Regional Reit Share Discussion Threads

[williamcooper104] 19/9/2023 08:33

Nuveen selling a prime Holborn office for 5.7 - they'd marketed it last year at 4.5 So prime London city (Holborn sort of/almost west end so arguably better) at 5.7 v 6.1 for RGLs regional assets in the wrong regions (eg not Ox/Cam/Bristol)

[williamcooper104] 19/9/2023 08:31

The Times forgot that BL distress sold half to Mould/Vaughan IIRC for just under £600m (through London and Stamford now LMP) in 2009 and it was they who sold a few years later at a massive profit to Norges

[spectoacc] 19/9/2023 07:22

Empty rates a killer too - often avoidable for a while (beyond the 3 months/6 months), but more difficult to do with offices, & even rates mitigation isn't cost-free.

Really interesting comment in ST at the weekend - slightly OT - about Meadowhall, which British Land is seeking to sell.

In 1999 it sold for £1.2bn.

In 2012, £1.53bn (when Norges bought half).

Meadowhall is ultra prime in shopping centre terms - currently 98% occupied, always busy.

Mooted valuation now - £750m.

Where's @ghhghh?

If you think Office is the new Retail, that's what the past 24 years looks like for retail.

[m_kerr] 18/9/2023 19:17

remember shoezone talked about this a few years back.

'Smith also said the retailer’s rates as a proportion of rent have “increased from 26.4 per cent in 2009 to 54.3 per cent in 2019 and forecast to be close to 60 per cent in 2021″.'

that was before covid, and with the various tax and input cost rises since then you wonder how some of these businesses are still going, let alone making a return for their owners / shareholders.

[williamcooper104] 18/9/2023 11:31

It's business rates Such a destructive tax

[williamcooper104] 17/9/2023 20:08

Yep; get that offices at the moment are a very idiosyncratic asset class; but 6.1 NIY does not seem plausible; so a few sales would help, but more importantly it's all about cashflow now

[m_kerr] 17/9/2023 19:47

what it boils down to is they've had a cash flow problem due to the issues previously discussed. they'd pay out of capital if they could, but at 52% LTV and a marginal cost of debt at a high level, that avenue has closed for them. as stated i think they should have cut by more like 50% or cut it entirely. would hammer the share price, but would be the longer term approach, and would relieve some cash flow pressure in the short run.

i wouldnt write off the chance of a share price recovery from here, as the correction has now taken some risk out of the stock. but even at these levels i strongly prefer CLS for a variety of reasons, despite what at first glance is a similar LTV.

what's needed is £50-80m+ of asset disposals at book or close to book. that would reassure investors but is easier said than done.

[williamcooper104] 16/9/2023 19:51

For sure there will be sites repurposed And offices updated to EPC B (you can't get a loan now unless there's a plan to get it too loan maturity) Question is how much all that costs and where's the funding coming from (hello shareholders that would be you so it would - most likely) Opportunistic money buying of the capital starved over-leveraged vendors will be the ones making the money

[fred177] 16/9/2023 15:50

Yes William there will be no
More renewals none of the sites will be repurposed and there will be no disposals at or around NAV we are all doomed I am
Off to Ukraine to fight the good fight

[williamcooper104] 16/9/2023 15:43

RGL offices 6.1 Prime food stores 5.5 Medial office bindings 5 Retail parks 7-8 Much worse on NOI as offices are way worse in terms of management, voids and capex

[williamcooper104] 16/9/2023 15:40

HMSO did a share consolidation with their rights issue which cosmetically covers up the c95 percent write down legacy shareholders took Still they did better than Intu What's the EBITDA/debt ratio here given a 6.1 cap and the LTV it's likely to be 7-11x (and higher or heading higher with voids) That's just not a sustainable capital structure

[williamcooper104] 16/9/2023 15:36

Indeed Retail on Bond Street - fine Office in Mayfair - fine; better than fine RGL isn't really a reit now - it's a developer - with those lease expiries it's all about capex, and repositioning All of that doesn't happen while paying a divi Any divi payment now just makes the rescue rights issue (see HMSO for how painful those can be) more likely Hence the share price falling despite the divi cut

[williamcooper104] 16/9/2023 15:33

Realty demerged all there office and you can buy them now at 3-4x FFO Americans loath offices

[williamcooper104] 16/9/2023 15:31

They even mattered during TINA QE didn't bail out any failing shopping centre

[spectoacc] 16/9/2023 15:30

@mondex - no one thinks offices are finished, any more than retail was finished.

But a glance at the history of retail, or your local High St, or the state of the retail specialist ITs, tells plenty.

If office demand falls 10%, all being equal, where is the economic growth to create the demand to replace that.

[cruelladeville] 16/9/2023 15:05

Thanks, but quite a few instances of "if" in the post. Hope you're right.

[nickrl] 16/9/2023 14:30

@mondex for sure office isn't dead far from it but what is clear is the demand for it is reduced currently whilst businesses right size their needs. Yes this goes on all the time but with covid its turbo charged the speed at which that realignment is taking place. Also whilst economy is doing reasonably well its beginning to stumble so companies will be more cautious about locking themselves in for years ahead. As i said above they need to generate sufficient cash from disposals to redeem the 50m bond so if they clear that hurdle they will buy themselves enough time to allow economy to pick up again. Who knows maybe Reality will bottom pick them or perhaps a merger with CLS!!

[mondex] 16/9/2023 13:52

CDV, as with many investments it's about timing. If RGL can survive by not breaching banking covenants, by not selling off the critical mass of its asset etc., future prospects should be good. But the question is can RGL last out?
I do not believe that the office market is doomed by WFH or hybrid working. It's not that simple. The arguments for many, if not most, organisations is the value to them of interaction, communality, training etc., having employess in the office. What happens in London where housing & commuting is so expensive is not the same as in the regions i.e. RGL's business model is basically sound. So I think that within a few years, with a reduction in inflation & an upswing in growth, RGL's business will greatly improve if it can sustain through the current business cycle it will prosper.

[fred177] 16/9/2023 13:37

Fantastic value at these levels imo dyor

[lonrho] 16/9/2023 12:23

Well despite all the negativity Winterfloods think these are good value at these levels.

[cruelladeville] 16/9/2023 11:39

And with asset sales the rental income is going to fall further from here for certain. It's a mess.

[cc2014] 16/9/2023 11:21

Hi Cruella.

What I saw in that RNS is that against a backdrop of around 8-10% inflation the rental income fell.

I'm trying to find a way to write this which will sound professional and not emotional but in the end no matter of selective RNS's, great presentations, ramping by individuals on BB's can get away from the facts.

The numbers matter. Or at least they always did before QE and TINA

[cruelladeville] 15/9/2023 20:33

I'm a bit surprised just how savage the shares have been marked down. The half year wasn't as bad as I think the subsequent price action shows, in my opinion. But now, the whole world knows RGL is a distressed seller. Probably going to have to sell some of it's best assets to get even close to book value. I think things are much worse now than they were a week ago. Smaller future office estate obviously equals less income and more dividend cuts. Is 30p the bottom here? I honestly don't know.

[nickrl] 15/9/2023 20:11

@CDV have to say i thought a divi cut would shore it up so got that badly wrong. No RNS suggesting any major holders have sold down/out nor was it showing up as being shorted so seems a pretty negative reaction but doubt it will drop below 30p. They need to shift some assets pronto so that bond can be redeemed refi will be suicidal. That will give them plenty of breathing space as next redemption is Aug 26.