The Lemon Fool

Do you think the REIT AA can help?
Or will they simply load and deliver to a scrap yard?

ukmtk wrote:Do you think the REIT AA can help?
Or will they simply load and deliver to a scrap yard?

Sadly, not. This one's heading for a total loss.

I think the price has dropped to close to what the market expects as the price for the capital raise.
I recently dumped a 1/3 at 25p. The 2/3 I still hold cost me £1 each.
It's the worst performer I have ever held. Thankfully.
The dividends were good over the years though.
I earned 42% of the original cost - so not a total loss.

BullDog wrote:

ukmtk wrote:Do you think the REIT AA can help?
Or will they simply load and deliver to a scrap yard?

Sadly, not. This one's heading for a total loss.

If you are right about 'heading for a total loss' what then? I assume you mean that you think the REIT will probably be wound down with a firesale of the properties to try and pay off the company debts?

If so, I wonder what the implications will be for other REITs with substantial regional office holdings? Are we likely to see contagion across other quoted REITs? (no sign of that yet as far as I can see)

My assumption is that the banks could do that but that they'd prefer for somebody to take it over.
It's not exactly expensive now given its portfolio - which is mainly smaller offices.
I work close by to one of them - it's on Pride Park, Derby.
From what I can see in Derby offices have high occupancy.
The company I work for had trouble acquiring suitable offices on Pride Park when we moved recently - during Covid!

RockRabbit wrote:

BullDog wrote:Sadly, not. This one's heading for a total loss.

If you are right about 'heading for a total loss' what then? I assume you mean that you think the REIT will probably be wound down with a firesale of the properties to try and pay off the company debts?

If so, I wonder what the implications will be for other REITs with substantial regional office holdings? Are we likely to see contagion across other quoted REITs? (no sign of that yet as far as I can see)

If I may say so, there is unlikely to be a fire sale simply because regional office blocks are not usually very liquid and so any wind down is likely to be a slow progress. Contagion maybe but they all have their own debt profile and those less indebted will probably survive, especially if interest rates start to fall back.

Dod

Snag is the whole world knows Regional is a distressed seller. They have managed to get themselves between a rock and a hard place. I am working on the premise that after costs, after debt clearance, an orderly voluntary liquidation would maybe return low single digit pennies per share to equity holders.

I am not here to make life more miserable for people who have lost money on RGL. I have invested in car crashes myself in the past and admit to have taken a cursory look at RGL a few times as the share price lurched ever downwards but fortunately never took it further. Nevertheless, one must always try to learn from these disasters so I took a quick look.

On March 23 2023, less than a year ago, the Chairman of RGL wrote in the 2022 annual report
"The company continued to be in a financially robust position" and concluded his comments with "Regional REIT remains well positioned to meet the challenges and take the opportunities that will inevitably arise in the coming years."
Really? Well he held 505,000 shares so he may have believed it.

As an aside, what, a chairman stating "challenges and opportunities"? How they get paid for rolling that line out year after year is beyond me. AI can do this for free.

In the same report, the Asset and Investment Manager (who held over 2,336,000 shares) reported that "The dividend is fully covered by ERPA earnings, which we hope provides shareholders with a high level of confidence in the sustainability of future dividend payments". In 2022, the dividend payout was 6.6p. In Q2 of 2023 the quarterly dividend was reduced from 1.65p to 1.2p (a cut of 27%). That high level of confidence didn't last long.

One thing I have learned from reading many financial reports is that the vast majority of chairmen and CEO's think they are in sales and present as rosy a picture as they possibly can. Be on your guard. The Warren Buffet's of this world who speak openly about their failings are a rarity. Lord Wolfson of Next is another I have seen write openly about mistakes. No doubt there are others but not many in my experience. Beyond this rare group, if they make any hint of the company not doing well then in my experience it's best to take heed.

One tool I wish we all had access to is a database of all directors (executive and non-executive) whereby you could search by company or director and see who has been at the wheel and when. That way, we can quickly check whether any of the directors have made a complete hash of things or not. One would be unwise to rush to judgment as they may have enjoyed considerable success elsewhere but I certainly want to be forewarned and would pause at length before having my money managed by either of these two.

Pendrainllwyn

Here is some grim news related to RGL:

analysts at Peel Hunt estimate the trust will need to line up more than £175million worth of disposals – roughly a quarter of its total portfolio – to reduce its loan-to-value (LTV) ratio

https://www.thisismoney.co.uk/money/markets/article-13187099/Regional-REIT-shares-plummet-property-trust-weighs-raising-cash-investors-material-discount.html

Well RGL has been a long drawn out train wreck with the share price declining incrementally (albeit with the occasional ups and downs) since the start of 2022. I can only offer my commiserations to any RGL holders here. I am not a holder of RGL right now, but have held it in the past pre-pandemic.

I confess that my strategy these days is to bale out of any investments that appear to be in a continual downtrend (or are at risk of becoming so) and invest elsewhere. Typically I bale out at ~10% down in total return terms, I see this as a capital preservation strategy. Sometimes things recover from a bad patch, but often they dont - as has clearly been the case here with RGL. This is just a personal approach, I’m not recommending it to others. DYOR etc.

Best of luck to all RGL holders.

ATB

Pref

Talk of a placing gets more and more difficult especially as the price keeps dropping. At some point paying the 10% coupon on refinancing starts to look attractive.

2023 results out. It appears that they are trying to sell their way out of trouble, 58 properties up for sale.

https://www.londonstockexchange.com/new ... s/16394504

Q1 trading update out. Little changed on Q4 but numbers still going (slightly) in wrong direction. Appears to me that there has been little progress on property disposal front and LTV at 55% is still slowly creeping up. However no new NAV was provided that I could see - IMO therefore likely that LTV is worse than 55%, perhaps significantly so?

Repayment of retail bond later this year still hanging over company. Still one to avoid methinks.

Full details in RNS below:
https://www.londonstockexchange.com/new ... e/16481744