Lxb Retail Properties Share Discussion Threads

[celeritas] 29/2/2016 10:34

Nail on the head npt. The IM are in a stronger position and are taking advantage.
The nav for me is currently undervalued which is very annoying, had the NAV been 115 or so then 130 wouldn't have looked that good but as it is it looks a great op for new buyers which it still is but could be a whole load better.

[thirty fifty twenty] 29/2/2016 10:12

mf

I think its about picking when to object,
I agree completely that although I laud the openness of LXB there has been a back track on the Dec announcement - I am much more frustrated with that as it holds back value in the stockmarket.

I think before the emphasis was in shouting about the NAV potential,
the 101p is now a much more 'conservative' valuation, using the short timescale of realisation as the basis. And all of it within the realms a reasonable range of estimated value (i.e prob 10-15% spread).
I know the 2 issues are linked but I'd rather the directors continued to highlighted the potential of the portfolio so that the discount to true value narrows, and i'm relaxed if they get an extra incentive for that though appreciate your stance.

hopefully after today there will be an incentive for good news to be released... its nice to be talking of this theoretical upside but I'd rather have it in the bank as soon as than on paper.

re the posts.... I;m pretty sure some content was removed!

best

[papy02] 29/2/2016 10:07

Mf,

I agree re lack of disclosure - either of the asset by asset breakdown of the 101p NAV, or alternatively an update of the current estimated "potential unrealised NAV".

So shareholders have had to vote "blind". This does not leave a good taste.

[badtime] 29/2/2016 09:59

Thirty...I think the posts removed were duplicates...but could be wrong

[mad foetus] 29/2/2016 09:30

thirty,
I'm a recent investor but my concern is one of corporate governance.
performance fees are increasingly common. I think it is unethical to agree a performance fee with an advisor, for the advisor to fail to meet the hurdle (but still get paid handsomely) and for the result to be a reduction of the hurdles.
I also object to being promised (in December) an update on the values of the properties in the portfolio early in the new year only to be told in January that the directors have decided the NAV is 101p and that will be used to rebase the advisors performance fee.

Whereas last may, the advisor himself said that the NAV did not represent the value that the company would be willing to sell the properties for.

The directors are supposed to protect the interests of shareholders.

[thirty fifty twenty] 29/2/2016 09:25

Its not a question of unprofessionalism / fraudulently.

I have 100% confidence in the LXB mgt integrity and they have consistently been open about the business, prospects and development.

I do think that incentive schemes drive behaviour - that is their intention.

What I don't see are any posts recognising the great job that LXB have done given the market they are operating in - which is unrecognisable from 6 years ago when IPO launched. The biggest risk to shareholder value was that LXB mgt team move on.... that they are totally entitled to do and whatever the assets would have left LXB plc floundering. its not that they would move on today - they would be professional etc.. and sell 80% of the assets but when it came to the remained it is only natural they would want to sell up and move onto another project - I;ve seen this personally in several wind up situations.

To me it makes perfect commercial logic to incentivise them to stay,
that incentive is totally aligned with current shareholder interests,
and with materially maximising shareholder value. the don't get paid ANYTHING until EVERY asset is sold and CASH is returned to shareholders.

Its easy to talk about sell this asset and that asset - the market is very difficult and the risk is not in the high profile asset but the less attractive assets - as I;ve said repeatedly a 20-30% fire sale discount on 20-30% of assets mathematically equates to 6-9% of total plc NAV.

Of course I understand the frustrations of those that invested 6 year ago in a great management team and thought that they would earn greater than 12% p.a. with their investment and the market has proven more difficult.

I believe the board has acted sensibly, and despite my optimistic expectations re 120p-128p within 12 months from here - I will be relieved when the CASH is in hand because there is still work to be done to realise value and its a good deal on the weaker assets that will actually general value in the given time frame.

most large shareholders are obviously in favour of the deal and have backed LXB mgt over the long term - as evidenced by the solid and stable shareholder register.

I wish you fun in your objections to the board - it seems ironically that you are fixated with your share of the gains over and above 120p. For me I am more interested to make sure that the 120p is reached which is not certain. To those that make money about 120p I wish them luck - I will have happily moved on.

That all said the arguments have been put forward logically though I notice some posts have been removed which I presume where defamatory but can understand frustration at your decision from 6 years ago not turned out as you intended.

[mad foetus] 29/2/2016 09:02

"Without the new agreement there was the risk that the IM only realised say 115p for us, and the rest was sold on to New Fund / friends."

I think this is an important point and one that I will ask the board directly at the AGM today. I want to know why the IM arrangements have been changed and who suggested it. The only rationale put forward is that the IM may act unprofessionally/fraudulently if they are not given additional incentive. If that is the rationale, it is at best unprofessional and at worst blackmail. I assume that LXB are a professional organisation and I am sure they will be represented at the AGM. I intend to ask directly whether they believe that they will not act professionally and in the best interests of investors if they are not provided with additional remuneration.

FWIW I think if the board and LXB sat back and thought about it they would ditch this proposal. It will cause LXB significant reputational damage: it will not be forgotten by the investment community that if you sign up as an investment manager, get paid handsomely for years and invest in an asset class that requires personal knowledge of the assets, and then ask for a hefty pay rise at a time the fund is in liquidation mode and a new IM practically cannot be appointed, that is at best, sharp practice. I assume the principals of LXB have not fully considered this aspect and will invite them to do so at the AGM.

[thirty fifty twenty] 26/2/2016 17:08

hi npt - yes that is my understanding.

in effect in the range 118p to c.128p our gain is dampened
[118 from 102p * 125 for 15mths to Mar 17)]

after c.128p we get the 80% again.

in addition it is adjusted for early CASH payments (which I want to happen).

So to me the incentive is heavily for the IM is to reach 128p but not above
(fine with me) and I'll move on.

Its critical to appreciate as well that the incentive is based on CASH returned.... so the figures are in effect net. i.e. the max efficiency point from the point of view of IM gain is an NAV of c.134.6p - 6.5p to IM, 128.1p to us.

But first they have to get us 118p CASH - the sooner the better,
and very likely the gain is skewed towards the end of the year / Mar 17.

For me the real difficulty will be deciding to reinvest the dividends or not...
in effect it'll be taking a higher position to get those higher returns just before the end. Still I see it as low risk unless the overall market starts to look a bargain.

Interested if anyone has other investments that offer a better 'zero' risk / 20%+ reward for 12mths

[badtime] 26/2/2016 16:55

Have a nice weekend everyone

[eeza] 26/2/2016 16:01

Shareholders signed up originally to a set of proposals.
The IM also signed up to a set of proposals.

But, both should hold to what was agreed.
The BOD have sided with the IM & given s/hlders Hobson's Choice.

They have a fiduciary responsibility to s/hlders - not to the IM.

& they are failing at it, imo.

But; never mind the quality - feel the width, eh?

[thirty fifty twenty] 26/2/2016 14:57

npt

very well reasoned and I can understand your frustrations,
and desires to keep the Board and I'm under scrutiny.

I see though that the revised hurdle works in our favour.
Because the first hurdle would not be met,
and because the market place is tough,
and its likely that the I'm will create a new fund....
they actually have an incentive to sell LXB assets cheaply and give themselves a head start in the new fund - this is always the risk of course and one relies on the integrity of management. I rate and trust the management but by adding in this new incentive I feel it gives me a baseline.

Let's say that current NAV is more like 110p to 114p (rather than 102p)
and that ultimate NAV is c.120p to 135p
but realistically we might get c.128p and IM sells on some assets to new fund.

So yes the IM in this scenario is getting 5p bonus (20% of 128p less 102p)
and some assets forwarded onto the new fund,
but as a shareholder I am getting protection because if you distrust the IM so much at least they will now sell assets for CASH for c.128p,
because they get the bonus immediately.
Without the new agreement there was the risk that the IM only realised say 115p for us, and the rest was sold on to New Fund / friends.

So I believe its actually in my interests that the new hurdle was put in place.

the total difference we are talking about (say 10p) is within a valuation range that it is not possible to say if I'm has done a good deal or a bad deal... i.e. is an asset worth 10m or 11m who knows for sure it depends on the deal and negotiation. What we do know now with the revised deal is that the IM's interests are aligned to us as shareholders. If the board had not agreed a revised hurdle there would have been a mismatch of interests because there was no chance of a bonus being earned under the original hurdle thus the IM has no incentive to maximise the valuations (particularly of the 2 or 3 assets that will be trickier to sell).

so maybe we agree to differ after sensible debate which is refreshing.
I do think as well that the market has been unbelievably more difficult that could have been imagined at IPO - its the internet to blame for that not the IM or Board. and regardless of any bonus payments the IM team have done an outstanding job to deliver 100% success in all developments.

none of it is in the bag so lets hope in 12 mths time we have 128p in the pocket and not worry about if it could a have been 133p.


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

[thirty fifty twenty] 26/2/2016 12:46

I welcome all reasonably argued post to a BB.

npt I think you that you have assessed the situation incorrectly.
I am a recent shareholder - very happy with my returns to date,
and very happy to incentivise management as they propose.
it is my choice out of hundreds of investment possibilities to stick with LXB,
they is a liquid market so if you don't like the company then don't invest in it.

The value of a property development company is always at the whim of those controlling the decisions. At any time they can 'sell' the assets. it is not difficult to 'sell' assets. the difficult bit is getting a good price.

I know you invested at the start but this was also the case at the start. When they started they said they would wind up in 5years but the risk then is not the 80% of asset that are good - it is the 20% rump of difficult assets. it was foreseeable then that not every development would be successful and that some assets would eb difficult to sell especially if you have a fixed deadline. So to me that was too much risk - it should have been part of your judgement at that time IMHO. In hindsight anyone who bought into LXB at the start made a bad decision - yes you can blame management for not 'delivering' but as an investor you choose that.

As Warren Buffet says:
"when mgt make a bad decision,
I dont blame the mgt,
I blame myself for deciding to back bad management"

LXB could easily have wound up within the 5 year timescale,
its just that the value from disposal of assets at that time would have been low. Shareholders were asked then - wind up or go on. We choose to go on and that looks like a good decision. I expect to receive 120p + 45p previous dividend, and my estimation is c. 120p to have wound up at the 5 year stage.

Out of hundreds of companies LXB has been very open and informative to shareholders. The investment proposition is very clear... do you trust mgt to sell these assets and return CASH and the IM is going to get paid £x to do so. The incentive is very very shareholder friendly... it incentivises CASH to be returned early, it only kicks in when all CASH has been returned, and its actual payment is phased once the hurdle is reached in shareholders favour. I like as well that mgt will be able to buy back shares on a limitless basis. I would love to know of other companies that have this specifc and shareholders focus mechanism in place. I can think of maybe NEXT, and Torday & Carlisle from 20 years ago... basically LXB is a rarity in the stock market and thus I think a very attractive investment proposition.

I have been very little invested for about 18 months but rather than CASH now I have LXB, as I see very little downside and realistic possibility of 25% upside with large CASH dividends within months.

For the record - of course I think the IM gets very well paid, and of course it very nice for them that the hurdle level can be changed. But if I got bitter and resentful every time I disagreed with director salaries and activities it would be a large drain on my energy. I am an investor, I analyse information and I assess risk.

What is brilliant about LXB is that the information is available and the risks known and documented. After that it is my decision. I am actually happy as well that there are disgruntled shareholders putting forth a negative slant - it creates a market. I hold a large chunk of LXB already so I'm in for the long haul but the longer it remains at 96p the move attractive the risk reward becomes and thus I am still buying as CASH comes in.

Good luck to all and hope your frustrations don't hinder your investment decisions or indeed your joy from the investing lifestyle.

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

[catsick] 25/2/2016 15:17

At the end of the day, its better the mgmt get 20% of the profit from here and investors get 80% than they sell the assets too cheap into a new vehicle and we get nothing, they are entering the critical phase here , an incentive to max out returns is not a disaster if you compare it to the possibility of them having no upside apart from in any new vehicle that takes over the longer running developments ....

[badtime] 24/2/2016 15:33

Uve duplicated yur post again :)

[mad foetus] 24/2/2016 14:26

I'm planning on going to the meeting, other commitments permitting.