Property IT's

[EssDeeAitch]

I have Std Life Property (SLI) and TR Property (TRY) in my SIPP as a diversifier with a total weighting of 8%. In the last three months SLI have lost some 15% on share price and TRY 7% in the last two months. TRY are on a discount of 3.2% and SLI 1.8% to NAV.

I have been looking for information on why these falls have occurred and can only find that SLI have reduced their void rate from 10 to 5% but still . I have no information on why TRY price would have declined. Can anyone shed light on these falls or is it just market sentiment?

Lastly, dos anyone have any insight on Primary Health Properties PLC (PHP) who are trading at a 22% premium on NAV?

[tjh290633]

What do SLI and TRY invest in? I have a recollection that TRY was heavily into Europe. PHP concentrate on GP's surgeries and health centres in the UK, which is not your typical REIT.

TJH

[SalvorHardin]

I have Std Life Property (SLI) and TR Property (TRY) in my SIPP as a diversifier with a total weighting of 8%. In the last three months SLI have lost some 15% on share price and TRY 7% in the last two months. TRY are on a discount of 3.2% and SLI 1.8% to NAV.

I have been looking for information on why these falls have occurred and can only find that SLI have reduced their void rate from 10 to 5% but still . I have no information on why TRY price would have declined. Can anyone shed light on these falls or is it just market sentiment?

Lastly, dos anyone have any insight on Primary Health Properties PLC (PHP) who are trading at a 22% premium on NAV?

TR Property is the only one that you've mentioned which I own (I don't follow the other two). I've seen nothing to suggest that it is anything more than following the overall market. There might be a bit more of a fall because investment trusts' discounts to NAV tend to widen by a little bit when the overall market is falling heavily (according to Hargreaves Lansdown's website the discount was about 2% two months ago).

https://www.hl.co.uk/shares/shares-sear ... lc-ord-25p

[EssDeeAitch]

What do SLI and TRY invest in? I have a recollection that TRY was heavily into Europe. PHP concentrate on GP's surgeries and health centres in the UK, which is not your typical REIT.

TJH

SLI is UK commercial, retail and industrial properties, 90% of which are direct investments, balance in equities.
TRY is a pan-European investor with a 40% weighting to the UK, no direct investments
PHP is, as you say an investor (direct) in healthcare orientated facilities. I am attracted to healthcare investments as it is not a thing that will go out of fashion but as yet, have no significant investments.

[EssDeeAitch]

TR Property is the only one that you've mentioned which I own (I don't follow the other two). I've seen nothing to suggest that it is anything more than following the overall market. There might be a bit more of a fall because investment trusts' discounts to NAV tend to widen by a little bit when the overall market is falling heavily (according to Hargreaves Lansdown's website the discount was about 2% two months ago).

https://www.hl.co.uk/shares/shares-sear ... lc-ord-25p

Thanks for your input on this, and I suspect that you are correct that it is just market sentiment causing the drop.

[77ss]

I have Std Life Property (SLI) and TR Property (TRY) in my SIPP as a diversifier with a total weighting of 8%. In the last three months SLI have lost some 15% on share price and TRY 7% in the last two months. TRY are on a discount of 3.2% and SLI 1.8% to NAV.

I have been looking for information on why these falls have occurred and can only find that SLI have reduced their void rate from 10 to 5% but still . I have no information on why TRY price would have declined. Can anyone shed light on these falls or is it just market sentiment?

Lastly, dos anyone have any insight on Primary Health Properties PLC (PHP) who are trading at a 22% premium on NAV?

Just sinking with the rest of the market, I think - for TRY. It fell by nearly 12% in 2018 - a shade under the FT100 fall, and better than the 19% & 15% falls in the DAX and CAC 40.

Last time I looked, TRY was 37% in the UK, 19% in Germany and 16% in France.

I've never looked at SLI. I do think occasionally about PHP, but a 20% premium to NAV? If things go wrong.....

[Dod101]

I have held PHP for some time and in the recent market turmoil it barely moved and yields 4.6%. I like it more than most property companies (I do not see it as a healthcare investment but a property company (a REIT) whose tenants are the healthcare sector, mostly GPs). Not like say British Land where the tenant might go bust like BHS or move to Frankfurt.

If it is on a 22% premium, that is for good reason, namely the security of the tenant base.

Dod

[monabri]

My take on TRY.
Predicted earnings growth on many of the top 10 holdings (especially the German companies) is quite negative over the next 3 years.
Dividends are well covered but with a yield of sub 3.5% (even after recent falls in share price) it wouldn't appeal to a dividend hunter.
Maybe general sentiment has affected the share price..very likely...but the question I ask myself is, if I'm not investing for dividend income, do I expect the share price to "fly"? In the short term, based on earnings growth expectations over the next 3 years, then I'd say ' no'. Will the dividends growth ( 5 year 11%) continue...only by a reduction in divi cover.

[LittleDorrit]

I think that at least in the case of SLI your discount values are out of date.
s://citywire.co.uk/investment_trust_ins ... undID=3220

Over the last month or so there has been an across the board widening of discounts in the direct property trust sector. To what extent this portends a fall in N.A.V. values time will tell.

[77ss]

My take on TRY.
Predicted earnings growth on many of the top 10 holdings (especially the German companies) is quite negative over the next 3 years.
Dividends are well covered but with a yield of sub 3.5% (even after recent falls in share price) it wouldn't appeal to a dividend hunter.
Maybe general sentiment has affected the share price..very likely...but the question I ask myself is, if I'm not investing for dividend income, do I expect the share price to "fly"? In the short term, based on earnings growth expectations over the next 3 years, then I'd say ' no'. Will the dividends growth ( 5 year 11%) continue...only by a reduction in divi cover.

Do you have a link for your comment about the German companies? TRY is heavily exposed to the German residential sector (24% in 3 companies alone).

From TRY's last interim (21/11/18):

Rented residential property with steady, reliable earnings growth also performed strongly and remains a core sector for the Trust, particularly in Germany and Sweden.

German residential remains the Trust's largest single asset class and it is good to report that fundamental market conditions remain sound with underlying rental growth c3% and structural undersupply evident in all markets. Berlin, which has been top of the growth league table for several years has begun to suffer from local authority intervention in certain jurisdictions. In some areas, developers are unable to push through modernisation programmes which enables them to charge open market rather than restricted rents. Some boroughs are also restricting the ability to sell individual apartments (as opposed to blocks). We are not overly concerned, such interventions merely drive up values in the longer run through constraining development in the short term.

Not saying you are wrong, just interested in some hard data - whatever it shows.

I am certanly not expecting a 10% dividend increase in the coming year, but I don't see that a reduction in cover should be a concern. Isn't that what Revenue Reserves are for? TRY's is enough for about 1.8 years at the current payout rate.

[Muddywaters]

I’ve recently topped up TRY after recent market falls. Still think it’s a good long term bet whatever the next couple of years might bring

[monabri]

The info is coming from "Simply Wall Street". It is a "paid for" service which claims to use S&P Global Market data in it's assessment of companies. By providing an email address you can do 10 free searches per month.

https://simplywall.st/user/views/157/popular-view

SWS doesn't claim to analyse funds/ collectives, hence I looked at the top 10 holdings which are individual entities.


p.s.I have no affiliation with SWS other than as a subscriber.

[richfool]

I've just noticed that PHP is currently at a premium of 24%. That to me is quite meaty, certainly compared with other REIT's., though I appreciate that PHP invests in healthcare real estate.

[Muddywaters]

I wouldn’t touch anything on that kind of premium. If it falls it’s going to fall big, nothing is bullet proof.

[richfool]

I wouldn’t touch anything on that kind of premium. If it falls it’s going to fall big, nothing is bullet proof.

Indeed. I wasn't thinking of buying. I was actually wondering whether to sell half my holding and take some profit.

[Spet0789]

I don’t own PHP as I look for growth not income but have recommended to others.

In my view the NAV is calculated on the wrong basis. Its only input is the value of the land, bricks and mortar. As has been pointed out, the true security is conferred by a 20 year lease to, in effect, the NHS. If you value that stream of cash flows as you would value a gilt (which would be a bit aggressive) PHP is on a discount of about 40%. Or to look at it another way it yields about 2.5% more than index linked gilts.

Bear in mind that when you have a long term lease on a commercial property, you should view the cash flows as a credit exposure to the lessee, secured on the property. In the case of PHP, the credit exposure is to the U.K. and Irish governments (more or less) and the property value secures that exposure.

[Alaric]

In the case of PHP, the credit exposure is to the U.K. and Irish governments (more or less) and the property value secures that exposure.

Can the governments walk away from the leases? Even if they cannot, there's political risk that they just change the rules to enable them to do so.

It's an interesting way of looking at the valuation. Contractors, which may have similar reliance on public money through contracts are under a cloud following several failures.

[Spet0789]

In the case of PHP, the credit exposure is to the U.K. and Irish governments (more or less) and the property value secures that exposure.

Can the governments walk away from the leases? Even if they cannot, there's political risk that they just change the rules to enable them to do so.

It's an interesting way of looking at the valuation. Contractors, which may have similar reliance on public money through contracts are under a cloud following several failures.

The leases are with NHS bodies rather than the government directly. Legally they can’t get out of the leases. Yes, there’s some political risk but not much in my view. Contractors like Carillion got into trouble by upfronting “profits” from long term contracts and paying dividends out of borrowings. As long as PHP is paying its dividend from rental income (as it does), no problems.