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Real Estate Investors - an attractive yield & discount

SKYSHIP
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Real Estate Investors - an attractive yield & discount

#128397

Postby SKYSHIP » March 27th, 2018, 5:27 pm

Re propcos with a yield:

I recommend taking a look at Birmingham-centric Real Estate Investors (RLE)

Last week’s Finals confirmed the value - EPRA NAV @ 68.9p versus offer price of 55.3p.

Also dividend up 19% @ 3.125p with a prospective 3.5p for 2018.

Those stats equate to an NAV discount of 19.7%, a current yield of 5.65% and a prospective yield of 6.33%.

Not dramatically cheap; but most certainly very good value, especially as the founder CEO is thought to be planning retirement and a willing seller of his 5.5% stake.

Being a Birmingham/Midlands specialist they are well positioned to benefit from both the economic growth in the region; and the investment community's preference for the regional players beyond the M25.

Following the results Liberum posted a target of 70p.

This interview sets the scene rather well

http://www.corelondon.tv/ceo-interview- ... stors-plc/

BusyBumbleBee
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Re: Real Estate Investors - an attractive yield & discount

#205642

Postby BusyBumbleBee » March 5th, 2019, 10:47 am

A year on, the SP has dropped to 50:51 (Bid:Offer) - Is this just because Birmingham is deeply unpopular or Brexit worries or just the general malaise of REITs?

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Re: Real Estate Investors - an attractive yield & discount

#206045

Postby GoldRush » March 6th, 2019, 7:13 pm

Had a look recently. Liked lots about them, but they seem to have very high admin expenses and LTIP. Decided against - seems to be run for the directors.

SKYSHIP
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Re: Real Estate Investors - an attractive yield & discount

#206372

Postby SKYSHIP » March 8th, 2019, 7:35 am

Happily I sold out about a year ago and switched into RGL, about which there has been much posted on this site.

I do feel now though that they may again be rather good value. At the 49.5p offer price they are on a Jun'18 NAV discount of 29.4% and a yield of 7.07% - a combination which possibly makes them the best value in the sector at the moment. That view may be endorsed or otherwise with the Finals due in c2weeks.

Meanwhile quite an active BB on the subject over at ADVFN. Below are my comments just yesterday:

=======================
A real problem here is Bassi's total failure to understand PR or IR.
Finally last Qtr he appoints a PR company to provide a report - but he appoints a nobody who no-one has heard of, then makes the report available only to institutions - not available to PIs!
He should have recruited Edison or Hardman...
Would be good for RLE if Bassi stepped down; he has overstayed his welcome
=======================
Actually though, I do believe he is ultimately the one responsible for poor positioning in the booming Midlands market. I also feel that one of the reasons for the lack of PI communication may be because it must be difficult to paint a positive comparison with peers.
I gather he also doesn't court The City, so with limited PI and fund manager involvement, perhaps not surprising to see a wider discount opening up...
The only positive appears to be his laudable move for increased dividends; but I hope I might be eating my words with the Finals in c2weeks ...
My main criticism I stated earlier, namely that in the sector allocation of the portfolio, the fastest growing sector, Industrial, has been totally ignored. Basically Bassi just called it wrong.
=======================
Re the endless supply of stock; can you see what is on the book, or is it iceberg style with every day another 150k available?
Either way, Bassi should be discussing this with the brokers and seeking to place the line into friendly hands.
From the Website as at 28th Feb'19; Major shareholders (3% or over):
Perpetual Income & Growth Investment Trust – 9.99%
J O Hambro Capital Management – 9.93%
Invesco Perpetual UK Strategic Income Fund – 8.14%
M&G Investment Management – 6.81%
Ruffer Absolute Return Fund – 6.38%
PPS Bassi – 5.51%
EFG Harris Allday – 5.04%
CF Ruffer Total Return Fund – 4.67%
Invesco Perpetual UK Equity Pension Fund – 4.64%
Miton Asset Management – 4.37%
Majedie Asset Management – 4.26%
Aberdeen Standard Investments – 3.25%
=======================
At 49.5p the Jun'18 NAV discount = 29.4% and the yield = 7.07%
Notwithstanding my concerns, at this level and on that yield/discount combination, RLE may be the best value propco.
=======================

brightncheerful
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Re: Real Estate Investors - an attractive yield & discount

#206450

Postby brightncheerful » March 8th, 2019, 12:15 pm

i have been following REI since the sp was 8p and before Bassi. I should think that many if not all of its major shareholders have been around since those days. I think I'm right in saying REI was founded by Peter Lewin: PL later became Chairman until retirement in 2011; some info here: https://www.birminghampost.co.uk/business/boost-bassis-real-estate-investors-3967953

I'm not sure what to make of Bassi or his achievements: an ego-trip prone to inflating the advantage of high-yielding purchases when, actually, high yield is a reflection of little or no growth. Unusual imv for a quoted propco to have testimonials on its website, which makes me think credibility an issue. As for achievements, the combination of borrowings secured mainly upon what REi owned pre-Bassi (or capital released following sales of which some are listed as sold on the website) plus equity/refinancing every so often, plus pruning of portfolios by institutions and others of ex-growth properties means that attractive propositions can be bought by cash buyers for around 10%+.

Ok, demand in Birmingham and the West Midlands generally has improved in recent years and many of the properties were vacant when REI bought them have now been let, mostly on short-term leases (a norm nowadays). But I should think that the NAV owes a lot to yield compression, rather than underlying growth geared to rent levels. [For example, I wouldn't have thought the rather nice looking parade of shops in Park street, Walsall is likely to perform. Around the time REI bought its parade, I did a rent review of a prime shop in Park Street where all the evidence supported a lower rent than my landlord-client was getting.]

REI's NAV has remained fairly constant in recent years which makes me think the potential has plateaued. I don't think div yield 7.07% good value - this minute it's 6.38%, as for 30% discount to NAV, HMSO's discount is about 40% and div yield 6.79%

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Re: Real Estate Investors - an attractive yield & discount

#212384

Postby SKYSHIP » April 3rd, 2019, 1:54 pm

Approaching 4weeks since my post on RLE when on offer at 49.5p. Now, after a good set of numbers and a regular series of large trades, perhaps signalling the end of the consistent tap, they can be sold at an XD equivalent price of 54.5p. That 10% turn in such a short space of time suggests time to bank the profit.

I've done so, though, as my average purchase price was 50.4p the turn was 8% - still, very handy and quite sufficient.


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