ReallyVeryFoolish wrote:Spet0789 wrote:SKYSHIP wrote:SB - The RGL article (27th Sept. MoneyWeek) is a far better researched article than the positive, but over-simplistic and inaccurate piece in The Mail a couple of days earlier.
A very brief extract & a key para IMO:
"The best opportunities, CEO Stephen Inglis believes, are in offices, where capital values of GBP129/sq ft compare with replacement cost of GBP185-200. Rental growth of 5.2% in H1'19 from 39 new lettings was most marked in the office portfolio, where RGL is seeing growth for the first time in 12yrs. Moreover, returns since 2016 have been higher in regional cities than in London; and Inglis expects that to continue. Supply of office space in the regions is at a 12yr low."
Is replacement cost all that relevant?
If RGL owned a skyscraper office block built in the Outer Hebrides, it would cost a fortune to rebuild but if none of the sheep farmers want to rent the office space, it’s not worth much.
Taking the above example, I think it's important to recognise that RGL don't have a sky scraper office block out there. Because it is a very well run property company. The day that RGL decide they are going to do something like that, then that's the day I sell my overweight holding of RGL shares. (I am confident they won't do that, so I'll hold).
Err.... obviously not. There are no skyscrapers in the Outer Hebrides.
My point (which you seem to have missed) is that it may not be relevant how much a given property would cost to replace if no one wants to rent it.