The Lemon Fool

Anybody else thinking now might be a good time to pick these up? I am warming to NRR at just above £2. Whilst the dividend is uncovered they seem a well run outfit. The pub acquisition seems smart as the initial yield and potential for redevelopment gives scope for returns. Also their financing seems sensible with no pressure in the near term.

flyer61 wrote:I am warming to NRR at just above £2. Whilst the dividend is uncovered they seem a well run outfit. The pub acquisition seems smart as the initial yield and potential for redevelopment gives scope for returns. Also their financing seems sensible with no pressure in the near term.

It might assist if the full names of the REITs involved were included but as RDI is RDI I suppose that wouldn't help!

I do recognise Regional and NewRiver. The former already having its own lengthy thread. It might be an idea for this topic to be entitled NewRiver REIT NRR though, such that future contributions can be made on an easily found thread via search.

Are you able to supply a little bit of further detail of the pub acquisition though, it sounds interesting (but I'm presently not topping up my REIT, retail and directly owned/managed pub holdings)?

https://otp.investis.com/clients/uk/new ... id=1028242

hopefully that helps! I would change the thread title to New River Retail but not sure how to do this.

flyer61 wrote: https://otp.investis.com/clients/uk/new ... id=1028242

hopefully that helps! I would change the thread title to New River Retail but not sure how to do this.

Will look later, thanks.

If you are happy to change the thread title, you can contact the Moderator(s) via the "Report this post" button (the ! above right) and ask.

I’ve been building up a holding of NewRiver over the last couple of months. They seem to have a clear strategy and their occupancy rate of 97% is impressive, given that conventional wisdom would suggest retail should be avoided at present. I like that they’re open to conversion to residential where it makes sense, giving them a Plan B.

And yet, the price continues to drift downwards, but i’m unsure whether this is just the fallout out from general retail woes coupled with Brexit-related housing fears, or something else that i’m missing. I’d also welcome the views of others.

On balance, I think the risks are worth it for a 10% yield, but I’m not a conviction investor so they’re still less than 1% of my investment portfolio.

Wasron

I too like NRR. All things being equal they have a reasonable story to tell. HOWEVER the dividend is not covered so you cannot rule out a cut.

flyer61 wrote:I too like NRR. All things being equal they have a reasonable story to tell. HOWEVER the dividend is not covered so you cannot rule out a cut.

I quite agree about the potential for a cut. I don’t think you can go into an investment on this kind of yield and not accept it as a strong possibility.

The structure of REITs is a positive here though, they will pay out most of their income.

i bought into NRR at 327 , SP now is 200 .

for some reason i had the idea that the SP of REIT's would be fairly stable.

big mistake there then.!

will they recover in the long run ??

jackdaww wrote:i bought into NRR at 327 , SP now is 200 .

for some reason i had the idea that the SP of REIT's would be fairly stable.

big mistake there then.!

will they recover in the long run ??

The NAV has been around 300p for the last three years. If that continues then they should be able to produce a decent income, either through rental to retail or conversion to residential (at which point they would presumably sell the assets)

retail owning prop co sps have been falling because there are question marks over the reliability of navs.

Navs are at the last reported date but yields are softening, particularly for shopping centres where there are a dearth of buyers. Valuers are being criticised for over-valuing rather than marking down. There is a conflict of interest between what is expected by the prop-co and what is wanted by the market - which is to somehow reflect the increasing number of retailers going broke, also the shorter leases being granted.

The auction results are a useful guide to yields but how far each individual auction lot yield should be applied across the board has always been questionable.

For some years, the link between rental and capital growth has been non-existent. Much capital growth in recent years has been from yield compression. With interest rates on the up (gradually) there is the questions of where, without any rental growth, future growth is going to come from.

Brightncheerful – “there is the question of where, without any rental growth, future growth is going to come from.”

A perfectly legitimate question; and as a commercial real estate bull (esp. in the UK regions) one I am happy to answer for you:

# rent reviews
# change of use
# portfolio sales and reinvestment on higher yields
# lease extensions (tenancy renewals on longer leases)
# increased occupancy (lettings of empty space)
# property refurb.
# peripheral development
# restricted development driving up local property rentals/values
# & there are likely others I have omitted!

Among other places, read P22 of this RGL Presentation:
http://www.regionalreit.com/~/media/Fil ... n-2018.pdf

A perfectly legitimate question; and as a commercial real estate bull (esp. in the UK regions) one I am happy to answer for you:…

I think you'll find that most if not all of the items on your list are already included in existing valuation opinion-thinking.

Commercial property valuation is not limited to capitalising existing rent: it also includes estimated reversionary rent as if the next rent review or lease renewal were now. As for lease extensions, an existing lease with say 2-3 years unexpired is not considered as secure as say 5 years unexpired but apart from a few sectors of the market most tenants are not willing to commit to a long lease without a break clause at year 5 at least so arguably the certain term is no longer than the duration of period before a break clause.

Refurb, development, etc requires capital injection. Lettings of empty space removes landlord liability for empty property rates but how much better off from letting depends upon what it has cost in empty property rates. For example, a value now of £x with vacant possession and nonrecoverable rates of £y is boosted by letting and no rates but the growth is largely illusionary when one allows for what it has cost to hang on.

I agree change of use can affect rental value but depends upon the tenant covenant and lease term.

Traditionally, the UK regions provided higher yields because rental growth was virtually non-existent. Yield compression per low interest rates has inflated capital values but yield is fickle and heavily into borrowing rates, particularly LIBOR.

“there is the question of where, without any rental growth, future growth is going to come from.”

BnC - this was your question. I answered it for you; so really don't understand your last post as you now seem to accept what I stated is correct.

Furthermore, re yr last para:

"Traditionally, the UK regions provided higher yields because rental growth was virtually non-existent. Yield compression per low interest rates has inflated capital values but yield is fickle and heavily into borrowing rates, particularly LIBOR."

It surely can't have escaped your notice that over the course of the past few years QE inspired low interest rates, EVERY, I repeat EVERY propco has extended debt maturity and locked in the current low rates. Though the reality seems to be that the predicted global interest rate rises are again on hold in any event.

So, UK regional propcos are borrowing at 3.5%, investing in properties on 7%+ yields and seeing rents rise due to a growing economy and limited modern space. It really is a very nice place for certain players, especially RGL. Listen to this interview:

Sept’18 - Edison TV Interview:-
https://www.edisoninvestmentresearch.co ... onal-reit2

RGL tipped in yesterday's IC. Frankly, for those of us on this thread who already know of RGL and its palpable attractions, the Jonas Crosland piece added nothing new, nothing we don't already know. It did though further publicise RGL; so for holders, no bad thing in itself.

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the last 2paras are as follows:

The dividend yield is one of the highest in the sector, and while this is expected to be only 93 per cent covered by after-tax earnings, recent disposal profits are expected to make up the shortfall.

IC View

Investors may be donning their tin hats to protect them from any Brexit fallout, but the reality is that demand for office and commercial space in the major regions outside London is holding up very well. In the unlikely event that the economy collapses then all bets are off, but assuming there is a workable outcome to Brexit, shares in Regional REIT, trading at a 25 per cent discount to forecast net asset value (NAV), may be due a rerating. Buy.

one thing i would add with new river is that most of their retail assets have been distressed purchases. i.e. they bought a prime city centre shopping centre near me in cardiff at an 8% yield. most of their retail parks have been bought in the 9% yield range, apart from the ones near london.

it's a conservatively valued portfolio when you compare it to the likes of hammerson (though i appreciate it's not a like for like portfolio).

regarding the dividend, it's uncovered because they haven't yet fully deployed their capital from the 2017 equity raise. and with plenty of distressed assets still to come on to the market (hammerson have announced they will be selling all their retail parks), there will be plenty of opportunities to buy at rock bottom prices. they're certainly better placed than other REITs who are now scrambling to sell assets to shore up balance sheets.

Wondering why NRR’s share price grumped today?

flyer61 wrote:Wondering why NRR’s share price grumped today?

I think it was a Woodford favourite, thus his suspended fund is selling to improve liquidity. Either that or the price has moved in anticipation of a sell off.

flyer61 wrote:Wondering why NRR’s share price grumped today?

Woodford fallout mostly.

Thanks chaps. Note the rise in NRR today. Obviously the market makers and others have tried to clean up at the expense of Woodford's tale of woe. Bought Imperial, my guess, it was his most liquid stock and he has been selling for no other reason than he is/was a forced seller. Might tickle a few more NRR in due course. Woodford's liquidity issues make me realise why I decided Microsoft would be my biggest holding.