Regional Reit Share Discussion Threads

[spectoacc] 12/3/2024 06:54

Wasn't rocket science @arbus5000, & plenty more have been saying the same recently:


"SpectoAcc - 06 Dec 2022 - 10:08:31 - 3034 of 4124 Regional REIT - Targeting High Yields from Regional Property - RGL

Also very bearish on RGL - IMO they should pass the divi, spend cashflow on meeting EPCs & cutting the high LTV. Don't think they will cut, but at cost/risk of the IT itself in future. High gearing in a shrinking sector is what did for the likes of INTU, HMSO, CAL etc."

[arbus5000] 12/3/2024 06:15

i'm humbled by the level of hindsight here!

[chucko1] 12/3/2024 00:08

The guy who went all-in on offices post COVID. Worth recalling prior to that how positive the updates tended to be, and how frequently Inglis was happy to be quoted for his expertise. This was quite clearly a lot riskier than just about any other REIT. Remarkably, trimming the divi in line with others and showing a tad of circumspection about regional offices would have given this easily sufficient breathing space to get through this period of refinancing. It is not as though there is a shortage of debt capital out there, contrary to the GFC.

A stunning failure of misplaced bravado.

[hpcg] 11/3/2024 23:47

That is the crux though - irrespective of the economics who wants to put new money into a vehicle run into a brick wall by the current manager with that same manager at the wheel?

[williamcooper104] 11/3/2024 22:36

Yep - if they'd axed the divi when they should have there's every chance they'd have avoided the rights issue The BoD can't get rid of Inglis - only fire the external manager of which Inglis is the CEO

[nickrl] 11/3/2024 21:57

Should they get anybody to underwrite this its going to come at hefty cost and reduce proceeds. Mind you the BoDs need to get a grip and get rid of Inglis now as they should have canned the divi 12mths ago to get the bond redeemed as no.1 priority then they had time to the next refi.

[williamcooper104] 11/3/2024 20:44

That plus it's likely another steep divi cut as they have to pay the same divi per share on a lot more shares Surprised that they'll get it away and shareholders don't just insist on a wind down Also why the divi has been kept so management have some cash to put back in

[spectoacc] 11/3/2024 19:37

Interesting, thanks @wc104.

Hope shareholders have enjoyed their dividends - you're about to be diluted c.60% (or dip into your pockets).


"...A £75m rights issue would bring Regional REIT’s LTV down to 45%"

is the key line for me. Then £60m of sales to bring it down further to 40%.

But but but - what happens when office values keep falling? When that 20% vacancy rate fails to improve, perhaps even gets worse?

What would the next RI be at?

Alternatively, if you see sunny uplands ahead for the economy, buying into this RI would be the sensible thing.

Who's underwriting it? What chance it failing? Will the divi be maintained from some of the RI proceeds (in effect)?

Couldn't make up that last paragraph from Inglis - we could see it, mate. It's been right in front of your nose.

The next one would see Inglis go, but he really ought to be out the door on this one.

[williamcooper104] 11/3/2024 19:36

10x standardised margin on IBKR for shorting But they've got borrow

[williamcooper104] 11/3/2024 19:31

From React News Won't be a surprise given the paid for research trailer it so heavily 10p offer price Surprised the share price hasn't moved much - but it will Regional REIT is laying the ground for a distressed rights issue to help recapitalise the business, React News can reveal.The company is understood to be planning to raise around £75m from the market to pay down debt that is due to mature in the coming months, reduce its loan-to-value (LTV) position, and fund necessary capex projects across its portfolio.In order to secure the funds from the market it will have to offer shares at a major discount, with the company currently trading at around 75% below its net asset value. It is expected that new shares could be issued at around a 50% discount to the current trading price, which is in the region of 20p after collapsing by around two-thirds over the past year.300 Bath Street in Glasgow is among Regional REIT's most valuable assetsPeel Hunt, the company's financial adviser and joint broker, alongside joint broker Panmure Gordon are working on the process. The offering is expected to be put to prospective investors around the same time as the company's full year preliminary results on 26 March.The most pressing issue for management that is driving the equity raise is the maturity of a £50m unsecured retail bond, which comes due in August. That instrument, which is currently trading at a discount of around 15%, carries a coupon of 4.5% – but given the considerable increase in the cost of debt since it was issued in 2018, taking out similar subordinated debt would likely cost between 13% and 16%.Management is understood to have determined that taking pain now, and undertaking a discounted rights issue to put the company on a more stable footing, is a more prudent and lower risk option to refinancing with expensive debt – which may not become materially cheaper in the medium-term and may still result in a rights issue further down the line. The remainder of company's debt does not hit maturity for several years.LTV in the spotlightLast year ARA Asset Management bought Regional REIT's asset manager London & Scottish Property Investment Management. The Singaporean giant has been supporting the business and its access to capital.Raising equity would also mean the company will need to sell fewer assets towards the bottom of the market cycle, albeit asset sales will be part of a broader recapitalisation process to reduce the company's LTV.Currently standing in the region of 55.1%, a £75m rights issue would bring Regional REIT's LTV down to 45%, having already begun selling lower-yielding and more mature assets.It is expected to sell £60m this year, with the view of reducing its LTV to 40% and close to current market expectations for a listed property firm. The company said last month that £22.2m of sales were in solicitors' hands, with £5m completed in line with valuations since the start of the year.Accessories, Accessory, TieRegional REIT's management is overseen by London & Scottish chief executive Stephen InglisFurther sales of £60m in 2025 and £30m in 2026 could be undertaken, subject to market conditions, the broader valuation of its portfolio and opportunities to recycle capital.Last September Regional REIT cut its dividend due to the economic backdrop and a fall in net rental income. Around £25m has been set aside for dividend payments, although this is expected to be reduced on a proportional basis as it will be spread across a vastly greater number of shares in issuance. In a trading update last month, the company revealed that its portfolio had experienced a 5.9% like-for-like fall during the second half of the year, with its then 144-asset collection valued at £700.7m – a 9.9% yield. With 92.1% made up by regional offices, the asset class has come under pressure due to shifts towards working from home and corporate occupier trends.At the time Stephen Inglis, chief executive of London and Scottish Property Investment Management, said: "2023 was one of the most challenging years for REITs in recent memory and Regional REIT was not immune from the macro-economic difficulties faced by the sector. While valuations have been impacted, the asset manager's active asset management initiatives continued to mitigate some of the impact on the portfolio."The leasing market was slower than anticipated, largely due to the uncertainty around working patterns and the geopolitical situation impacting inflation and interest rates, but with some stability we are witnessing increasing numbers of enquiries for our assets."

[m_kerr] 05/3/2024 23:13

Rgl generated around £10m in cash in h1 per the cash flow statement. THe non recoverable Capex and property operating expenses is about £8m, but that cash generation figure has already accounted for that.

So that suggests for h1, a sustainable distribution is £10m if at 100% payout.

However, with approx £350-400m in debt, a modest increase in servicing takes a big chunk out of that. Then you get to free fit outs and rent frees of which there will be many with a low WAULT. Both are awful for cash flow.

This is not an income play any more. Its a bet on whether a rebound in office values (or sentiment) will occur. Sentiment cannot easily be predicted, but doesn't take much to get it moving the other way (as many retail investors take instruction from Mr market).

[williamcooper104] 05/3/2024 18:38

A wind down is also a good way of getting your creditors to go easy on covenants as management is doing what an administrator would do, at a cheaper cost

[williamcooper104] 05/3/2024 18:37

Question over how real that NAV actually is in the current market Valuers are better than they used to be; but regional offices are a distressed market with poor transaction levels so it's difficult to get a reliable value I'd still expect on a liquidation that shareholders would get something back at least and certainly it would be unlucky for the retail bonds not to get par Hence why think a wind down is more likely than a rights issue; and if I did hold that's what I'd be hoping for

[williamcooper104] 05/3/2024 18:35

Note that if you have a shell and core shed the capital allowances aren't that much But if you have offices fully fitted out the capital allowances are material

[williamcooper104] 05/3/2024 18:33

Edison did indeed say that and they are totally wrong; I suspect they've been fed that as an excuse by RGL for paying the divi - how many times have I heard tax used as an excuse for something Sorry for repeating myself as I've mentioned this many times on these boards But firstly REITS must distribute 90% of taxable not accounting profits; almost always taxable profits are considerably less than accounting earnings - mainly due to capital allowances. Most REITs over distribute and thus build up their capital allowances such that they can cut the divi for a while Secondly they can always pay a scrip divi - eg HMSO did this for years

[grahamg8] 05/3/2024 18:19

dekle HL says 72.48% so spot on. Edison considered stopping the divi and pointed out that tax on profits would need to be paid. If profits roughly equal the divi distribution which is about £25mpa and the Corporation tax rate is I think 25%, (it could be different by the end of tomorrow). Then holding onto that £25m is going to cost 25%pa. Issuing a new bond at 10 to 12% coupon seems cheap by comparison.

I think the flaw in the Edison equity raise argument is that they assume post a 1:1 rights issue shareholders would be so happy that the price/NTA immediately rises to the same as the competition average. I doubt that would happen, RGL is in barge pole territory.

We can all see the problem and there is no easy way out. Avoid. Unfortunately I am a shareholder for my sins.

[dekle] 05/3/2024 11:07

With the NAV £700m and LTV @55% according to my calcs that’s a 75% discount share price to the NAV. Do you agree?

[rcturner2] 04/3/2024 20:22

lol harry

I am well aware of the risks here. That's why I am always heavily diversified.

[williamcooper104] 04/3/2024 18:40

Yep there's probably default interest but that's probably just 100-200bps

[hedge fund harry] 04/3/2024 16:55

Don't worry, Inglis will release a "positive trading update" with the rights issue lol
and RC Turner will lap up everything said and stick his head even further in the sand - if that is possible.

[m_kerr] 04/3/2024 15:08

Would have been much better to suspend the dividend a year to 18 months ago like some of us said.

In that time they could have raised approx £30m extra in cash taking into account taxes.

An equity raise would trash the share price, I don't know what planet the lapdogs at Edison are on. Would be good for the bond though.

[rcturner2] 04/3/2024 14:51

I doubt any insiders can legally purchase shares at the moment while they are working out how to deal with the retail bond.

I'm looking forward to the day I can sell this share mainly so I don't have to read this thread any more.

[cc2014] 04/3/2024 14:07

That's the nail on the head. And further Edison suggest that after the rights issue that would allow a 11% dividend. It's all just bonkers.

If RGL are so short of cash one has to ask why they declared the dividend and the one before that and the one before that as well. It's like they are creating their own problems.

Unless of course they all know the game is up and it's a last chance to get some cash of the business before it goes under. It wouldn't be the first time. INL was the most recent example where only a few months before it all unravelled they were saying everything was fine and were buying back bundles of shares.

[feddie] 04/3/2024 13:57

If the company were seriously considering a rights issue, why would they declare a dividend?

[davep4] 04/3/2024 13:45

1:1 rights issue @ 10p would raise £50m