Schroder Real Estate Inv... Share Discussion Threads

[nickrl] 07/4/2021 16:31

Surprising there has been no M&A amongst the REITs but most BoDs are on a nice gravy train whatever happens to the share price and many aren't that invested in the shares witness the lack of buying by most when shares were on their knees this time last year.

I recollect PCA said they made an offer to CDFF a while back who are one of the smallest but they wouldn't play ball.

[brwo349] 07/4/2021 15:25

big property rally.
this has been left behind and is the standout

[spectoacc] 07/4/2021 13:33

Ha ha you're both right - supermarket sale, not purchase, oops.

Add to that, the buybacks will tweak things too, as well divergent NAV changes (eg the big retail falls vs Industrial rises).

All still look cheap tho IMO, discounts in a generally v strong property market.

[skyship] 07/4/2021 13:23

Whoops - had posted Office & Industrial the wrong way round - have edited.

Difficult to keep up as everything alters with every purchase/sale. That 9.6% in supermarkets has now been sold!

[8w] 07/4/2021 13:21

Specto : I thought EPIC had sold a supermarket..... I've been wondering what they were going to do with the proceeds?

[spectoacc] 07/4/2021 13:11

@Skyship - took the Feb RNS from SLI but as their "% of net assets" is not a "per cent", you could be right - tho even if a Dec figure, the £37m industrial estate sale should be included already I think. Tho that might explain it.

£m % of net
assets

Industrial 211.2m 63.8%

Office 142.7m 43.0%
.........



EPIC also a Dec fig, from last NAV. They've bought a supermarket since:


Sector & %

Retail warehouse

59.8

Office

26.4

Supermarket

9.6

Development

2.3

Other commercial/ Leisure

1.9


I still wonder if SREI/BREI may fit together?

And should note RLE have mentioned the possibility of M&A (RLE need it! Wouldn't touch with a long stick).

DRIP is in the process of finding a buyer but it's a special case.


Edit - hadn't noticed EPIC nearly 30% Wales - for a Scottish-run Trust.

[skyship] 07/4/2021 13:05

Specto - agreed, extremely unlikely .

Incidentally, in my REIT spreadsheet I have:

# EPIC R/Whse at 72%

# SLI - 33% Office; 48% Industrial

[spectoacc] 07/4/2021 12:38

Can't agree that EPIC and SREI are similar or would fit well together. SREI are about 11% in Retail Warehouse; EPIC are 60%. SREI fairly well spread, with 37% in Industrial. EPIC 0% Industrial. (26% offices, to SREI's 35%, as near as the two come).

Most of the smaller REITs (still not that small, all below are well over £100m) are different to each other, in geography (generally whether they target London/South East or not), sectors, or weightings.

Be interesting to find the most similar - outside of the warehouse/industrial lot. Can't think anyone else has eg RGL's offices weighting, nor EPIC's Retail Parks, nor BCPT's London retail (mainly St Christopher's Place).

SREI & BREI? Similar EPICs too ;) SLI?

You'd struggle to put eg UKCM or PCTN with anyone else due to the tighter discounts.

Edit - SLI more industrial than I remembered - nearly 64% - with 43% offices, 15% retail [SLI's %'s add up to 132% due to gearing; "Other Commercial" another c.10%].

Edit #2 - mkt caps (mostly yesterday's):

SLI £245m
BREI £178m
SREI £200m
EPIC £148m
BCPT £570m
RGL £333m
PCTN £484m
UKCM £949m

My guess is, few Boards (or managers) would be eager to get off the gravy train. Which doesn't rule out takeovers, but might make voluntary mergers unlikely..

[ec2] 07/4/2021 11:43

Interesting comments regarding the share buybacks. I see them as having short term benefits. The longer term impact of reducing the number of shares in circulation reduces liquidity leading to wider spreads and reduced NMS. This in turn makes the shares less attractive to larger/institutional investors as it's impossible to trade the stock in meaningful size. It's good the asset manager has not wasted excess cash buying overpriced properties, but I would prefer this cash be returned to shareholders. IMO a number of REITs have become too tiny and lack the critical mass to operate efficiently let alone register on larger investors' radar. I've suggested on the EPIC message board that EPIC and SREI would be good candidates to merge. EPIC mkt cap 147m and SREI mkt cap 198m have similar investment styles and both have excess cash. The REITs could be merged leading to: 1) Economies of scale in terms asset management, admin and compliance costs; 2) Improved share price liquidity and attractiveness to larger investors; 3) increased asset/tenant diversification. These points would in turn encourage a narrowing of the discounts, and the excess cash could simply be returned to shareholders.

[skyship] 07/4/2021 11:16

Indeed - 8.25m = 1.68%. Would be nice to see that as a buyback taking out the tap.

A single trade costing £3.34m & adding £1.51m to the NAV - 0.3p/share

[spectoacc] 07/4/2021 11:07

Wow yes - SREI never gets trades like that, wonder who the seller is, and if that's the end of the overhang.

We're due a move back up..

[sphere25] 07/4/2021 10:54

Still no movement here but an interesting 8.25m gone through at 40.5p. Can't recall anything close to that going through SREI before. It clearly sticks out on the volume charts like a sore thumb.

Any more for any more to finally tip the scales here?

All imo
DYOR

[spectoacc] 07/4/2021 05:45

Felt a bit "new ISA year" yesterday.

[skyship] 06/4/2021 20:01

EI - a strong performance today as SREI consolidates above 40p in 1.66m turnover; though buybacks of only 67k.

[essentialinvestor] 06/4/2021 14:11

BCPT, BREI etc motoring, SREI moribund.

It must be overdue some attention, hopefully not the wrong type ).

[hindsight] 06/4/2021 11:31

Thank you EI and SpectoAcc for the detailed replies, much appreciated. My thoughts are very similar

[essentialinvestor] 06/4/2021 09:29

hindsight, 45 pence plus if current market consensus if correct-
the pandemic morphs in to another endemic virus.

On a more troublesome outcome- difficult to treat new variants and
mass reinfections, would still hope SREI might hold around the 34/35
mark given a NAV discount cushion. BREI has hit the level
I mentioned to you recently. Good fortune with your holdings.

Guessestimates at best obvs, nothing more.

[spectoacc] 05/4/2021 15:57

I can get away with answering a slightly different question.

I think many of the small REITs are great value atm. NAV falls have moderated in retail & office, and are (rightly) still going strong in industrial. So we might be near the bottom of NAV falls overall, with the prospect of gentle NAV rises again soon.

The economy's been juiced by govnt cash, interest rates can't go anywhere due to debt levels (say from 0.1% to 0.5%), inflation's going up at least temporarily - hard assets the place to be. A wall of consumer savings set to be spent - tho how, and how much, is anyone's guess. Where resi/industrial have gone, the rest may follow.

Some (eg SLI) used to trade at a premium - currently 24% discount. Needs a consistently rising NAV to get back to par, but that'll happen eventually. Then a double whammy share price push.

In a year - who knows - I'd hope some narrowing of the discount and with some of them, higher divis, to reflect REIT rules if nothing else, and our c.6% in the meantime.

Plenty could go wrong - vaccine-proof Covid kicking off, as you say. China/US causing a global recession. UK recession. More Brexit trouble.

But looking at eg SREI's holdings & tenants, only the retail weighting remains a bit high. But even the entirety of it is less than the discount, and as they said: "Of which [20.6%] 11.4% is retail warehouse, 5.2% has retail as part of a mixed use of assets and 4.0% has retail as sole use".

[hindsight] 05/4/2021 14:19

EI, to put you on the spot where do you see the future, 1+ years, now for share price If mutations dont render vaccine ineffective

[essentialinvestor] 03/4/2021 15:45

Issue is the extraordinary economic support provided may have
reduced opportunity to acquire 'on the cheap'.
The moritorium has arguably also played in to that, which may be overlooked.

Made a guessestimate here about 10 months ago on where I saw the share price and
NAV cycle trough. Although I got the share price guess about bang on 'high 20's,
I was about 30% (woefully) out on the cycle NAV low - expected that to trough lower down.

SREI found themselves ideally positioned with high levels of cash to deploy as the Covid-19
hit materialised, but particularly in industrial warehouses/distribution assets, bargains perhaps
did not materialise as expected, or at least to an extent.
The exponential growth in e-commerce has clearly also been a factor for that segment.

[skinny] 02/4/2021 16:35

I'd have to agree with most of last few posts - I'm not a great fan of buybacks generally - but this seems to be the best option here with such a NAV discount.

[kenmitch] 02/4/2021 11:49

All fair comment SpectoAcc. It’s hard to know but is there really nothing much to buy? No point buying the wrong properties but there are distressed sellers at present and some REITS seem to have spotted some genuine bargains.

Buybacks often favour sellers at the expense of those who stay, though I accept that argument is much weaker for Investment Trusts than with single shares.

When looking to buy an Investment Trust I see a larger than normal discount to NAV as a big plus and even more so a buying opportunity if there’s a big discount that seems inexplicable.

Investment Trusts often see discounts like a virility symbol and that makes them feel they have do to something to lower that discount, with buybacks the one they go for and often ahead of spending spare cash on investments themselves. But successful Investment Trusts often trade at premiums and Trusts with improving performance or at discounts because sector is out of favour (as is the case for the likes of SREI now) can see their discounts narrow and even go to a premium on improved performance and improved enthusiasm for the sector. So arguably that reduces the need for buybacks just to try and speed up what could well happen without them.

[spectoacc] 01/4/2021 20:08

@kenmitch - agree buybacks don't have a straight line effect. Hoovers up at least some sellers, who might otherwise have sold at lower prices. But for most, no, they'd be hanging on, and if they did sell lower, it would be the likes of us buying in. So mainly agree that there may be little price boost to them.

However - in the absence of being able to purchase good property at a similar discount to the shares can be bought at, then I'm def with @Skyship. If SREI have a sum of money they can either spend on generally overpriced property, or on their own (cheap) shares, then buy the shares. Save the annual divi, boost the NAV, and ultimately all-things-being-equal boost the share price down the line.

Only works if a big NAV discount with nothing much to buy, & feels like that's the situation we're in.

[kenmitch] 01/4/2021 16:22

SpectoAcc

Where would share price be without the buybacks? Probably about the same as what it is now. I hold SREI, SERE, EPIC and AEWU and all are flat lining at present. SREI buybacks have probably made no difference to the share price, and SREI is the weakest performer of the four from my buy prices. All 4 have done well but SREI gain is the smallest.

I’m a fan of Skyship’s excellent posts but I‘ve never shared his enthusiasm for buybacks. Spend spare cash to invest wisely is better imo than resorting to artificial ways to try, and often fail, to give the share price a lift.

Buybacks do increase NAV but at considerable expense and the problem is a higher NAV does not always mean the discount will narrow. Sometimes it widens despite the buybacks. Or it narrows while they are buying back and then can widen again when they stop.