Regional REIT.

[BusyBumbleBee]

BBB - "...the same used to be said (at least by me!) of preference shares."

Sorry, could you explain. ... Are you referring perhaps to a pref share trading at a premium to par as it adjusts higher to falling interest rates? If so then I'm afraid your comment is incorrect and I'll elucidate once confirmed.

I certainly said prior to the start of new millenium that you should not buy prefs above par so my comment is absolutely correct. Somewhere round about then came a tipping point and that rule no longer applied. Prior to that - quality Prefs (Aviva, Stand.ch.7te pr (STAB)) etc hovered either side of par and you could make a turn if you played the market - much as you can on Green Infrastructure shares today as well as collecting nice dividends along the way. I remember a 'conversation with CompSciDude on the Motley Fool on how I did it.

If you download the data from ADVFN (which only goes back to 2000) on STAB you will see this. I realised this was a tipping point and held on to my AVIVA prefs and only sold them when the yields on Green Infrastructure Funds exceeded their yield.

with kind regards - BBB (aka A0002577 on ADVFN)

[SKYSHIP]

Ahh - so historically may have been the case. I really only started to seriously invest/trade when in 2001 I took over management of my pension fund & opened a SIPP.

Now, in a world of QE and ultra-low interest rates, buying prefs at a premium to par is very much de rigeur.

Incidentally, you mention the Aviva prefs. Perhaps as you're on ADVFN, take a look at my yesterday's post on the GACA thread. For the exceptional reasons I explain, those prefs currently look great value IMO.

[BusyBumbleBee]

Ahh - so historically may have been the case. I really only started to seriously invest/trade when in 2001 I took over management of my pension fund & opened a SIPP.

Now, in a world of QE and ultra-low interest rates, buying prefs at a premium to par is very much de rigeur.

Incidentally, you mention the Aviva prefs. Perhaps as you're on ADVFN, take a look at my yesterday's post on the GACA thread. For the exceptional reasons I explain, those prefs currently look great value IMO.

When things are very much "de rigeur" my basic contrarianism tends to make me avoid them. I have noted your keenness on GACA (and others in the same stable) - and your analysis is probably right but maybe slower to come about than you expect - and I have a feeling we are approaching another tipping point so I am keeping clear for the moment.

Moderator Message:
Folks, can we please avoid any further discussion of prefs, which are definitely off-topic for this board. -- MDW1954

[SKYSHIP]

Richfool

PHP v. HCFT

PHP has indeed been a great trade YTD 2019; but is now seriously over-extended on a 24% NAV premium & 4.3% yield.

Their 10yr track record shows an average NAV increase of 2.8%pa versus 7.0% for HCFT

Throughout this time the HCFT yield has been consistently higher and now stands at 5.7% historic.

A good switch perhaps; but in any event well done with PHP, but perhaps time to move on after the exceptional gains from the MedicX merger.

[MDW1954]

Richfool

PHP v. HCFT

PHP has indeed been a great trade YTD 2019; but is now seriously over-extended on a 24% NAV premium & 4.3% yield.

Their 10yr track record shows an average NAV increase of 2.8%pa versus 7.0% for HCFT

Throughout this time the HCFT yield has been consistently higher and now stands at 5.7% historic.

A good switch perhaps; but in any event well done with PHP, but perhaps time to move on after the exceptional gains from the MedicX merger.

Re: HCFT, who are the Kingerlees? And why don't more of the directors have any skin in the game? Director remuneration also seems a tad generous.

That said, there's no denying the track record.

MDW1954

[richfool]

Richfool

PHP v. HCFT

PHP has indeed been a great trade YTD 2019; but is now seriously over-extended on a 24% NAV premium & 4.3% yield.

Their 10yr track record shows an average NAV increase of 2.8%pa versus 7.0% for HCFT

Throughout this time the HCFT yield has been consistently higher and now stands at 5.7% historic.

A good switch perhaps; but in any event well done with PHP, but perhaps time to move on after the exceptional gains from the MedicX merger.

Skyship, You aren't comparing like with like.

PHP invests in a specialist sector of the property market - including clinics and Doctor's surgeries, not commercial property generally. It's premium is due to the appeal and demand for that particular sector, along with its dividend income which as as good as index-linked.

[SKYSHIP]

RE the PHP discussion:

The IC reports that £138m of revaluation losses from PHP's all-share merger with MedicX Fund pushed them into the red in H1'19. Interim results flagged not just a 44 per cent rise in net rental income and a £4m drop in the enlarged GP landlord's operating costs, but also further signs of its organic growth credentials. Rent reviews resulted in a 1.9% cent annualised income increase, and 22 refurbishment or development projects were either completed, on-site or about to commence, which should add a further £0.3m in annual rents. Exc.MedicX’s contribution, recurring adjusted earnings rose by c20% to £20.3m. The IC remain buyers, even though PHP are on a f/c 2019 premium of 18% and a pretty average 4.85% yield

[BusyBumbleBee]

To return to the Regional Reit : they got there fundraising away at the right time didn't they? Price has dropped below the offer price at 104 (bid) to 104.2 (offer).

[SKYSHIP]

# RGL has been drifting under profit-taking and congestion post the Rights & placing @ 106.5p. Now looking rather attractive again @ c104p. F/c dividend for this year is 8.25p; so the prospective yield = 7.9% and the NAV discount = c7.5%.

Great acquisition with some 40% of the new money announced this past week. A portfolio of regional offices providing a Net initial yield of 8.87% and anticipated reversionary yield of 9.54%. Pretty impressive. IMO truly surprising that such yields are still widely available.

https://uk.advfn.com/stock-market/londo ... s/80576795

This link gives some info on the Manchester and Chester properties accounting for about half of the purchase:
https://www.placenorthwest.co.uk/news/c ... -26m-deal/

[SKYSHIP]

An excellent CEO Interview / Update following the recent Interim report.

States convincingly why rents look secure, supporting the excellent 8% yield, further yield compression and NAV growth:

https://tinyurl.com/y5nj6c5v

[spiderbill]

Thanks, that's reassuring.
Just topped up a bit more last week after selling part of my Charles Taylor holding. Now just over 4% of my share portfolio with an average buying price of 100.07p. Doing a damn sight better than some of my other choices (cough IMB cough).

cheers
Spiderbill

[SKYSHIP]

spiderbill - 4%! I admit to a far higher allocation. 10% used to be my SIPP max; but I now exceed that self-imposed limit when a very clear and secure position presents itself.

Incidentally, apparently they were written up in Friday's MoneyWeek.

[spiderbill]

Probably doesn't sound that high in isolation but it's about 50% above my mean holding and 10th on my list by holding value out of 38.
Only ones above it are: Sun Life, Shell, L&G, Glaxo, National Grid, Aviva, HSBC, Taylor Wimpey, and Rio.

I'm overseas currently so can't pick up a copy of Moneyweek and it's not on their website. Will keep an eye out in case it's added later.

cheers
Spiderbill

[SKYSHIP]

SB - The RGL article (27th Sept. MoneyWeek) is a far better researched article than the positive, but over-simplistic and inaccurate piece in The Mail a couple of days earlier.

A very brief extract & a key para IMO:

"The best opportunities, CEO Stephen Inglis believes, are in offices, where capital values of GBP129/sq ft compare with replacement cost of GBP185-200. Rental growth of 5.2% in H1'19 from 39 new lettings was most marked in the office portfolio, where RGL is seeing growth for the first time in 12yrs. Moreover, returns since 2016 have been higher in regional cities than in London; and Inglis expects that to continue. Supply of office space in the regions is at a 12yr low."

[richfool]

SB - The RGL article (27th Sept. MoneyWeek) is a far better researched article than the positive, but over-simplistic and inaccurate piece in The Mail a couple of days earlier.

A very brief extract & a key para IMO:

"The best opportunities, CEO Stephen Inglis believes, are in offices, where capital values of GBP129/sq ft compare with replacement cost of GBP185-200. Rental growth of 5.2% in H1'19 from 39 new lettings was most marked in the office portfolio, where RGL is seeing growth for the first time in 12yrs. Moreover, returns since 2016 have been higher in regional cities than in London; and Inglis expects that to continue. Supply of office space in the regions is at a 12yr low."

I read an article in "Simply Wall St" (1st September) which was pointing out that RGL paid out more free cash flow than it generated last year - 116% to be precise, and that they were thus concerned about the sustainability of the dividend. The article also pointed out that RGL's earnings were effectively flat over the last 3 years.

If I can find the article, I will post an edit to this post with the link.

https://finance.yahoo.com/news/dont-rac ... 49487.html

[Alaric]

Supply of office space in the regions is at a 12yr low

As a contributory factor, has there not been a move to convert commercial property into residential accommodation? I know of an office building on a commercial development of around thirty years ago that's been converted into flats. It's not even in a town centre, but in its favour it's about ten minutes walk to the local village centre, a railway station within commuting distance of London and a motorway junction.

[SKYSHIP]

Richfool, thnx for the Intro to Simply Wall Street – thanks but no thanks really as it proved to be one of the most useless and amateurish financial websites.

All looks very professional, however their stats are full of absurdities, perhaps because they haven’t made the distinction between an investment company and a conventional trading company.

The worst such is their Fair Value estimate where they postulate the frankly stupid figure of 177p; this versus a current NAV estimate of c113p!

They also query the ROE figure of 7.8% due to the apparent use of Debt. Well really!?~ All UK propcos use debt gearing; especially in the current climate when debt costing 3.5% can be used to buy properties yielding 8.7% - as per today’s RNS – see link below.

They then get the dividend cover wrong. The cover last year was at 93% versus your implied 86%. Also, the short-term shortfall was down to one very good reason; they were selling a load of properties at large premiums to NAV; and had not yet reinvested the proceeds! This was quickly done subsequent to the year end; and we've now had another dividend increase forecast - 8.25p.

https://www.investegate.co.uk/regional- ... 00012968Q/

[Spet0789]

SB - The RGL article (27th Sept. MoneyWeek) is a far better researched article than the positive, but over-simplistic and inaccurate piece in The Mail a couple of days earlier.

A very brief extract & a key para IMO:

"The best opportunities, CEO Stephen Inglis believes, are in offices, where capital values of GBP129/sq ft compare with replacement cost of GBP185-200. Rental growth of 5.2% in H1'19 from 39 new lettings was most marked in the office portfolio, where RGL is seeing growth for the first time in 12yrs. Moreover, returns since 2016 have been higher in regional cities than in London; and Inglis expects that to continue. Supply of office space in the regions is at a 12yr low."

Is replacement cost all that relevant?

If RGL owned a skyscraper office block built in the Outer Hebrides, it would cost a fortune to rebuild but if none of the sheep farmers want to rent the office space, it’s not worth much.

[spiderbill]

Richfool, thnx for the Intro to Simply Wall Street – thanks but no thanks really as it proved to be one of the most useless and amateurish financial websites.

I've read a number of their articles over the last few months but I gradually noticed that there were a lot of what I suspect are auto-generated passages and figures that reminded me strongly of the sort of useless rubbish which is produced in the seedier end of my industry (search engine optimisation) by automated audit reports. I strongly suspect that they are untouched by human hand and no longer pay any attention to them.
In this case I also wonder if they even know there's a difference in definition of REITs between the US and UK.

[Spet0789]

SB - The RGL article (27th Sept. MoneyWeek) is a far better researched article than the positive, but over-simplistic and inaccurate piece in The Mail a couple of days earlier.

A very brief extract & a key para IMO:

"The best opportunities, CEO Stephen Inglis believes, are in offices, where capital values of GBP129/sq ft compare with replacement cost of GBP185-200. Rental growth of 5.2% in H1'19 from 39 new lettings was most marked in the office portfolio, where RGL is seeing growth for the first time in 12yrs. Moreover, returns since 2016 have been higher in regional cities than in London; and Inglis expects that to continue. Supply of office space in the regions is at a 12yr low."

Is replacement cost all that relevant?

If RGL owned a skyscraper office block built in the Outer Hebrides, it would cost a fortune to rebuild but if none of the sheep farmers want to rent the office space, it’s not worth much.

Taking the above example, I think it's important to recognise that RGL don't have a sky scraper office block out there. Because it is a very well run property company. The day that RGL decide they are going to do something like that, then that's the day I sell my overweight holding of RGL shares. (I am confident they won't do that, so I'll hold).

Err.... obviously not. There are no skyscrapers in the Outer Hebrides.

My point (which you seem to have missed) is that it may not be relevant how much a given property would cost to replace if no one wants to rent it.