Newriver Reit Share Discussion Threads

[ccraig69] 28/9/2020 16:02

And when Divis are back returns could be high at this price

[grahamburn] 28/9/2020 15:02

Another significant drag on commercial property companies must be the rising prevalence of pre-pack administrations. Even relatively successful retailer (eg JD Sports) are taking advantage of them for failing subsidiaries. It's the landlords in such situations that take the biggest hit.

[chucko1] 28/9/2020 14:43

This careless selling has been going on in many REITs the past 2-3 weeks. I fancy part of it may relate to open-ended funds selling liquid holdings in anticipation of customer redemptions. News flow on property has not been good at the same time, it has to be conceded, but anything with higher than average LTV has got smoked. Some others, like AIRE, as well.

Been buying them all on the weakness.

[dhoult12] 28/9/2020 13:24

haha chucko1. Indeed.

Agree with the statements reference avoiding a raise if at all possible. Clearly some of that risk priced in at whatever % people believe it is likely to happen. Part of management of that i would also suggest is not spending cash on share buy backs etc.

There was also some pretty poor selling by someone who didn't seem to care (or their broker didn't) price achieved. That has stopped for a bit now.

[chucko1] 28/9/2020 13:07

I suppose to demonstrate the point about valuation, the share price has just risen 10% the past two hours or so.

No clue why whatsoever, but then according to my thesis - who cares anyway?

[diggybee] 28/9/2020 12:49

That is pretty much my thought too.

[dhoult12] 28/9/2020 09:02

@candid - apologies if you thought i wasnt being respectful, long day on a delayed train! with someone munching picked onion monster munch like they were starving next to you can cause issues! Lets all remain civil :-)

I also haven't seen the Alternative use calc. My point was that i made the mistake of taking the 2019 figure and naively, looking at residential land reg data showing increases in prices. Therefore worst case AUV doesn't move and the 2019 asset prices hold at AUV value.

That was not the case and they shot right through? why? i am not sure any of us know. But i am not relying on AUV to hold up the valuation going forward after that. Some might like to - but only fair to bring up that prior "error" shall we say so people can make their own judgement.

I would also note that in their investor tables they talk about valuation decline levels that would go through the NAV again. Why? should they not hold?

I held previously sold out and bought some on the way down - see my error reference 2019 valuation holding. Now hold sub £1 average but still not a nice loss. I personally think as dire as the share price is it reflects the real risk of creditors and falling valuations. They need to stabilise LTV 47% was pretty shocking to see in 2020 accounts - and we expect a further decline this year in asset values.

Reducing LTV below 40% if it can be done without a raise will increase the share price sustainably as will come out of the "fear zone", more so than a share buy back.. look at the volume going through this. Any share buy back will find a seller.

[theprovosts] 28/9/2020 08:39

One question I have for you ..what do you think about the share price and what would you like NRR to do.

-------------

Sell a decent asset, and immediately commence a buy back to show management are serious about their shareholders. Check SREI, APF, RSE. All recent share buybacks, all have rallied on the back of them.

Recent FT article (famously negative) highlighted how people were deserting the UK due to Brexit and Covid. Covid will pass and Brexit deal now 1/4 on to succeed. Lets see how aptly timed these sells were when they find there isnt the same volume to re-enter a trade after they've sold.

If your a buyer in NRR, you naturally want the best price. Anyone who's watched Level 2 will have seen the games being played. Have some patience imo.

[candid investor] 28/9/2020 00:13

Dhoult...You ask a legitimate question wrt the movement in AUV from year to year..of course it would be dangerous to jump to any conclusions based on a legitimate question gone unanswered by the person accountable for putting the numbers together.. what I can say though , is that I haven't seen any breakdown for the 2019 AUV calculations..
Slide 31 of 68 of the 2020 accounts presentation shows that around 85% of the alternative use relates to residential, approx 10% for office and perhaps 5% for logistics, so warehousing only represents a minority .Slide 59 of 68 goes on to explain the assumptions used in calculating the AUV and as you can see, they did use Land Registry price indices for residential sales prices.. you can also see the other assumptions they used with regards to costs as well...I am afraid I couldn't comprehend the gist of what your other question was with regard to share buy back etc but might just be because it's past my bedtime ..let's continue the banter tomorrow and try to remain respectful .
One question I have for you ..what do you think about the share price and what would you like NRR to do.

[hugepants] 27/9/2020 23:38

"chucko126 Sep '20 - 12:58 - 3276 of 3301
But the excellence of the management and current strong capital position (which they seek to strengthen further via disposals) will likely be the determining factor."

From browsing the annual reports I have noticed they do quite often highlight just how excellent they are. Not saying they are delusional in any way but I suspect the investors who coughed up £225M at 335p in the June 2017 placing might disagree!

[dhoult12] 27/9/2020 21:20

Just to add the 10pm curfew is utterly absurd. Even the Sage scientists aren't defending it, which leaves ye olde we are following the science politicians floundering more than ever.

Only query is if they return to a rational staggered closing time or shut all pubs.

[dhoult12] 27/9/2020 20:54

Candid, please explain how residential and warehousing fell between March 2019 and March 2020?..why did the alternative use as per 2019 accounts not hold? Sorry not only not hold but be shot right through.

See residential house price indexes hitting new highs today and warehouse reits doing the same for your evidence. That's all despite Cv19 impact, let alone before...

As for share buy backs lets agree to disagree. You seemingly think underlying free cash flow per share can fall down to an estimated 5p from above 20p and the lenders casually dismiss that as a Wednesday ,take your cash and buy back shares...what's a banking covenant between friends?

Not to say again that the equity is undervalued just that the notion that everything is, as was last year is so far removed from reality it's unture

[chucko1] 27/9/2020 18:00

Darkest before dawn! So long as they can avoid financial deterioration, which would require some part of the £100mn in sales to materialise, some good things will come along although not this side of Xmas. Unless the moonshot Boris speaks of comes to pass (which is far less unlikely than the press would have us all believe, I think) in which case the concept of a "Freedom Pass" comes to the rescue of the hospitality and mass audience sectors of the economy. A vaccine is not the only game in town.

Whatever, things will improve before NRR's finances are shot. In the near term, Conservative MP backlash against the 10pm curfew would be helpful. The boss of Hawthorne argued that this would increase by at least 20% the number of pubs that were no longer viable. He would say that, but one gets the point. Everyone knows there is only behavioural science, not "real" science, arguing for this curfew ("it sends the right signal") but this may end up being outweighed by evidence that people are safer in pubs at 10.01pm and beyond than continuing on to their mates' homes. Something may give here soon. Prior to all that, things were tolerable at around 75% of income, from what I can tell.

It's worth considering the journey William Hill was on - no betting and a reduction in share price of 75% and more. They turned the corner in May/June as on-line got going and then more sports restarted competition. To be quite honest, some decent recovery was not hard to see as they were bound to survive with the improved finances following an equity raise in April. Now likely to be taken out at multiples of the low as the market looks again at the value of the business, especially in the US. Why did it ever stop? Of course, the businesses are entirely different so you could argue the read-across is merely an object of fantasy. Except that right now, they share(d) in common abject fear of the uncertainty that had befallen their respective businesses. And how when the uncertainty diminishes, whoosh. Worth also taking a look at the journey NEX has been on, and they are not yet entirely out of the woods - share price up and down in huge multiples. It's as though no one actually has any idea whatsoever how to assess these businesses. In most cases, it will end being almost entirely about the lack of long-term damage done, but some investors just don't have the patience to deal with this uncertainty. Remember, you shouldn't be in an equity if you cannot tolerate a 50% fall (Buffett). 75% is tricky, I grant you.

[candid investor] 27/9/2020 17:50

Dhault..you have also made several assertions such as "residential has not shifted nor has warehousing". Are these both verifiable facts or your opinion ...if they are your opinion can you say so or if they are facts could you quote the external source.
Re the share buy back .. we just have opposing views...I want NRR to conduct a share buy back as a stated aim along with a statement declaring that they believe the current share price to be far below its true market value . , I don't know how they will achieve this in practice though with current LTV.
Your assertion about not doing share buy backs when no dividends are being paid is misguided...companies conduct share buy backs in lieu of dividends that are not being paid, in order to maintain shareholder value... Just an announcement to embark on one, helps to prop up the share price and give existing shareholders the reassurance to know that they have a buyer for their shares if they want out..HMSO did try it but they had to abandon it because their situation was much worse than ours. In NRR's case, a market value of below £140 million, wouldn't take much to buy back the lot , not that they would ). The obvious danger of course would be that they would be more exposed to a predator hedge fund , but as existing shareholders we would probably be well rewarded for that if it happened

There is always a bigger picture.. ignore the media hype and background noise and stay put...NRR has the liquidity to get through this in my view ...but as always dyor...

[candid investor] 27/9/2020 17:16

Fenners..the figures I quoted were from the year end accounts which excluded any part of the £100 million current year proposed sales..

[candid investor] 27/9/2020 17:07

Cut myself off...still below covenant at 56% ..Under such extreme circumstances covenants unlikely to be enforced...and you are allowed to engage in a dialogue with your lenders before this materialises..!!
Regarding UFFO...NRR baseline case at beginning of year was scenario 4 which would have produced a small surplus, latest update in August showed them on course between scenario 2 and 3 which would result in slightly larger surplus...half year ends on Wednesday so can't be much different to August update ...even assuming case 5 worse case scenario with 50% reduction in net revenue by the end of the year, then NRR still manages to break even ..i.e. they don't use up any cash or break any covenants.
Can I suggest you read provost post on 14/9

PS..in earlier message I meant to write "bearish" case..

[fenners66] 27/9/2020 16:57

candid - which dates figures are you using for your debt and asset val calcs?

Reason for the question - if memory serves - a large slug of the hoped for £100m disposals have already happened - so depending on timing its already in and cannot be double counted....

[candid investor] 27/9/2020 16:48

Dhoult...so I am a "fantasist who talks nonsense ". steady on! Don't confuse bullishness with positivity. Of course there is a bear case...if you look back at an earlier posting of mine you will see a bullish case I put forward, which, dare I say is more robust than anything you have offered The AUV of 90% in 2019 you refer to was pre-covid...so had to be debased post Covid along with corresponding AUV..nothing untoward there.
Let's keep things simple..baseline case now is net debt £563 million = 47% of NAV of £1197 million ...proposed asset sales of £100m reduces debt to £463million and NAV to £1100 million = 42%. If NAV falls even by a further 25% to £825 million then NAV is still below covenant at

[vow] 27/9/2020 15:40

They have 3 projects ongoing. Burgess development is set at £65m. Even if in partnership with the local council they will have to find millions. The other two I haven’t seen figures but they do not have enough cash in the bank to carry out all three if rent continues to dry up.

They should be fine but as I said they aren’t just sitting back and collecting rents.

[dhoult12] 27/9/2020 13:26

VOW, agree with a lot of what you say.

However reference development they have been selling excess land with planning - not developing themselves for all but the small pub conversions to C-stores. Agreed in current climate demand to buy development land will be lower. However thats not to say there is no demand nor that NRR will take on the development themselves.

Policy as per results presentation in June this year is:

"Most projects will be developed in capital
partnerships or sold with the benefit of planning
• For smaller projects with a lead time of less than 12
months, we can deliver ourselves through
experienced in-house development scheme
• Very limited committed capex across the
development pipeline"

[vow] 27/9/2020 13:09

You all seem to be simplifying this to they own a building, the rent is X and they have a mortgage of Y = Z

NRR have a raft of developments they are committed to that will require funding and in the current climate doing anything costs more. They could possible delay or mothball a couple of projects but others have to go ahead.

That is where the cash pinch will come from.

In regards to them selling £100m of their “worst performing assets” Good luck with that in this market.

Still cheap though but it’s not as simplistic as some make out. (Plus the loans are unsecured, as someone said otherwise above)

[dhoult12] 27/9/2020 12:22

@Fenners 66 = haha its a Reit. If one thing is for sure the management have terms that in the event of termination they get 3 years paid up or such nonsense, strangely the chairman who gave those terms, also has the same terms.

Small world for a lot of them!

Would say reference wind up though, stranger things have happened. It has been in shareholders interests before (and completed) to sell the underlying assets into cash and close. The return of funds being significantly more than the price the equity was trading at.

If it wasnt for the politics and pensions, i am sure someone would consider doing similar with even BT at the moment.

[lord gnome] 27/9/2020 12:00

carolpeters789 is non other than our old friend smallcappick driving traffic to his Twitter account. Best ignored.

[fenners66] 27/9/2020 11:55

candid investor
26 Sep '20 - 22:59 - 3283 of 3287

"your point about timing of any share buyback and like I said, it was just by way of example to dismiss the idea of an additional fundraise."

As an example as an alternative to fundraise.... its extreme

I was going to give you the benefit of doubt there until I re-read the first bit

"about timing" - so really what your saying is

a company that uses other peoples money to invest on their behalf in property to make money for them .... should give up , admit they have no ideas , sell the properties and buy back the shares.

An investment company that gives investors their money back instead of investing it surely has admitted they have no purpose ?

It may be true.
It may be that investing in commercial property right now is stupid - but I don't expect the BOD to sign their own P45's.... not unless they want to retire and have already written their own very generous termination terms.....

Actually on second thoughts , this is a quoted co. so they probably already have !