Standard Life Investment... Share Discussion Threads

[nickrl] 23/9/2020 20:02

I watched the Minster for Housing in Commons earlier defending why they weren't extending the resi moritorium saying it would help the market to function effectively and that Landlords have there own bills to cover. Interestingly he quoted figures of 89% of tenants paying, 4% who've struck deals and 7% who aren't paying so less of an issue than commercial.

As i ve said before my read of the quoted sector is they (and us as shareholders!) are doing there part to assist tenants and its small number of tenants who can pay that won't are risking this sector. So currently its shareholders that are bearing the brunt here along with a few BoDs have made some modest contribution but how long before contamination spills out into the banking sector which won't help anyone. Why the government is tolerating the likes of Boots undermining the sector when they've given them plenty of other support isn't clear.

We will see in few weeks when RNS issued over Sept qtr whether this can't pay won't pay has worsened or not or perhaps Sunak will come to our rescue tomorrow.

[spectoacc] 23/9/2020 16:31

Have to say, as soon as Boris mentioned 6 months yesterday, I thought "there's the moratorium extended beyond December".

However - and it's a big however - all the better REITs are managing it well. 80% may have be the new 100% for rent collection, but there's few I can think of who won't survive through it - "it" being a year plus of disruption.

Discounts mostly too large IMO, tho clearly more NAV falls ahead.

SLI aren't my favourite, but they're well ahead of the likes of RLE.

[essentialinvestor] 23/9/2020 16:24

Spoke with a friend today, who is a better longer term investor than I am.
He questions whether the UK commercial property sector is investable atm
because of government policy on rent payments and arrears.

If you want to take the flip side then currrnt discounts allow for this.

The issue is, if COVID cases accelerate once again then this moritorium
is unlikely to end in early 2021. Conceivably significantly longer,

HMG could always step in to help the sector by paying a % of rents.
But politically in this climate that may be a non runner, you can just
Imagine the headlines. Landlords a very easy target to take the pain atm.

Hopefully some sense will prevail in 2021.

[spectoacc] 22/9/2020 09:12

@Sky - think that could def apply in the North East. Prestigious offices should still do well tho I reckon.

[skyship] 22/9/2020 09:10

Specto - "Renew at lower rent, or renew smaller, or don't renew at all. Or go somewhere more modern with a long rent-free."

One other I quite like being a holder of RGL & SREI: Or move a chunk of employees out to the Regions for lower rents and a better lifestyle...

[cwa1] 22/9/2020 09:05

Apologies EI, my post crossed with yours above

[cwa1] 22/9/2020 09:04

I see that Gove is suggesting a governmental shift in emphasis this morning from return to the office to get back to WFH where possible.

[essentialinvestor] 22/9/2020 09:02

Speaking of which, guidance change this morning from HMG - work from home if you can.

[spectoacc] 22/9/2020 08:50

Thanks @Skyship, is an interesting read.

My take is that offices are only getting by atm due to vast majority of tenants being locked in to their leases. The interesting thing will be when those come up for renewal. Renew at lower rent, or renew smaller, or don't renew at all. Or go somewhere more modern with a long rent-free.

And that's even without the recessionary effects of Covid, Brexit, govnt deficits/tax rises.

SLI are no doubt correct that the best offices will see the lowest hit.

[skyship] 22/9/2020 08:43

Interesting to read the para on WFH:

"WFH, or to give it the full title, Working From Home, has become a new normal for many people over the last few months. This has caused a considerable amount of thought and challenge around the future of the office. Although the WFH experiment has been welcomed by some, and changed opinions of others, it is unlikely to cause the death of the office. Agile working was a theme that we had seen for a while and COVID-19 has accelerated the acceptance of the ability of and benefits to a workforce to work in an agile manner. In the short term, economic factors are likely to be the main influencer of take up and rents in the sector. We are already seeing companies put new acquisitions of office space on hold, and over the longer term we will no doubt see reduced demand for the sector as workforces are encouraged to spend some time at home. The demand that remains though will be for offices that are inviting, where people can share, engage, develop and socialize. Rent and yields for grade A space meeting these needs are likely to remain more resilient than those on poorer quality assets. The Wellness agenda is increasingly important. We have positioned our office portfolio to provide attractive workplaces that will meet future demand. Great changing facilities, showers and bike racks will be required, along with shared meeting rooms (and yoga rooms!). We have also found a pick-up in demand for our fully fitted office suites and expect that to continue. There might be a short term increase in demand for car parking and suburban locations, however over the medium term easy access by public transport will remain very important, as will proximity of housing. Offices will remain an important component of balanced portfolios."

[nickrl] 22/9/2020 08:40

Receivables up from 3m to 9m, direct property expense +1m although nice to see inv mgt fee reducing in line with lower NAV.

Not sure the dividend is covered in true cash terms so like many reits now a lot of reliance being placed on deferred payments actually being received and not subsequently written off

Still at sub 50p im tempted to take a loss elsewhere.

[spectoacc] 22/9/2020 07:32

You'd struggle to call SLI expensive from this morning's RNS, altho:

"In terms of rent
collection, some tenants, depending on what sector they are in, will continue
to have difficulty in meeting rental obligations over the remainder of this
year, and quite possibly for the first half of 2021."

A valid point, particularly if/when a disrupted Xmas. The next full quarter could be a year from now, & let's hope the occupancy level isn't greatly lower.

[hindsight] 21/9/2020 19:55

Cant say the B word bothered me long term, but would produce a short term cliff edge effect, at worst the FX rate would counter balance any longer downside if it occurred, albeit a fx loss against a currency basket. The C word is looking more of a long term issue, will need some tax revenue long term to cover the debt insurance. My preference would be 5% IHT minimum rate before any exemptions applied, this would raise enough over 30 years to pay off covid debt. But fear some may pull the panic button for repayment earlier and hit the recovery post vaccine

[essentialinvestor] 18/9/2020 15:55

Well I try sometimes Not to mention the B word as if you make a point in that context
some tend to jump to an immediate conclusion that a political case
is being made. The political debate on Brexit is over(in terms of the electorate having a say) it's now an economic consideration - we had a referendum and arguably more importantly a decisive Tory GE victory.

And yes on a sentiment basis leaving without a deal would be a negative for the London office
REITS in particular. You could argue that any actute weakness would present opportunities.

[hindsight] 18/9/2020 15:49

Agree, think similar and also had Brexit trade deal issue on my list. However think covid may well mean both sides put pen to paper on a trade deal now

[essentialinvestor] 18/9/2020 11:14

Cut my sector exposure by 40% since Wednesday.

SLI is one of the positions I've added to.

Expected autumn-winter to be messy with escalating COVID cases,
what I did not expect was this to start hitting in mid September,
weeks before the flu season even starts. Madrid has morphed from
problem free 4 weeks ago to locks downs being imposed from this Sunday
because of dwindling hospital capacity. Need to be a little careful on some of the UK cyclicals.

[spectoacc] 17/9/2020 14:31

@EI - or much (if any) knowledge of The Rule of Law.

Really wouldn't be difficult to come up with something such as: "The moratorium has ended; however, due to restricted court time, you have to go to arbitration first, at joint expense, and only then can issue winding-up petitions, which we've quadrupled the price for so as to discourage".

Incentivise both sides to reach agreement. As many are doing with eg monthly payment or a rent-free in return for longer lease/removal of break.

The moratorium was a blunt instrument at a time when they perhaps didn't have much opportunity to think. There's no excuse for just rolling it on & on IMO.

[essentialinvestor] 17/9/2020 14:27

Exactly.


My concern about the current Cabinet composition (and this is not a political point)
is not many ministers appear to have extensive industry experience, particularly of running a business.

This is radically different from the Thatcher cabinets of the 1980's.

[spectoacc] 17/9/2020 13:00

@HP - but why single out landlords? What about, say, bondholders? What about the ones who clearly can pay (eg FRAS), but simply decide not to?

As per EI's point - this is proving open-ended. And landlords haven't been helped at all, whereas others have had cash grants, BBL's, furlough, rates holidays and more. Yes, if govnt going to shut the economy down, they likely need to pay compensation. They have, just not to landlords. (Or banks, possibly the only group destined to get hit harder).

Fortunately, most REITs navigating it well, and majority of tenants are honest. But that's in spite of govnt, not because of it.

[essentialinvestor] 17/9/2020 11:29

Joined you two.

You did well to get 50 pence on the offer.

[skyship] 17/9/2020 11:04

Bought back in for a few this morning @ c50.45p...hoping that 50p support turns this ship around again.

[essentialinvestor] 17/9/2020 10:57

I'm not against the moritorium per se, it's understandable HMG want
to support businesses through acute uncertainty.

My point is a lack of clarity on any end date and the implications that has
for investor confidence in the sector.

As mentioned, if the government were to say...this will run for another X months,
that's quantifiable, an open-ended scheme is not.

[hugepants] 17/9/2020 10:47

I don't see it as dangerous at all. In fact it's necessary. The government are doing all they can and landlords have to absorb some of the pain. Shops/leisure were ordered by the government to close down for 3-6 months. They had no choice. Should they be paying rent in these circumstances? The government has already helped landlords indirectly with the furlough scheme and the business rates cancellation. Both these measures will have resulted in landlords receiving more rent than otherwise.

Anyway picked up more of these this morning at around 50p.

[essentialinvestor] 16/9/2020 16:56

It's a very dangerous development for the sector.

[spectoacc] 16/9/2020 16:55

@EI - can you see them allowing rent collection after Christmas? They've opened a Pandora's Box with this. There has to be a better way.