Schroder Real Estate Inv... Share Discussion Threads

[spectoacc] 05/8/2022 18:14

Agreed re InvestorMeets - can get more out of them talking personally, but get far more information you'd not have thought to ask. Well done with the q's @nickrl.

Interesting piece in last week's IC on offices - basically saying it's going to take 5-10 years to play out, due to the long leases. Forget the % they said had needed renewing since the pandemic started, but it was tiny. Clearly whatever is going to hit offices has yet to do so.

[nickrl] 05/8/2022 13:03

The investor meet sessions are good as i would have never been able to get that close to these sort of companies. They've largely taken my questions even if some of them are a bit evasive in giving me the answer to the specific issues ive raised but pleased SREI have included lease renewal profile as i requested at the last meeting!! Mind you couldn't explain why there most similar competitor REIT BCPT has done better.

On the macro economic picture can't see discretionary spending won't fall off a cliff with the forecasted energy price rises and any business with a natural customer base from lower income households is going to come under pressure. So i reckon hospitality as to be most exposed which SREI have little if any but Montgomery clearly far more pessimistic only time will tell.

[skyship] 05/8/2022 12:58

The concerns regarding office space are rather overdone IMO. Google just the latest large employer to state that WFH productivity is a serious concern.

Even with a recession there is a shortage of good office space - good meaning adequate parking.

# CTPT still the stand-out value opportunity; even though now up 7% from recent lows.

# RGL a serious contender as it again sinks toward 70p. At 72.3p the yield = 8.99% on a 25.6% discount.

[pavey ark] 05/8/2022 12:07

I agree the discounts are a real buffer but although both API and SREI have a low(ish)percentage in office space the fact remains that there will be real pressure in this area.

If SREI are hoping to sell industrial at 3% they are obviously looking a longer time frame than I'm suggesting.

API was always my REIT of choice but I sold at 88p late March (SREI recently for 55.4p) and was going to buy back at c.78p but didn't as I think things will get tough before things improve.

All REIT managements point out the good, gold plated tenants but if a few of the others go down or leave then I can't see a queue forming to take the space.

The traditional office space does carry the greatest risk as people (who actually come into the office)want easy transport or parking and even things like changing facilities and gyms.

Anyway enough of this ....I will be back with REIT purchases and probably with these two but prefer to give it a couple of months to see how things go.

[spectoacc] 05/8/2022 11:02

Good luck @Pavey Ark, tho don't you think there's a lot in the discounts already?

SREI said in their presentation they were looking to rotate out of Industrial at 3-something % yield, into offices at 8-something %. If they know what they're buying, that doesn't seem the worst strategy.

But agree on Offices overall - the new Retail.

But disagree the REITs aren't good value down here - and API/SREI both have NAV-accretive buybacks. Can't see either of them falling through the floor, albeit tougher times are coming (& IMO in the dicsounts)..

On Offices - need to dig down to see what they actually hold. Eg SREI referenced their large London office let to the University of Law, with a hint they were trying to buy the adjacent buildings and looking to redevelop the block. In meantime, they've a very secure tenant. Similarly, UKCM have a large campus office with HM Govnt as tenant.

[pavey ark] 05/8/2022 10:13

The big drag on most mixed asset REITs is office rentals.

Most office space is on relatively long lease period but must eventually come up for renewal.

If leases are to be renewed hard bargains will be driven with some companies looking to downsize (home working ?)

There is always a market for good quality assets but if less than top quality assets a left vacant it doesn't take much to make a dent on the bottom line.

I have sold out here and API although they were obviously my initial pick of the bunch I can only see short term downside.....perhaps a bit longer than short term.

All with the usual caveat...."you pays your money you takes your chance"

[spectoacc] 05/8/2022 08:01

"5-10% difference between asking prices and prices being achieved in logistics & London Industrial".

"We're expecting that on average, from the start of this year to the end of next year, average real estate values could fall between 10 & 15%." - But they're not expecting SREI's portfolio to fall like that, due to mix, income etc.

Don't see that myself - are they nearer to the coalface? Or a case of lot size?

Consider inflation (RPI) 11.8% & heading higher - a fall of say 12.5% Real Estate at same time as 12.5% inflation is a 25% fall in real values (ish!). Can't see it, except perhaps in things that have overshot - Big Box, some industrial, London prime.

If you've been selling on yield of 3%, can well see that going back out as interest rates continue to rise. But there's still a lot of demand out there for real assets IMO.


Edit - an hour's background listen, but a must for any SREI shareholder IMO. The path to higher income chart worth it on its own.

[spectoacc] 05/8/2022 07:52

Enjoying the InvestorMeets presentation:


Reminded that SREI spent £27m around 3 years ago to exit their previous debt facility, but that has left them in the strong position they're in now.

[badtime] 04/8/2022 21:25

Thanks for posting ...it did pass me by

[spectoacc] 04/8/2022 14:38

XD today, nearly passed me by.

[chucko1] 01/8/2022 11:00

As we say, buying on "forced(?)" sellers' weakness pays off almost invariably.

"almost invariably" is such a naive comment in investing, and yet it is trumped by the apparent desperation of certain sellers of a number of ITs. Manna from heaven.

[spectoacc] 01/8/2022 06:00

Schroders the company very much in the inept category - the old school tie, job for life, money for life, old boy network. Witness them at the former WPCT, now SUPP.

Fortunately, SREI the REIT completely different - well managed, with an independent board.

At least some of the recent weakness can be explained now.

(Is likely Schroders are deservedly losing some AUM & rebalancing, but equally they may just have chosen to sell down, a decision I'm more than happy to be on the opposite side of).

[nickrl] 31/7/2022 09:33

That 5.5m has gone somewhere as SREI haven't bought that many back so potentially another RNS may materialise if a threshold is exceeded on any of the other major shareholders.

Listened to Montgomery and useful but he can't beat current levels of inflation but if he can cover half of it that will keep me content. He's on Investor Meet on Wednesday and usually get your questions answered on those.

[irishmatt] 31/7/2022 09:14

Looks to me that the selling is from the asset management side (in another fund etc) and the buyback is within the REIT itself

[janeann] 31/7/2022 09:07

Apolgies for my maths ,,, but why are they reducing when they say theyre buying them back?!

[skyship] 31/7/2022 07:48

The holdings RNS shows Schroders reducing by c5.5m shares.

[janeann] 31/7/2022 07:10

well i thought they were buying back shares and yet the holding notice shows Schroders sold a load - I assume c82000 shares at 54.1 !

[flyfisher] 28/7/2022 16:58

Interesting presentation.
Long term development potential for the university of law site in London sounds promising. An extensive low rise site in a prime area for life sciences.

[speedsgh] 28/7/2022 16:00

Schroders: Don't let recession put you off property income - https://citywire.com/funds-insider/news/schroders-don-t-let-recession-put-you-off-property-income/a2393510?re=99588&refea=472547Nick Montgomery of Schroder Real Estate (SREI) explains how UK commercial property is well positioned for the slowdown in the economy and why real estate investment trusts (Reits) can generate income ahead of inflation and also do their bit for the environment. Montgomery, who heads UK real estate at Schroders, has helped run the Reit since its launch in 2004. The portfolio of 42 properties has a net asset value (NAV) of £390m and a gross asset value of £494m including debt.Over 10 years it has delivered a 141% total shareholder return, ahead of the FTSE Epra UK index return of 74%. With the shares trading 32% below NAV, the trust offers a high dividend yield of nearly 6%.Last month the company reported that in the year to 31 March it made an investment return of 30.9%, with its quarterly dividends restored to their pre-pandemic level.In this 30-minute interview, Montgomery explains:* where UK commercial property can fit into investors' portfolios;* his confidence in real estate avoiding a crash in the impending recession despite it slowing down;* how the Reit is shielded against rising interest rates, having refinanced three years ago;* how he can generate inflation-beating returns by growing the rental value of properties; andwhere he is seeing value in the key industrial and office sectors at the moment.

[metis20] 27/7/2022 12:55

The buy-backs will be made under the authority granted at the annual general meeting of the Company held on 9 September 2021, pursuant to which it has authority to repurchase a maximum of 73,612,937 of its ordinary shares (being its outstanding shareholder authority). Such authority lasts until the next annual general meeting of the Company (or other such general meeting of shareholders at which authority to buy back shares is obtained).

[petewy] 27/7/2022 12:41

Good results for the future. Buybacks in September

[flyfisher] 27/7/2022 07:46

Some incremental gains should arise in 2023 as they have the £8m new build at cheadle due for completion in Q1/23 and the planning app at chippenham should be progressing.

As the chippenham planning app is on nil valued land, at what point in the process is any value recognized ?

[chucko1] 27/7/2022 07:22

The small 1% dividend increase is a sign of more to come. In the same breath they mention "progressive", which does not need to include an out-of-cycle increase as this one appears to be.

Discount of 32.3% with a share price of 53.5p and NAV, just published, of 79.1p. At these sorts of levels, a share buy-back clearly makes sense at this point of the cycle. The recent pace of property revaluation is very unlikely to continue at this pace for much longer, if at all. But with low LTVs the norm, unlikely to fall much even in a mild recession.

[spectoacc] 27/7/2022 07:07

Not had time to dig into it property but looks the usual rock-solid performance from SREI.

Edit - looking for negatives:

- The interest rate cap on the revolving facility with RBSI expires in July 2023, making their debt interest rate comments slightly more nuanced than stated
- 29% LTV doesn't feel like an ideal time to be doing buy backs, welcome tho they are
- Portfolio activity is excellent but we only hear the good stuff, not eg rent-frees or incentives
- Void rate at 8.4%/6.9% is relatively high.

Overall, SREI is an absolute bargain IMO. Which makes it one of several, but still.

[petewy] 12/7/2022 10:44

Thanks Flyfish, interesting