The Local Shopping Reit Share Discussion Threads

[tiltonboy] 08/8/2014 15:49

I'm trying to pick up some LXB Retail with the money.

[badtime] 08/8/2014 15:46

That buyer gives me confidence to carry on holding

[tiltonboy] 08/8/2014 15:38

Buyer (if it's the same one) just got a bit more aggressive and has taken out the 35.25p, and 35.5p offers.

[skyship] 08/8/2014 14:47

Värde buys Local Shopping REIT's Project Minard

By Paul Norman - CoSTAR - Friday, August 08, 2014 8:28
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The Local Shopping REIT has sold a portfolio of 235 UK-wide local shopping assets dubbed Project Minard to Värde Partners in a deal with an implied property sale price of £79.3m.


CoStar News revealed in April that Internos Global Investors, which was appointed by the Local Shopping REIT Board to execute the proposed orderly sell down of the REIT's investment property portfolio last year, had appointed Allsop to bring to market the portfolio.

The REIT has confirmed now that sale via two of its property-holding subsidiaries, NOS 2 Limited and NOS 3 Limited, to Farraday Limited, an investment vehicle owned by funds managed by Värde Partners, has been completed a cash consideration of £11.2m.

The two subsidiary companies own 235 properties with a net rental income of £7.07m.

The transaction represents an implied property sale price of £79.3m and the subsidiaries will take with them third party fixed rate debt totalling £66.7m.

Allsop sold the entire share capital in the two Local Shopping REIT subsidiaries - NOS 2 Ltd and NOS 3 Ltd - which own the legal title to the properties. A debt package relating to a loan provided by Barclays Bank was included in the sale.


It was seeking around £80m or circa 8.5% for the portfolio, which comprised 235 shopping assets spread across urban and suburban centres across the UK but with a circa 50% bias towards London, the South East and South West.

The portfolio comprises around 750,000 sq ft of property in total mainly located on UK High Streets. It includes around 120,000 sq ft of vacant space mainly in upstairs offices and residential offering significant development and asset management opportunities.

The portfolio includes a series of planning permissions for change of use under the government's recent permitted development rights.

Around 450 tenants occupy the assets. There is the opportunity to increase this by around £1m via the leasing of vacant accommodation.

The Local Shopping REIT plc was founded in January 2005 Grahame Whateley and joint chief executives Mike Riley and Nick Gregory with the objective of building a portfolio of properties and letting units in the convenience shopping market. LSR was floated on the London Stock Exchange in May 2007.

In the latter part of that year the company adjusted its property purchasing programme in response to the downturn in the UK property market, focussing activities on active asset management.

From 2009 it developed its asset management proposition and established a number of joint ventures to complement its wholly-owned portfolio.

In July 2013, following a strategic review, the company's shareholders resolved to change the investment policy to enable the orderly liquidation of its assets, the repayment of debt and the return of the remaining capital to shareholders.

The Board appointed Internos Global Investors to manage the process. Steve Faber, Head of UK Markets at Internos Global Investors, has primary responsibility for operating the agreement between Internos and LSR for the management of LSR's investment property portfolio.

A revaluation of the Local Shopping REIT's directly owned portfolio in its last published results in December of last year revealed it comprised 640 properties with 2,037 unit lettings with a valuation of £168.9m with a yield of 9.48%. In 2012, the portfolio was valued at 177.2m.

The void rate across the portfolio has been improving to stand at 11.97% (end-October 2013).

Announcing the new investment strategy in July of last year the REIT said it had secured consent to a change of management from Indus (Eclipse 2007 1) plc (an affiliate of Barclays Bank plc) ("Indus"), the service provider to loans in two subsidiaries (for loans totalling £69.2m). In connection with the consent, the company agreed to amortisation on the facilities in the amount of £300,000 per quarter. These loans were due to be repaid in January 2017.

It added at the time that HSBC Bank is the provider of loans to two remaining subsidiaries (for an aggregate amount of £66.3m). These loans had been extended, to expire in April 2018.

Commenting now on completion of the deal the parties said that after taking account of the net short term liabilities of the subsidiaries of £1.4m, a total of £11.2m was received.

A further balancing payment will be made by either the buyer or the seller following post-completion adjustments in respect of rent receipts and debtor balances and certain balance sheet adjustments.

The implied sale price over the most recent valuation of the properties of £77.5m results in a gross book gain of £1.8m.

After adjustment for sales costs (debt breakage costs, impairments, vendor's insurance and marketing and agency fees) of an estimated £2.6m, the directors anticipate a loss of £0.8m.

The sales costs contain £0.75m of fixed rate debt breakage which are not included in the company's Net Asset Value (NAV) under International Financial Reporting Standards. This amount compares favourably with the implicit liability of £5.7m at the time of sale.

Following on from the sale, all the company's remaining financing is swapped or floating and the related breakage costs will continue to be fully reflected in the IFRS NAV.

The directors of the Local Shopping REIT said that adjusting the 31 March 2014 NAV for this transaction, together with a limited number of individual asset sales and recent movement in derivatives, results in an implied NAV per share of 42-44p on an IFRS basis and 47-49p on the Adjusted NAV basis.

The net proceeds of the sale will be applied to reduce the company's indebtedness, thereby reducing its overall loan to value ratio from 75% to 58% (before balancing payment).

Subject to the post completion adjustment, the company has no carried liabilities resulting from the sale.

As part of a transitional arrangement the company's fund manager, INTERNOS Global Investors Limited, has been retained by the purchaser for a minimum of three months to ensure the orderly handover of property assets and operational matters.

The sale of the subsidiary companies is in accordance with the company's investment strategy, adopted by shareholders in July 2013. Following the sale, the company continues to own 387 properties across the UK, with 1,127 individual letting units

[strathroyal] 08/8/2014 14:24

Can't imagine that they will sell properties individually as Internos are there as advisers and this sale has been reasonably successful. I would therefore expect the remaining properties to be packaged up and offered for sale sooner rather than later although you could not rule out a bid as one or two companies (CIC) have shown interest before.

Whatever way you look at it, seems to me that there remains a decent amount of upside.

[skyship] 08/8/2014 14:10

If Solera take on another 1m today, that would add 1.2% - so up from 26.1% to 27.3% - still quite a way to the all important 29.99%.

As a matter of interest, from 35p to, say, 45p on/by 31/12/16 would deliver a Gross Redemption Yield of 11.05%.

[skinny] 08/8/2014 11:32

They certainly are!

[badtime] 08/8/2014 11:28

someone/body is picking up a hell of a lot of stock

[eezymunny] 08/8/2014 10:00

My quick sums say properties sold on a yield of c. 8.9% which is about the same as the entire portfolio did in H1 results. Suggests (rather weekly!) that remaining properties might sell for around book value, and that something towards that 47-49p might be possible as final outcome. I'll make a final guess at 44p eventually returned. Any other guesses?

I have no idea how favourably remaining props compare with those just sold but yield a decent indicator I guess?

Feels to me like risk/reward still with us, with a good chunk of the risk side now eliminated.

Wonder if they will go for another portfolio sale or try to run off with individual sales (imagine individual would net better return but much longer timescale?).

I'll stick with it for now.

[redhill9] 08/8/2014 09:48

If Solera are still buying after their 500,00 addition last week, we have to assume they know what they are doing.

I'm a little surprised the share price hasn't moved higher than it has as IMO yesterday's announcement has significantly de-risked the NAV. I know the sale result was to some extent already in the share price (such news always seems to leak) but I would have thought a rise of maybe 10% resulting from the RNS wouldn't have been surprising.

An important point for me is that having sold a large part of the portfolio at virtually the published NAV the valuation of the remainder of the portfolio has far more credibility as being realistic than it otherwise might have had.

[badtime] 08/8/2014 09:34

yes it crossed my mind too...i wonder what there objective is (apart from to make a profit)

[skyship] 08/8/2014 09:31

Certainly are - presumably Solera soaking up more stock...

[badtime] 08/8/2014 08:52

Yes...plenty of sells being absorbed

[tiltonboy] 08/8/2014 08:44

Big buyer in the market, so I let him have a few of the last lot I bought.

[scburbs] 08/8/2014 08:12

Not a spectacular result, but completely transformational nonetheless. In the circumstances the share price response looks a bit muted (albeit it had moved up pre-announcement!).

Leverage below 60% LTV, operating profitability high and valuation pressure on the upside.

Got to be worth IFRS NAV at least.

[bscuit] 07/8/2014 23:29

Lol----- I do. As I recollect my estimate was relatively low. Any clues as to why final figure?

Aka Tod elsewhere

[skyship] 07/8/2014 18:38

Bscuit - 80.80m

So well done Bscuit - hope you continue to hold...

[skyship] 07/8/2014 18:37

"The sales costs contain GBP0.75m of fixed rate debt breakage which are not included in the Company's Net Asset Value ("NAV") under International Financial Reporting Standards ("IFRS"). This amount compares favourably with the implicit liability of GBP5.7m at the time of sale."

Yet again underlines why we need to consider the EPRA NAV - now 47-49p.

So, now we've sold c50% of the portfolio and the remaining portfolio (dross or not) is of course valued at Market, so no reason to think not just as marketable. I expect a second auction package to be announced before end 2014.

Personally disappointed that we didn't attract higher offers; but 50% of our NAV has been underwritten; so I suspect AlanJI is on the right track...

And the winner of the guesstimates is:.....

[tiltonboy] 07/8/2014 16:26

HE,

A valid comment, and it would be interesting to see what the criteria was when the individual properties were put into the respective subsidiaries.

It would also be interesting to see what sort of values were achieved by the "limited" other sales.

[gfrae] 07/8/2014 16:19

A good result over all under the circs.

[alanji] 07/8/2014 16:09

As you say Tilts a tad disappointing but great news. With the ltv down to 58% the discount appears too large so I have bought more and exceeded my normal 10% limit in the hope of a short term profit.

[greasynut] 07/8/2014 16:06

Sale at close to NAV.
Nice to see some progress.

[tiltonboy] 07/8/2014 16:00

A touch disappointing, but perfectly acceptable. Good news on the swap liability. Should be worth a bit more than this.

[skyship] 05/8/2014 12:20

& it seems as though they paid 32.5p for that top-up. I view it as a positive that they are continuing to add up at these levels.