity, won't be a vaccine yet, won't be particularly welcoming of foreign students, who are most of ESP's business.

[rambutan2] 30/3/2020 21:00

I would have thought Empiric will come under pressure to offer a get out clause/refund for the summer semester, as Unite have offered. My son and everyone he knows in his Unite accom in Sheffield are taking up the offer as with the Uni closed down, along with any social activities, there is absolutely no reason to stay. Also, the summer semester rent is a bit of a rip off as whilst Uni effectively finishes in May, rent is paid until well into July.

[spectoacc] 30/3/2020 07:02

Agreed; also: "Shares would now have to increase by 70% to reach NAV again" They were on a decent discount to the moveable feast that is NAV, even in the good times, due to failure to cover divi. So you need both a new NAV, and a new discount to it. Not saying ESP aren't a buy, but if you believe Covid-19 will resovle sooner than say 12-18 months, there's prob better buys IMO.

[belgraviaboy] 29/3/2020 17:46

I think it is realistic to now refer to NAV as (very) historic. I for one do not have a clue what anything is 'worth' any more - but it is unlikely to be the same....

[rik shaw] 29/3/2020 17:30

No idea what Empiric approach will be but they won't be able to ignore the fact that Unite in a statement this week stated, 'Unite will not charge any student who wishes to leave their accommodation for the final semester of 2019/20, with effect from mid-April. We will continue to work closely with our University partners through our nominations agreements to meet any additional short-term requirements.'

[mattphillips940] 29/3/2020 15:41

That is very true nothing is guaranteed in such uncertain times and if the government intervenes the situation may change. It may be that Empiric has insurance policies for such an occasion or the government may step in with money to help students pay rent. Given that many of the beds are still occupied and nobody knows how long the universities will be closed I can't personally see the government forcing companies to issue a blanket refund to all students. It's also a lot harder for Empirics tenants to just not pay. They require either full payment for the entire academic year upfront or you can pay in three installments term by term in this case they require a guarantor. In the worst case scenario there are 12 weeks left of the academic year. Empiric has 9401 beds currently let. They make a net rental income of £115 per bed. If they cancel rents for the next 12 weeks they are looking at a roughly £13 million reduction in profits this academic year. Like you say the big question is going to be what happens come september. With regards to dividends my understanding is the company class part of the profits as being from rents and part as profit from building and then refinancing new developments. I imagine this is for the tax benefits it gives to investors as PID is subject to income tax and Non-PID is taxed at a much lower rate. RE the NAV poor wording by me yes the shares have fallen 42% below the NAV. Shares would now have to increase by 70% to reach NAV again

[arichardwilson] 29/3/2020 15:05

Can you explain the 70% discount to nav please?

[stemis] 29/3/2020 15:03

Empiric is currently trading at a 70% discount to NAV. Last EPRA NAV was 110.2p and share price is 64p so I make that a 42% discount

[spectoacc] 29/3/2020 14:33

Looks a professional piece of research. Re: "So any refunds given will be in the full control of the company." There's a letter in the Sunday Times today asking student landlords to forego rental payments, and for the govnt to step in if they don't. So I wouldn't assume that income is coming in. And if students withhold it, the govnt have already barred landlords from evicting/chasing the rent, at least for the next 3 months. The bigger issue, of course, is the following academic year. Covid-19 may die down, we may be back to something resembling normality within months. Or we may very well not.

[2wild] 29/3/2020 14:06

Yes excellent research and post. Just a minor correction, the REIT distribution rule is 90% not 95. Do you know why only a fraction of the Divs have been PID? Over the last 4 quarters average has been about 53%. Most other REITs pay 100% PID.

[panshanger1] 29/3/2020 12:59

Great post Thanks for the feedback ?

[apollocreed1] 25/3/2020 23:45

ESP at the end of the day has lots of small flats, so if there are no student takers why can't they be let out to anybody else who needs a flat? I can't see why they would lose any income from voids if they took that approach.

[spectoacc] 24/3/2020 15:49

Largely agree, assuming the world hasn't changed, and assuming this doesn't take a year to resolve. Not sure ESP would do well with an entire 12 months of missing income. Some mad, mad moves today - oil up 15 cents, RDSB up 18%.

[chucko1] 24/3/2020 15:27

Good call. Did the same, but underwater as I forgot to sell the ones I bought higher!! Too busy selling riskier things. This will recover, even if 2020/21 is a washout. This share’s weakness is to do with its former poor execution and that part has been largely overcome.

[spectoacc] 24/3/2020 15:25

Well done, all counts. Also looking to sell into this rally, can only see extended bad news ahead, particularly US death rate, and ours in a fortnight. Perhaps some better news after that.

[stemis] 24/3/2020 15:22

Closed out at 70.95p net. Could go a bit further but not enough upside to risk it. That's a 30 % profit in 5 days. Normally I'd pretty happy but at the moment it's just a drop of blue in a bath of red...

[stemis] 19/3/2020 14:00

Picked up a few. Don't think that university will be cancelled this September and, if it is, the absolute worst case scenario is that ESP will have no income and £45.7m of costs to bear (probably quite a bit less); they have £67.5m of undrawn facilities so no funding issues. That's about 7.6p a share compared to NAV of 110.2p. The following year the universities would have an extra year to accommodate so I don't think there'd be much probably with occupancy or price... Can't see this less than 90p in a year or two, which would be 65% return.

[chucko1] 18/3/2020 23:00

Half of NAV is a decent entry point. Even if next year is a washout. If I’m wrong, good luck with your alternative!!