Lxb Retail Properties Share Discussion Threads

[loobrush] 07/2/2016 18:25

Papy02-where are uplifts coming from-if you look at March 15 accounts which say

NAV uplift and timings

"As the Group has stated previously, the independent valuers are obliged by IFRS to report fair value in line with the RICS' 'Red Book' guidance and the standard approach for investment properties under construction is to apply the Residual Method of Valuation. Under this approach, total costs including construction costs, professional fees, contingency and finance costs together with an allowance for developer's profit are deducted from the valuer's estimate of the investment's value at completion to arrive at a surplus which is called the Residual Land Value, i.e. the amount that a purchaser would be willing to pay for the development in that state and at that time. This approach works well in the early stages of a development however matters can become more complicated as the development progresses towards the date when rents start to accrue. It is important that shareholders understand that these valuations, which are properly recognised for accounting purposes, are different to (and in general lower than) the values which the Board would place on those assets when considering offers for investments. In some cases, there is a significant difference between the carrying value and the price the Group would be prepared to accept. At the current time, this is most notable in the case of Rushden Lakes because, when calculating the Residual Land Value, notwithstanding the recent planning success and the investment's very significant long term potential, the independent valuers are required to reflect, amongst other things, that only a small portion of the space is pre-let.

The Chairman's Statement reports the Board's view that there is still significant potential value to be unlocked in the Group's balance sheet and that the Board expects to be able to provide much greater clarity about the remaining value within the next 12 months. Shareholders may find it helpful to understand that the Group's current internal appraisals are suggesting that over time there is a further £75.8m of potential unrealised NAV in the investment portfolio, including the further phases at Rushden Lakes"

So, at the time of these accounts the asset value per share was 140p
Since then distribution of 45p per share leaving 95p

With possible £75.8 million further gain (as above) that equals
43 p a share.
So total asset value per share would be 95p +43p = 138p
That is a rough calculation but does not take into account recent share buy backs.
I expect investors are calculating anything from the Decembers asset value of 104p to 139p as above.

[papy02] 07/2/2016 16:18

1) There's quite a range of figures posted here so far for when the IM performance incentive kicks in - from 114p to 118p.

I make it 117.1p. My calc is below - I'd appreciate any corrections/comments.

a) Jan 1st NAV is stated as 101p, x 175.2m shares as of Jan 1st = £177m baseline NAV

b) 12% pa increase from Jan 1 2016 to Mar 31 2017 = 15.1%

c) So distributions must reach 115.1% x £177m = £203.8m before the IM performance incentive kicks in.

d) Buybacks from Jan 1 to date (Feb 7th) total 6.88m shares for £6.65m

e) So distributions to come must reach £203.8m - £6.65m = £197.1m before the IM performance incentive kicks in.

f) Current (Feb 7th) share count is 168.35m.

g) So the distributions to come are equivalent to £197.1m / 168.35m = 117.1p per share in terms of the current shares in issue.

h) The Jan buybacks have not much modified the stated 101p Jan 1st NAV/share - I calculate the current figure as 101.2p. So 16p "uplift" required before the IM performance incentive kicks in.

2) Estimates posted here of the likely value of future distributions (incl the IM performance incentive) range up to 140p/share in terms of the current shares in issue.

It would be great to understand the rationale as to where the uplifts are expected from, for each (or some!) of the estimates (eg Rushden Phase 1 completion = x pence uplift, etc)
Would anyone be kind enough to share that detail behind their top-line estimate?

[loobrush] 07/2/2016 13:48

From accounts published last May refering to npt's concerns

-----I have not commented thus far on the foodstore led investments at Truro and Ayr which are pre-let to Asda and Sainsbury's respectively. We were pleased to secure Planning Committee approvals for both in March 2015. As well as providing more than 166,000 sq ft of foodstore space, the consents include 1,185 houses and other ancillary uses. Inevitably, final confirmation of planning permission for large scale projects like these is subject to satisfaction of a number of detailed conditions, including sizeable contributions to local infrastructure. We are now working through these with the local authorities. Both investments are HELD AT at what we consider to be CONSERVATIVE VALUATIONS (which reflect very little uplift from cost) until we are satisfied that all the key post Planning Committee agreements needed to support a viable investment project are in place. We expect to have greater clarity on the REAL VALUE of these investments by EARLY 2016.

[loobrush] 07/2/2016 13:36

Well a lot of discussion all at once here.
Obviously at the moments there are some unknowns but my view is that as was stated last year the managers will give an updated final projected asset value quite shortly which includes all assets. It is pretty obvious that they have already worked out the figures.
This value should be given before the AGM so that the voting can be based on actual projected figures.
We shall see in the next couple of weeks.

[badtime] 06/2/2016 14:59

Ah that's it Eeza

[eeza] 06/2/2016 14:53

Re; Ayr
winsome147 - 15 Jul 2015 - 11:18:01 - 474 of 793
The 75m value for Ayr and Higher Newham is a rough guess based on the value of the Higher Newham and Corton residential plots minus infrastructure costs. I read somewhere that the Corton site could eventully contain 2000 homes but I don't know if LXB own that additional land but that would be some years away anyway and could be part of the 10 yr plan talked about.

I forgot to say there is a big Asda in Ayr too. So the Sainsbury megastore would be the 6th big supermarket in a relatively small town. But there is also a Lidl in town. I'm not convinced Sainsbury would still be committed to what is now an outdated strategy for supermarkets to build megastores these days. However, nothing to stop the houses being built. With these 2 sites its the councillors and not the planners making the final decisions. The planners recommended approval of Higher Newham (which is seperate from Threemilestone) but the councillors as ever thought they were more qualified than the planners and threw it out. If they cannot approve the new road plan then it is dead in the water.

There is siginifacnt risk with the two sites facing further planning obstacles so on reflection I will wait for more news. I'm guessing we should have further clarity on both sites by October. Would be helpful to know if LXB intend to keep going for aonther 10 yrs to build out Corton or just sell it on to a developer.

winsome147 - 29 Oct 2015 - 15:42:43 - 639 of 793
I've been siting on the fence for some time on this one but nice to see Higher Newham sorted which I hope will add at least a few pence per share to the NAV.

I previously posted on here that I knew Ayr well as I lived there for a time and I've just twigged (after looking at the directors' Bios) that Alastair Irvine is the very same who was a friend and neighbour of mine until he moved to Portugal. Cannot believe I did not spot this earlier. He is a decent guy and has been buying a lot of shares recently. Although I'd like more clarification on plans for the Corton site, I've finally bought in.

[badtime] 06/2/2016 13:25

20% up tick in just over a year ..yes I'd be very happyNPT why do u think we r possibly getting a raw deal in AYR in particular ..I remember a poster sometime last year being very negative in that site ..I can't recall the detail (he lived close by)

[thirty fifty twenty] 06/2/2016 12:26

loobrush, npt and tiltonboy agree with the great points and issues raised.

despite a history of providing clear and detailed updates this was some-what lacking.

my take on this is that they wanted to play down aspects until they had the new IM bonus arrangements approved by shareholders - so if the price still at 98p on 29th Feb I think there will be regular positive news flow.

also as tilton boys points out however we need to be aware that the market they are operating in is difficult and thus all negotiations tougher. the value is not really in the 70-80% of 'good developments' which anyone could sell, but the difficulty selling the last 20-30% of developments as a forced seller. A 20-30% discount in 'true value' has a significant impact (6-9% of overall value). It realistic to expect the IM to take some advantage of the situation - the good news is that we know all of these factors.

So me - the IM is incentivised to get >120p CASH within 14 mths,
so today at 98p I'd be happy with that return in the context of current markets.
ideally I wiesh I would get maximum value from the assets but as the Zurich Axioms advise.. "be happy to leave some for the next guy"

All IMHO, DYOR + BoL,
LXB is in my top5 hldgs

[tiltonboy] 06/2/2016 10:22

There had been talks about putting the remaining assets into a REIT, but I wouldn't be surprised to see those assets find their way into the managers new vehicle as npt mentions.

Referring to the Ayr and Truro assets, I think there may still be matters to conclude on the supermarket front, and I would guess these are the assets that might have been written down. Supermarkets are shelving store opening plans, and trying to wriggle out of contractual obligations where they have already committed.

At a minimum, I think the company could have elaborated on these issues.

I set out with a target of 120-135p, and given their performance in poor equity markets over the last nine months, I would be content with a figure near the bottom end of the range on the basis that there is an earlier timeframe.

[loobrush] 05/2/2016 20:51

I would like to point out a couple a couple of items.
1.The cash paid out last year could of been recycled by the management to achieve more gains.
2.They are not being given the opportunity to complete all the sites, IE. rushden 2 & 3 , living village etc.
So I expect this rejigged incentive is to some extent compensating them for this.
I will vote for this as I still think they are doing a great job.

[speedsgh] 05/2/2016 19:26

tiltonboy - yes, aware of that. value of Rushden may already be in the price but hopeful that the rest of the portfolio will return somewhat more over the following 9-13 months than I am buying it for now.

[thirty fifty twenty] 05/2/2016 18:45

When we see the interim results there will be a provision for the IM fee so that's great news as it will give great insight as to what Mgt have worked with auditors to show the likely expected final value.....

[thirty fifty twenty] 05/2/2016 18:38

a couple of points of clarity...

1 - I understand the new agreement is being voting on at the meeting.
shareholders have probably already been canvassed thus why we are talking about 29th feb yet the dec RNS indicated 'early in 2016.

2 - the initial hurdle was 12% = c.200 - 205p
(depending on how one adjusts for the divi paid)

Now the hurdle is effectively at 102p + 12% for 15months + 45p = 162p
This works out at around 9% p.a. from formation.

So to me, yes it is a reduction, but I think in fairness to the IM,
the conditions in their market place have been much much more difficult that initial expected. I see this as reasonable.

Regardless or its 'fairness', it's fact + all part of the investment decision.


To me its great news they are re-basing! they wont do this unless it gave them potential to earn money - so that means they have effectively signalled they expect to return > 117.5p and of course they must expect a decent level above that .. 10p/15p more.

So to be able to buy at 98p when mgt have signalled the value to be [AT LEAST]c.130p within 14 mths (50p of which paid back within 4 mths) is a great BUY signal.

Additionally with the recurring buy back... the price will hardly fall to much so one can park CASH into LXB at these levels knowing that there will be a stable 'out' price anytime over the next 14months if another opportunity arises.

All IMHO, DYOR + BoL
LXB is in my top5 hldgs

[flyfisher] 05/2/2016 18:08

From todays document. 'The revised carried interest provisions will provide a stretching target.'

The previously announced uplift to nav on completion of the rushden lakes deal should add about 12p to nav, giving a nav of about 113p.

How can the 114p base for investment managers bonus be seen to be a stretching target ?

Am I missing something.

[loobrush] 05/2/2016 17:29

So npt-So according to your calcs what will the final asset value be per share ?
Have you an answer ?