Real Estate Investors Share Discussion Threads

[hillofwad] 28/6/2022 10:33

Anatomy of a deal! Straying out of their area picking up a dog


Commodore Court Nottingham Purchase -£2,385.000 2016

"Acquisition of a Sainsburys anchored retail investment in Nottingham c.

The 2005 built retail and residential scheme comprised three ground floor retail units, anchored by Sainsburys. The 33 apartments above had been sold off.

The three units were let to Sainsburys, Barnardo’s and Bathstore. There was additional ground rental income from the apartments. The total rent roll was £216,710 per annum.

The investment was purchased for £2,385,000, reflecting a net initial yield of 8.59%. heb acted for the vendor."

Bassi waxing lyrical about the resilence of the convenience & neighbourhood sector 2 retailers went
Former Sainsburys let to an Eye Clinic at a substantially lower rental

Today the income is about £105,000pa with the Bathstore unit still empty after a few years
hxxps://www.rightmove.co.uk/properties/85867442#/?channel=COM_LET


Maybe worth £1.3 /1.4 m today Asset management -creating value LOL

[hugepants] 28/6/2022 08:47

Priceless. Thanks captain.

[hillofwad] 27/6/2022 17:16

Nicklr

Yes agreed desperately selling anything which can see a profit reducing portfolio quality

Hugepants You are starting to sound a bit tetchy !

Well excuse spelling error -it should read Problem

Maybe you ought to acquaint yourself with their purchases. Nothing to do with hindsight just observation

Anyone familiarwith the W Midlands property market understands that because its the city of a thousand trades & it's unique distribution location that the industrial property investment market is the one to tackle

[spectoacc] 27/6/2022 15:29

Agreed @nickrl, with seemingly no pressure to reduce their remuneration. Would look bad on a REIT 5x the size.

[hugepants] 27/6/2022 14:37

Thanks for that Captain Hindsight. Don't understand any of it, and there are some words in there that don't exist (what does "Pronlem" mean?) but I'm sure it's full of wisdom.

[nickrl] 27/6/2022 14:33

Huge part of the issue with RLE is its selling down the family silver in part to get LTV down which is sensible but NRI is declining year on year and whilst they've saved about 10% on interest costs the admin costs (Bassi and mates big salaries) are largely unchanged and consuming more of the pie each year. The divi is covered at the cash level as of FY21 but with further sales in FY22 it will become marginal so i guess the question is if they can hold at that level by maintaining NRI then a 9% yield isn't to be sneered at.

[hillofwad] 27/6/2022 14:28

RLE have bought many of the properties with their gimlet eye firmly fixed on high yields buildings on short leases with decent covenants

If you buy enough of them those companies
that decide to stay and renew outweigh the voids that appear in the rest

The skill of course is picking the right ones and those that become empty find replacement occupiers quickly and at comparable rentals

The irony is not lost is that industrial properties are better suited to this Mississippi Riverboat gamblers game

A property comapny I know would make their choices on plant and machinery If a company had invested in new heavy machinery and were trading OK they would be less likely to move out because the costs and disruption of relocation are too high It stood them in good stead

Pronlem with RLE they have made some bad choices Telford Wolverhampton Oldbury Leicester Notingham

[hillofwad] 27/6/2022 14:05

HugePants


What you are really saying because RLE portfolio wasn't well diversified they missed out on the increased demand for industrial and distribution properties and missed out

Huge strategic error by the manageemnt Nothing to do with crystal balls

Irrespective of the pandemic the maj of property comapnies located in the West Midlands have milked this sector for years Mucklows , St Mods, Foulkes ,LCP Revelan Coltham Richardsons to name but a few

They really didn't have to look very far -all they had to do was fall out of the W Brom office and bring out the cheque book Opportunity missed

[chucko1] 27/6/2022 14:00

Precisely.

RLE is possibly good value at the current (lower) price, but given the falls in a number of others, why bother?

I do agree that history in of itself can be discarded in part, and there are great examples of buying trash, but at "appalling" prices. So long as you know every line item of trash and non-trash, this is a fair way of making returns no long available to those who cannot bear to look.

[spectoacc] 27/6/2022 13:54

An argument for retail at the right price - something NRR would claim to have done.

Only argument I can see for RLE itself is the discount. But when far better RETIs have gapped out to fat discounts, why punt on 2-man, historically poor RLE? Where's the catalyst? Who'd want to have money with Bassi?

Or buy a REIT with decent management like AEWU.

[hugepants] 27/6/2022 13:44

The pandemic put a rocket under industrial/logistic valuations and did the opposite to offices and retail. Unfortunate obviously for RLE and big Shirley must have been asleep at the wheel not to have seen signs the pandemic was on its way. There was the alignment of the planets the year before and some druids in the Welsh hills had been forecasting it since 2016. So it was flagged well in advance.

[hillofwad] 27/6/2022 13:28

Well both Land Sec. and BL had already gone lukewarm on both prime retail and department stores by the time RLE came galloping in.

BL already got well stuck in shifting a number of the Debenhams sale & leasebacks they had acquired

Dont blame the pandemic for some poor purchases .

The irony is not lost is RLE failed to utilse the assets at their disposal .Andrew Osborne for example who had enjoyed a long career succssfully lu involved in industrial proeprty .He would have been offered many local opps bur I guess Bbassi rebuffed these as Bond Wolfe for some strange reason ahve had little involvement in this sector

[hugepants] 27/6/2022 12:14

"The point I am making is that all they had to do was turn up in the last 10 years buy property which the W Midlands is famous for metal bashing and distirbution and they would be sitting pretty"

Umm...if only LAND and BLND had ditched their shopping centres and offices 5 years ago and bought industrial/logistics instead they'd now be sitting pretty. Their management must be pretty thick eh?

And as for the pandemic. I mean a blind man could have seen that coming.

[hugepants] 27/6/2022 08:35

This is all very emotive stuff and you clearly hate this company with a vengeance but what point is it you are trying to make? I don't care about historical mistakes when trying to value this company in the here and now. Shopping centres have been in decline for years. NRR have shopping centres with plenty of voids and they have been valued accordingly. I assume therefore you think the RLE valuers are not valuing, for example, Crewe shopping centre correctly despite it being a bit of a basket case for years. What about the retail parks? Have they screwed up there as well?

[hillofwad] 27/6/2022 06:47

Huge Pants

Landmark Buildings! You can't be serious like the collection of 70/80s buildings in W Bromwich which scream cap ex.

"Pretty well diversified" 0 Industrial/distribution/logistics in portfolio

You are having a laugh if only they had dodged picking up retail & office buildings and had replaced with industrial within a stones throw of their office they would not have had to take a knife to portfolio valuation

Values of ind property might be peaking but still a country mile above 2016 the time they were picking up regional offices and duff retail so could be selling and banking a profit

You need to revisit the retail "They believe their retail assets are mainly in the essential/convenience end of the market"

Not exactly their biggest purchase was The Market Centre Crewe which they paid £20m+ for.Ouch"

Now full of voids and unrecovered service charge and a millstone A complete and utter disaster area Prime shops in Walsall . They couldn't even get the convenience store sector right The Sainsburys in Nottingham exercised their break clause at the earliest opp Now relet at a much lower rent at an eye clinic with the former Bathstore unit empty still after a few years

Cast your eye back with this double whammy of purchases Neither of which have worked out well hxxps://www.insidermedia.com/news/midlands/double-deal-for-rei1


Just the ground floor let at Titan House as HP failed to renew Revenue falling ,capital values falling .interest rates rising and unrecoverable service charges

[hugepants] 26/6/2022 18:26

"The portfolio is full of secondary offices which is currently the worst sector to be in .Capital values diminishing"

Not really. Many of the offices are in busy areas, well located and are almost landmark buildings. Check the portfolio on the website. Anyway the portfolio is mainly retail of one sort or another. They don't breakdown their portfolio in the same way as others but its pretty much this;

Retail (55%)
Offices (33%)
Leisure (12%)


So pretty well diversified. They believe their retail assets are mainly in the essential/convenience end of the market. Going forwards I can see offices struggling and trending slightly downwards in value. I think the retail portfolio and leisure will trend upwards in value now the pandemic is over. I agree with RLE in that the NAV will continue to go up this year, albeit modestly. Probably to over 60p though.

The biggest negative for me is the relatively high LTV. Its 42.5% net of cash. The same as RGL. I can only think that is the reason for the current very lowly valuation; 9.25% yield and 39% discount to NAV. Imo they should forget buying anything else just now just get the LTV down. It should be under 40% if they complete on the sales they have lined up for after the year end though. And still scope for increasing revenue by addressing the voids.

Anyway goes ex dividend this week and should get the H1 trading update in the next few weeks.

I noticed this line in the results which sounds more than plausible;

"...Industry experts believe that industrial values have peaked, with yields across the region at 4.5% now widely considered to be expensive and investors are shifting to alternative, higher yielding sectors such retail, retail warehousing and offices that offer superior returns..."

[nickrl] 25/6/2022 09:58

Hillofwad perhaps Bassi managed to shift them all under his Commonwealth Games bonanza he's been promising!! Anyhow bit of trend here though as RGL down 20% so far this year and kinda what i expected might happen but would have thought short of an outright deep and long recession the regional market will just tread water on lettings and limited scope for NRI to increase over next 12-24mths. These two are close to 9% yield on my s/sht and probably for good reason. Neither do qtrly NAV updates but we normally get H2 trading updates so will sit back for them me thinks although RLE unlikely ever to get as far as pushing the buy button.

[hillofwad] 25/6/2022 08:19

The portfolio is full of secondary offices which is currently the worst sector to be in .Capital values diminishing

It seems that the current policyis anything which can show a book profit is up for grabs That is about the limit of their asset management

So rental income decreasing and also the quality of the portfolio expecting the share price to get down below 33p

They have removed their portfolio on their website in a game of hide the voids

They made some very bad purchases Market Centre Crewe Titan House Telford Birch and Birchfeld House Oldbury &Commodore Court to name a few

[nickrl] 20/6/2022 20:01

Huge they certainly have sold a lot of property often via one his companies Bond Wolfe but in doing have reduced LTV so not all bad but the NRI is dropping year on year so their ability to cover the dividend is diminishing. They also have an eclectic property mix some of which won't hold up if a recession comes. Anyhow at least they didn't tell us how good the Commonwealth games would be for them!

[hugepants] 20/6/2022 19:46

nick, True but that was the final dividend which is sometimes inflated. Year on year the dividend is going up which is confusing me because I was under the impression from this thread that big Shirley was siphoning off most of the company's income into his own pockets!

[spectoacc] 20/6/2022 19:41

Hmm I wonder which two directors get the 1p/nil cost options?

"..12% levels of annual return/growth are achieved..".

From what base? 12% pa on the share price from here, with a few more buybacks perhaps, and a narrowing of the discount?

And/or 12% on the NAV, hardly a stretched target when RPI inflation is 11%?

And paid handsomely either way regardless: some of the highest salaries compared to mkt cap in the sector.

I'm with @nickrl.

There are good REITs - API, BCPT, BREI, SREI, UKCM etc - and there are "less good" REITs. For all the research posted on here, no one should be under any illusion which group RLE sits in. Clue - start at Companies House. Or compare the charts.

...Which isn't to say anything isn't a buy at the right price.

[Edit - £64m mkt cap, over £1.5m of salary costs in 2020. 2021 a/cs should hit Co House this month).

[nickrl] 20/6/2022 18:42

Huge divi was already increased to this level at FY so maintaining it which is sensible as they have lost income from the sales over the last 12mths.

Like some other REITs though the directors fill there boots with tasty share options but never put their hands in their pocket when the share price was on the floor in 2020.

.

[hugepants] 20/6/2022 17:47

Contrary to the merchants of doom posting here things just keep improving. Dividend increasing and yield now of 9% and on a mere 38% discount to NAV

[cwa1] 20/6/2022 17:29

Real Estate Investors Plc (AIM:RLE), the UK's only Midlands-focused Real Estate Investment Trust (REIT), with a portfolio of 1.5 million sq ft of commercial property across all sectors, is pleased to announce that in accordance with its progressive dividend policy, REI will pay a fully covered Q1 2022 dividend of 0.8125 pence per share for the period 1 April 2022 to 30 June 2022 (Q1 2021: 0.75 pence per share). The payment will be made on 22 July 2022 to all shareholders on the register as at 1 July 2022. The ex-dividend date will be 30 June 2022. This dividend will be a Property Income Distribution (PID).



The Company also announces that on 20 June 2022 it granted annual awards to two Directors and other employees under the Real Estate Investors Plc Senior Executives Long Term Incentive Plan adopted in 2021. The awards under the Plan give rights to certain Directors to acquire a total of 1,810,127 ordinary shares of 10p each in the Company ("Ordinary Shares") as detailed below at a price of 1p per share (in the case of an issue of new Ordinary Shares) or nil (in the case of a transfer of existing Ordinary Shares). The vesting of 50% of the award is subject to a performance condition based on total shareholder return, with 50% subject to a performance condition based on net asset value per share growth including dividends paid. The performance conditions will be measured over the three years up to the vesting date with full vesting if 12% levels of annual return/growth are achieved...