Newriver Reit Share Discussion Threads

[nickrl] 18/8/2019 20:12

Also of note is that circa 120 pubs are available on the Hawthorn Leisure Site (its linked off NNR site pub page so is current). However, a random sample didn't throw up any as closed and most had a web or social media page so maybe this is just usual level of churn in the pub world but feels a high percentage to me.

[spectoacc] 18/8/2019 18:53

54p of every pint goes to the Treasury, rising by RPI inflation.

[eeza] 18/8/2019 17:50

No.
Uni's are for snowflakes, yet to experience life.
Pubs are for boozers coping with life.

[shawzie] 18/8/2019 14:07

Who said "let the trend be your friend"?
An article from the The Times a few days ago ;
"A Scottish university (Abertay University in Dundee)has announced that it is to shut its Union bar, as there is no longer enough demand for alcohol amid a growing number of teetotal students. Income at the bar has dropped drastically in recent years as many students now prefer coffees and cafe culture to cheap pints and shots.
A recent survey by the National Union of Students found that one in five students in the U.K. is teetotal and that demand for alcohol-free university events us rising."

Are we seeing this trend already in pubs?

[shawzie] 18/8/2019 14:07

Who said "let the trend be your friend"?
An article from the The Times a few days ago ;
"A Scottish university (Abertay University in Dundee)has announced that it is to shut its Union bar, as there is no longer enough demand for alcohol amid a growing number of teetotal students. Income at the bar has dropped drastically in recent years as many students now prefer coffees and cafe culture to cheap pints and shots.
A recent survey by the National Union of Students found that one in five students in the U.K. is teetotal and that demand for alcohol-free university events us rising."

Are we seeing this trend already in pubs?

[essentialinvestor] 17/8/2019 12:22

Tony's list might be more interesting if we were mid recession, or beginning
to emerge from one. I would substitute LAND (don't hold) for BLND just fwiw.

[chucko1] 16/8/2019 21:33

As you say, it’s all in the stability of the rent roll (net of borrowings which are largely fixed and so the liability side is stable). The rest is just noise in comparison. And in noise, I include whether the property is primary, secondary or tertiary as well as its NAV as these are all a function of NOI stability.

NRR has been designed to be able to withstand these cycles. Let see if it can as the better REITs were able to in the mid/late 2000s, notwithstanding the panic which induced many to sell at any price even though rent was stable!

[hpcg] 16/8/2019 18:44

nickname27 I am long so in essence I agree with your analysis of whether this is an ongoing business. I don't see any sign of their rent roll being under pressure, and like you I see no immediate prospect for the business of their tenants disappearing. A recession might even be good for some of them. Also some may either ditch or start charging for their loss making home delivery operations.

The share price would shoot up if they reduced the dividend to 90% of actual FFO. I assume the management income is non-PID (happy to be corrected if wrong on this) so best use for that is paying down debt or building cash.

I do accept fenner's point about rent competition but from my examination of their town centre retail properties they are locally prime. In other words if I had too many Boots in the area I would be keeping the one in the NRR location given that a) my rent is low in absolute terms, and b) I could lose business to better position competitors.

We shall see, the share price continues to probe lows, whereas financial reports have been much more stable. One or other is wrong.

[lord gnome] 16/8/2019 17:52

1583 and 1584 - great posts - thank you.

[spectoacc] 16/8/2019 16:08

All fair comments, and I'm decidedly long, but - when property goes wrong it can go wrong very quickly. Eg a dip/recession, Unit Trusts become forced sellers, valuers mark down prices, LTVs become more hairy.

Likewise vacancies, empty rates, inability to raise more cash if it were needed (eg CAL, or INTU saying they're looking to raise now share price is on the floor).

The pubs point is one I keep making, but is generally ignored by the "all retail is dead" crowd.

[speedsgh] 16/8/2019 16:07

Interesting thoughts on retail property & NRR specifically in this blog post by Tony Yarrow of Wise Funds...

[hpcg] 16/8/2019 11:10

There seems to be a lot of cross purpose talking here so I'll try to straighten out a bit.

Yield on Nav (PropInv): what the assets should be valued at using the rent as the control. Yield on debt or property is a function of the perceived risk of not getting paid. However it is also a function of the yield on zero risk debt so works as a spread rather than an absolute value. Marking to market would look at recent transactions if possible. This would tend to be local, though there is reflexivity as the national picture influences the local whilst at the same time being the sum of all local markets.

Debt adjusted yield (PropInv): The yield should be measured across the whole capital structure as that is the liability when looking at a return on a terminal valuation. Our return must first pay all debt, all interest, all physical depreciation and all equity. The cost of debt is also greatly influenced by the risk free rate of return and operates in its own competitive, market, as well as being influenced by its own security of capital return. The larger the equity component of the NAV the safer a debt issuer is.

Rent on the properties: This is the factual income. It does not care about the NAV, debt or any financial metric. Its absolute change up or down influences both real returns, the NAV and the perceived safety of both debt returns of capital and on capital, and similarly for equity. To me this is the key metric, but it is also the most difficult because it is the future rent roll that matters.

Cost of capital: Highly reflexive. The lower the cost of capital the safer it is to issue debt. Also influences NAV because if property buyers have a low cost of capital they will pay more for a property for the same spread on the risk free rate of return.

Risk free rate of return: Both debt and equity have a risk free rate of return to measure against. I've mentioned debt above, but us equity holders have the same. Similarly return of capital is prime. With debt being senior we have to be more careful, but debt also leverage our equity. It the cost of capital becomes to high we can also choose to finance by increasing the proportion of equity. This is why the debt adjusted yield is important.

So in order (IMO) these are the most important:
1. The direction of change in rent.
2. Market validation of NAV.
3. The actual rent.
4. Yield on the total capital stock.
5. Cost of capital.
6. Risk free rate of return.

I would argue that we have neglected mentioning the risk free rate of return even though I admit it is the least significant. Transactions in the annual report show sales of some properties to private equity at NIY of 5.6%. This has to be influenced by their cost of capital.

[chc15] 16/8/2019 10:17

Tempted for a nibble here, good write up on wise funds, its multi asset income fund holds this..

[propinv] 15/8/2019 17:29

Big tax hit if they halve dividend.

[spectoacc] 15/8/2019 17:17

That IVI discount is starting to look tempting - got utilities exposure via EGL but only NG. (3.52%) in their Top 10. Again - spoilt for choice on market dips!

[essentialinvestor] 15/8/2019 16:56

Well if Labour get in my IVI will take a proper pounding with 9% UK utilities
exposure, helps explain the fat NAV discount atm, added another small amount Of those today. Too much risk to recommend it pre election.

[spectoacc] 15/8/2019 16:50

Plenty of reasons why it might go there, as listed above. Be there the day after McDonnell becomes Chancellor!

Worst of all is the 2 or 3 year grind-down - realise you've spent all your money 2,000 FTSE points higher. 2000-2003 was awful, tho financial crisis wasn't much fun either.

Edit - enormous fun really, takes skill to trade a bear market :)

[essentialinvestor] 15/8/2019 16:50

Mentioning the share sale, What's Alan's salary package?.

[fenners66] 15/8/2019 16:50

Its getting to the point that a 50 % reduction in dividends would still give a reasonable return.

The question is under the rules , given a large reduction in NAV could they still halve the dividend, whilst at the same time generating similar income ?

[rcturner2] 15/8/2019 16:47

In 08/09 FTSE went to 4000. I can see the FTSE under 6000 easily.

[spectoacc] 15/8/2019 16:19

I admit the director sell has knocked it for me a bit - I don't care what the excuse is, he should be moving heaven & earth not to be offloading at these prices. Want to see director purchases, not sales.

But there's a heck of a lot in the price with NRR down here - thought that at £2.20, & nothing's changed. We all know the High St is sh*te, but NRR are cheap rents and pubs and development.

Barnett may yet be a seller of course, but if they go lower, and nothing else has changed, I buy more.

Getting spoilt for choice right now tho, more so if eg another 500 points to come off the FTSE. And all that is before a bad Brexit or El President Corbyn!

[essentialinvestor] 15/8/2019 16:10

Oh, brave man.

[spectoacc] 15/8/2019 15:59

Bought more today.

[essentialinvestor] 15/8/2019 15:43

GPOR looks in a good position to me, however would expect they will
be available lower down.