Uk Commercial Property R... Share Discussion Threads

[skyship] 19/4/2023 06:48

NY Boy. Agreed re UKCM. Perhaps continue your research over at the CP+ thread, starting with this:

[ny boy] 19/4/2023 01:10

Looking into the sector for value, these look interesting

[spectoacc] 09/4/2023 16:01

Phoenix funds swapped physical property for the stake in UKCM, via seeding the IT with the property (and several later transactions, if memory serve).

ie rather than their various funds holding physical property, they preferred to hold shares in an entity that took on the management.

I don't know enough about the Phoenix funds to know if they'd ever want to cash out, but Phoenix themselves clearly aren't a bidder, and they've sold no UKCM shares over the past years. They could in theory sell out of UKCM and buy into another property co to keep exposure, but why would they?

These Life funds tend to be very long duration.

Someone else may have better knowledge of the funds/Phoenix. But unlike eg the very focussed MLI, or the not-actually-bid-for-yet EPIC, UKCM's very generalist.


@giltedge1 - I don't see Precision Park as the big error, true it was "let's buy now everything's gone up" but still a quality asset. The Hyatt deal was the big clanger IMO: no certain income, large build liabilities, no income until it's finished sometime in 2024 (choose your month), looks very expensive for what is effectively regen.

I'm long UKCM but realistic about what it is. "Cheap but poorly managed".

[nickrl] 09/4/2023 12:30

@sky my take is its a cash cow for Phoenix why else was that special paid last year when the business had other cash needs for developments but everything has its price.

[skyship] 09/4/2023 09:43

Specto posts these would not be a bid target because of the Phoenix controlling stake.

I believe that is exactly why they might well be a bid target, as any prospective bidder approaches Phoenix and starts the process with 46% in their pocket.

What do others feel? Bid target or not...

[giltedge1] 08/4/2023 17:41

Did not participate in recent rally seems made a few bad decisions buying Precision Park paid 94M, seems a top of the market disaster, did not disclose yield, so guess poor. Think lost at least 30M my guess. Hotel in Leeds Jury's out could offload, point is since when did they have the expertise. Should have concentrated on industrial estates on or around M25

[topvest] 05/4/2023 15:59

Yes LTV going to 25% or so with developments. Could go to 30% top end I suppose, without a very bad recession. They could sell something like the Birmingham property last year, I suppose. Anyway, hopefully, its mostly in the price!

[skyship] 05/4/2023 15:47

Back in for a few today. Joins holdings in:

# Large allocations to: EBOX, EPIC & SREI.

# Small allocations to CTPT, SERE & now UKCM.

[essentialinvestor] 05/4/2023 15:40

UK cyclical stocks taking a significant hit today.

[spectoacc] 05/4/2023 15:35

UKCM's LTV is moving higher :)

Good luck - one of my few REITs atm, but will sell any spike.

[topvest] 05/4/2023 15:27

I've added a few more of these. Not bought any for a long-time. 80p of assets at 50p is a pretty good long-term buy given the low LTV here in my view. 6.5% yield whilst you await a recovery. Could well go lower in the short-term. Share price is lower than where it was in the GFC!
I am staying away from higher LTV property companies.

[spectoacc] 05/4/2023 09:23

OK-ish, but cost AEW the mandate at what's now AIRE, as well as the initial lost rent.

"...Once rent frees expire.." is the key point. For assets that are already earning, it represents a loss, for between 3 and 9 months. If the alternative was the properties falling vacant - which I doubt - it shows a not particularly healthy market.

Waiting for the one who announces an eg 5yr new lease at 100% increase in rent but with a 5 year rent-free ;)

[nickrl] 05/4/2023 09:18

So works out about 90k extra on the rent roll once rent frees expire as they say every little helps but of course we will never see an RNS from any of them when they lose a tenant!! Mind you at least AIRE or AEWL as was did lets us know their main tenant had gone bust a few years ago fortunately that one turned out ok.

[spectoacc] 05/4/2023 07:17

OK I'll do it :)

Car parts at Sunbury - it isn't 4% ahead of ERV if there's a 3 month rent-free. I totally understand rent-frees for new tenants, I never understand them for existing tenants.

2% ahead of ERV at Bristol, but it's a very good tenant with a 10 year no-break lease. But still - 9 months of rent free? Bristol's a hot market.

KFC - another good tenant - 9% ahead of ERV and a long lease, but again, it's an existing tenant, and there's a 6 month rent-free. If KFC are there already, and happy to stay long-term, why give them half a year of paying nothing? This is the sort of deal a co in need of something to take to the bank does. Is UKCM becoming that co?


What I will give UKCM some credit for is declaring the rent-frees this time. It really does alter the return and the cashflow, but it often gets hidden from shareholders. (What remains hidden is any provision for rental uplifts).

[spectoacc] 05/4/2023 06:16

I'll let @nickrl comment on this morning's RNS, and the rent increase vs the rent-frees.

[hindsight] 04/4/2023 10:36

spectoacc and nickrl, thank you for the replies.

[nickrl] 03/4/2023 16:28

@hindsight they certainly would be one of the last dominoes down but reckon they can get away with just holding divi for time being based on current economic outturn looking better than expected.

[spectoacc] 03/4/2023 13:21

Yes, agree with that. I'd say EPIC, BCPT, CTPT also on that list - all made sales pre-end of ZIRP, CTPT's in particular was market top.

Anything with an LTV already creeping up above 40% looks at least vulnerable, regardless of where they've got the debt fixed, regardless of for how long. One hard recession would be all it took.

Saying that, all seem healthier than going into the GFC, albeit we lost a few then.

[hindsight] 03/4/2023 12:58

Key point and filter for me on reits is survival. If have 2 years of divi slashed, etc then come out the other side rather different to a INTU, etc
Not fan of management here but they pass the survival filter

[spectoacc] 03/4/2023 12:37

They can't be taken out due to Phoenix.

Agree re divi. Where UKCM have shot themselves in the foot is obviously the big increase in gearing (from effectively zero) to in part fund the ridiculous, non-earning for years, uncertain earning even when built, being built by a co who are late filing their a/cs, Leeds hotel deal. You only need look at the pictures to see it's a regen project, and a very expensive one.

So abrdn tell them interest rates are going back to 2.5% in 2023 - great, load up with debt, don't worry about the RCF.

Then abrdn say 3%. Still fine.

Then abrdn say 3% but the cutting cycle only begins by the 14th December meeting - eh??

I wouldn't have bought back into UKCM if the Leeds hotel deal was any bigger than it is - c.5% of NAV - but I fear there's more twists & turns to come with it.

If they wanted a good use for their gearing - bring everything up to EPC C. Hunker down, concentrate on covering the divi. They're clearly good at the leases side, probably because much of UKCM's property is good quality. Even the hotel may work out but it'll be early - mid - summer - Q3 2024 before it's even finished. There's going to be a lot of water under the bridge between now and then.

[spectoacc] 03/4/2023 08:56

Thanks - seems odd, did UKCM take on the construction contract agreed by previous owners? ie they bought the development from Marrico/Helios announced in May, article from July. Construction contract + purchase price maybe gets to the quoted £62.7m.

That means the contract was agreed even further back - and again, no word on who pays for overruns.

This is GMI, with accounts overdue:



Still - UKCM state they're creating jobs, so hopefully that gives shareholders a warm glow.

[hindsight] 03/4/2023 08:48

Maybe of use

GMI has a £39.6m construction contract with Marrico Asset Management and Helios Development.

[spectoacc] 03/4/2023 08:07

Lots to chew over in today's RNS. They're still trumpeting the Leeds hotel deal, despite it being likely to send LTV above the targeted max of 25%, despite no financial details, despite it being a t/o rent, despite construction not finishing until "summer" 2024. I make this a slight slip already from the original announcement?

"..We expect this to deliver an attractive elevated income return against a traditional leased hotel model."


I'd say that's almost impossible to call, over that timeframe, with no certain income amount, and what I'd really like to know is - who's on the hook for construction cost overruns. If anyone can get that out of UKCM, please message me.

£62.7m total commitment, they state.

"The development has progressed well throughout the period."


Apologies if this sounds over-critical - I am a UKCM holder, one of my few REITs atm, but not because I regard it as well-managed.


"At 31st December 2022, 28% of portfolio rent is subject to a form of index-linked rent reviews or fixed increases, which provide an estimated blended annualised increase of 3.3% per annum."

Overall, or just on the 28% subject to review? They don't say. Still - this is at least as good and often better than the "inflation-linked" fibbers like THRL etc.


"76% of the Company's portfolio by ERV in England...is currently rated A, B, or C".

So 24% isn't. But unlike some, at least they recognise the importance of EPCs.


There's a lot on student accommodation, more than I remembered in the portfolio?


Won't repeat CP. thread comments on the interest rate expectations, but suffice to say they've rowed back a little from the comedy of the last RNS, whilst still either keeping in the typo (2023 or 2024?) or else looking really silly. Place your bets.



"In essence, our strategy is very straightforward maintain our robust balance sheet and focus on continuing the progress we have made to improve earnings through leasing activity and successful completion of our modest development pipeline, while remaining alert to market opportunities linked to an eye on future interest rates."


Idiots on interest rates, fools on the development side, once again getting LTV all wrong - but leasing activity is good, occupation & rent collection are strong, and the portfolio overall is good quality. I like UKCM, but with major caveats, and only because it's "cheap".


Edit - First Leeds Hotel RNS said completion "..In 2024". Subsequently that became "Mid 2024". Now we're "Summer 2024". Semantics, maybe, but suspect they've gone from spring, to June, to August. On the plus side, £62.7m has been the stated cost throughout, but I'd love to know who's on the hook for construction costs that could easily have risen 50% between them buying the deal (they didn't put it together) and completion in what I guess will be late 2024.

"12 May 2022: UKCM...announces that it has acquired a hotel development opportunity in Leeds, from.... a joint venture between Marrico LLP and Helios."