Presumably a reaction to yesterdays RNS or maybe in expectation of a good set of results on the 24/5?. If the latter then it might take the edge off any SP movement when the results come out, but who knows.
For myself none of this has fundamentally changed my view on this stock, which is that it is too volatile and too focussed on retail. I might regret exiting if it jumps to 320 or something, but right now Im not that bothered.
Most people are probably aware but when looking at property companies & REITS it is important to remember that they present their profit figures in a different way from other companies.
Basically accounting rules require them to include property revaluations of their investment portfolios before arriving at their P&L figure.If their portfolio has been valued upwards by say £20m this has to be added to net income;or if valued downwards has to be deducted.Property held for trading,which mainly applies to non REIT property companies does not need to be revalued.
The reason I am mentioning this is that if potential investors are buying a property company or REIT mainly for dividend income you need to look further than the headline profit figure and look for the net on going rental income that is left after deduction of all costs,interest etc.This may well be a very different figure than the actual profit recorded but it is this figure that will pay a sustainable dividend.
Ive been busily churning through a list of about 50 REITs that i downloaded from my broker checking their chart patterns and yields to identify possible candidates for a more detailed investigation.
I quite like the look of PCA which is not on that list. Looks like a commercial property company with a similar operating model to a REIT without actually being one. Thats fine with me as long as the divi is maintained, i can actually see some advantages in that. Good discount to NAV and i like the diversified portfolio, good mix of industrial, offices, leisure and retail in there - unlike NRR. Share price a tad volatile though. Might give it a go if I can get in at the right price.
Took a look at BBOX as you suggested. Looks like you have probably done really well there if youve been in it from the start. But for me the 4.2% yield is too low and i dont like buying stocks that have done really well, as i find thst they have a tendency to NOT do well therafter !. No specific criticism of BBOX intended, just my gut feeling about stocks that have just gone straight up the way that has.
I take a look at CGI occasionally too, are you still buying there ?. Looks to be doing well again, share price back up at 1420. But again yield just too low for my new portfolio.
Hi Pref, have you looked at BBox? I've been in from the placing so yielding pretty good from that entry point but currently around 4.2% so is less than your target but they do count Amazon as one of their tenants.
Sorry for short post, doing on my phone as currently away.
From my experience holding a variety of REITs over the last few years, I have formed an expectation that they should perform as follows:-
1. That their share price should be pretty stable and typically be within ~5% or so of the purchase price.
2. They should deliver a substantial yield, at least 5.5% and likely more.
3. Their NAV should progress upward fairly slowly due primarily to the increasing value of their property portfolio. I suspect that this is due in large part to the requirement to distribute 90% of their profits to shareholders leaving limited room to increase NAV through operating profits.
I have always had a problem with NRR due to its failure to comply with point 1 of my model. To me it seems much too volatile, and for the last year not in a good way !.
I intend to go looking for an alternative REIT that does comply with my model, even if it does yield a bit less.
"LTV of 25% (based on September 2017 valuations) and over £200m of undrawn credit facilities presents firepower to exploit opportunities in our marketplace"
- 18 Jan 2018
You'd hope, if the pub purchase rumour it true, they are using that firepower to exploit an good opportunity.
I think it's possible they could generate 8% from pubs and this certianly looks like it's a community-focused portfolio of boozers. I like the community focused strategy.
- Our local pub has just gone up for sale. Developer bough it a short time ago for £300k, the landlord wants out and it's back on the market for £500k +. I reckon you could put in excess of £1m of housing on the site. I can't ever see anyone running it as a pub again.
The last purchase gave them a blended income of 9%.
All looks good to me, but I wouldn't be surprised if they come back and tap the market for more cash sooner rather than later.
£100m for the pubs, £26m for the retail parks and what other development cost for Basingstoke.
NRR latest NAV is £2.97, I think, so a 10% discount. Yes, Intu is a much bigger discount but by some measures is more geared.
The divi is uncovered, but that is largely due to cash sitting on the balance sheet. Once the cash is spent and gearing added to match it, the divi should be covered.
I do agree that the price is unlikely to exceed £3 for a while.
My thought process is a bit different to most. The yield on Gilts for anything up to 50 years is about 1.7% ie below the rate of inflation. So where are you supposed to get a decent yield from? It has to be equities of some sort. So high yielding equities are great, as long as the dividend is reasonably secure.
My view of all property is the same; look for the maximum gap between the cost of money and the return that you get. Will the pubs kick out 8% plus?
In an idle moment I took a look at the NAV, share prices and yields of a few REITS including INTU, HMSO, NRR, AEWU & RGL.
The first two (the big ones) have just as much debt (35-50%), but have fully covered dividends (INTU ~115%, HMSO ~192%) and trade at about 50-70% of NAV.
The last three (much smaller) have LTVs of (~20% AEWU, ~50% RGL, ~30% NRR) have less well covered dividends (AEWU ~70%, RGL ~116%, NRR ~74%) and are trading at or slightly above book value (AEWU ~1.26, RGL ~0.95, NRR ~1.2).
Based on this if the 3 small REITS were to trade on the much lower p/b ratio of the bigger REITS then their SPs would be much lower. But clearly much of a premium to NAV doesnt seem justified either, so its hard to see NRR being worth much more than say 300ish (given that its NAV is ~290) perhaps justifying much of the fall from last year of ~360. Mind you I would have been quite content to hold had the share price been 285 plus.
Be interesting to see the results on Thursday. Not sure about their further expansion into pubs as other companies operating in that area arent that profitable. But that said widening their scope out of retail seems like a good idea to me, especially the way the high street is right now.
NB All figures from a single central source (ie didnt visit each REIT web site for info) so its possible that the figures are not the very latest.
Following on from ToysRus and Maplins stores closing, Mothercare recently announced the closure of a number of stores and I now read that Next is apparently looking for 20+% rent reductions:
" Before it opens a new store, Next models whether it will still be profitable in the 10th year of operation if sales fall at the worst-case rate. It is renewing leases on shorter terms, which gives it the option of handing back stores before they become unprofitable. Next is forcing landlords to share the pain of high street contraction. Typically it's achieving more than 20% rent reductions on lease renewals, and renewal terms of only five years. " http://www.iii.co.uk/articles/504104/are-next-shares-buy-long-term
Sounds rather ominous. If this kind of thing is limited to a small number of retailers then I would have thought the damage to REITs such as NRR should be containable due to being sufficiently diversified. However I think sentiment will do most damage. Maybe that's what we're already witnessing with the ongoing fall in the share price?
"Well I think we have a simiar situation as U + I where share price kept dropping for no particular reason. "
Perhaps there is a reason why the SP has been falling. According to this morning's Times:
A company that owns about 300 community pubs across England and Scotland is poised to change hands in a deal worth more than £100 million.
The Times understands that New River Reit, a property investment trust focusing on retail and leisure, is set to double its mainly tenanted and leased pub estate by taking over the privately owned Hawthorn Leisure.
Hawthorn, which is controlled by both its management and Avenue Capital, an American private equity firm, was put up for sale recently via Sapient Corporate Finance with a price tag of more than £115 million. It was formed four years ago to acquire 275 Greene King pubs for £75.6 million. It quickly followed that deal with the purchase of 88 pubs from R&L Properties.
The company has since taken over two small packages of managed pubs from Nectar Taverns and JD Wetherspoon, and has sold off about 100 non-core hostelries.
Its pubs are mostly community locals, such as The Stags Head in Carnoustie, eastern Scotland, and The Wheatsheaf in Newmarket and The Crossways in Kings Lynn, Norfolk.
The emergence of New River as the buyer will come as a surprise, as most experts had been favouring Patron Capital, which teamed up with Heineken last summer to complete a £1.8 billion takeover of Punch Taverns. Admiral Taverns, itself acquired last year by Proprium Capital Partners and C&C Group for £220 million, was also hotly tipped.
New River is understood to be hoping to agree terms on a deal in time to make an announcement alongside its full-year results next Thursday.
It may retain the management team at Hawthorn, led by Gerry Carroll, its chief executive, to help to run the enlarged pub business.
New River, which was founded in 2009, has a £1.3 billion property portfolio that includes shopping centres, convenience stores and about 330 pubs, of which about 200 were acquired from Marstons in 2013. Two years later it bought another 158 pubs from Punch Taverns.
Shares of New River fell by 5½p, or 2 per cent, to 266½p. None of the parties involved chose to comment on the deal.
Well I think we have a simiar situation as U + I where share price kept dropping for no particular reason. Then just before results they moved up and are now 20% higher.
NRR have gone from 374p to 265p in a year , that's 109 p down.(about 30%)
I can't see any reason for that and consider they are oversold.
But we will see soon.
Well it wouldnt be a market if we all had the same thoughts on a stock. The market liked the Q3 update and there was a significant bounce as i recall. However holding over results can be bad as well as good, for example BT lost 9% on its results day last week. Now i am not trying in any way to compare those two stocks - just saying that results are a double edged sword.
I wish you well with your top up, but personally i dont see this leopard changing its spots and even if it does bounce i suspect it will then slip back into its downtrend thereafter.
Directors can't buy due to the close period. Maybe they will after.
Someone is going to get fried. I get the impression that there is a fairly heavyweight buyer out there, but it isn't buying enough to offset the shorters. At some point the shorters have to close out, and there isn't that much liquidity.
One decent institution with balls could do really well on the buy side. The trouble is that only Woodford seems to have any.
Yield closing on 8%. Fab.
All my opinion, this is a heavyweight holding of mine. It's an income stock and, yes, I'm down a good bit. But I hope to stay in and earn a good yield. 97% occupancy is pretty blinking good.
Well I have taken an alternative view and bought in today on the drop.
My view is that the drop in price has gone to far and that NRR is undervalued as I see no reason for the price to have dropped to this low point and that we could well be in for a bounce.
Next Thursday results will see who made the right decision.
Well NRR made a positive start to the day, so I didnt sell straightaway but set a stop loss at 270. That stop loss has now been executed as this stock continues its steady slide towards the drain, down at 266 as I write this. No doubt it will recover strongly now, along with BT, as I have exited both.
This is normal practice for me, I dont let stocks drop by more than 10% (including dividends received). If they do I sell. Objective is to stop a 10% loss becoming a 20% loss and then a 50% loss........... Failed to execute my strategy on BT and it cost me more than 10%, wasnt about to let that happen again.
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