Regional Reit Share Discussion Threads

[meanreverter] 05/2/2024 12:27

Skyship: I agree about EBOX. I have added it to my REIT portfolio, particularly since the asset type complements the others.

[skyship] 05/2/2024 11:57

Meanreverter

Firstly, EBOX the best value of the other three - 43.4% discount; 8.75% yield & stupidly sold down. Will bounce back quickly, same as in December.

As for API/CREI - all well laid out in the 19th Jan Offer statement:

[meanreverter] 05/2/2024 11:02

Skyship: Thank you for your pointers. I hold RGL and CLI, but I am looking to diversify into other high-yielding REITs. I notice that API, which you mention, is going to merge with CREI. For simplicity, then, it might be better to buy the resulting company (CREI, now at ~71p). What do you think about the dividend prospects, price-to-NAV, and debt burden of the combination?

[skyship] 04/2/2024 16:41

I've frequently held GACA. Not at the moment; I feel all the Aviva prefs fully valued.

Would far rather hold REITs - proxy bonds at overblown discounts.

A collective purchase of API, CLI, EBOX & SERE provides a combined discount of 45%; but more to the point, a combined yield of 8.0%

Now that's what I call VALUE!

[williamcooper104] 04/2/2024 16:31

I've some GAGA and have held the aviva prefs for years Good buy, forget and pick up the divis

[rcturner2] 04/2/2024 11:46

Vatacarma, right now there are some good options in preference shares, which pay yields around 7%. GACA is a good example.

[nickrl] 04/2/2024 10:45

Their game plan was predicated on (i) disposals to reduce the LTV and (ii) driving up occupancy. The first has resulted in a paltry 26.7m over the last 12mths so either they weren't offering at right price or better assets or its clear indicator that this market has no appetite for this asset class. And secondly occupancy has gone backwards which just worsens overheads. So cash generation is down and there isn't enough stashed away to cover the bond so i see no choice but to cut the dividend now as that at least saves 6m/qtr. Then im afraid they need to identify assets that the market will take - we've seen other successful transactions in smaller office mkt ie API just recently - to generate another 20-30m and then just maybe they will at least get past the bond refi and have breathing space before the next refi.

[skyship] 04/2/2024 10:38

Vatacarma - safer options? - sure, just go to the CP+ thread and stick a pin into any stock chart shown in the Header. They are ALL safer than RGL!

Yet, if I were still a holder here; having come down so far I would most likely hold for a double bottom and another 20% uptick before deciding to kiss my loss goodbye & delete from my Monitor.

If you still want to try for some profit from this sector, then I would strongly recommend two stocks (I hold both), mainly with continental Europe assets - a region with inflation linked rents and lower interest rates:

# CLI @ c97p- a prime office specialist (NB: Not secondary/tertiary regional as per RGL). NAV Discount a cavernous 66.7% and a 1.5x coverered yield of 8.2%. No debt pressures, no alarums - just a sentiment driven low. Take a look at these links to see quality of assets






# EBOX @ 49.2p - a Euro logistics play with a portfolio of prime, modern buildings spread across 7 countries. Discount 44%, Yield 8.8%. Had a strong 30% run up in Late Autumn; now back down for a 2nd bite at the cherry! Great webcast shows all:

[williamcooper104] 04/2/2024 10:12

Often the way when an over leveraged company dies - it becomes an out of the money call option So it can easily rise 50 percent But once loans get called in it's still a zero

[cc2014] 04/2/2024 09:32

@grahamg8

Regrettably if you post anything negative on advfn 95% you will get shot down. It's human nature that those long with money invested will want to defend their positions whether they believe what they write or not.

With regard to RGL as I and others have written before, the balance sheet is in a bad place but worse the actions of the directors and Board are not helping it. At 55% LTV the dividend should have been binned last time, yet it's not even clear they will bin it this time.

This creates a feeling of lack of credibility over balance sheet management and inevitably will lend to all debt being renewed at a higher coupon that would have been necessary had appropriate action taken place. To be blunt the lack of credibility around the directors has been apparent for years as evidenced over the persistently wide discount to NAV when compared with peers.


In the end what price to roll the retail bond? The ENQ and IPF bonds are trading around 10-11% yield and they are far safer bets that RGL. That puts this in the range of around 15%, but I'm not even sure that's enough for an unsecured bond at the bottom of the stack in both time and subordination. There's another problem too in that at 15% retail investors walk away as the risk becomes crystallised in the coupon.

If the retail bond is reset at 15% and the dividend is reset to zero what price the equity? Something beginning with a 1 rather than a 2?

(and finally as I know someone is going to assert that they don't need to roll all of the £50m retail bond, if they were going to do that they'd be buying them back in the market now at well below par rather than waiting to redeem them later in the year)

The only hope for RGL shareholders is that somehow an asset is sold close to NAV and preferably one with not much debt on it.

Good luck to all holders. I don't think it's going bust but there could be very many years with no dividend.

[vatacarma] 04/2/2024 08:34

Care to name one or two safer options RC ?

[rcturner2] 04/2/2024 08:31

I don't think there are many "bulls" on RGL. It's a mess currently and the share price is certainly at "option" level, it is clearly not a share to plough a lot of money into. There are much better and safer options out there.

[arbus5000] 03/2/2024 19:58

mmmkay, so RGL is doomed, but also a 50% rise is possible.

thanks for your insight here - i can take that to the bank.

[spectoacc] 03/2/2024 19:34

"* The value of office properties is below the cost to replace them, so there's a limit to how much they could fall."


That could not be more wrong.

I've been calling RGL for at least 18 months, but thanks for your input @airbus5000.

On the flip side, amazing how the bulls disappear on the falls.

50% bounces more than possible on RGL, but watch that vacancy rate...

[williamcooper104] 03/2/2024 18:53

Yes but you can still cut the divi and pay a stock divi HMSO did this for years Plus it's payment of 90% of taxable profits after capital allowances In practise that means can get away with paying out c60 something percent especially for capex intensive proprieties

[redhorse2020] 03/2/2024 18:42

You say the chief has a tonne of shares but the latest RNS that seems to make reference to this (October 2023) states that the Inglis family has a holding of 2,514,365 Ordinary Shares in the Company representing 0.49% of the available share capital. Sure, this is a significant holding but less than many other managers and not huge in value terms at todays prices...

[arbus5000] 03/2/2024 18:39

it also never fails to tickle me how the doom mongers find their voice after share price falls, which quickly fall silent when the price moves in the other direction.

the bearish analysis is fantastic - however, please do try to share it before its fully priced in, and not after.

[arbus5000] 03/2/2024 18:36

the sell-off is over done imho

falling valuations have led to the current situation, causing LTVs to rise. This isn't a case of being over leveraged or poor management, and the valuation declines are due to rising gilt yields. They do not necasserillly reflect market values.

To provide a bit of balance in the current discourse:

* The value of office properties is below the cost to replace them, so there's a limit to how much they could fall.
* The portfolio is well diversified geographically, and has small lot sizes.
* RTO / Hybrid working is here to stay.
* Much of the debt / covenants is limited to specific properties. So a company wide LTV does not mean much and any breach could be remedied.
* interest coverage does not appear to be an issue, rental income of >8% versus average cost of debt of 3.5% gives a healthy spread
* it is unlikely that the whole £50mln retail bond needs to be refinanced - there is c30m of free cash.
* a rights / scrip share offering could provide alternative financing options should it be needed.

[neilyb675] 03/2/2024 18:05

To be a REIT the company has to comply with certain rules: 75% of the company’s profit must be generated from rental income. 75% of the company’s assets must be properties available to rent. 90% of the company’s rental profit must be paid out to shareholders via dividends.

[dartboard1] 03/2/2024 16:15

Almost hoping they breach the covenants at this point. Why management haven't cut the div to nil to pay down debt and deleverage is pretty dim. Do they want the debt holders to own all the equity or what... I know the chief has a tonne of shares but think he's driving it off the cliff here trying to clip as many div as he can until it cannons into restructure

[grahamg8] 03/2/2024 11:13

Thank you all for the positive replies. I am so used to being shot down on these forums that I pitched a low 8% to avoid claims that it might be possible to refinance at less than this. I agree that the likely level will be higher. The often touted ENQ2 is currently trading at 96p and 9% coupon with 3 years to run. And Enquest have a proven track record of paying down their debt over recent years. RGL would need to match or improve on what is already available elsewhere to tempt risk takers looking for income.

So back to the shares. How do we get out of here with the shirts still on our backs? A slight glimmer of hope would be to liquidate the entire company. Assets: portfolio £700.7m, cash say £20m (Directors omitted to say this time but £50.1 on 31/12/22 and £32.6m on 30/9/23 - another red flag?), 6m rent roll £33.9m; less sell at average of 20% discount -£140.1m, debt -£386.1m, interest on debt say 12m -£13.5m, expenses -£11.2m from 2022 financial report. That leaves shareholder funds of £203.5m or 39.5pps compared to the current price of 27.15-27.25p.

[williamcooper104] 02/2/2024 21:45

Yep - it's realty really hard to de-leverage though selling in a down market They won't get 8 on a refinanced bond Senior secured is likely to cost them 7-8

[spectoacc] 02/2/2024 19:33

@grahamg8 - spot on, and why I've been saying for ages that RGL is toast. Only the timescale is unknown.

Which isn't to say, for the avoidance of doubt, that it can't have a 50% rally or two along the way, and be a good trading share. [Nor is it to say that things may change - an economic boom would definitely help.]

As you say, to fix the debt they need large sales, and large sales are going to have to continue to be of the good stuff.

[1knocker] 02/2/2024 19:32

Anything we slvage from our investments here will be a bonus. When a property company gets to this point, there is no return. Don't throw good money after bad.