Regional Reit Share Discussion Threads

[chucko1] 15/11/2019 12:21

Great posts from mature, successful, down to earth investors.

Could we have a huge sell off à la 2007/8 property crash? Between 2008 and 2018, one of my tasks was to unwind a portfolio of distressed CMBS/RMBS securities. Distress occurred wherever:

1. Leverage was too high, or

2. The underlying properties supporting the loans were non “repurposeable”.

3. A degree of fraud (more common than you would like), more in Europe than in the U.K.

Everything else ended up being fine with many securities returning to par. If you are prepared to be patient in this market and not shoot for the moon, I think returns will continue to be very useful as compared with the risk free rate and also experienced volatility. In that regard, it should not only be a good investment for older investors, but also consider the effects of compounding at, say, 7.5% for 20 years in a 2% inflation environment. 2.86x your money in real terms. With CAPE at near record highs on mainstream stocks, good REITs can be a great alternative bedrock.

So, could we have that huge sell-off? Not at LTVs sub 40%. The huge yields of the previous decade resulted from LTVs higher than 70% and covenant breaches that could not be waived on account of net income turning negative (poor economy leading to more voids as well as MUCH higher funding spreads). A lot of lessons have been learned. Be much more afraid of covenant-lite unsecured commercial borrowing that has ballooned the past few years.

Just my opinion.

[skyship] 15/11/2019 11:53

Clausentum - impressive. We are of the same age (I hit 71 next week) and similar in that I too retired early and live off a moderately successful pension portfolio.

Two things:

# Did you buy into AEWU? (- see my P. No.1280 above)

# Can you suggest another seemingly secure stock providing both yield and capital gain prospects?

I'm finding it really difficult to find anything that matches up to RGL in those regards.

[redhill9] 15/11/2019 10:37

True SpectoAcc, there is always risk in even the most apparently "safe" share, and there are seemingly safer shares than RGL.

Bearing that in mind though I tend to look on RGL (and a number of other shares) in much the same way as Clausentum - ones to hold for the income and, subject to keeping the disaster scenario and sustainability of yield under review, not worry too much about share price fluctuations along the way.

As long as such a portfolio is well spread across sectors the diluted risk can be acceptable with a far better return than any conventional annuity, with the option of cashing in and moving on if necessary.

[clausentum] 15/11/2019 10:31

I first bought shares in 1963, I been through many ups and downs! IMO RGL is a useful for pensioners like me. I retired 30 years ago at the age of 41 yrs, and have supported myself with my shares ever since.

[spectoacc] 15/11/2019 10:13

...Or there's a recession/depression. People have short memories of 11 years ago! Could pick up offices on 25% yields.

Not expecting another financial crisis mind - history rhymes, it doesn't repeat.

[clausentum] 15/11/2019 10:09

I hold RGL as an indefinite source of income, it is an annuity with a possible surrender value. The share price is only significant when I or my executor should decide to sell.

[rcturner2] 15/11/2019 07:42

You cannot untangle the yield from the share price, both matter.

I invest primarily for yield, I will not buy a share that does not yield more than 5%. However I have to be very careful on the capital side, as many high yield shares have high yields for a reason, ie that the business is under pressure. For this reason I have about half my money in investment trusts where this is less likely to be an issue.

[davr0s] 14/11/2019 18:27

Well in this case I include the yield in my definition of price as it's a REIT but my point is that what you make or lose is determined by the price you buy and sell at with dividends included. Everything else is irrelevant - it really is but many make it far too complicated than needed

[skyship] 14/11/2019 18:18

Both good and comprehensible posts; and being now on the cusp of 71 I certainly understand the yield argument; however I will still top-slice if I believe the share price to be over-extended, then buy back on any subsequent fall.

For the time-being I will not do so for the reason laid out in my earlier post - even at an share price equating to NAV (c114p) the yield here would still be 7.24%. In the current low interest rate environment, what's not to like about RGL. Especially when you consider that their office investments are valued at £130/sq ft versus a replacement cost of c£200/sq ft!

[redhill9] 14/11/2019 17:14

Quite right. And going further, if like me you are holding shares like RGL for long term retirement income then short term movements in the share price become far less important as long as the yield continues to be attractive based on comparative risk/reward.

[a0002577] 14/11/2019 15:41

"The only number that pays and which matters is the share price - rest is analysis paralysis"

Just how does a share price pay? It's a number and nothing more if taken in isolation. It only matters if you think it is going to go up or down when you can either sell it at a profit or a loss. The number that really matters is the yield - and it is as well to keep getting ideas of what others are thinking about its prospects and history. Even analystes add to the pool of knowledge.

Taking the share price in isolation is just putting yourself in limbo - and you have in fact paralysed yourself as you can take no rational decision on that single piece of information.

[spectoacc] 14/11/2019 12:10

@chucko1 - secondary unless covenants being tested ;)

[chucko1] 14/11/2019 11:15

Clausentum, in the long, that is the only thing that matters. Others say the NAV matters, but that is secondary.

[clausentum] 14/11/2019 11:12

Since May 2016 each of the 15 dividends has been 0.05p more than a year previously, I expect 8.25p this year and 8.45p next year.I bought this share for safe increasing income, I would only be concerned if the dividend cover deteriorated.

[chucko1] 14/11/2019 11:08

... or trading something, looking for a short term drop in the basis of what is already known.

Might make something doing that, but I would far prefer to take the buy-side risks with a div yield of 8% and growing income. If this one gets slammed because of a recession, think of what will happen to many other things.

My bigger concern is the quality of information submitted to shareholders - but even then, it’s not a large concern. I’m just mindful of it, especially as I have a fair few of these.

[davr0s] 14/11/2019 10:42

Lol - surely we don't have people here trying to short a REIT do we ? :)

[rcturner2] 14/11/2019 10:31

Any drop in eps as a result of the fund raising will be of the order of 1 or 2%.

You really need to try harder.

[spectoacc] 14/11/2019 10:15

Some scepticism warranted IMO, and agree the delay in investing, and more pertinently purchase costs (eg stamp duty), would lead to a "temporary" drop in EPS.

But RGL seem to still be doing well & heading in the right direction IMO.

[kev0856153] 14/11/2019 10:08

Id expect a short term drop in earnings per share since they did not invest the new funds immediately and would not have benefitted from income.
rgl are buying into a bouyant market so they could be overpaying, just need to wait and see.

[rcturner2] 14/11/2019 10:06

Kev, surely you understand the basic idea that RGL issued shares to raise cash which they will then spend on acquiring more assets? This raises more income and reduces the LTV, both of which are good things.

[davr0s] 14/11/2019 09:48

The only number that pays and which matters is the share price - rest is analysis paralysis

[redhill9] 14/11/2019 09:47

Earnings per share is likely falling.

A baseless statement - guesswork, nothing more, and hardly a likely strategy for any propco to follow.

The reason for raising extra cash is to invest and increase the portfolio size and investment return. A larger portfolio means more investment opportunity plus the benefit of greater spread of fixed costs.

You clearly don't like RGL but haven't made much of a success of explaining why. Perhaps come back this time next year and see how things are going?

[kev0856153] 14/11/2019 09:25

All the numbers are going up. Of course they are. Here's another number that's going up - the number of shares in issue. Funny the cheer leaders didn't mention that one. Earnings per share is likely falling.

[davr0s] 14/11/2019 09:19

I don't know how people know if something has been priced in or not. Have they contacted all the participants in the market, all the future buyers/sellers - pray do share how you do this? It's just an opinion and throw away statement that is often used doesn't really add to the picture

[rcturner2] 14/11/2019 08:38

I assume that Kev has a sore head as he has realised he missed out on a bargain when this was lower.