Regional Reit Share Discussion Threads

[nickrl] 21/9/2023 09:04

Absolutely Squarestone came with a lot of vacant space but also their decision to focus on offices only was equally poor.

[cruelladeville] 21/9/2023 07:28

You're right. It was a terrible decision to double up on office real estate when they did. The company would probably be in a far better place had that not happened.

[m_kerr] 20/9/2023 22:32

capital value of about £120 per square foot and £14.50 psf or so average rent strikes me as very cheap. but as cheap as it is, they're struggling to lease the space. IMV the squarestone portfolio caused alot of damage to RGL. it's rarely a good idea to buy assets from private equity due to chronic underinvestment.

[fred177] 20/9/2023 20:08

Upgrades only relevant at lease renewal so push back should buy time maybe those sensitive tenants should pay for the privilege of being sensitive

[williamcooper104] 20/9/2023 19:10

Won't matter because lenders will just assume that labour will change it back And even with that nobody wants a sub EPC building, many tenants are sensitive about it

[fred177] 20/9/2023 17:09

will the Net Zero pushback help RGL? they've got £60 mill off NAV for capex hopefully they can lobby for extra time given todays news

[cruelladeville] 20/9/2023 11:03

First sign today the bottom trawlers are out? Nice to see a bit of buying for a change. Possibly kicked off by better than expected economic news this morning.

[ghhghh] 20/9/2023 11:00

Specto

In high inflation, high interest rate times, they do poorly.

For Gawd’s Sake that’s why I’m buying at greatly discounted price at what I hope is the bottom of the cycle when inflation/interest rates close going down.

Golden rule - if demand increases and supply goes down, then prices ALWAY increase? This time turbo boosted by catching up with historic inflation

Remember markets will buy six months before the bears wake up

[williamcooper104] 20/9/2023 09:04

Also in the US you get a lot more labour mobility and tax competition between statesIt was unthinkable just a few years ago that San Fran would be Detroit in the sun And once would have been unthinkable that Detroit would be the capital of the rust belt

[williamcooper104] 20/9/2023 09:02

Yes Orion is interesting as the spin of from O IIRC the WAULT is about 4 - and at $50-60 psf that may not be a bad thing They're suburban offices and those can convert well to resi Haven't bought in as can't really understand how much development opportunity there is V good point on balance sheet/dividend

[spectoacc] 20/9/2023 08:24

Long term, REITs have performed poorly.

In low inflation, low interest environments, capital values (& REITs) do well.

In high inflation, high interest rate times, they do poorly.

A prime logistics unit in a great location has suffered capital value falls when inflation has been v high. That's despite "..Demand [is] greater than supply".

Meadowhall far from an irrelevance, it's a prime hard-to-replicate asset, and we've plenty of price points for it.

Demand/supply, but nothing so simplistic as "inflation is up, therefore capital values will inevitably rise in the future" (over a timescale that keeps increasing).

ERV/valuation are also two separate things.

[m_kerr] 19/9/2023 23:21

WC - i stumbled across orion office reit in the US a while back (based on screening), and it's very interesting to compare strategy.

orion are only distributing about a quarter of their FFO in dividends. they seem to understand the challenge they will face in terms of renewing leases and the need to retain capital to maximise flexibility in this uncertain time. i suspect their strategy is the correct one. orion have sold some assets for around $40-60 per square foot. over here the land value provides more of a backup, there's a very restrictive planning system, and protection from competing development. that's one of the reasons the UK is seen as a very attractive place to invest among US based investors.

[cruelladeville] 19/9/2023 18:15

Oh well. I suppose "only" being down 1.1% today is something to be pleased about.Almost.

[spectoacc] 19/9/2023 15:09

My point is that lack of supply, inflation, all those other reasons you give, simply aren't valid. Real assets, but all too often wasting assets.

What matters is the business case - the income, the cost of the debt. Same applies to resi - the cost & availability of money dictates the capital values.

Related back to inflation & interest rates, it's demonstrably the opposite to what you claim. When inflation goes up, rates go up, property values go down.

Meadowhall's a nice example because although retail, it's prime retail, with no shopping centres likely to be built to rival it. And we have the prices.

[ghhghh] 19/9/2023 14:18

Specto

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?

Sorry but what's your point? The only issue of interest is what value did BL place on it at last NAV update. Market reaction implies already baked in. Would make BL look a bargain?

[williamcooper104] 19/9/2023 11:51

It's that plus if every 5-7rs you've to redo the Cat A then that's £50-60 psf or say £8 psf pa that should come of the number you are capitalising Not such a drag in Mayfair (even with fit outs being to a more expensive spec) but a big problem if you're in the regions The same argument applies for hotels, which used to get valued on ebitda multiples and now are adjusted to sustainable free cashflow or are EBITDA but at much lower multiples Hence why the words hotelificion of offices should fill investors with dread

[cruelladeville] 19/9/2023 11:12

I suspect with RGL's estate, it's not crystal clear what's ongoing maintenance and what's capital.

[williamcooper104] 19/9/2023 10:56

And what capex isn't really capex but should be considered as irregularly spent operating costs

[williamcooper104] 19/9/2023 10:54

The reversion is what they will be using to get the NIY down to 6, suggesting EY/IRRs of about 8 But as you say; there's just a few costs along the way, and it's going to be very difficult to untangle from the valuation what capex is required to unlock the reversion

[cruelladeville] 19/9/2023 10:08

Market bottom is feeling closer? It's been absolutely savage to RGL. Deservedly so though, I think on balance. I think Inglis has talked the talk. But failed miserably to walk the walk. Considering how much his family have at stake here, I'm somewhat surprised.

[cruelladeville] 19/9/2023 10:05

Lies, damn lies and statistics. I guess?

[m_kerr] 19/9/2023 09:43

I have no idea how rgl value their portfolio at 6.1% NIY. They state reversionary yield in excess of 10% but what do these numbers matter for when the vacancy is 17% and rent free periods and free capex are provided to new tenants.

[williamcooper104] 19/9/2023 08:37

The implied yield that Land Sec bought Intus debt on Cardiff St David's was c9 Though there were some peculiarities in the JV agreement which could warrant a discount - so it's not a direct comp - but still shows the trend