Ediston (EPIC)

[MDW1954]

Most REITs seem to be going into one main element and Epic picked warehouses so I can't see someone who has just sold warehouses and moved into offices wanting to buy them. The multi owners like to keep certain ratios so might push their limits but could sell and recycle I suppose over a time period.

It will be interesting to see who might be a fit or who would want to buy

You need to be careful here. EPIC did NOT pick warehouses. It picked "retail parks", in which one finds "retail warehouses".

Or, to you and me, shops.

Proof? See: https://www.epic-reit.com/properties/

I've two REITs doing this, and I'm wondering if they're right.

MDW1954

[SKYSHIP]

TR Property Trust is the likely instigator of EPIC’s Strategic Review. They now own 17.1% of EPIC and their manager has been calling for consolidation in the sector.

See this interesting excerpt from TRY’s recent Interim statement:
"Our retail exposure in the UK remains minimal. However, I have steadily added to the specialist retail warehouse owner, Ediston, where we now own 16% of the company. It has successfully deleveraged with the sale of its remaining office buildings and is now a pure retail warehouse play. As a very small company in listed terms (market cap. £130m) it has failed to attract a broader range of investors even though its portfolio and balance sheet are sound. Its dividend yield is over 7% and its implied yield on current share price of over 10%. It has no refinancing requirements until late 2025 with 100% fixed priced debt."
Https://www.trproperty.com/wp-content/u ... R_2022.pdf

Clearly EPIC’s BoD are not going to recommend a course of action contrary to the best interests of shareholders; so a merger with another poorly rated REIT is one for the birds!

IMO there are likely just two outcomes on the table:

# Voluntary liquidation - which could take up to a year
# Status quo

The first would not result in cherry-picking of the best sites and an unmarketable rump left over. All the RW sites are attractive assets; readily marketable; and may well go to one buyer as a discrete portfolio.

However the company has put up a FOR SALE sign, so the shares should trade at a higher level because at any stage someone could swoop for the company or the portfolio.

So to earn 7%-8% whilst waiting for perhaps a 10%-20% capital gain on a deal, seems a pretty fair proposition.

Peel Hunt came out with a BUY note yesterday with a TP of 80p. I view that as a tad optimistic, still, I'll enjoy the 7.8% yield at 64.2p and await events; events which could well deliver a nice capital gain of 10%+ to add to that 7.8%.

Downside? Well, I suppose if nothing happens they could drop back temporarily to the 60p support level for a 25.9% discount and 8.33% yield. Not a problem that...

[SKYSHIP]

If you feel strongly about your investment here, EMAIL the Chairman, William Hill. Surely right to state that the only two reasonable options are Voluntary Liquidation or the Status Quo. Also do stress the Review should have both a cost and a time cap.

info@ediston.com

or

william.hill@ediston-reit.com

A bit of a holding reply; but at least I stated my case and received a reply:

Dear Mr xxxxx

Thank you very much for your email of 20th March and taking the trouble to contact me. It is much appreciated as we are very keen to hear from as many of the Company’s investors as possible. I can therefore assure you that your comments will be shared with Board and be fed into our considerations.

Please do not hesitate to keep in touch.

Kind regards

William

[scrumpyjack]

Thanks, I have written to him as follows:

Dear Mr Hill

As a modest, and hopefully long term, shareholder in Ediston (about xx,000 shares), I was interested to read about the review of the company’s future.

I think the only alternatives that I could support would be the realization of the assets at near net asset value or to continue with the status quo. The liquidity of the company’s shares is not an issue that worries me and I see no benefit in selling out the company at a large discount to NAV.

Yours

[pje16]

Excellent, I look forward to his reply

[MDW1954]

I shall do the same. And I know two other shareholders who will, as well.

MDW1954

[scrumpyjack]

I've had a reply:

Dear Mr xxxxx

Thank you very much for your email in connection with the strategic review. The Board is really keen to hear from the Company’s private shareholders and I can assure you that your views will be circulated to my fellow directors and the Company’s advisors.

Thank you for taking the trouble to get in touch and please do not hesitate to do so again.

Yours sincerely

William Hill

Chairman
Ediston Property Investment Company plc

[scrumpyjack]

I see HL won't allow dealing in the shares at present. Perhaps this means an outcome of the 'review' is near?

[scrumpyjack]

RNS issued today
https://www.investegate.co.uk/announcement/7514271

NAV at 31/3 virtually unchanged vs 31/12 (80.44p vs 80.93p)
Update on Strategic review expected early in Q3
New rentals at above agent estimates gives confidence in the value of the portfolio.

They will publish an updated Factsheet shortly. (The absence of this was apparently the reason HL block buy orders, so presumably they will then allow buying)

Management admit their preference is for merger with another REIT but, apart from perhaps ensuring they keep their jobs, I can't see how that could be preferable to liquidating at somewhere near NAV and then shareholders can use the undiscounted proceeds to buy other discounted REITS if they want to?

[Magnets]

From the 2022 accounts:

This rate is fixed for the period of the loan as long as the LTV is maintained below 40%, increasing by 10 basis points if the Loan-to-Value is 40% or higher. These loans are secured over EPIC (No.1) Limited’s property portfolio

the LTV ratio, being the adjusted value of the loan as a percentage of the aggregate market value of the relevant properties, must not exceed 50%

They are sitting at 39.1% LTV now

As at 31 March 2023, the average loan-to-value across the Company's two debt facilities was 39.1%.

[brightncheerful]

"I can't see how that could be preferable to liquidating at somewhere near NAV"

because trying to do that would likely fail, and there is little or no appetite for buying 'dry investments; ie, nothing to do but wait in hope. the NAV is an on-paper estimate of value.

[SKYSHIP]

I think everybody knows that the NAV results from the Valuer's opinion on portfolio value. Every property is assessed and valued based both upon DCF values and actual transactional activity.

The latter is currently at low ebb; nevertheless the RW sector remains in demand and recent valuations should be sustainable.

On the whole directors and investment managers prefer to remain in business so that they can continue to receive their generous remuneration packages. But clearly if no third party offer is made for the company, then the best result for shareholders would be to liquidate.

A 12 month programme should be readily achievable; likewise a target of c75p for distribution in 2-3 stage payments.

That would provide a 28% uplift from Friday's closing offer price of 58.6p.

A very poor 70p target would still provide a 19% upside.

If the Directors fail to do anything, then the status quo delivers an ongoing 27.6% discount and an 8.5% yield.

EPIC clearly good value again...

[scrumpyjack]

Update today on their review

https://www.londonstockexchange.com/new ... e/16068121

They are in advanced discussions re the sale of the portfolio

SP up 9.5%

That would be a far better outcome than a merger!

[BullDog]

Update today on their review

https://www.londonstockexchange.com/new ... e/16068121

They are in advanced discussions re the sale of the portfolio

SP up 9.5%

That would be a far better outcome than a merger!

Someone sees value in UK property even if the wider market doesn't. It won't be the last REIT to be taken out.

[SKYSHIP]

Scrumpy - indeed, a portfolio disposal and liquidation would be a positive outcome.

Bulldog - not the last REIT to be taken out. Agree 100%. API the rather obvious choice. On offer at 49.6p for a 39.8% discount (Mar'23 NAV) and a yield of just over 8%.

[Gerry557]

Although not done and dusted it's looking like I might need to look where to put some cash that might be coming my way.

I was in the process of transferring my Epic shares to a different broker, which didn't go well and now I'm wondering about cancelling it altogether.

I was looking to take the monthly dividend out as cash. This option looks like it will disappear shortly so it might be a consideration going forward. Not many monthly payers.

I wonder who the buyers are. There might be a chance to swap Epic shares for theirs which I would consider. I know SREI mentioned them and said they would look at their properties if it happens.

Still its a nice problem to have.

[brightncheerful]

I don't think there are any buyers that would want to pay full price for the properties. It's not ad though the mrket is short of retail parks.

As for TRPIT the main reason i would think for accumulating 16% is to help prop up its own dividends.

[scrumpyjack]

It's convenient small beer for an insurance company. My guess would be they will settle for a price that effectively split's the 20% discount with the buyer, but I have no basis for saying that other than it would be in both sides interest.

[brightncheerful]

i reckon ikely buter is AEW or NewRiver

[BullDog]

i reckon ikely buter is AEW or NewRiver

AEW are likely up to their eyes sorting out the management of HOME. Trying to rescue it. I think they have their hands full.