Newriver Reit Share Discussion Threads

[fenners66] 15/7/2019 13:16

nickname27
15 Jul '19 - 08:30 - 1388 of 1395

"12% of the working population works in retail. If a "tsunami" that wipes out retail sites to the extent that the land is worthless hits then your portfolio is going to have bigger problems than just NRR."

nn, you are completely missing the point.
Retail does not have to close, land does not have to be worthless.

But the profits for Retail landlords leveraged both to the value of land and the rental income can change far more rapidly than the falls in the other two.

The debt will still be there, the interest still needs paying , the staff should still be required to manage the business regardless of income and values falling so profitability could rapidly decline and with it the dividends.

That would still knock the share price further - and avoiding investing in declining share prices is what it's about.

I have been thinking and saying this for long enough and saying the market looks forwards so the effect does not have to be in the numbers yet - for me that was a good enough reason not to chase the yield here.

Seems the market has agreed too.

The newsflow for retail is still getting worse.
Sports Direct delaying results today - not for good news is it ?!

HofF seems to still be a yoke around their neck - so expect further store closures.

Then what ?
Destination shops close others close , values fall , rents fall. Sooner or later they will get new tenants but this will ripple out to all other landlords until the general level of rents has declined enough to give retail a chance.


Some say the rents here are already low . Why ?
Because the retail sites are not deemed Prime ?

So what happens when the Prime sites are almost as cheap then ?

[hpcg] 15/7/2019 10:55

Sale at something more than 19x rent.

This isn't directly related to NRR, I just post it as an indication that retail properties are clearly not worthless.

[rcturner2] 15/7/2019 10:53

LG, as an example you stated (and I am quoting) "it would be very easy for any pub that needs to close to be redeveloped for residential". This is simply not true.

[propinv] 15/7/2019 10:38

Conflict of Interest?

[lord gnome] 15/7/2019 09:21

By way of clarification before someone screams 'conflict of interest', I do not own and have never owned any shares in NRR.

[lord gnome] 15/7/2019 09:18

As examples, one local pub (a Marstons house in a village that had three pubs at the time) was closed down and converted into a co-op convenience store - by NRR as it happens, hence my interest here. Another, close to where I lived, was knocked down and the site used to build a care home for the elderly. One large site in my town was half-developed as a retail park. Change of use was granted for the other half and houses were built.

[lord gnome] 15/7/2019 09:12

Oh Dear. Sorry to say that you couldn’t be more wide of the mark, RCT. I came off my town and district councils at the last election. I was vice-chairman of my district council planning committee. I had to be trained for that job. I do know what I am talking about. My comments come from personal experience on the planning committee. Where do yours come from?

[rcturner2] 15/7/2019 08:32

LG, no offence, but I don't think you should be spouting off about the planning process, as you clearly have no experience in this area. You are way off the mark on quite a few of your statements.

[nickname27] 15/7/2019 08:30

12% of the working population works in retail. If a "tsunami" that wipes out retail sites to the extent that the land is worthless hits then your portfolio is going to have bigger problems than just NRR.

[propinv] 12/7/2019 15:17

Agree with all these comments fenners66. The change of use slide or alternative use that the board produced was meant to comfort all that there was downside capital mitigation plan that could be implemented in that Tsunami event. I doesn't stand up to scrutiny in the first wave of DD

[lord gnome] 12/7/2019 15:17

Nothing of the sort. It is just another option open to NRR and no doubt they will be evaluating every site against alternative uses. They have a huge pub estate now, and I venture that it would be very easy for any pub that needs to close to be redeveloped for residential. Similarly, a retail trading estate of big sheds could also go for change of use to industrial without great trauma. My belief is that NRR has the capacity and imagination to get best use out of its assets. That's why I will be buying the shares when I deem that the time is right.

[chucko1] 12/7/2019 15:16

The probability of the tsunami is far less than you think. In finance, tsunami-chasers (Bob Janjuah and such like) tend not to be good advisers to their clients. All these recessions and 60% market meltdowns etc. have a habit of not quite making it to the start line.

Every 20 years or so when they do, those with strong balance sheets will survive, and then thrive afterwards. NRR looks like it fits that description and is a well-priced risk.

[propinv] 12/7/2019 15:14

Good luck with that approach Gnome. I don't agree with your facts, save for the local council is obliged to consider any planning application, but you aren't going to get consent where they have mapped out their framework

[fenners66] 12/7/2019 14:18

So with declining asset values , rising debt ratios, reduced rents and profits - how would they fund a change of use?
Or are you suggesting a fire sale to another developer ?

Fine a small scheme in isolation -but that is not the Tsunami protection if a Tsunami hit....

[lord gnome] 12/7/2019 13:43

Not so PropInv. Most local authorities do not have a five year building land availability and are therefore open to planning applications from opportunistic developers. Plus, brown field development ticks a lot of boxes - better than building on green fields to supply housing. Even with an approved local plan in place, the local authorities must consider any formal application.

[propinv] 12/7/2019 12:52

Chucko - I think you are right on that assumption over time. But I think the time between A and B kills them if they all happen at same time (across all sites) In interim valuation plummets, cash flow drys up, covenants get breached etc. A lot of these businesses don't have issues because of profit, it's cash flow, market sentiment that forces their hand.

[chucko1] 12/7/2019 12:37

PropInv, I take the point. Though I think you are generalising as retail parks are only a certain fraction of the portfolio.

But either the park is functioning in which case there is a reasonable rent roll, or the opposite is the case (shades of grey in between, of course). In which case there is little employment in which case the council will likely accelerate matters.

[essentialinvestor] 12/7/2019 12:36

There were some extraordinary bargains in the ROI to be had.
To be fair if you can time anything about right there are usually
nice % gains available.

[chucko1] 12/7/2019 12:30

RCTurner, yes, anything is possible. Some trophy properties in Ireland fell 90% - but I can only speak of the general case. We are nowhere near as overstretched as we were in the run up to 2006/7 on the commercial side. Certain residential is mad, but there’s much more emotion in that, typically. And the fellow who bought the penthouse apartment of 1, Hyde Park Corner was not likely to have been fussed with the sub 1% yield.

[lord gnome] 12/7/2019 12:00

Surely Woodford is now out completely, full stop.

[hpcg] 12/7/2019 11:56

chucko1 Woodford is still a factor, he has between 14 and 28 days of volume to exit completely, if that is what will happen.

[rcturner2] 12/7/2019 11:55

Remember that these REITs have to value their assets and their loans contain covenants that include LTV ratios. The income can be fine, the voids can be fine but if the general market for these assets is going down, then so is the valuation of NRR's assets. The loans turn this into a geared play on retail, all fine when things go well, but equally it makes this worse when moving in the opposite direction.

I know personally an investor who held a £8m property asset with a £4m loan. In 08/09 the property was adjudged to have dropped in value by 50%, and he has been trapped in it ever since and it is not a happy situation.