Schroder Real Estate Inv... Share Discussion Threads

[nickrl] 19/6/2022 10:46

Added to SREI pre results and was quite hopeful that 60p looked on teh cards but looks like a big seller appeared late on Friday so back all square!

There is no doubt there will be a recession how deep isn't clear but this may help in moderating commodity prices so lower the inflation peak. What's pretty clear though is BoE doesn't have the desire to raise IRs very fast or even far as they expect prices to moderate with demand destruction driven by higher energy costs. This will have a knock on impact into discretionary spending although with savers having accumulated so much over last two years even that area won't fall off a cliff. So all round currently not too many threats in our sectors. So if REITs can raise debt they will still get a low rate so not yet the time to be too underleveraged.

[chucko1] 19/6/2022 10:19

Flyer, quite so. But the lower leverage is paramount as it was that, the far higher leverage of 2007, which resulted in no financing available post-crash at any reasonable price. Leverage will result in a death-spiral in a way higher financing costs [alone] can only dream of.

[spectoacc] 19/6/2022 08:56

@Flyer61 - agreed.

[flyer61] 16/6/2022 16:17

SpectoACC/SKYSHIP230;.also it is pleasing to note that these small REITs seem to have their financing in a far better place than pre the GFC.

[spectoacc] 16/6/2022 16:07

Agreed @Skyship. Slightly concerning seeing the warehouse boys (SHED; WHR; BBOX) well down, but that's surely more an Amazon thing. On the ground, everything still tight - Industrial still strong.

Will that change with UK recession? Maybe, but there's a heck of a lot in the discount already; no issue with over-gearing; no issue (so far) with rent recovery; divis while-we-wait.

Added EBOX & UKCM amongst others.

Markets could have a long way to fall, & REITs not going to be immune, but I'd take physical assets in an inflationary environment over trading co's.

[skyship] 16/6/2022 15:56

Specto - "added others today". At the open today I held just 2 REITs; and at the close I will be holding just the same two!

Preferred to have an increased weighting in the sector having recently sold CREI & SREI.

But decided really couldn't do better than adding to what looks like the absurd value in BREI. Discount at 33%!

I'm now overweight there and carrying a large loss; but frankly not concerned...

[spectoacc] 16/6/2022 13:43

Always find it curious how quiet the BBs go when the markets are tanking - is by far the most interesting time. When everything's going up, can hardly keep up with the posts.

Not added SREI, due to the XD today, but keeping an eye on it & have added others today.

Every chance a recession is looming, & the BoE now admitting CPI - CPI! - could hit 11% in October. But the REITs have real assets, making a real yield, and paying real divis.

[shieldbug] 14/6/2022 19:19

Today's Schroder Real Estate IT presentation posted on Investor Meet Company - hxxps://www.investormeetcompany.com/investor/meeting/full-year-results-for-year-ended-31st-march-2022

[nexusltd] 12/6/2022 22:19

Reviewed the recent accounts to 31st March 2022. My key takeaways.
- Rental FCF (excludes investment activities, acquisition/disposal assets) = 15.7mn = 3.2p/sh (divi cover 100.6%)
- LTV a conservative 28.6%.
- Borrowing costs a very low 2.6%, with a long weighted loan term of 14.1 yrs.
- Reversionary Yield down, but still a healthy 6.4%; wide margin over borrowing costs.
- Lease incentives reduced to 8.6mn.
- Bad debt / arrears provision write back 150k.
- Weighted average lease length a relatively short 5.4 years, allowing opportunities for asset management initiatives and increases in rental levels IF the asset is attractive, demand remains good & absent a severe recession. Opportunity for divi growth.
- Voids 7%; with divi already covered. Opportunity for divi growth.

[starpukka] 11/6/2022 11:42

I watched LLOY like a hawk after the covid falls. It dropped and hovered around 30s for ages. Then it went to 26p and I bought heavily. Then it went back into early 30s and I sold all. DOH !

[flyfisher] 11/6/2022 08:27

These results include a full asset list.

SREI have previously commented that they are seeking to exit some smaller investments, i would guess that the poorer EPC rated properties among these will be due for disposal, particularly traditional retail.

With the RCF having been increased SREI has headroom for a decent sized purchase, but with industrials being fully valued, what sector offers value, leisure ?

[badtime] 09/6/2022 10:58

Lloyds tipped by 'Questor' last week

[pdt] 09/6/2022 07:24

Both banks trade below NAV, have yields of 5%, benefiting from increase in net interest margin as rates rise, cost reductions with branch closures and more digital, pandemic provisions being added back, economy is slowing but not in recession, mortgage book strong with better credit lending controls. Happy to collect divis and not expecting capital gains. So for me 10% of portfolio in UK Banks doesn't seem unreasonable. Time will tell.

Back on topic I must have around 35% in REITs and Infrastructure funds. Such as UK Commercial, Aberdeen Logistics, Ediston, Tritax Big Box, Tritax Euro, Warehouse, BMO real estate, Custodian, Urban Logistics, Standard Life Property Income, Gore St, HICL, Greencoat, IPP, BBGI, Primary Health, Supermarket Income as well as of course Schroders!

Again I am not going set the world alight with capital gains but as a retired guy in my 50s it is a relatively safe portfolio. I live off the income and the capital is protected and slowly growing. However, I am always learning from others here on their approach and keep tweaking my formula! GLA

[spectoacc] 09/6/2022 06:58

"Cheap" tho. Avoid banks because I can't understand their balance sheets, but LLOY, BARC, NWG all look in value territory, notwithstanding the millstones of historic branch networks, and in Barclays case, the ability to shoot themselves in the foot every c.18 months.

Wouldn't touch HSBC or STAN with a bargepole - giant money laundering machines (allegedly) with an over-reliance on China, which to me is uninvestable at almost any price.

NWG back below £2, or LLOY back around 40p, & may be interested - rising interest rates have to help the banks.

Apologies for OT.

[flyer61] 08/6/2022 20:58

PDT….. cannot believe you are retired and have LLOY and NAT WEST in your portfolio.

I have one bank and that is the Bank of Montreal.

Those two leave me cold!

[spectoacc] 08/6/2022 19:34

@PDT - valid points. I'd be more cautious if I was retirement age.

Hmm 10% in UK retail banks! But SUPR a good diversifier, and despite some volatility, I really think the smaller REITs are bargains. Feel more comfortable being heavily in them than I would a "regular" share.

[pdt] 08/6/2022 19:11

Skyship and SpectoAcc, thanks for your replies.

It is interesting to know what others do. However, it also depends on your stage of life, I am now retired and my desire for relatively safe yield and capital preservation are now much higher. My other 5% holdings are Supermarket Income REIT, Lloyds bank and Natwest Bank. Everything else are smaller percentages especially the high risk/high reward biotechs.

Also what you did for a living affects your investing style. I was an accountant to entrepreneur types. They were all risk takers and they liked the fact that I was the cautious one to balance them out sometimes!

[spectoacc] 08/6/2022 18:53

@PDT - no, I'm in the "All your eggs in one basket, then watch that basket" camp (Andrew Carnegie).

Also, are you limiting by asset class? Eg if you had all PE ITs, or a load of the REITs, you're exposed to almost all the same share price drivers. None of them diverge by much, & all would get hit by the same macro calamities.

@speedsgh - interesting - isn't the top of the market yet IMO but fair enough not waiting for it to turn, and he makes a valid point on yields (which is his real reason it seems):


‘Results were driven by industrials but now at the level they are, they cannot offer the income yield [we want],’ he said. ‘The premiums are at a level where they are not delivering incremental increases in income. But we can invest across all sectors and tack and change into higher-yielding sectors.’

[skyship] 08/6/2022 18:11

PDT - Yes, I follow the same system, but my MAX for a secure, high commitment investment is 10%. Mind you, that would usually always be for an asset investment, ie a REIT or a PE trust.

[pdt] 08/6/2022 17:48

Nice to see a £50,000 purchase from a Director.

I have been adding but it has now reached 5% of my portfolio so I will not be adding any more. That's the limit I impose on all holdings to spread risk. Out of interest do others have this as a reasonable percentage of their holdings?

[speedsgh] 08/6/2022 17:15

Schroders Reit to sell industrials as red-hot sector fires up dividend -

... "Industrials – which have seen relentless demand and rip-roaring price growth since the pandemic as consumers turned to online shopping and businesses looked to onshore – may have been a winner for Montgomery but with sky-high valuations being bestowed on them, he is keen to take some profits.

‘Industrials will not get much better,’ he said. ‘And we may look at taking some profit and so you may see the exposure reduce a bit.’

In previous results, Montgomery said he was keen to dispose of smaller assets in order to focus on larger properties but this plan is yet to be executed as he said the trust is focusing on asset management ‘so we can maximise the price’...

[chucko1] 08/6/2022 09:42

The fall in Gilt yields (hence swaps, to a good approximation) was around 2% or so from early 2007 to early 2009. This would have added around 12% to the cost of selling property which had largely been financed with debt and swapped.

A truly unholy combination.

It could have been worse - those who bought long-dated Italian inflation-linked debt at around the same time would be looking at losses of OVER* 100% of what they paid were they to have sold (had to) in 2013 to 2016. So 12% on the swaps for SREI (its predecessor) is the minor part of the nightmare - the leveraged property purchases were really what led to the meltdown.

*How so? The ultra-long duration was one thing, but the very large increase in credit spreads was now applied to the increasing face amount of the bonds (increasing as they are inflation-linked) and yet the market value of the bonds was falling rapidly. The notional value of the swaps were also increasing with inflation and going in the opposite direction (a rapidly increasing liability).

[skyship] 08/6/2022 07:35

Simon Thompson gives a good appraisal of the SREI Finals in his IC online column today - though looks as though a last recommendation para may be missing!

==================================================================

# Net asset value (NAV) total return of 30.9 per cent in financial year
# Industrial assets deliver 38 per cent total return
# Dividend restated to pre-pandemic levels and covered 113 per cent by earnings

Schroder Real Estate Investment Trust (SREI:57.2p) has delivered a thumping 25 per cent increase in NAV to £372mn (75.8p a share), buoyed by an overweight exposure to the hot industrial sector and strong rental growth across the portfolio. etcetcetc

[donald pond] 07/6/2022 21:23

Invista....one of the problem stocks that could still come back and bite BRK. Long story.