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Regional REIT.

richfool
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Re: Regional REIT.

#308276

Postby richfool » May 13th, 2020, 2:18 pm

jonesa1 wrote:This is worth a read: https://www.youinvest.co.uk/articles/in ... lues-slide

Today's RGL fall is probably contagion from the response to Land Securities results and cancellation of their 4Q dividend. General doom and gloom in the sector, which may be over-blown (or not!).

That sounds logical, as SLI (Standard Life Investments Property Inc trust) is down 6.10% at the moment.

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Re: Regional REIT.

#308279

Postby ReallyVeryFoolish » May 13th, 2020, 2:26 pm

richfool wrote:
jonesa1 wrote:This is worth a read: https://www.youinvest.co.uk/articles/in ... lues-slide

Today's RGL fall is probably contagion from the response to Land Securities results and cancellation of their 4Q dividend. General doom and gloom in the sector, which may be over-blown (or not!).

That sounds logical, as SLI (Standard Life Investments Property Inc trust) is down 6.10% at the moment.

Indeed, thanks for the heads up. RGL and Land Sec are chalk and cheese. Zero concern now.

RGL

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Re: Regional REIT.

#309492

Postby jonesa1 » May 17th, 2020, 10:02 pm

More food for thought: https://www.economist.com/britain/2020/ ... or-offices
I think you can get access to a few articles by registering an email address, without taking out a subscription.

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Regional REIT Says Future Quarterly Dividend Distributions Remain Under Review

#310874

Postby ReallyVeryFoolish » May 22nd, 2020, 9:08 am


richfool
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Re: Regional REIT.

#310880

Postby richfool » May 22nd, 2020, 9:17 am

Well according to the brief, RGL collected 93.9% of rents due up to 19th May 2020, compared to 92.7% to 19th May 2019. Considering the Covid-19 related circumstances, that sounds pretty good to me.

It would seem only prudent to keep the level of dividends under review.

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Re: Regional REIT.

#310923

Postby ReallyVeryFoolish » May 22nd, 2020, 10:38 am

richfool wrote:Well according to the brief, RGL collected 93.9% of rents due up to 19th May 2020, compared to 92.7% to 19th May 2019. Considering the Covid-19 related circumstances, that sounds pretty good to me.

It would seem only prudent to keep the level of dividends under review.

100% agree. I am still confident in RGL management. If I wasn't up to my neck in RGL stock I would buy a serious chunk today. IMO, RGL is definitely mispriced today. It has been damaged by the INTUs of the property sector. Collateral damage to RGL.

RVF

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Re: Regional REIT Says Future Quarterly Dividend Distributions Remain Under Review

#310952

Postby Gerry557 » May 22nd, 2020, 11:26 am

ReallyVeryFoolish wrote:Cuts to come then?

https://www.reuters.com/article/brief-r ... SFWN2D216V

RVF


Well like any company, if it can't get funds in it will have to review funds going out. There is the possibility that some tenants will struggle in the future and a small amount needs a bit of help now. They do have some quality tenants too so there should be some income even if it's reduced over the next 12 months. Hence the review comment.

I was more surprised that this wasn't issued earlier.

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Re: Regional REIT Says Future Quarterly Dividend Distributions Remain Under Review

#310957

Postby ReallyVeryFoolish » May 22nd, 2020, 11:39 am

Gerry557 wrote:
ReallyVeryFoolish wrote:Cuts to come then?

https://www.reuters.com/article/brief-r ... SFWN2D216V

RVF


Well like any company, if it can't get funds in it will have to review funds going out. There is the possibility that some tenants will struggle in the future and a small amount needs a bit of help now. They do have some quality tenants too so there should be some income even if it's reduced over the next 12 months. Hence the review comment.

I was more surprised that this wasn't issued earlier.

Almost 94% rent collected is darned good. I think most REITs would be very happy indeed at that outcome. I am very hopeful for RGL.

RVF

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Re: Regional REIT.

#313228

Postby ReallyVeryFoolish » May 29th, 2020, 8:13 am

I have a fairly long held overweight position in RGL. I think it is a sound company in a presently poor sector. On a total return basis I am about 8% down on purchase cost. Given the likely pressure on office rents short to medium term and a potential medium to longer term pressure on demand it may be prudent to reduce and diversify elsewhere. I have a couple of investment trust ideas to switch into. Perhaps a bit less yield but 20 to 25% recovery potential too. RGL may not have a sustainable rental income, hence my thinking to reduce my holding by perhaps 50%. What do other RGL holders think? Thanks.

RVF

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Re: Regional REIT.

#313336

Postby jonesa1 » May 29th, 2020, 12:20 pm

I recently sold out (at a loss) because the original case for holding RGL (sustainable & increasing rents from non-London office & industrial holdings, with very limited retail exposure) no longer looks as solid. In the short term they have managed to collect rents, but as soon as furlough unwinds we are likely to see a large number of redundancies and failing companies, along with a recession which will lower demand over the next year or two (with a potentially messy end to the Brexit transition as a complication). Even if RGL tenants are OK, lower overall office demand would drive down sustainable rents.

The need for people to work from home has proven to many businesses that they can function quite happily with people WFH. That creates an opportunity to reduce costs at a time when most businesses will be dealing with lower revenues. Many people would welcome the opportunity to avoid commutes a few days each week and few wouldn't welcome the flexibility to work from home when it suits them. COVID-19 may well have changed office culture permanently. Maybe one area that could grow will be WeWork style local, shared office space for people who don't have the facilities at home to work comfortably, but for whom it's no longer necessary to commute to a central office. I doubt this will offset the decline in traditional office demand though.

How this will actually play out is, of course, unknown. However, the fall in share price reflects the risk that rental income will not be sustainable long term and will lead to lower property valuations in future as well as lower dividends.

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Re: Regional REIT.

#313510

Postby midgesgalore » May 29th, 2020, 10:53 pm

I hold at around 2% of my shares portfolio. (less were I to amalgamate my IT and OEIC portfolios).
I got the impression from hearing lots of real conversations, waiting in the supermarket queues, that people like working from home but really miss the office environment and find it difficult to get any peace from others in the household when doing their working from home.
My thought is there is a bigger affinity to having real colleagues than virtual colleagues. Also I would think that is better for a company's productivity if it keeps their employees emotionally happier.

I think longer term this company (Regional REIT) can work this kind of thing out.

midgesgalore

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Re: Regional REIT.

#313592

Postby baldchap » May 30th, 2020, 10:18 am

I piled into RGL and 2 other more industrial REITs when they tanked recently. Not to make a quick buck but to lock in very cheap prices & income.
Granted they may dip in the short term, and there are other risks.

That being said, the long term positives are
1)Very limited Retail
2)Not in London
3)Considerable number of Govt & Large company tenants

Will offices go out of fashion?, or just offices in London and larger cities? I get the impression people miss work, but not the commute.
Offices may or may not go out of fashion, but buildings and land don't.
Time will tell, Reit's make up less than 10% of the portfolio (but 15% of the income).

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Re: Regional REIT.

#313633

Postby jonesa1 » May 30th, 2020, 11:31 am

midgesgalore wrote:My thought is there is a bigger affinity to having real colleagues than virtual colleagues. Also I would think that is better for a company's productivity if it keeps their employees emotionally happier.


The key may be whether people have a choice. Before retirement I worked for a company that saw an opportunity to generate cash by selling its office and data centre buildings and then leasing back a portion of them. This meant meant people had to find somewhere else to work (home or client premises) for some of the time, the key being that it wasn't their choice. If companies can see an economic advantage in reducing office costs by getting more people to work at home, more of the time, many may do so. Especially during a recession.

My own experience of mostly working from home for many years, is that so long as you get regular face to face contact with your closest colleagues, then it's easy enough to adapt. It was far more challenging to form good working relationships with colleagues based outside the UK, especially when business travel was more or less stopped by the company - but even that worked out ok. For me, after several years of hardly ever going to the office, the optimum ended up being 3 days in the office and 2 at home, but only because the office was nearby and the people working on the same project as me were in the same office (a novelty after a decade of working with people scattered across the globe). My last role had that pattern, but in an office a long way from home, which certainly influenced the timing of my retirement.

The people who are likely to be most adversely affected by a reduction in office working are those who don't have the facilities at home to work comfortably and / or those for whom socialising with colleagues is important - eg young people. It's possible that having city centre offices could remain a key differentiator for companies wanting to attract the best graduates.

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Re: Regional REIT.

#313639

Postby jonesa1 » May 30th, 2020, 11:47 am

baldchap wrote:3)Considerable number of Govt & Large company tenants


The public sector have just learned the same lesson as many businesses, ie it's perfectly possible to function ok with many of their staff working at home. My partner is a civil servant, she and her colleagues been working very long hours (dealing with the CV19 impact on their area of responsibility), that simply wouldn't have been sustainable if people had been commuting to their offices as well. Once the current spending spree is over, the public sector will have the same need as businesses to reduce costs.

Good luck with your investment, for me there seems to be too little up-side and a lot of risk in most property funds. Some of the specialists look ok, but we're in a period then it's likely we will see a lot of changes, eg if most GP consultations continue to be virtual, will demand for surgery property hold up?

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Re: Regional REIT.

#313644

Postby richfool » May 30th, 2020, 11:57 am

I think the biggest impact was and will continue to be on retail properties, to which RGL has minimal exposure. I had previously noted that RGL's exposure was more to large company and government offices, which I tend to think will continue to be required for some time yet. I may be sticking my neck out here, but I can't help thinking that working practices will need to evolve a lot more, before working from home has a major effect. Though I am conscious of the old idiom: "where there's a will, there's a way".

I note that my holding of Warehouse REIT has maintained its value well.

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Re: Regional REIT.

#313666

Postby ReallyVeryFoolish » May 30th, 2020, 1:27 pm

The comments here are all very valid, both upbeat and downbeat, nobody really knows. What's prompted my present reappraisal is that the company I am with, like many others has had it's entire workforce working from home for a couple of months or more now. Productivity has not been impacted. There is nothing that couldn't be handled by home working. There is no longer any question about negative business impact, there isn't any. None. Last week an opportunity to return to the office was made available to those who really did not like being at home. Two people returned to the office last Monday. Very soon the workforce will transition to a 50% staff alternate week in/week out of the office. I expect there will be considerable flexibility on who or when or if you go to the office. The company leases six floors in a prime central business district location. It has given notice to the landlord that they want to reduce that to three floors. The saving is millions of $$$ per year. This is an unexceptional company, very typical. I expect the same situation to repeat worldwide.

RVF.

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Re: Regional REIT.

#313708

Postby dealtn » May 30th, 2020, 4:00 pm

ReallyVeryFoolish wrote:The comments here are all very valid, both upbeat and downbeat, nobody really knows. What's prompted my present reappraisal is that the company I am with, like many others has had it's entire workforce working from home for a couple of months or more now. Productivity has not been impacted. There is nothing that couldn't be handled by home working. There is no longer any question about negative business impact, there isn't any. None. Last week an opportunity to return to the office was made available to those who really did not like being at home. Two people returned to the office last Monday. Very soon the workforce will transition to a 50% staff alternate week in/week out of the office. I expect there will be considerable flexibility on who or when or if you go to the office. The company leases six floors in a prime central business district location. It has given notice to the landlord that they want to reduce that to three floors. The saving is millions of $$$ per year. This is an unexceptional company, very typical. I expect the same situation to repeat worldwide.

RVF.


Interesting to note that all seem to think there is no cost for employers of their employees working from home. I'm not sure long term how this works out but if every "house" has to have an office space in some form or another I wouldn't be surprised if this gets "rented" and the Office costs saved from downsizing might not be as great as assumed. In the same way that company cars for salesmen (as an example) get provided by the employers, I wouldn't be surprised to see an "Office" allowance become the norm for those that work at home, such that the savings are shared.

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Re: Regional REIT.

#313724

Postby jonesa1 » May 30th, 2020, 5:01 pm

dealtn wrote:Interesting to note that all seem to think there is no cost for employers of their employees working from home. I'm not sure long term how this works out but if every "house" has to have an office space in some form or another I wouldn't be surprised if this gets "rented" and the Office costs saved from downsizing might not be as great as assumed. In the same way that company cars for salesmen (as an example) get provided by the employers, I wouldn't be surprised to see an "Office" allowance become the norm for those that work at home, such that the savings are shared.


If I was the boss of a company looking to reduce office space costs, I'd argue that the cost of employees providing their own space is balanced by their reduced costs (travel, clothing, coffee, etc) and increased convenience. There may be room for negotiation for people with in-demand skills in a shortage skill area, I doubt anyone else would have much bargaining power. Especially as allowing staff a mix of home and office working potentially widens the geographic recruitment area (which could be interesting for London housing rental prices and possibly London salaries), a long commute isn't so much of a problem if it's only once or twice a week, or even less frequently.

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Re: Regional REIT.

#313725

Postby Spet0789 » May 30th, 2020, 5:08 pm

We opened a position in RGL at 80p, a yield of just over 10%, having watched for a while.

I agree that the future of the office is less certain than it used to be, but I think the shares offer value for the following reasons:-

- Decent WAULT. Commercial leases are contractual obligations. Short of bankruptcy, the lessee can’t escape them. RGL’s rent roll is diversified and includes lots of strong names.

- No upcoming debt maturities and leverage headroom.

- Scope to convert office properties to residential if they can’t be let puts a floor under values.

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Re: Regional REIT.

#313730

Postby dealtn » May 30th, 2020, 5:16 pm

jonesa1 wrote:
dealtn wrote:Interesting to note that all seem to think there is no cost for employers of their employees working from home. I'm not sure long term how this works out but if every "house" has to have an office space in some form or another I wouldn't be surprised if this gets "rented" and the Office costs saved from downsizing might not be as great as assumed. In the same way that company cars for salesmen (as an example) get provided by the employers, I wouldn't be surprised to see an "Office" allowance become the norm for those that work at home, such that the savings are shared.


If I was the boss of a company looking to reduce office space costs, I'd argue that the cost of employees providing their own space is balanced by their reduced costs (travel, clothing, coffee, etc) and increased convenience. There may be room for negotiation for people with in-demand skills in a shortage skill area, I doubt anyone else would have much bargaining power. Especially as allowing staff a mix of home and office working potentially widens the geographic recruitment area (which could be interesting for London housing rental prices and possibly London salaries), a long commute isn't so much of a problem if it's only once or twice a week, or even less frequently.


Well I was talking long-term, but even in the few minutes since posting I have found this.

https://www.telegraph.co.uk/technology/ ... king-home/

possibly paywalled. Essentially there is a recognition, in Switzerland at least, that the employer is utilising property that doesn't belong to them, and isn't being rented, but provided by the employee.

In fact the more I think about it the more difficult it becomes for this to be thought about in a simple way. Not every home is set up to accommodate home working. How do those with just a studio flat, or one bed flat compete with other employees that have 3 bed semis, or detached houses with rooms available for "conversion" to home offices. If this becomes a permanent route for employers to employ staff how long before discrimination cases are attempted?

Can those still living with parents, or in House of Multiple Occupants, even married couples work in a shared way? What happens if they "need" to rent a room at the local library, or rent-an-office? Is that their cost or can that be passed on to the employer, and if so what stops others that don't need to do this from being given an "allowance".

In the long term I am sure the "way we work" will change. I am less confident that all the cost will be borne by employees, some will be borne by employers. As such this needs to be factored in to the rental "saving" argument, and the impact on Office owners, and REITs.


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