Tritax Eurobox Share Discussion Threads

[chucko1] 09/2/2024 12:58

What is becoming clearer is that open ended European focused RE funds are having liquidity issues. We have seen this movie before and it always ends up with a bifurcation of losers and long term decent returns if you avoid the obvious traps.

I see EBOX ending up squarely in the latter category. Rough ride along the way in the near term, as we are now experiencing.

Note the price to book ration of PBB is paltry 0.2x - this is a bank which, as part of the old DePfa/HPFB merger previously got into trouble in its real estate lending. I know this bank inside out, and they had a policy of lending to strong countries' (i.e. UK/EU/US) RE sectors. Mad, mad, mad, mad, mad. All the people there are the same as in the 2008/9 fiasco.

RE is fine as long as risk management is good. That is what to look for.

[hpcg] 09/2/2024 12:23

Pyufak - I disagree with your macro commentary. The US economy is doing fine, UK and Europe not so. Both central banks are waiting to be clear that inflation is under control before cutting. The ECB can never be seen to be keen to cut rates, but nor is it the Bundesbank any longer.

I also disagree about CTP vs EBOX. CTP has enormous development risk and its LTV is already circa 200bps worse and going in the wrong direction. It has the advantage of size and diversification. I don't know if the industrial component makes it better or worse. EBOX has levers to reduce interest, for example it could make the bond secured rather than unsecured as now.

I was being sarcastic about the over-subscription on the CTP bond, I should have made that clear. At least there was decent demand.

[essentialinvestor] 09/2/2024 11:59

Subjective may be, but thought the FY conference call very clear on prioritising disposals.

Bought a small amount this week under 48.7.

[chucko1] 09/2/2024 11:38

Pyufak, what is your evidence for the comment "I believe management are under appreciative of tails risk". Have they made comments that support this position?

In fact, too much talk and declaring their hand could adversely affect their various negotiations.

Do you expect a running commentary to suit your individual risk tolerance?

[riverman77] 09/2/2024 11:00

I think the point is that EBOX are not going to have to do a fire sale of assets or do an emergency fund raise as you seem to be suggesting is possible. Now all this could change if we see another big sell off in property markets, but would have to be quite extreme - LTV would need to go to 65% before they are breaching covenants so we're talking significant further falls in property values.

[elsa7878] 09/2/2024 10:35

Excellent highly informative exchange of views on here. If only there were a few more threads like this on Advfn.

[pyufak] 09/2/2024 10:27

it isn't 'complete panic talk' and I do not appreciate the label; I have a significant holding of EBOX and as I stated in my first post decided to stick with it. In a cordial and polite exchange of views it is fine to agreeably disagree. I believe management are under appreciative of tails risk; you do not. If you consider alternative views to your own or the consensus bullishness here as panicking then I am happy to leave you in an echo chamber of bulls.

[riverman77] 09/2/2024 10:14

When I say interest rates I really mean market interest rates not the policy rate, and my expectation is for corporate bond yields to fall sightly over the next year or so, which should be good for EBOX. However, EBOX are not reliant on this and could still comfortably refinance at current market rates.

Complete panic talk from Pyufak - EBOX are not financially distressed and in a worst case scenario may have to rebase dividend (eg 20% cut which arguably already priced in and would still give a 7% yield). The commercial property funds you mention may need to sell physical properties to meet redemptions - they're not going to be selling EBOX! EBOX is a closed ended fund so will never be a forced seller. Obviously all this could change if interest rates shoot up much higher to say 6%, but as it stands and with inflation coming down there's absolutely no reason to expect this.

[pyufak] 09/2/2024 09:41

okay, I have more than made my point the past two days. Summary, since the Oct lows risk assets have rallied hard and funding rates have dropped dramatically. I agree with the commentary here there's a path for EBOX management here to secure a reasonable rebased dividend but I have at length highlighted if you passively 'hope' rather than take action we risk running into a mess and my patience is wearing thin ... as it seems by the share price is that of a lot of other investors.

I read on bloomberg terminal an article just launched - 1bn pulled from European commerical property funds in Jan; some funds considering gating. This could mean they have to sell what is liquid which would be things like EBOX. This is exactly the sort of mess I am talking about if we have to sell assets or refinance if it gathers pace... and i know not all commercial property is equal but in a panic people throw out the good with the bad

[pyufak] 09/2/2024 09:31

'hopefully interest rates have come down' ... markets are already priced for 200bp of interest rate cuts from the European central bank. This is what matters, and if the expectations that the ECB will deliver more or less than this amount of cuts. Currently the ECB are pushing back against market pricing for cuts (as are the Fed and BoE) due to continuing strong economic data. Inflation may be coming lower but the economy is not slowing as much as expect. If the market is wrong on that 200bp of cuts expectation, and management take no action near term to lock in financing rates, then we could have a problem

[riverman77] 09/2/2024 09:23

The 500m green bond matures in 2026 so hopefully interest rates have come down a bit by the time they need to refinance. However, assuming they don't and EBOX need to pay an additional say 4% on top of what they currently pay then this be an extra 20m in interest payments. This would obviously hit earnings quite hard, although EBOX estimate around 20m of additional rental income can be achieved over the next few years (see latest presentation) through mixture of reversion, indexation and development. The dividend is also currently 1.1x covered so this also gives them a slight cushion. Putting all this together they should just about be able to maintain dividend if they choose to, even if it is slightly uncovered for a time.

[skyship] 09/2/2024 08:23

hpcg - thnx for that.

The most interesting thing about the much larger CTP is that they yield just 2.2% and stand at an NAV PREMIUM of 2%.

The EBOX valuation by comparison is an absurdity. 44% discount & 8.8% yield!

[hpcg] 08/2/2024 23:08

Here is a decent enough analogue of 3 days ago

press release:

They were sold a touch under par: which somewhat contradicts the 5x over subscribed, or at least means the runners badly mispriced it.
It still trades about there today, per Frankfurt, so I guess the other 4x of subscription money hasn't rushed in yet:

CTP N.V.Series 9 - Issue of EUR
XS2759989234
750,000,000 4.750 per cent.
Notes due 2030 - GEM05/Feb/2024Listed05/Feb/2030

Note that it is a once annual payment and it increases the debt for CTP as they are only tendering 250mn.

At first blush this looks ooh scary scary, a 19mn delta of 4.75mn to 23.75m (on the 500). But then look at the rent, the year exit passing rent, rental growth, and that the 40mn in dividend expense was 110% covered and the amount they might have to cut the dividend comes down a lot. I mean, if the dividend was 4c and interest on the debt was stable the 7% yield and rising would look tasty. For that matter the 5.7% at 4c on a 70c share price which is where it was a month ago would also look tasty. Lets not even consider if they ran uncovered for a couple of years.

I'm sure I went through this type of calculation on here in the autumn, and there we didn't know where rates might end up

Oh, and the Tritax Eurobox 2026 XS2347379377 - currently trading at 92, which is about 4.5% YTM

[spooky] 08/2/2024 19:42

Try putting in the Market Identifier Code - BG382L7.

[essentialinvestor] 08/2/2024 19:31

* you can buy either through ii.

Ebox by telephone (at web rates).

Type Tritax in to the search feature and BOXE should come up - but you will pay a hefty FX % spread unless you hold cash in € already.

[elsa7878] 08/2/2024 19:24

2 questions.

The major refinancing issue is the 500m Green Bond which yields 0.95%. Clearly refinancing costs will be multiples higher. I agree further asset sales would be beneficial.

How does one buy. I use interactive investor (II) and can not get a quote at all for ebox or boxe. Has anyone else any II experience and know if this problem is singular to them? Many thanks.

[hpcg] 08/2/2024 18:05

Share price action summer / autumn last year was driven by rates carrying on up, I.e. legitimate. Share price action now is driven by (what were always deluded) hopes for a March cut nixed, and more extremely by the share price itself. This is not rational. Go back to fundamentals, estimate a refi cost, estimate rents, work out the FFO and thus dividend. Also thanks for the shares.

[riverman77] 08/2/2024 15:37

I think you're painting too bleak a picture - yes EBOX had a little too much debt but not exactly financially distressed. Unless rates go up again sharply I don't see any problem. I think the latest sell off is irrational - far worse than any other REIT which makes no sense, so happy to add more.

[pyufak] 08/2/2024 15:18

but i totally agree; you are paid handsomely vs. NAV here - there's a clear path to sort this out they just need to get on and do it.

[chucko1] 08/2/2024 15:12

As I see it, an investment in EBOX equity is simply a play on management not doing anything stupid. It is not as though they have to be particularly smart. But do not expect to receive daily calming noises - likely because they are not intending to be stupid.

At the current price, you are paid well for that risk.

[pyufak] 08/2/2024 15:11

and last comment from me; if we don't crack on - the EBOX share price will stay under pressure because to me it implies i. the books marks are wrong and they can't shift assets - goes against Dec commentary so hopefully not the case; EBOX also has 21 sites so there's plenty of options. ii. management taking a big punt on interest rates and hoping. Given markets price 200bp of cuts already into the middle of next year I can't see much more support coming from this area ... so i really hope it isn't the latter. I'll go back to sleep now

[williamcooper104] 08/2/2024 15:05

If they can buy the bond back at a yield of around the earnings yield a property is sold for then they can deliver and keep earnings/divi

[pyufak] 08/2/2024 15:02

it has been 18 months of 'hope' from management I think on interest rates and we started to see action last quarter as time is running down a bit too much so I think time to take the portfolio by the horns while markets remain relatively benign - the share price is priced for an awful outcome which would only be realized by continued inaction and then running into an awful situation where inflation goes back up and market yields rise again / asset prices falling = and then bond refi becoming crazy expensive like it was 6.5-8% in late 22 to mid 23 and management have just crashed our investment