Newriver Reit Share Discussion Threads

[onjohn] 04/10/2020 18:29:26

It’s fuct rack rents are on a downward spiral due to vacancies being let for a shirt button


London is finished


Nrr will go to 15p

[candid investor] 04/10/2020 16:42:46

Dhoult..thanks for your reply which raises lots of different points which I will try and get through ..First of all I totally agree with you that NRR is a high risk,high reward share...recovery shares (as NRR is) always are, more so with Covid.. I don't subscribe to the 'world going to end theory' I think the world will just 'muddle through' as it always does(remember 2008/9?) Likewise I think NRR will manage to muddle through all this due to its ample liquidity , 50% margins and no tax.. It's important to note that selling assets which are not recycled reduces a company's footprint which reduces UFFO and therefore dividends ..asset devaluations also reduce NAV per share. Under such circumstances, share prices in my view aren't likely to rise substantially.. Can you explain why you think a substantial fundraise would be necessary given current liquidity ? Such an act at current share prices would surely destroy shareholder value and unnecessarily so ...doubling the number of shares to 600 million to raise less than £150 million (given required discounts) will dilute shareholder value by 50% and more so given the discount you will have to offer..Current asseta sold are £62 million with a further £38 million being progressed..this alone will raise £100 million...buying back shares on the other hand would increase shareholder value as my earlier calculations demonstrated due to their being fewer shares in circulation to match the reduced footprint.. ..if as you say , share prices fell , then all the better because it would then cost less money for the company to buy them back ..my fear would be that share prices would rise too much during this exercise because there would always be a buyer for shareholders wanting to sell so sellers could ask for more ..
The sticking point is being able to sell the London portfolio or similar.. I was hopeful this could be achieved but you think not..

[dhoult12] 04/10/2020 16:16:32

Yes agreed. Legislation as is doesn't work.

One thing I would say is in my view some of the risk is misplaced in this sector. Yes we all know retail isn't going ideally well.. Look at the huge discounts being applied. Sorting through the fine and the unsellable is key.

However look at some of those that hold London offices still valued at huge valuations. Just like retail there is no market for new leases at the moment. Gone down from 13.74m sq ft leased central London and west end in 2018 to under 3m so far this year. And most of that at start of year pre Cv19..

Will people want a huge London office in a tower block in 2021 and at what price? Same question as will they want a shop in a centre. However, one is being carried at £600m in the books the other £30m etc

[essentialinvestor] 04/10/2020 13:41:43

Fwiw would allow for 20-25% peak/trough declines for UK commercial property,
Before the effect of gearing. Within this expect significant divergence in terms
of asset class (this is contingent on the moritorium ending in H1 2021).

Every investor in listed UK commercial property should be aware of the moritorium. IF this does not end in 2021, it arguably creates systemic sector risk.

As one example, why should Greggs continue to pay their rents when similar businesses refuse to pay.


Given that some well capitalised profitable businesses are refusing to pay rents, I'm surprised rent
collections have held up reasonably well for many REITS.

That may begin to change the longer a moritorium remains in place.

Perhaps the government are happy to see a complete reset of rents accross commercial property
and will intentionally let this continue?. Cant be ruled out imv.

[gbjbaanb] 04/10/2020 07:48:23

I imagine selling shops will either be a almost full price (for those with good prospects) or unsaleable (for those without). Which is why there was so much emphasis on alternative use, those that cannot be sold will be converted. Turning them into flats will fetch decent prices (assuming homes under the hammer isn't fake!) so I wouldn't be too pessimistic about the valuation.

[dhoult12] 04/10/2020 00:46:58

I'm not in principle against much tbh. If it works it works.

On this I said when I came back in on here it's a high risk high reward bet on the world not ending nor changing beyond recognition from Cv19. I'm still of that view.

To remove the risk from this my view is you need to get the LTV close to or below 40%.If that's done even though you have sold assets the share price will rise significantly as the risk of a massive raise at these levels is reduced.

A share buy back in my view leaves the risk as even larger. Someone (or multiple) won't want that risk and sell so the share buy back won't shift the price much and damage the long term prospects.

As just discussed I can't see enough buyers of these assets now to do both.

[candid investor] 04/10/2020 00:17:46

Ah ok...so its not the principle of buying back shares that you have a problem with but the ability to execute it at the present time ...

[dhoult12] 03/10/2020 23:22:47

I just don't think it's viable as there is not a market to purchase NRR assets at close to last valuation over the next 6 months.

The material sale this year as announced was to a related party.

That's not to say in 12m time the world might look different and in 12m after that you can sell as people have confidence to buy. That's my personal bet...

[candid investor] 03/10/2020 23:11:53

Thanks for your comments Dhoult, which are much appreciated ..is your problem with the strategy itself or the difficulty of implementing it ?

[dhoult12] 03/10/2020 21:56:12

I wouldn't trust the march 2020 valuations match the price that could be achieved at auction tommorow.

Hence the market is pricing in such a discount. Personally over a 24month period I think the discount is overdone. But that doesn't mean you can liquidate to cash now.

I would say historically the takers have been councils for some of these centers. They will not be buying now.

As for free cashflow per share I'm pencilling in around 5p...rising once they can chase rent.

TBH I haven't seen their London asset, but zone 1 office space has no market at the moment. Sellers and waiting as are buyers,who are typically pension funds. They need consistent income on a 20year plus timeframe which is far from certain right now.

[candid investor] 03/10/2020 20:44:59

Dhoult, thanks for your post ..I don't think they will take this route anyway for probable reasons...if they did though then an extra £62 million in the bank will await ...yes it depends on how successfully they could offload the London assets...given that only a 6% fall in value last year, presumably a quality asset.as you say it might be difficult right now but only time would tell . If it took too long and the share price recovered significantly in the meantime, then the proposition would no longer be beneficial anyway ..have you seen the NRR assets there ? A full out concerted effort to sell depending on its attractiveness might still yield a positive outcome..

[dhoult12] 03/10/2020 19:20:11

I think some of your post doesn't appreciate quite how bad the market is for some of these assets.

Take the London head office who exactly is the buyer?

I am currently negotiating on behalf of an organisation in Mayfair. Office is 1.2m per annum. Without blinking they have offered return of full rental deposit and a 6m rent free period. Pushing for more.

There are no takers for leases right now. In 12months who knows.

[candid investor] 03/10/2020 18:13:23

Catsick...I think you and others mis-comprehend the purpose of and benefits to shareholders of conducting share buybacks in circumstances such as these. Take the position as at present ...net assets £610 million .(£2.03 per share) with current share price at 50 pence per share. net debt £563millon, LTV 47% and UFFO is £52 million or 17 pence per share.Given the discount on value of assets sold I think it's safe to reduce asset value of approx £1200 million by 5% or by £60 million...this reduces net assets by £60 million to £550 million which now reduces NAV per share to £1.83... The current plan is to sell £100 million of these assets ...this will reduce debt to £463 million = 45% LTV...selling the assets will also reduce UFFO though to approx £48million or 16 pence per share.i.e.both worse than at present ..
I want to buy back 20% of the shares at today's extremely low valuations...so how do I finance it ? NRR have sold £62 million to date...stop there but.sell the London shopping centres and head office relocating staff to Birmingham ...selling London assets will raise £150 million and only lose £9 million in net revenue .ignore opposition, NRR is a regionally based organisation ..no need for a head office opposite Mayfair..relocate to other office in Birmingham, it's cheaper.. total proceeds for both London and elsewhere amount to £215 million...I would pay off the £175million revolving credit facility (knowing it's still there in reserve)..this reduces net debt to £388 million and fixed assets to £925 million and LTV to 42%. With the remaining £40 million I would buy back 20% of the shares and put them in treasury leaving 240 million shares still in circulation
Net Asset value reduces from £610 million (by £60 million due to asset devaluation and by a further £45 million due to funding of share back) to £505 million but divided by only 240 million shares which gives revised NAV of £2.10 per share (rather than £1.83). I have also calculated that UFFO now reduces to approx £45 million or 18.5p per share thus actually increasing dividends...icing on the cake is to reissue the 60 million shares when share price reaches say £1.50 to get £90 million which in turn enables further capital investments of £150million...that is why companies buy back shares..

[m_kerr] 03/10/2020 11:58:18

to think by the way that the CEO described NRR is the best managed REIT in the sector, last year's results presentation (mysteriously they've taken it down from their site).

[m_kerr] 03/10/2020 11:38:43

well, NRR know that the shopping centres are the assets positioned the weakest, hence the last shopping centre they bought (not counting the grays shopping centre as the investment case there was to develop a large part into non retail use), was way back in june 2017. the only assets they have sold since then are pubs and retail parks. so effectively no NRR transactions for over 3 years. there are other reits out there that price in similar discounts to the gross assets (NRR is currently pricing in a fall in value of 38%). however some of the other reits don't have a majority of assets in structurally challenged sectors, and have much lower gearing, so i dont see why people are taking unnecessary risk with this stock. as i said before, NRR have been in the last year or so positioning their portfolio towards the sectors with the lowest income certainty to try and maintain a high portfolio yield, to support their dividend which after all their promotion and bluster about sustainability, has proven to be anything but.

[spectoacc] 02/10/2020 19:18:17

But the valuations reflect the quality of the assets surely. Accepted, the weaker stuff will be downgraded the most/likely due another bump down at next NAV, but it's value reflects whether it's good tenants on strong covenants, or poor tenants on naff covenants.

LTV was getting too high, I see them keeping 10%/still getting the management fee on the full 100% as not a bad deal. You'd have to mark everything else down a long way to get anywhere near existing discount.

Yes, LTV could still come in to play, assuming we've really got 6 months of increasing lockdown, continuation of the moratorium on chasing rents, and unemployment starting to kick in.

[m_kerr] 02/10/2020 17:42:07

NRR continue to sell their best assets, leaving them stuck with the effectively unsellable assets with unsustainable rents. spruce field was largely about the development plot of land, which they no longer own (well, only 10%). it has 7 years left on leases to very high quality tenants like sainsbury's, kingfisher (b&q), b&m and next. i remember them selling an asda supermarket at something like a 7% yield. well had they retained that they would have received that rent throughout lockdown (£1.2m or so annualised). i see the spruce field disposal as an act of desperation. they should have retained the development plot. i'm not saying NRR is or isn't a good investment at this share price, just that it's difficult to value assets that they can't dispose of at a price say within 20% of book.

[chucko1] 02/10/2020 10:22:45

They would be buying the bonds back at a 10% discount (or so) whilst selling the assets at a lower discount. And reducing the LTV.

Sensible capital management over a period of many months or even small years could yield interesting shareholder returns with current valuations. This is far more than a prospective income play now. Market has not caught on yet, possibly as news flow is still pretty wretched. That said, CZ Capital the only notifiable short now at 0.55%, having cut the position from 0.90% a few months back.

[catsick] 02/10/2020 09:59:04

I think they are in cash preservation mode, share buybacks while not paying a div do not make sense, the bonds are trading at 88 at the moment so buying back some of these with the proceeds of the sale could make sense and would also unwind the effect of selling at a discount to nav, with the bonds only on a 5pct yield I don't think the credit markets are too concerned about them

[candid investor] 01/10/2020 22:40:40

I agree VOW..Management won't do this...when management say they exist to maximise shareholder value..switch the word 'shareholder' for the word 'management'
What we need is an ACTIVIST shareholder forcing them to wake up to the reality that anyone who has placed their trust in them and holds their shares today has LOST money..apart from maybe a few people lucky enough to invest this week.
We could hope for a move by a hedge fund or a sell off of separate discreet portfolios .I am afraid that pubs will be scattered so they will probably have to be looked at on a pub by pub basis..

[candid investor] 01/10/2020 22:28:05

Flyfisher...your assertion isn't correct..the £53 million quoted in August didn't represent COMPLETED disposals..i.e. cash received for them. only a certain amount of that (which we don't know how much ) had been completed...we know that Spruce field has now been completed for £34.7 million increasing the COMPLETED disposals to £50 million...the total amount now sold or under offer totals £65.7 million, so the remaining £15.7 million of sales has still to be converted into cash rather than just being under offer ..it should further be noted that this wont increase the current cash total by a further £50 million for the completed disposals, because NRR have also spent money on capital expenditure projects on the pubs to both prepare them for social distancing restrictions and also improving the premises to make them a more attractive place to visit.. . The half year ended yesterday so we will see these half year results unimpeded by what happens from now ..we wont know this until November but ALL retail premises remain open...40% of them remained open ALL the way through lockdown , pubs were open for 3 months out of six months and other retail outlets a bit longer . not as disastrous as it could have been ..I am forecasting a small UFFO surplus based on these statistics but we will just have to wait and see.

[vow] 01/10/2020 21:52:19

Candid,

I used to dream of that back in 00’s when biotechs were sitting on millions in cash and their price was trading negative levels.

Alas managements very rarely do themselves out of jobs, plus it would be a fire sale of the pubs.