Divi paid in both IG Index and iWEB this morning. |
my dividend from SOHO has landed in my broker account. It wasn't there first thing this morning.
Asagi (long SOHO) |
They're good - they manage SUPR - have built up a social/assisted housing team - took over the management of the private HOME reit |
SOHO can close the gap a bit with a buy back. I'm expecting that soon and we should get to 80p. |
Hope not SOHOs about 2.5x the market cap of RESI so it's got a shot at getting to a reasonable size to get a cheaper cost of equity RESIs assets didn't work that well together - one a pure duration play and the other an operating intensive set of properties |
Take a look at RESI. Throwing in the towel in order to close the discount gap. Perhaps SOHO need to do the same. |
Well, that's my line of thinking. But there folks out there know a lot more about this business than I do. Hence the question. |
They couldn't be any worse than Triple Point. Could they?? |
Only just noticed the upcoming change of management from Triple Point to Atrato probably January next year. I don't actually know anything really about either of them. Any likely upside for shareholders after the management change or just business as usual? Thanks. |
Not SOHO specific but usually because they get paid to do so, either through raising more from a sale and leaseback than they otherwise would and/or getting cash from the landlord or other incentives - eg the landlord does the fit out the tenant should do and gives a large rent free and accepts an SPV covenant such that the tenant has a free/cheap option I've been shorting a large US hospital reit for the last 2.5 years - MPW that did all of this - and more HOME reit was SPV tenants with the landlord supposedly funding the fit out but that money then been used to pay the landlord thier rent once the rent frees had expired |
Good question - also, what impact does the over renting have on NAV? Guessing the value these properties are held at is considerably more than their market value given triplepoint have been involved.... |
Trying to understand the incentives here.Why would a care provider want to contract in a patient/client to over rented accomodation rather than to accomodation that reflects market rates ? |
Thanks. Sounds reasonable.
"There’s plenty of room in the share price to allow for it"
I tend to agree. Just considering what the market reaction might be under such circumstances. |
At a guess take away 10% of the income to reduce the GAV by c5-7%There's plenty of room in the share price to allow for it |
"In the current market this shouldn’t trade at more than a 20% discount to a kitchen sinked NAV"
Any thoughts on what the kitchen-sinked NAV is likely to be?
Just plucking a figure out of the air, a 20% cut in NAV to 90p would put this on a 28% discount at the current price. |
Or in simple terms; the current valuation will have priced in some degree of rent cuts in the future |
If you're passing rents are higher than fhe market rent then that over-rented part of your rent gets valued at a higher yield So when you remove that over-rented income then you should lower your overall valuation yield as there's of fhe high yield income The degree of the discount depends on the length of the term certain leases and the covenant of the tenant - eg if you're overrated to a strong covenant on a long lease then the yield premium is there but it should be too penal But if it's over rented with short leases and/or to a weak covenant then you'd expect more of an adjustment |
Hi William can you explain what you mean by 'valuation yield includes a premium for being over rented'. |
A fall in the income doesn't necessary lead to a one for one fall in GAV as the valuation yield includes a premium for being over rented so you'd expect to see the valuation yield come in a bit Also taking the hit on income with a good general kitchen sinking is likely to help narrow the share price discount to NAV In the current market this shouldn't trade at more than a 20% discount to a kitchen sinked NAV |
There are issues both at board and management level.
A key matter will is what aspects of performance the new managers are remunerated upon.
We have endured TP entering into contract with incompetent care providers and it is not clear how deep that runs. They say 2 are materially in arrears, but refuse to say how many are in arrears.
Re-contracting at 90% of previous rent should mean that the asset value of those properties falls 10% and the nav 14% [gearing] but TP have again refused to clarify.
The board have had more than 2 years to clear this up, but have been too slow. The chair has been in place since 2017 and has numerous other board positions [10+ according to wsj].
Replacing the manager is only beneficial to shareholders if it is cheaper, but for greater competence to the key issues.
Once that has been dealt with, the board should be replaced. |
Do we know Atrato to be materially better? Although can hardly be worse - my hope is that they see a meaningful and mutually profitable long term engagement - my worry is pillage |
 James CARTHEW in Citywire-...Ibought some Triple Point Social Housing Reit (SOHO) at 57p back in July 2023, and have made some money on this given the high yield and a roughly 15% uplift in the share price since then. However, it still feels too cheap, and I may add to the position.The most recent interim results (covering the six months to 30 June) were published a couple of weeks ago. The net asset value was down slightly, as the valuation yield rose from about 5.6% to 6%, more than offsetting rising rents. Falling UK interest rates should bring the yield back down and the NAV back up in time. The dividend was covered, thanks to improved rent collection.There is an ongoing review of the trust's investment management arrangements. The board has pushed back the timing of the announcement of the conclusion of that, saying it wants to secure an appropriate, cost-effective agreement for the benefit of the company and its shareholders. I am not necessarily expecting anything dramatic to come out of it, but the implication is that good news is on the way. On that basis, a 49% discount and 8.4% yield looks pretty attractive. |
I agree - one for the long run. Swapping Triple Point for Atrato is pretty well as much as one might have wished for. |
Do you think there's any chance of a bit of "kitchen sinking" after Atrato get their feet under the table? |
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