Regional REIT.

[ukmtk]

I have a large holding in RGL. It was a good dividend generator.
I too hope you're wrong about the death spiral.
I'm hoping that it will be snapped up (API/CREI?).

[BullDog]

I have a large holding in RGL. It was a good dividend generator.
I too hope you're wrong about the death spiral.
I'm hoping that it will be snapped up (API/CREI?).

I hope I'm wrong too. But over leveraged, falling revenue, increasing vacancies, falling asset values, imminent retail bond repayment, looming LTV covenant breach, doesn't sound great.

We'll find out more soon, I expect the dividend to be cut again and hopefully some news of progress with retail bond repayment plan.

[ukmtk]

A little good news on the RGL front.
The dividend was maintained (at 1.2p).
Discussions ongoing over £50 million retail bonds.
The market reacted positively to the news.
https://www.londonstockexchange.com/news-article/RGL/dividend-declaration/16343540

[Dod101]

A little good news on the RGL front.
The dividend was maintained (at 1.2p).
Discussions ongoing over £50 million retail bonds.
The market reacted positively to the news.
https://www.londonstockexchange.com/news-article/RGL/dividend-declaration/16343540

The dividend is of course a required distribution if the company is to maintain its REIT status so it probably did not have much choice.

Dod

[ukmtk]

They could have reduced it (as they have recently done so).

[BullDog]

Slow motion train wreck continues. Share price is now sub 20p. Edison recently published a (paid for) note that strongly suggests a rescue rights issue is likely. Given Edison is paid by Regional to write this stuff, it seems probable. I have a (now very) small holding and I think it would be throwing money away. So if there's an issue I'll sit and suffer the resulting dilution.

[RockRabbit]

I note from the 2 Feb update that their occupancy is down to 80% or so. That appears to be significantly worse than their REIT peers including CLS Holdings. I appreciate that their assets are primarily regional offices, but is their high void rate entirely a result of WFH or do they own particularly bad offices (location, EPC, facilities etc).

Their share price decline has been largely since covid 'ended' when WFH was well established as a long term outcome. I guess that rising interest rates on top of WFH proved to be the sucker punch?

https://www.londonstockexchange.com/new ... e/16315245

[ukmtk]

The Edison RGL note is available here - it seems like quite a detailed analysis:
https://www.edisongroup.com/research/lancing-the-boil/33301/

[Laughton]

Had read the Eddison note and, given that I consider that as the position of the BOD having been paid for by the company, have taken some comfort to continue holding onto RGL1.

But, if the story changes, I reserve the right to change my mind.

[RockRabbit]

The Edison RGL note is available here - it seems like quite a detailed analysis:
https://www.edisongroup.com/research/lancing-the-boil/33301/

Thank you for this, certainly helps explain some of the share price movement. But even if they raise further equity to pay for the bond, the high and rising void rate is going to be a serious drain on resources. (zero rent, but maintenance costs, rates etc).

[kempiejon]

Had read the Eddison note and, given that I consider that as the position of the BOD having been paid for by the company, have taken some comfort to continue holding onto RGL1.

But, if the story changes, I reserve the right to change my mind.

Yeah, having looked at the prospects as per the Edison publication I agree. RGL1 should pay me back at par. I was buying at around 90p in 2020 attracted by the steady yield. I had expected them to come back above that price by now with redemption just 6 months out with just the final dividend to pay but I guess that's the market.

[PrefInvestor]

Well in my experience investing in anything that is REALLY high yield (say 10%+) quite often comes at significant risk to your capital. Numerous examples out there IMHO – DEC, HFEL, PHNX, VOD as well as RGL.

While a high yield is seductive to income investors like myself, I personally avoid such investments as I consider them to be “value traps”. Far better IMV to invest in things with a slightly lower yield that can deliver a positive total return. Just my opinion obviously, others may disagree. DYOR etc.

I feel that RGL lost its way when it decided to focus exclusively on office properties at a time when demand for that class of property has reduced due to significant post pandemic working from home trend. Now I suspect they may need to re-purpose some of their properties for alternate usage if they want to let them or sell them. Their occupancy rate appears to be only in the low 80%’s according to their HY 2023 results, that’s very low for a REIT.

Best of luck to any RGL holders here.

ATB

Pref

[ukmtk]

When I started out with RGL I was a little more naive than I am now.
I was after yield but bought too much at a high price (~ £1).
They even reached £1.20 just before Covid struck.

I liked RGL as all the properties were smallish offices outside the M25. They have some big name clients.
I think that a combination of Covid & higher interest rates is what has knocked REITs (especially offices) badly.

I also thought that the nice thing about RGL compared to other companies is that they own something tangible.
No doubt my mistake was not paying attention to finances.

After this I started buying multi company IT/ETFs to help prevent a single point of failure.
I did buy too much of IUKD - not realising that the underlying companies may be suspect.

I was gambling with real money in my own SIPP.
At least I was paying extortionate fees to an IFA to make the same mistakes.

[ukmtk]

Obviously I meant:

At least I was NOT paying extortionate fees to an IFA to make the same mistakes.

[PrefInvestor]

Well umtk when picking REIT investments it pays to pay attention to the following REIT features:-
- Company market cap. Small companies (sort of < £200m) could be a greater risk of going bust, especially ATM. Personally I prefer £1Bn plus myself ATM.
- Yield. But anything over 10% likely not sustainable I would say. And check that the dividend is FULLY covered by earnings. Anything less might get punished by the market.
- Debt. LTV < 40-45%, even lower is good. Debt ideally fixed at a low rate for an extended period.
- Low void rate (ie Percentage of their properties on which they aren’t receiving rent). REITs with a significant number of properties needing repair and refurbishment can also be an issue.
- Good mix of property types (Office, Logistics, Retail, Industrial) & locations. I try to avoid REITs too much money in a number of big properties. But personally I would avoid specialist REITs like NRR & RGL that are ALL retail or offices. All logistics is probably OK.
- Good management. Rent collection close to 100%, fixing property problems quickly, buying/selling to realise capital and re-cycle it etc.
- Time was you’d have looked for a low discount to NAV and avoided those on a premium. That ship has pretty much sailed now !.

There are other factors too, but the above are probably the most important I think. Just my collected opinions from investing in this sector for many years. DYOR etc. !

Well done for avoiding the IFA trap anyway.....

ATB

Pref

[ukmtk]

Many thanks for the analysis Pref.

Unfortunately in my case I bought all my RGL 6-7 years ago.
When things looked rosier.

I checked my SIPP spreadsheet and see that RGL closed at 93.4p at the end of 2021.
The good old days.

[BullDog]

Many thanks for the analysis Pref.

Unfortunately in my case I bought all my RGL 6-7 years ago.
When things looked rosier.

I checked my SIPP spreadsheet and see that RGL closed at 93.4p at the end of 2021.
The good old days.

Yes, back then RGL would have passed all or most of those tests. So not much use really.

Same boat as you, at least you have had a big chunk of your money back as dividends in the meantime. Cold comfort, but the situation isn't quite as bad as raw numbers suggest. Hope that helps.

[PrefInvestor]

Many thanks for the analysis Pref.

Unfortunately in my case I bought all my RGL 6-7 years ago.
When things looked rosier.

I checked my SIPP spreadsheet and see that RGL closed at 93.4p at the end of 2021.
The good old days.

Yes umtk, trying to buy & hold anything long term can result in significant capital losses. Personally these days I keep my holding sizes small and monitor total return for all my holdings in my portfolio spreadsheet. I have a lot of holdings, I dont mind that. Any that go off the rails (total return < -10% typically) I try to sell before the damage becomes too great and invest elsewhere.

I had a bad experience with VOD years ago and swore I'd never again let myself get into that "locked in and facing a significant loss" position ever again if I could possibly avoid it.

Not recommending this technique to anyone else though. DYOR etc. !!

ATB

Pref

[ukmtk]

RGL just posted a response to press speculation:
https://www.londonstockexchange.com/news-article/RGL/response-to-press-speculation/16372218
It did NOT have a positive impact on the share price.

[BullDog]

RGL just posted a response to press speculation:
https://www.londonstockexchange.com/news-article/RGL/response-to-press-speculation/16372218
It did NOT have a positive impact on the share price.

Yes, looks like all four wheels have fallen off the band wagon all at once.