Abrdn Property Income Trust (API) - oversold on an 8.7% yield

[richfool]

Since my original post 7 weeks ago (18th August) API has been fairly steady in an overall weak sector. They have risen c7% to 49p, at which level the discount is still high at 41.5% and the yield likewise at 8.16%.

With interest rates now looking to have peaked, though predicted to stay high until Summer'24, this generalist fund should make further progress as the Market tends to look ahead; and in this case that should mean looking ahead to more "normal" valuations.

So I see API as a strong hold; and still a BUY for those coming new to the sector.

Currently the BEST BUY in the sector is EBOX. At 48.75p the discount to their Mar'23 NAV is 45.9%; but more importantly their yield is a massive 8.90%.

Their Interims back in May just reinforced everything the bulls say about EBOX. Quality, assets; quality tenants, rising income, secure dividend. LTV modestly too high, but a reduction through minor sales projected. Debt costs low, RCF only half drawn, medium term maturities.

Well worth spending a fruitful 50mins viewing this Presentation:

hxxps://stream.brrmedia.co.uk/broadcast ... 24552e4f2b

I continue to hold API, which I topped up a couple of months ago, with some of the proceeds from my sale of EPIC.

Looking at the breakdown of API's holdings, I would rather it held less offices and perhaps more warehouses and industrial.

My other REIT/Property company holdings are: WHR (warehouses) and PHP, both of which I have topped up earlier this year, but as we know are all down currently, primarily due to higher interest rates (which don't look like going away for some time to come).

Well API continues to offer an ever increasing dividend yield, 8.55% currently at 47p, (if not increasing value!? ... hmm).

My combined holding of API is currently down -28% in capital performance terms.... which compares with my holdings of:
PHP: -27%
though WHR has the edge at -31%

Obviously all 3 currently offer very significant dividend yields, .... greater than the dividend yields on offer when I originally purchased them! So I deduce I should console myself with the large dividend yield that each currently offers (even though I didn't buy at the current share price!)

All of which brings a wry smile to my face, when I think back to how on the odd occasion in the past, certain HYP'ers used to insist that I shouldn't take any notice of "yield on cost", but should instead only focus on "yield on (current) value", and that to focus on "yield on cost" was to simply flatter oneself. In the current situation, I can't help thinking that I am flattering myself if I focus on "yield on current value"!!

I conclude that these things are all measurements to be borne in mind, but not to focus solely one, to the exclusion of all others.

[SKYSHIP]

Well, I too hold 3 REITs - API, EBOX & SREI. Taken as a group, the average yield is 8.9%!

The dividends on all 3 are covered & the BoDs state the dividends are secure.

None of them have pressing debt concerns, occupancy is good and rents are rising.

The average NAV discount is 43.2% to Mar'23 & Jun'23 valuations. Allowing for a further 5% fall
the discounts reduce to 40.2%.

The discounts are cavernous, the yields are immense, the stock-market valuations are bizarrely
bearish and untested.

Sanity will return once inflation and recession fears are reduced; but the current geopolitical
situation is hardly conducive to improving markets, regardless of apparent value.

So whilst higher for longer is thought to apply to interest rates; lower for longer might apply
to all sectors of the market.

However, here in the UK that recession seems to be constantly in abeyance, so if it does
eventually kick in, it may hopefully prove to be a rather mild affair; really posing little
concern to rent rolls. Furthermore, with high interest rates damaging governments,
corporates and individuals; it seems to me that the central banks may actually cut
sooner than anticipated, especially as inflation rates are falling fast – outside the UK
that is!

As interest rates fall back, the secure yields in the REITs will inevitably trigger a strong
recovery in share prices.

Consider this. If the average yield across my 3 plays cuts from 8.9% to 7.0%, that provides
a 27% increase in the share prices. I’ll enjoy my 8.9% whilst I wait!

[richfool]

https://uk.finance.yahoo.com/news/abrdn ... 00426.html

abrdn Property Income Trust Limited

Spotted today

[richfool]

https://uk.finance.yahoo.com/news/abrdn-property-income-trust-limited-070000426.html

Abrdn Property Income Trust Limited

Spotted today

I was out when I posted the above, but am now able to attach the text relating to the link (see below):
Abrdn Property Income Trust

30 OCTOBER 2023

ASSET MANAGEMENT UPDATE

Following the positive letting transactions completed during the first half of the year, abrdn Property Income Trust (API) is pleased to be able to announce some further asset management activity that has secured over £1.3m p.a. in rent through new lettings and lease renewals.

In the office sector, the lease over the fourth floor at One Station Square in Bracknell has now completed, securing a rent of £132,250 p.a. At The Pinnacle in Reading, our existing tenant Egnyte Limited has upsized on the fifth floor, taking 4,174 sq.ft at an annual rent of £130,000. This rent is 11% ahead of the March 2023 valuation. The lease over the first floor at 160 Causewayside, Edinburgh has been regeared with the removal of the tenant break option. This has secured £157,000 p.a. of rent for a further 5 years.

At 54 Hagley Road in Birmingham, the previously reported lettings to the Chamber of Commerce and UK Cab have now completed following the conclusion of the landlords works. Combined, these reflect a total of 27,770 sq.ft and £538,090 p.a. in rent. The positive momentum at this building has continued with a letting of part of the 4th floor to Property Investor Network, securing a rent of £49,830 p.a. Terms have also been agreed on two further lease renewals of 9,365 sq.ft where the tenants are remaining in their existing suites and the rents are increasing by an average of just over 30% from previous levels.

Refurbishment works at our logistics unit on Rainhill Road in Washington are progressing well (including the completion of a new 1,150kWp PV scheme on the roof) and are due to complete in early November. The unit is let under an agreement for lease and the new 15-year lease will start then. This letting, along with the others completed since quarter end, will reduce the void rate as at 30 September from 8% to 4.4%.

This activity demonstrates that API's investment strategy of investing in assets that tenants want to occupy remains relevant. The API office assets, which account for just under 18% of the overall portfolio, continue to be attractive to occupiers with good levels of amenity at attractive rental levels even in a market with significantly reduced demand and take-up.

In the industrial sector, API is pleased to announce completion of a lease regear at Monkton Business Park in Hebburn. Hitachi Construction Machinery (UK) Limited have taken a new 20-year lease at a passing rent of £310,500 p.a., which is an increase of 19.4% over the previous passing rent. As part of the transaction, Hitachi are obliged to carry out a package of works that are anticipated to improve the EPC rating to an "A".

The EPC on API's Bolton industrial unit let to DPD has recently been reassessed following completion of the letting and the landlord's refurbishment works. API took the opportunity, at the expiry of the previous lease, to carry out an extensive package of upgrades to the unit including the extension of the roof-mounted solar panel installation, an increase in on-site biodiversity and the inclusion of staff welfare facilities. Following the reassessment, the EPC has been lodged as an "A" with a score of -54. This negative score reflects the fact that the unit is operationally carbon negative.

API's speculative 107,000 sq.ft industrial development at Knowsley is progressing well, with practical completion scheduled for the turn of the year. The unit will be a best in class building with enhanced ESG credentials, and this has been reflected in the occupational interest received to date. Whilst early days, we have received proposals from two parties and are hopeful of agreeing a letting of the unit ahead of completion.

Mark Blyth, Deputy Fund Manager of API commented: "Despite challenging market conditions, we continue to have good success letting our void properties as well as retaining existing occupiers with lease regears. Reducing void property costs and increasing rental income, whilst at the same time ensuring a strong focus on ESG, will strengthen API's overall financial standing and position it well for the future."

https://uk.finance.yahoo.com/news/abrdn ... 00426.html

Re Skyships post above, I am not sure that I can see interest rates falling anytime soon, or even during 2024. So we could be in for a fair wait, before the cost of borrowing reduces significantly.

[Dod101]

I was amused to read in the Asset Management Update that their strategy is to ‘invest in assets that tenants want to occupy’. That is surely novel and must be a real positive for API.

What they narrate is just what anyone would expect from a property company and seems to me to be singularly unimpressive.

We can speculate about interest rates and when they are likely to fall but the fact is no one knows. In the meanwhile, all we can do is individually judge what seems to be the better run companies and enjoy the relatively yields available. It is not all bad.

Dod

[BullDog]

I was amused to read in the Asset Management Update that their strategy is to ‘invest in assets that tenants want to occupy’. That is surely novel and must be a real positive for API.

What they narrate is just what anyone would expect from a property company and seems to me to be singularly unimpressive.

We can speculate about interest rates and when they are likely to fall but the fact is no one knows. In the meanwhile, all we can do is individually judge what seems to be the better run companies and enjoy the relatively yields available. It is not all bad.

Dod

I have very low expectations from a company that calls itself Abrdn. A remarkably stupid name for a business. My expectations are usually met by this company.

[Gerry557]

I have very low expectations..... And they often fail to meet them.

[gnawsome]

I have very low expectations from a company that calls itself Abrdn. A remarkably stupid name for a business. My expectations are usually met by this company

Very well said!
How the managers of this outfit can imagine the time and expense incurred in changing the name from something sensible, to a bagful of consonants was a useful engagement of their time exposes their utility as executives -- they should be sacked.

[SKYSHIP]

gnawsome - the crass renaming had nothing to do with the Board of API; and even less so the investment managers.

It was all because of the renaming of Aberdeen Asset Management. Aberdeen became Abrdn!

No-one likes it. An infantile move that has no doubt lost them a lot of AUM; and will continue to do so.

[Dod101]

gnawsome - the crass renaming had nothing to do with the Board of API; and even less so the investment managers.

It was all because of the renaming of Aberdeen Asset Management. Aberdeen became Abrdn!

No-one likes it. An infantile move that has no doubt lost them a lot of AUM; and will continue to do so.

Although I see it as totally irrelevant as far as the attractiveness of API is concerned, the renaming must have had something to do with the Board of API. They would have had to put forward a resolution to the shareholders for a change of name. abrdn are simply the appointed investment managers and could be sacked by the Board of API if they wanted to.

Dod

[Charlottesquare]

I have very low expectations from a company that calls itself Abrdn. A remarkably stupid name for a business. My expectations are usually met by this company

Very well said!
How the managers of this outfit can imagine the time and expense incurred in changing the name from something sensible, to a bagful of consonants was a useful engagement of their time exposes their utility as executives -- they should be sacked.

Remember Royal Mail

[BullDog]

Very well said!
How the managers of this outfit can imagine the time and expense incurred in changing the name from something sensible, to a bagful of consonants was a useful engagement of their time exposes their utility as executives -- they should be sacked.

Remember Royal Mail

Consignia.

For a very short time indeed.

[Wuffle]

Meanwhile.........

Skyship's API went up 6% today on interest rates just ceasing to increase.
Thanks for the stream of info Skyship.
Even if I didn't benefit directly I appreciate the intention.

W.

[monabri]

Meanwhile.........

Skyship's API went up 6% today on interest rates just ceasing to increase.
Thanks for the stream of info Skyship.
Even if I didn't benefit directly I appreciate the intention.

W.

Ditto!

[SKYSHIP]

A real yo-yo this one. Up to 52p, where I'm sure many will have top-sliced; then down 10% to 46.5p; where many will have re-entered.

Luckily I did both; so happy to see them now back above 52p again.

At 52.7p they are on a 41.5% discount to the Mar'23 NAV and still yield 8.24%.

Prelims are in early December. I suspect we could see an 8% fall in the NAV from 90.1p to 82.9p. Discount would still be 36.4% and of course yield unchanged.

[SKYSHIP]

Sorry - didn't edit in time.

Back above 50p again....then delete the rest which applied to EBOX - not API !!!

[richfool]

Note API goes ex dividend tomorrow (16/11/23), producing a yield of 8.06% based on today's SP.