Ing Uk Real Estate Income Trust Share Discussion Threads

[skyship] 21/11/2008 11:51

KEIF report that the deal doesn't affect them - not directly at any rate. That one doesn't look excessively exciting in any event - not compared with the value in IRET & IERE.

[nickcduk] 21/11/2008 08:12

Good spot Skyship.

Here is a link to the article in the FT.



It suggests they are taking a sensible stance in their lending. I think it bodes pretty well for IERE. I picked up a chunk more in IERE yesterday at 15p. Still looking to add heavily to the position. I think there will be plenty of time to add though even after news of a successful refinancing. I don't have high hopes of them reaching conclusion with banks before results next week so the shares could lurch lower still.

[skyship] 21/11/2008 07:55

07.30 - Bloomberg reports HBOS has agreed a major refinancing package for Kenmore (KEIF) - however, no mention elsewhere that I can see! If true, would certainly be a positive.

[chopshs] 20/11/2008 13:26

Don't forget that capital values are determined from yields and rents. Falls to date have been caused almost entirely by yield expansion. Falls from here will be caused by further yield expansion and increasingly from rental value falls. With increasing tenant failures and companies' desire to cut costs, the outlook for rents is not good. Fortunately most existing leases are subject to upward only rent reviews, so landlords of let property have some protection whilst their property is let. Apologies if I'm teaching to suck eggs...

On a more positive note I can't believe how low some of these things have gone but beware, IRET has plenty of company in terms of its relative performance.

[skyship] 19/11/2008 07:51

Thanks Nick.

[nickcduk] 19/11/2008 07:51

Allsop are the biggest players in auction market. Here is a link to the last auction in mid October. As you can see yields hardly Armageddon like.



Next auction is on the 9th December



I think Allsop actually flogged our last mixed use property. I saw a picture of it the other week.

[skyship] 19/11/2008 07:46

Kavnish - ditto, thnx for that. My question is: do you know when the auctions take place?

Personally, most likely as I stated earlier, I suspect that when it comes down to it there will be a bidding frenzy at yields in excess of 9%. The low interest environment and strengthening bond market will quite possibly result in more buyers than expected and a yield at the bottom of no more than 8%-8.5% for prime property. The fall has been flagged to all and sundry, resulting in a buyer famine - so those buyers will all be looking for the same opportunities at the same time. Result, higher auction prices than currently feared! It will be very interesting to see what happens....

[sleepy] 19/11/2008 00:05

Thanks Kavnish - interesting and helpful post.

I agree that values have fallen by c 25% as far as valuers are concerned. However this probably underestimates the level of where the market is now at. We may also see more pressurised/forced sellers over the next 2 months. I would not rule out a peak to trough drop of 50% in capital values which implies a doubling of yields, even though this seems a little unlikely to me in a low interest rate environment. However I can see that there will be more voids and that, with banks being more selective, tenant quality will become more important.

If values are already down by 25% from peak then a drop to 50% would imply a fall of 33% from current "values" and would suggest that IRET's properties would be valued at up to a 10% yield depending on their level of voids.

Interested and a little surprised by 2 of your comments - buy-to-let mortgages at 4.89% and Savills suggesting yields at 4-5% over 5 year swap. Any further info on these appreciated.

[kavnish] 18/11/2008 21:31

Interesting pricing been seen here. Do people have a view on where commercial yields will blow out too ?

This is in my view the best placed of the REITS the Fm is managing well with a couple of good well timed disposals.

The trick is the LTV, if asset valued fall below 450 million then this starts to create issues for the manager.

After repaying debt they probably have about 15 million still in cash so the reality is they could take a hit of another 10% and still not require disposals to avoid a covenant breach.

I expect to see asset values by 50% from their peak, 25% of the pain has already happened.

10% is headroom the company has to time further exits.

If assets worth 90 million can be sold this i am guessing will create a worst case scenario.

There are other options open to the FM , such as paying a fee and looking for a covenant waiver, for example if the LTV could be moved upto 60% this would be worth paying a fee to the bondholders.

Given the recent changes in the funding rate the funding has gone from being exceptionally cheap to reasonable. A standard buy to let investor can raise money at 4.89% so these options also open up to fund if the liquidity kicks back in.

The current drops are hedge fund bailouts completely agree, the trick here is to see the wood from the trees and be clear about what is happening in the real world.

The commercial auctions in December will tell us what is happening to yields so we can understand if yields are stabilising or still moving out.

Savills has a prediction of 4 to 5 hundred basis points over 5 year swap funding.

This is implying a yield of 9 to 10% lets see what the auctions throw up

[skyship] 18/11/2008 15:28

Well, the IMS seems to suggest that it has indeed been pure selling based on need; rather than selling based on a more than average deterioration in the fundamentals:

[nickcduk] 18/11/2008 10:59

Read an interesting article on Hedge Funds de-leveraging their positions:-



Highlights how hedge funds have been drastically reducing their long positions and also the number of positions they hold. QVT have been culling their portfolio equally aggressively and are probably responsible for the collapse in share price here. They went below 3% in mid August and probably held around 10 million shares at that point. Once cleared the share price may begin to stabilise. Equally I think Moore macro were large holders in IERE.

[skyship] 14/11/2008 09:00

Today's IMS from Brixton makes interesting reading. I've highlighted two extracts:



"Given the valuation standard imposed of a willing buyer / willing seller assumption further caution over balance sheet valuations is needed but it is unlikely, in our view, that transactional pricing will decline to the levels implied by the current stock prices of many of the UK REITs."

" Brixton's portfolio is externally valued at the end of each June and December and given the decline in our portfolio value June 07 - June 08 of 15.5% our estimate of the worst case peak to trough fall in value for our portfolio is approximately 40%."

[chopshs] 12/11/2008 21:27

If the market has any specific concern with IRET then I reckon its the 50% LTV covenant. I accept 50% is a low figure but it will still need addressing if breached and in those circumstances, I guess the loan note holders will want their pound of flesh. By my calc's the portfolio can fall about 11% before it's breached. Unfortunately I think property market valuation declines in Q4 are going to be in the order of 10% (i.e the worst quarterly performance since the downturn commenced) and some may be selling now in anticipation the covenant issue is just around the corner. As we all know, the market is killing anything with a potential debt issue.

[nickcduk] 12/11/2008 19:30

A brutal couple of days for IRET. Don't think it is anything company specific. The seller from a couple of weeks ago has simply decided to unload again. That coupled with the fact there are few buyers for property trusts at the moment has led to the carnage. There was a large seller in auction so I wouldn't be surprised if chophs is right in that we might hit new lows again.

In terms of relative valuation we are cheaper than the REIT's of this world. We have lower gearing than others and much higher dividend yield. No development properties on the go either. Also have less exposure to retail and London offices where the greatest tenant default and pressure on rents is most evident.

Here is a list of our top 10 tenants. None of whom seem to be in any particular trouble. TAN could be argued as being risky but they have plenty of cash and their problems are with their US operations. We own the property that produces the electric vehicles and that part of the business has a stronger footing.


TNT UK Limited 7.6
Merrill Lynch Europe Plc 3.3
Cadence Design Systems Limited 2.8
Sybase (UK) Limited 2.5
Tanfield Group Plc 2.4
Barclays Sharedealing 2.4
Tibbett & Britten Limited 2.4
Menzies Hotels Property No.20 Limited 2.2
Computer Associates UK Limited 2.1
S P Group Limited 1.9

[chopshs] 12/11/2008 13:55

My guess is that it's simply that the PIT's have been outperforming the prop co's over the past week and the market is correcting the position. I expect all the PIT's to be hitting new lows again.

[tiltonboy] 12/11/2008 12:03

SKYSHIP,

I would guess somebody has got spooked, and is getting out of the smaller plays.

[skyship] 12/11/2008 11:58

A bit of a relief rally in the property majors (BLND,HMSO,LAND etc) after the LAND figures, but the tertiary property trust sector being badly hit - IRET, IERE, MERE, TAP, UKCM. Any ideas anyone?

I obviously moved into IERE too early, but the £20m Mkt Cap compares with a last property valuation (30/06/08) of E.675m & debt less cash offsets of c.E390m. A 20% fall in property valuations would still give us c.E150m equity. Still, until the end November NAV & Refinancing statement, the panic machine may well win the day....

[sleepy] 06/11/2008 22:38

Nevertheless it can't be bad news that "ING Real Estate Investment Management (UK Funds) Limited" - what a mouthful - has bought shares

[nickcduk] 06/11/2008 21:58

Well spotted. Jumping the gun. Again!

Well done on your UKCM trade. Bears make money, Bulls make money and pigs get slaughtered!

[sleepy] 06/11/2008 18:48

Skyship - well done on UKCM

[skyship] 06/11/2008 18:11

Not a buyback - just a related party transaction surely.

Hi Nick - You asked: "Do you still have your UKCM?" No, sold the last of them @ 65p yesterday. They had moved from bizarrely oversold to just "Fair Value". Will remain on my Monitor as a very good friend for buying again sub-60p.

[sleepy] 06/11/2008 17:57

Not sure this is actually a share buyback -

"ING UK Real Estate Income Trust Limited ('the Company')

6 November 2008

Purchase of Shares by ING Real Estate Investment Management (UK Funds) Limited

ING Real Estate Investment Management (UK Funds) Limited has notified the Company under DTR 3.1.4 R (1) ( c ) that on behalf of an ING associate it has purchased 100,000 shares in the Company at an average price of 37.5p'."

[nickcduk] 06/11/2008 17:52

Excellent news:-



Exactly what we were looking for from the company. A cut in the dividend and a portion of remaining profit to be used for a share buyback. Should help put a floor under the share price. It will also enhance dividend cover, increase eps and nav.

[tiltonboy] 06/11/2008 14:59

Sleepy,

No implicit mention, but under certain circumstances they obviously will. Hopefully it won't come to that.

[nickcduk] 06/11/2008 13:11

Rate cut obviously very positive on a number of counts. We don't have any floating rate debt so we won't benefit on that score. Retailers should benefit markedly from consumers having more money in their pocket to spend. That should help retail sales and support what is the most stressed part of the property market. With rates as they are it should make property a more attractive investment and encourage cash buyers to park their money into the sector. Should help stabilise values.