Gcp Student Living Share Discussion Threads

[edwardt] 02/10/2015 13:14

overseas posh kids love London and dad pays upfront in advance for nice digs in London while they pretend to study. rent is increasing 3 to 4% a year and properties are largely running at 100% occupancy. the trust is growing with a lowering cost of finance. how's that?

[jonwig] 30/9/2015 17:34

All done-and-dusted regarding C shares and acquisitions. I hope they have a rest period now rather than pursue new acquisitions. Maybe Empiric are over-stretching themselves?

nevernever - sorry no-one responded to your post, but really, I didn't know where to start!

[neverneverland] 08/9/2015 11:25

Hi, I am new to this stock and recently also posted on the ESP thread.

Can anyone give any advice on the company, its progress and what kind of yield if any they are giving. Trying to decide whether to enter this sector via these companies in a SIPP.

[jonwig] 27/8/2015 11:28

Yes, I can go with that ... thanks.

[edwardt] 27/8/2015 10:24

I think all I did was look at the nav uplift on the trust over the eighteen months and apply it to the percentage of the raise that had the forward agreement applied. actually by doing that I got quite a large uplift so think my 102ish is probably about right. we shall see....

[jonwig] 26/8/2015 18:26

I've looked at the "Forward Purchase Agreement" in the prospectus. If I've read it correctly, it seems to suggest that the C-share NAV at 30 Sept will see an uplift which covers issue costs: ie. it will be 100p or more. (How much more?)
the C-share price would seem to discount this.

I don't know if I've missed anything else.

[jonwig] 26/8/2015 16:39

edward - thanks, have I missed something? (Something good, anyway!)

Will come back to you on this.

[edwardt] 26/8/2015 11:26

yes but what about the forward agreement on the property purchase that is linked to digc? I expect a nice nav uplift there before conversion.

[jonwig] 29/7/2015 08:24

Is there any arbitrage on selling DIGS and buying DIGC?

DIGS ... nav 125.5 ... bid 132 ... offer 135
DIGC ........ 97.9 ....... 105 ......... 107
Say conversion ratio is 0.78:1, 4.2p dividends foregone, 0.8p sd and brokerage.

So 1 DIGS share gets you 132 - 0.8p = 131.2p, buys you 1.2 DIGC shares. These convert to 0.9 DIGS shares.


So this trade gets you a return of 0.9 DIGS - 4.2p for every 1 you held.

So how about selling DIGC and buying DIGS?

The share price ratio is 0.77:1 (bid:offer with dealing costs) which is just about the conversion ratio. So you'd gain the 4.2p in dividends. Worth it?

[jonwig] 11/7/2015 14:01

'C' shares trading around 105 (looks like a 7% premium at first sight) - will try to put a chart in when time allows.

IC positive on both DIGS and ESP in an article this week: DIGS more focussed but higher valuation vs NAV, ESP more diversified (geographically) and lower NAV premium.

[jonwig] 25/6/2015 13:33

Open offer oversubscribed and capped at £120m, which seems to be below the demand. Perhaps a sound decision.

Size of company should more than double, with 110m existing shares and 120m 'C' shares which will probably convert below 1:1.

[jonwig] 29/5/2015 18:13

Right, the C shares issue prospectus has been published.

As expected, they are the type of C shares which have been commonly issued by infrastructure funds, etc. and are in no way preference shares (they have to be called that, to satisfy the REIT rules).
No dividends for the C shares before conversion, the date of which is flexible, but I estimate it to be in about seven months time (prospectus p.76).
C shares will convert before Jan 2016's dividend declaration. Conversion won't be 1:1, but depend on relative NAVs.

Entitlement is 1 for 2 at 100p, with opportunity to subscribe for less, or more.
Apply by 23 June - if nominee account, the broker will want it done a few days earlier.

Target is 95m shares at 100p, maximum 130m. (Current issue is 110m ords, so they must expect a lot of excess demand.

[jonwig] 28/4/2015 13:46

tournesol - yes, I'm aware of that.

I think I've found the reason for the confusion in the REIT rules. A REIT is only allowed to issue one type of ordinary share capital, so the route taken by other C share issuers isn't allowed.

It can, however, issue non-voting fixed-coupon convertible preference shares, which seems to be their intention. It appears, from their RNS, that they expect to raise the funds to purchase three assets (at least two of them already owned by Tom Ward's private company) by October.

If that goes to plan, the monies raised will be fully-invested by that date and - assuming my interpretation - conversion would happen soon after that. In other words, I wouldn't place any bets on holding a "typical" preference share.

Assuming your interpretation, presumably you needn't convert. We'll both be happy!!

[tournesol] 28/4/2015 12:05

"What puzzles me is why they should use the term "preference"."

Because they are preference shares.

They take precedence over ordinaries if the co is wound up.

Their fixed coupon dividends take precedence over the variable and discretionary divi paid to ordinaries.

That's what a preference share is.

I think the C shares thing is irrelevant to the situation. The prefs will need their own ticker - it can as easily be DIGS-C as DIGS-P

[jonwig] 28/4/2015 10:44

Spangle - interesting points. I've looked for all sorts of stuff in manifestos, etc. which might affect my portfolio, and haven't come across anything with a direct impact on student accommodation. Labour government might have a general effect on capital values? Overseas students might be more/less likely to want to come here? Dunno.

ESP hasn't had quite the performance of DIGS, maybe because outside London. I didn't see any point in holding both.

~~~~~~~~~~~~~~~~~

tournesol - about 15% of our porfolio is in prefs of the sort you list, so yes, I'm familiar with them.

Renewables and Infrastructure funds have issued C shares from time to time, but they are converted into ordinaries within about a year, as a rule - and not at a predetermined rate. The asset make-up of the C shares is a separate cell and they pay dividends from those separated assets. When conversion occurs it's decided by the relative NAVs of each share class.
The advantage of issuing C shares is when the ords are trading at a significant premium to NAV, and subscribers may be unwilling to pay a similar premium for new shares.
What puzzles me is why they should use the term "preference".

[spangle93] 28/4/2015 07:10

Morning, sage folks. Two questions:

1. Has anyone seen anything in the exciting and compelling election campaign (irony) that may have an impact on the student property sector. Linked to this, is there a possible outcome that could cause the share price to fall (or rise?)

2. The share club I belong to is heavily into UTG, whereas I have shares here. I was looking at ESP this morning. There are a number of companies with a similar twist on the student residence theme. How many are too many, when does the pipeline of opportunities get spread too thin?

AIYOHO of course
Thanks

[tournesol] 28/4/2015 07:10

jonwig

you are misunderstanding what a preference share is, I think

I have much of my portfolio invested in preference shares issued by banks and others and regard them as a cornerstone of my investments. (LLPC, LLPD, NWBD, BBYB.....)

The difference between ordinary shares and prefs is major and is critical in any decision to invest. Ordinaries are not guaranteed any dividend and any dividends that are paid are variable and discretionary. When things go well they get rewarded, when things go badly they do not. Prefs get a fixed coupon (NB not a fixed yield) so much per share. The divi is not discretionary and is paid come rain or shine (apart from special circs which for example happened when the banks faced terminal difficulties). But the coupon does not get bigger oif things go well.

So in a nutshell, prefs are steady eddie things churning out a fixed divi but not participating in long term growth. Ords offer the possibility of much more reward but can also return a loss and are more variable/risky.

Anyway, let's wait and see what the details are here.

[jonwig] 27/4/2015 19:13

tournesol - they describe the C shares as "convertible preference", as you say, but that is unusual, to say the least!

Normally, C shares trade alongside ords until they are fully invested, at which point they convert in proportion to net asset values, so that the ords aren't diluted.
As for "preference", I don't think that will matter (maybe the coupon will be 0.1p or something) as the proceeds will be used straight away for the new purchase, and conversion within a year.

We'll need to wait for the prospectus to clear this up, but I don't think you're right about the coupon aspect.
I agree it would be potentially attractive.

[tournesol] 27/4/2015 18:04

The new shares are going to be preference shares which means they will have a fixed coupon which will have to be paid before dividends are paid to ordinary shareholders.

Also they may be redeemable at some pre-determined date - so have a fixed duration.

This means the prefs are in many ways more like bonds than ordinary shares.

Have seen nothing to indicate what that fixed coupon is going to be but I'd expect it to be at least 6%- 6.5% - possibly significantly more (maybe even as high as 8%?) RUSP for example has a coupon which provides an effective yield of about 8 or 9%

If the coupon is higher than 6% then there will be some scope for them to trade above the issue/redemption price of £1 so that there could be some short term capital appreciation - which will lower the yield obtained by buyers who pay more than £1.

Sounds like something I will be minded to subscribe to.

[jonwig] 27/4/2015 17:25

Open offer of 'C' shares announced - basically 1:2 at 100p. This way of doing it reduces the risk that the market might take fright at a new issue above NAV, what with some goings-on on 7 May.

Incidentally, this seems to be doing rather better than Empiric.

[edwardt] 24/4/2015 15:20

the unite results flagged it!