SREI - the next to look anomalously cheap...

[Gerry557]

I topped up Epic and RGL last week. This was also in the frame. The share price of this hasn't fallen to the previous lows but it wasn't until today that I noticed that the differential between the price and NAV is similar to the lows as the NAV has risen.

So it seems a good price but the trouble is it can alway look better, normally just after you have bought.

[Gerry557]

Well now having looked closer at some of the metrics and the changes in NAV to SP. I decided to add some more mainly due to the discount and the high yield.

REITs generally suffering but hopefully will get an even bigger dividend just in time for Christmas

[BullDog]

Well now having looked closer at some of the metrics and the changes in NAV to SP. I decided to add some more mainly due to the discount and the high yield.

REITs generally suffering but hopefully will get an even bigger dividend just in time for Christmas

I think patience will be amply rewarded given time. Meanwhile, enjoy the yield!

[SKYSHIP]

SREI posted their Interims yesterday. Followed shortly thereafter by an InvestorMeet presentation - Nick Montgomery is a seriously impressive manager; and it is very likely he who decided to fix the debt when they did. Not Schroder, or surely SERE would have done likewise.

In the InvestorMeet presentation (see below) they rightly made great play of the ERV which promises rising revenues and dividends.

At the unchanged 45p the discount is 26.8% and the yield 7.43%. IMO they look right for a rise back to the 50p level.

I also like the portfolio sector split:

# 46.8% Industrial, 90% of which deliberately chosen as multi-let.
# 27.4% Office – but delve into that (26mins into the IM presentation). 10.7% is London universities; 8.3% in the Big6 cities & a further 8.4% in well-located areas such as Cheltenham & Fareham
# 11.8% in Retail Warehouse – universally viewed as a positive
# 7.7% Retail are convenience stores in densely populated areas

https://www.investormeetcompany.com/inv ... tation-346

For the chart go to P. No. 4187 on ADVFN's Commercial Property thread (CP+)

https://uk.advfn.com/cmn/fbb/thread.php3?id=29245091

[mark88man]

A newbie question - but I am starting to rebalance my portfolio from growth to income (ideally both!). I have another "slug" of cash to put in.

I like ITs but am less experienced in REITs - I like the look of SREI from value and income point of view - but looking at the documentation both it and SERE have 3.8% annual costs - is that a REIT thing, judging by the quality and the firepower from other commentators I assume that is acceptable, but a little rationale would be very gratefully received

thanks in advance

[Dod101]

A newbie question - but I am starting to rebalance my portfolio from growth to income (ideally both!). I have another "slug" of cash to put in.

I like ITs but am less experienced in REITs - I like the look of SREI from value and income point of view - but looking at the documentation both it and SERE have 3.8% annual costs - is that a REIT thing, judging by the quality and the firepower from other commentators I assume that is acceptable, but a little rationale would be very gratefully received

thanks in advance

According to the most recent Annual Report, the Ongoing Costs are 1.32% as to the Fund itself and if including the costs of the property management the costs are 2.28% all in. This is a relatively small fund and so these costs are not untypical.

Not sure where you got your 3.8%.

Dod

[monabri]

The AIC website indicates an ongoing charge of 2.28%.

https://www.theaic.co.uk/companydata/sc ... te/charges

The AIC definition of the ongoing charges being

"A measure, expressed as a percentage of NAV, of the regular, recurring costs of running an investment company."

Other 3rd party sources, eg Hargreaves Lansdown quote a different number.

I'd highlight that SREI are domiciled in Guernsey so dividends are "foreign income" in a tax return.

[mark88man]

A newbie question - but I am starting to rebalance my portfolio from growth to income (ideally both!). I have another "slug" of cash to put in.

I like ITs but am less experienced in REITs - I like the look of SREI from value and income point of view - but looking at the documentation both it and SERE have 3.8% annual costs - is that a REIT thing, judging by the quality and the firepower from other commentators I assume that is acceptable, but a little rationale would be very gratefully received

thanks in advance

According to the most recent Annual Report, the Ongoing Costs are 1.32% as to the Fund itself and if including the costs of the property management the costs are 2.28% all in. This is a relatively small fund and so these costs are not untypical.

Not sure where you got your 3.8%.

Dod

Thanks Dod. I got the number from the Key Information Document on the HL website.

It indicated that there was 0.5% for portfolio transaction costs and 3.3% other ongoing costs. It was displayed in a 1 - 3 -5 year cost of doing business table.

To monabri's observation in regards to foreign income - these will be held in a SIPP so I am assuming no tax implications as HL states they are SIPPable

https://www.hl.co.uk/shares/shares-sear ... rd-shs-npv

[Dod101]

According to the most recent Annual Report, the Ongoing Costs are 1.32% as to the Fund itself and if including the costs of the property management the costs are 2.28% all in. This is a relatively small fund and so these costs are not untypical.

Not sure where you got your 3.8%.

Dod

Thanks Dod. I got the number from the Key Information Document on the HL website.

It indicated that there was 0.5% for portfolio transaction costs and 3.3% other ongoing costs. It was displayed in a 1 - 3 -5 year cost of doing business table.

To monabri's observation in regards to foreign income - these will be held in a SIPP so I am assuming no tax implications as HL states they are SIPPable

https://www.hl.co.uk/shares/shares-sear ... rd-shs-npv

You said a newbie question. I would recommend that you go to the Company documents for info like this rather than a third party site although the AIC site is usually accurate for investment companies. For that matter I would recommend reading the Annual Report anyway. It gives a lot of good information in all sorts of different areas of the company, an indication of the culture, the style of management and so on as well as the sometimes dry numbers. All well worth reading though if you are a half serious investor.

Dod

[monabri]

Report released 8th June 2023, for the year ended 31st March 2023.

https://www.schroders.com/en-gb/uk/indi ... &gclsrc=ds

[mark88man]

Well thank you both - I am more educated (although not entirely), but very much more confident this is understood and accepted by more experienced fools

[SKYSHIP]

The sector shakeout continues apace; but finally, finally we may be at the lows.

When you can get 8%+ yields, covered or uncovered but reaffirmed by the BoDs, then you surely
have to accept that the sector may well be oversold. Especially when those yields are supported
by 40%+ discounts.

SREI has the best B/S in the sector with an average debt cost of 3.4% for 10.5yrs! Yet at the offer
price of 40.4p they yield 8.28% on a 34.4% discount.

Well worth watching the most recent InvestorMeet Presentation (27th July):
https://www.investormeetcompany.com/sch ... r-investor

SREI have been trading the past year in a range of 40p-50p. I expect a return to the mid40s by the
end of this year, so providing a 10% capital gain to add to that excellent fully covered running yield.

[Gerry557]

I suspect some of the EPIC money, when it's eventually sold or whatever becomes of it will end up in here.

Sods laws says It won't happen that way though you never get an influx of cash at a profit when there is something decent to reinvest it in.

Although I will have to check limits of my holdings as I could end up with too many.

Maybe I should just add now as the EPIC thing might fall apart.

[SKYSHIP]

Gerry - hope you decided to buy ahead of the mid-morning rise - now 41p choice - ie bid and offered at that!

[Gerry557]

No I'm still sitting on my hands, SP up another 1% as we speak.

Still a few weeks away from a particular horse race and maybe an interest rate rise to come. It would only have been a small top up anyway.

I think I'm more musing options as its looking like EPIC will be cashed in for me and I might have a decision to make.

I keep telling myself I need to build up some more cash too and at least there is some interest which might be handy if inflation drops a bit more.

Once the EPIC unknown becomes known then the pressure will be on to make a decision. Ideally I'd be happy to keep epic as it is and keep topping up both on a discount as they compliment each other a bit.

[brightncheerful]

Interesting thread. I am familiar with some of SREI retail properties and on the strength of that can understand why the sp is as is.

SREI has the best B/S in the sector with an average debt cost of 3.4% for 10.5yrs! Yet at the offer price of 40.4p they yield 8.28% on a 34.4% discount.

On the other hand, Newriveer NRR borrowing fixed at 3.8%, no refinancing until 2028, earn interest on their >£100M cash, and yield 8.3%; and in my experience of the secondary retail property market, operating in more of a growth market than offices and industrial.

[SKYSHIP]

Ahh - New River Retail - so nearly went bust in c2019. Shares sunk from 350p to 50p.

They've turned things around - now a far smaller company but shares still only 80p.

Retail warehouse good, but still have shopping centres.

Nevertheless the 8.3% yield and 33% NAV discount implies value.

They still have £164m of debt and a 29% LTV; so not all cash as you implied.

Personally I believe SREI a far more secure proposition both with B/S and portfolio.

Still, you pays your moneyt, you takes your choice. Good luck with yours!

[flyer61]

Rec. in todays Sunday Mail...

[Chelseaforeva]

I’m looking to invest in a reit and have concluded that the fundamentals of this fund are sound except possibly for consideration of decarbonisation of commercial property. Any thoughts?