The Local Shopping Reit Share Discussion Threads

[tiltonboy] 31/3/2017 23:47

frazboy,

I think there was an element of "cherry picking" involved, and I believe some properties that were originally intended to be sold by way of Private Treaty found there way into the auction to "test the water" I think the results give a compelling reason to put more into the auction process.

I was, admittedly, being cautious when I suggested 5%, but I would rather be surprised on the upside, and not be disappointed if it came in at that figure. We shall find out soon enough, so no point trying to be too scientific about it now.

We are also only around six weeks away from the interim results being announced, and there is quite a lot of disclosure made, so we will have a better indication then on what has gone, what is left, and any yield shifts as a result of the sales.

[frazboy] 31/3/2017 22:35

Tilts...

'...but you have made a major error in your assumptions...lol...What you have assumed is that every property yields 9.5%, when in fact some may yield 6% and some may yield 11%. If they have only sold the lower yielding ones it is wrong to assume that they have sold with an uplift of 20%.'

But statistically how likely is it that of the 11 properties they sold (for which I have all the data), they all had a significantly below average yield, which on aggregate is 7.5%? Why would they cherry pick the low yielding properties, in a given price bracket, for early sales? I've had a few and my logic may be dodgy but that seems extremely unlikely to me.

Manchester vs. Leeds - school boy error, apologies

[tiltonboy] 31/3/2017 22:30

strath,

Just come in after a nice steak, did some work on the sales, and then scrolled down and see that you had already done exactly what I have spent an hour on...lol...I have slightly different figures, but that is down to properties being valued in one band, but being sold in another, either up or down.

Having revisited the first Acuitus auction, I can't help but be disappointed by some of those sales, given the March results. I had feared the Acuitus March auction, but it surpassed my lowered expectations by a wide margin. I wonder what forms the decision to choose between Allsop's and Acuitus, as both seem to have good quality lots. Perhaps hillofwad can share his thoughts on this.

I mentioned in an earlier post that to stick to the Road Map, they only had another £11m of kit to move by the end of the year. This in effect would mean few sales, if any, above the 200k level, as there is around £17m of properties left below this level.

I will speak to Internos following the announcement next week, and will push for an accelerated timeframe. In particular I will push for the "core" portfolio to be reduced in size, with more properties sold in the next two rounds, and/or the marketing of the "core" to be brought forward by three months.

There are two more rounds of auctions for Allsop's and Acuitus before the summer recess, and three for each of Pugh's houses. Around £3.5m was raised in each of February and March, and there does not appear to be any signs of indigestion in the market.

I'm sure there will be reasons why the "core" portfolio needs to be £55m, and I will listen to valid answers.

[strathroyal] 31/3/2017 18:32

frazboy,

I've also been trying to keep tabs on the sales and my own figures up to and including the latest Acuitus sales are:

0-£100k 32 sold for £2.25M
£101-£200k 19 sold for £2.9M
£201-£500k 7 sold for £2.19M
£501k -£1M 3 sold for 1.93M.

So 51 smaller props sold for an average of £100k, potential loss on valuation of around 9%(based on the stated intention to average £110k). Bank debt should be down to around £35.7M.

Certainly not entirely accurate as LSR/Internos don't release sufficient information.

Also re lot 112, that is in the Leeds auction whereas I think you've just looked at the Manchester one.

[tiltonboy] 31/3/2017 17:44

frazboy,

1st line of the table.

You haven't made an error in your calculations, but you have made a major error in your assumptions...lol...What you have assumed is that every property yields 9.5%, when in fact some may yield 6% and some may yield 11%. If they have only sold the lower yielding ones it is wrong to assume that they have sold with an uplift of 20%.

If we focus on the 500k-1m lots there were 18 properties at the time of the report, with an average yield of 9.6%. We know that three have gone, with two going substantially lower than that yield. Of course, there are still 15 left, and we do not know the quality of those assets. It would be wrong to assume that they are all capable of going on 7% yields, but even if they were in the low 9's, we would see some uplift.

Lets look at the portfolio another way:

0-200k - 30% of portfolio
201-500k - 32%
501k -1m - 17%
1m-3m - 17%
3m+ - 4%

The hits are most likely to be in the lower range, but the more we sell at close to, or even above NAV, the less the aggregate hit. Hopefully the higher value properties will at least achieve book!

In all of this, we have to believe that " the Company's sales programme is currently focussed on smaller properties and those that are management intensive with higher non-recoverable costs or geographically dispersed."

The company are aiming for a "core" portfolio of £55m, which means the non-core sale process is already 45% complete, and hopefully at an aggregate discount of (very) low single figures. The next £11m of sales are key to my valuation guesstimates, but I am increasingly confident of the outcome.

hillofwad will quite rightly remind me of the costs involved in the sale process so far, but equally, today is the last day of the first six months, where they will have accumulated rent.

[frazboy] 31/3/2017 17:29

Your reply is much appreciated Tilton.

One question: "October- December is pretty straightforward with 22 lower quality assets disposed of for £2m. It's pretty safe to assume that they came out of the first line" - do you mean they came out of the Phase One Part a? Or from the first line of the table pasted in, in your post?

I was a being a bit dippy, and assuming that the 10 properties referred to in Phase 1 Part c of the Roadmap had values of over 500k - that's not what the document says, they have average values of 500k, which means that even ignoring your post, my estimate of 2 properties being sold from that category is clearly wrong.

I also made a double counting error in the number of lots sold (& pre-sold) in the March auctions. I now make it 14 so presumably I'm missing one (details details...). Of those 14, 3 were pre-sold (2 in Hamilton, and 1 in Kilmarnock). From those that sold (the 11 I know about) at the auctions I estimate the aggregate yield to be around 7.5% (aggregate annual rent divided by the aggregate sales value). Using this number and the "value equivalent yield" of around 9.5% (from the table you pasted) I've estimated that the properties have sold for over 20% above value - I find this very difficult to believe, and have assumed that I've made an error in my calculations somewhere. Regardless, I think your 5% over NAV estimate is reasonable, and I would be very disappointed if the March properties were sold for less than their NAV.

Thanks for the note on the Pugh auctions - I had briefly scanned the catalogue of the upcoming auction in April and had noticed that the properties were not the best - they were what I previously referred to as garbage. For what its worth I couldn't see all the lots referred to by strathroyal (112 is missing).

I'm looking forward to the company's update on the March auctions - should come in early next week with a bit of luck. I'm increasingly comfortable that this we'll pocket 35p+ 2 years or so down the line. Time will tell.

And time for beer!

[tiltonboy] 31/3/2017 16:26

Nosey aren't you!

[badtime] 31/3/2017 16:21

Buys of 30k and 17.5k..you Tilts?

[tiltonboy] 31/3/2017 16:18

frazboy,

I will try and address your points.

It might help if we look at the dynamics of the portfolio:

Value Range No. of Properties Value Equivalent yield


------------------- ------------------ ------ -----------
GBP0 - GBP100k 134 9.16 10.7
------------------- ------------------ ------ -----------
GBP101k - GBP200k 90 12.73 9.5
------------------- ------------------ ------ -----------
GBP201k - GBP500k 76 24.02 9.5
------------------- ------------------ ------ -----------
GBP501k - GBP1m 18 13.02 9.6
------------------- ------------------ ------ -----------
GBP1m - GBP3m 8 13.13 9.1
------------------- ------------------ ----- - -----------
GBP3m + 1 3.25 6.5
------------------- ------------------ ------ -----------
Total 327 75.31 9.5



October- December is pretty straightforward with 22 lower quality assets disposed of for £2m. It's pretty safe to assume that they came out of the first line.

February - Acuitus - Two were sold prior, three were sold in the range 186-208k, and one lot was sold for 634k.

February - Pugh - This is where the dross is being sold, and most of the lot sizes were sub 100k.

February - Overall raised £3.5m from 22 properties but on a 8.6% discount.

March - both auctions appear to have gone exceedingly well with 15 properties having been sold. I would be disappointed if these haven't been sold at a 5% premium in aggregate. I would anticipate that around £3.7m was raised in the two auctions.

Most of the sales (56?) have come from the lower valued properties, with only three from the 550k -1m band.

I think that properties highlighted for Private Treaty sales (500k plus), may have gone into auction, and achieved excellent results, so it may be that they will continue to do this.

I have urged Internos to accelerate the process, and await their comments.

I would guess that there is still a lot of "garbage" to sell, but if the other stuff goes at a premium it will hopefully offset that to a certain degree. Bearing in mind that sub 200k properties only account for 30% of the portfolio, and some of that has sold at excellent prices already (look at the bakery shops in Grimsby from Monday).

Hope that helps.

[frazboy] 31/3/2017 15:43

I'm trying to reconcile the Roadmap with the ongoing sales programme. By my calculations I think we have sold the following numbers:

October-December: 22 @ $2m total
February: 23 @ 3.53m total
March: 16 @ 3.94m total

I appreciate that I may be missing the odd property and my March total is based on the fact that I've estimated the pre-sale prices (using assumed yields varying from 10 to 15%) but, by my reckoning, we have sold at least 61 properties for at least £9.47m, since the start of the financial year. My issue is that the Roadmap talked of 90 smaller (@110k average) and 10 lower yield properties (@500k average).... now, the average sales price is around £160k thus far, and, as far as I can tell we have only sold 2 (both sold this week) of the properties over 500k (unless we sold some in February? Apologies I wasn't watching the February auctions closely). If this is correct, then we have 8 properties to sell which are valued at 500k+, which is at least £4m. Even if I'm mistaken and we've sold 5 properties in total over 500k then we should still expect proceeds of £2.5m bring us to around £12.5m total. Which leaves £2.5m outstanding.

In short, does this mean that we have a lot of garbage left to sell? I'm assuming that we have not sold any of the properties of type b (Private treaty Sales).

[tiltonboy] 30/3/2017 23:06

Nice 1m trade marked from Tuesday;)

40k was a buy;)

[badtime] 30/3/2017 18:43

Or maybe that 40k was a buy

[badtime] 30/3/2017 18:42

Couple of large trades at the end there and 40k dumped on the rise

[tiltonboy] 30/3/2017 17:48

This last lot have gone through Acuitus, and at excellent prices as well.

[skyship] 30/3/2017 17:45

How come we allknew they should be selling via Allsops, but Internos didn,t!

What are they doing to earn their 1million per annum?

Hopefully they will accerate the selling programme...

[tiltonboy] 30/3/2017 16:54

A slight anti-climax for the final three properties, but at least they went through above guide. I would suggest another good days work.

Hopefully an announcement early next week.

[hillofwad] 30/3/2017 16:48

Looks like they bought a portfoilo of Corals and Betfreds on sale and leasebacks Does anyone know how many are left in the portfolio
Cant believe the price paid for the one at Wickford Be interesting to see how the results comapreto book wouldnt be suprised to see an overall of 10%+
very impressed auctions way to go

[tiltonboy] 30/3/2017 16:25

Buying interest will increase if these sale prices continue to be good.

[badtime] 30/3/2017 16:20

And a bit of movement on the sp

[tiltonboy] 30/3/2017 15:54

A guide of 90k for Lot 61 looked on the low side, but £166k, on a 6.9% yield looks like another great sale.

[badtime] 30/3/2017 15:10

Well Tilts ......LOL