Value And Indexed Proper... Share Discussion Threads

[spectoacc] 16/11/2023 16:03

Or another way to look at it - LXI are charged c.£14m (by my estimate) by Alvarium for management. It's long-lease assets, there's relatively little actual day-to-day management, and I fail to see how it requires more than a handful of full-time employees to run. It isn't knocking on doors collecting rents, or doing frequent re-gears, or arranging lots of CapEx.

Since all out-of-pocket expenses are also charged to the co, the management fee is free money. On a £2.3bn portfolio like LXI's, should you grudge them a mere £14m a year? Definitely - there's c.£200m pa coming in in rent, and they get to swipe £14m of it, year in, year out, irrespective of performance.

VIP have slightly more managing to do, but why should it cost 12% of your (shareholder)'s rent, on top of all the other expenses? They could do the job for a fifth of that: a couple of people on £100k pa, or 4 part-timers on £50k/£100k pro rata.

The fund management industry are great at picking pockets, via small-sounding charges that are actually large and cumulative. REITs are no different.

[spectoacc] 16/11/2023 15:48

Just under 1%...of what? NAV?

Market cap c.£75m

Total assets c.£153m.

Discount to NAV c.27% (I think - they were quiet on the NAV per shares last RNS).


I've made the point many times elsewhere - charging a % on assets actually needs assessing against what's being taken from income every year. It's a sector problem, not VIP-specific, but I reckon they get c.£9m/year in rents, and charge more than 10% of that in management fee. An even higher % if looking at the bottom line, ie rent after costs ex AMC.

@Lindowcross - HL & others tend to calculate the annual charge by including the stamp duty paid on purchases I think, hence the much higher figure than the AMC for the REITs.

[skyship] 16/11/2023 15:08

lindow - a mistake made by many new to the sector. I assume you're looking at HL or KID stats. Wrong!

Fees are 990k/annum. Just under 1% of Net Assets.

[lindowcross] 16/11/2023 14:40

The charges on this trust seem high at around 5% a year. Is this because of the high cost of managing the properties?

[jellypbean] 14/11/2023 20:48

Due a bounce if the likes of SUPR is anything to go by?

[cousinit] 29/10/2023 17:39

The valuation isn't like for like - there were some small sales in the period

[skyship] 29/10/2023 13:01

The Update shows an exact 10% fall in valuation. A bit too exact; and actually a bit too high compared to CBRE stats. I'm a bit suspicious of those numbers!
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Portfolio Update

Savills' independent valuation as at period ended September 2023 totalled GBP135.45 million (31 March 2023: GBP150.50 million)

[spectoacc] 27/10/2023 20:40

For taxable cash, agree the Gilts are unbeatable.

8% equity yield isn't what it was! Can get more than that on eg renewable/infrastructure, at least on the loan side.

Agree US may well crash, & that's before we get to Middle East conflict spreading.

[topvest] 27/10/2023 20:01

The dividend yield on the shares is nearly 8% and growing. It's very tempting, but I am not buying anything more at the moment until shares have bottomed and new uptrends start. I will miss the bottom, but there could be further falls if the US crashes and that spills over to everywhere else. I wouldn't compare with the 6.2% NS&I personally as you are locked in on that. Cash is c4.5-5% on a short-term gilt. TN24 is my favourite and its 4.8% tax free with cash back in January to reinvest in equities. Much better!

[spectoacc] 27/10/2023 08:38

And that earnings yield bought at a discount. Dunno - more recession-proof than some, but those "inflation-linked" uplifts amounted to all of 3.8% on the few that had reviews.

"Contracted income from the 35 properties is now £8.795 million (31 March 2023: £9.338 million from 39 properties). 65% of rental income comes from the top six tenants - Marks & Spencer, Government/Local Authorities, Ten Entertainment Group, Premier Inn, Sainsbury's, and Parkdean Resorts."


As with everything else atm, there's a lot of choice out there, & struggle to see a reason to buy back yet.

[riskvsreward] 27/10/2023 08:31

But risk-free 6.2% in NS&I possibly on its downward way while the VIP indexed yield on its way up over the long term? Not calling it the bottom but may be fair or good value at its current price.

[spectoacc] 27/10/2023 08:07

Read OK I thought, but is that yield high enough in this market - even with the (largely fake whilst inflation high) indexing? Was a risk-free 6.2% in NS&I recently, with no hits to capital.

[topvest] 27/10/2023 08:04

H1 valuation shows a -5% decline like for like, but £8m of property sales above book value. Not too bad in the circumstances really, although a slight under-performance on capital values for once. LTV not quoted, but probably c30%. Well positioned versus most. 6.5% indexed running yield.

[jellypbean] 31/8/2023 16:48

There was some chat on here last year regarding VIPs holding of CTPT, and having to sell it at a loss (CTPTs shares went to a discount, but then so did VIPs, and they were then able to buy VIP shares back to some extent

Looking back, this related to the debentures, which they bought back early in mid 2022. Having the debentures meant they needed to have some equity holdings, which they could only dispose of when debentures were paid off.

It's in the 2022 half year report.

Anyway, I did have some CTPT back then (sold after the London Metric offer), and have a decent chunk of VIP as a core holding.

Half wondering if there would be any (tax) advantages for VIP to convert to a REIT, I don't think it is one currently?

[topvest] 27/6/2023 12:09

Results out. Announcing at 6.28pm on a Monday is not best practice guys!
Anyway results pretty good. Continued out-performance. NAV hit by refinancings. 247p NAV. 12.9p dividend. I have a full size position here, but still tempting to add a few more at a 6.5% dividend yield.
I particularly like the Chairs quite "Illusory wealth in technology stocks and crypto related assets which will evaporate as reality dawns". Spot on!

[topvest] 23/6/2023 15:59

Results a couple of weeks late. Anyone know the results date please?

[spectoacc] 25/10/2022 20:48

I think they'll be hit from all sides.

The "V" is surely going to crater, albeit it'll take time. I don't see banks calling in loans tho, it'll be relaxed covenants all the way. But will imperil dividend payouts.

I envisage rent collection becoming more tricky - how can it not? There's already been some relief on supposedly baked-in rises elsewhere.

If we get as far as voids, then it's only 3/6 months to Empty Rates. Worse, if tenants have gone pop & there's no dilaps, there'll be capital spend. So it isn't just the loss of income - there's an a cash cost. And there'll barely be a secondary market to get out.

None of this feels imminent, but can see it happening well within the next 12 months. How can we not have a bad recession? Who's bailing us out? Not the consumer, not govnt, not (for the first time in a long time) the BoE. All are going the other way - consumer being strangled by fuel price/mortgage payments, govnt putting up taxes & cutting spending (proportionally), BoE going QT & raising rates. It's a stagflationary bust.

Or as Roubini memorably put it last week - it'll be the worst of the GFC and the worst of the 70's, both at once :)

I've come full circle on REITs - I thought they'd be a decent bond proxy, a safe port in +10% inflation what with having real assets, and that with LTVs being so much lower than going into the GFC, there'd be unlikely to be any serious problems.

Instead, they have indeed acted like bonds (by falling off a cliff), the inflation play has acted in reverse - Industrial did +41% in 12 months when inflation was a few %. And turns out the LTVs on just about all of them could create an existential danger, if things get bad enough.

The only positives are 1. It may not happen (gas prices, Ukraine, finding a couple of hundred billion down the back of the sofa?); 2. There's a lot in the prices already (tho less after today's daft rally - which I hope continues, particularly on EBOX so I can sell).

As to what to buy instead - anything that didn't rise strongly in 14 years of ZIRP. Good luck finding that tho. And anything with genuine inflation protection, not the total fraud of "inflation-protected" which turns out to be 3% or 4% capped. Removal of govnt fuel cap from April is going to keep inflation higher for longer - it may even peak then, somewhere above 11%, depending on gas prices.

[topvest] 25/10/2022 19:38

Key thing I have been looking at is rental yield, interest cost and whether this is fixed and LTV versus covenant levels. Most property companies are OK on the first two unless thay have a revolving credit facility expiring. The one that is scary is LTV as most property companies are 30-40% leveraged. Some will be in trouble if interest rates cause hefty property write-down's. VIP looks reasonably well positioned from what I can see.

[captainpanakin1] 24/10/2022 13:08

Note small buybacks around these levels. Should be benefiting from so good rent increases with their indexation

[spectoacc] 26/9/2022 14:09

I suspect it's the unprecedented rise in borrowing costs giving them the heebie jeebies - tho SREI kept buying, and their LTV is at the higher end (c.29%).

BCPT may well have completed theirs. API are in a closed period and said they'd keep buying back, but have done so only once. CTPT seem to have trouble finding stock, but look by far the best placed.

Haven't kept up with VIP's, one I've not held for a long time.

I know rates are going up, the economy's going down, and property is going to suffer, but - I'm yet to see any evidence of it. Surely foreign buyers (eg CTPT's superb Lond sale) will keep the market afloat at least to some extent. They've seen c.15% come off before any falls.

Or is it all about yield? 3% on a London property looks ridiculous when Gilts are yielding 4.2%?

One thing's for sure - the baby will be going out with the bathwater, if you're able to identify the baby. And catch it at the right moment.

[spectoacc] 26/9/2022 13:36

As with all the REITs! Did think the other day, "maybe VIP did right in selling down CTPT after all", but you've only got to look at their own share price to have doubts about that.

I note the last share repurchase was at 248p on 1st September - in common with many, they seemed to like buying their own shares when they're high, less so when they're low.

[rcturner2] 26/9/2022 12:52

Interesting price action here, looks like freefall?

[nickrl] 09/8/2022 15:43

Sky more sizeable off market trades reported today maybe indicates they are selling down again at a few pennies more than last week

Looking forward to hearing their explanation over CTPT.

[skyship] 09/8/2022 10:08

Yes, VIP made to look rather stupid with CTPT's NAV Update and buyback statement this morning. CTPT now 88p versus VIP's last big sales down to 77p!