The latest Investing Matters Podcast episode with London Stock Exchange Group's Chris Mayo has just been released. Listen here.
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TEF are over in Hong Kong dipping their toe for the third time in the foreign investor pond on City North
Both Savills and JLL giving it some wellie. Fingers crossed
https://twitter.com/Hatch_Interiors/status/1135841900890640385
file:///C:/Users/John/Downloads/JLL_Canary_Wharf_Report_May%202019.pdf
Plenty of opportunities going begging. This might be a bit heavy on the commercial element but looks to be a potential BTR opp for a large chunk
https://www.egi.co.uk/news/dagenham-sheds-and-beds-scheme-hits-the-market/
BTR + !!!!
Certainly see TEF exploring the institutional demand for this. TEF' s site locations look very suitable
Here is The Collective's scheme
http://www.plparchitecture.com/the-collective-old-oak.html
https://www.thecollective.com/locations/old-oak
Starting to come of age and possibly a sector TEF might be able to feed product into .The management of change
https://www.multihousingnews.com/post/cushman-wakefield-sees-co-living-tipping-point/
Not many left at NGQ .All credit to the sales team where every single sale will be hard won ,So different to the experience with Stratopshere and Stratford Central close by where bucketoads were signed up in hotel rooms without even as much as a accompanied site visit
Good to get a clean sheet here before the next launches at Gallions and City North with still plenty at Liberty to get shot and the 4 at Manhattan
Coming up to 12 months since planning consent obtained at Chrisp Street.TEF no doubt been busy with negotiations to obtain vacant possesssion.before commencing the phased works but no updates since.
Not an easy task especially when dealing with claims for total extinguishment of business.Hopefully that this won't necessitate LBTH becoming involved having to use compulsory purchase powers .The road to perdition
If satisfactory progress has bene made TEF will be turning their attention to funding the 640+ apartments and 109k of retail/commercial space
Certainly can't be organised from current interal resources.No doubt we will be hearing something soon.
There are only 2 apartments both at Calders under £600k currently available ( of those developments being actively marketed). Let's hope that the Help 2 Buyers below the £600k threshold get stuck in at Gallions when it reappears
https://www.london.gov.uk/decisions/md2350-bishopsgate-goodsyard-planning-performance-agreement
Extraordinary! Developers paying for planing officer to deal with application .Maybe TEF can wheel one in at Tower Hamlets !
Don't worry I think we are just caught in a mini -vacuum
I would have thought Stone Studios is ideal BTR fodder. That could be turned around in the next 6 months. TEF already have a site price.the building costs will be broadly estimated In addition a take out price .From a deal like that Steffy will be able to give strong guidance as the arithmetic is there
All Steffy has done is to steer clear of crystal ball gazing . In the past with most developments fully sold 2 years in advance he could forecast with confidence more accurately. Having been caught out last FY he is not going to factor in deals which haven't already been done
However he is cautiously optimistic and every right to be !!
Disappointing never the less.
I never thought profits would dip for any other reason than an external shock like a recession.
I really don't understand why our profits growth curve seems to have been derailed. BY Terr's assessment it will be 2023 until we get back to our previous 50m forecast for 2019. A 4 year lag. When will divi start rising again? 2024??
The current market valuation is £224m .So even with £25m its showing crudely 10%
Not bad for a low point Embedded in that valuation is a 50% share of Chrisp Street which withitn the hext 12 months they could conceivably bring in a BTR partner
Within 4 years the whole merry private dance could strike up again
Steph...."stonking" very unlikely......estimated PBT
2020....25m
2021....30m
2022....40m
so you may have to wait 4 years until they report PBT above the level reported yesterday.
So you support the "supposition" that TEF is a company growing profit in the medium term and any dip will be temporary and not affect the relentless upwards trend?
Bit scary for me. My TEF holding in my ISA is a significant part of my retirement planning. I've made an assumption that pre tax profit will roughly double every 6 years or less with a corresponding increase in the dividend and SP.
So a 2 year "holiday" from an otherwise upwards trend worrying. Requires a stonking 2021 and 2022.
The dip is primarily due to the fact that completion at City North has been delayed by a few months because of problems with TFL and the railway
So;profit from the forward sales shunted into following year which is a big chunk. In addition delays to site at 9 Elms
So most of this years profit comes from NGQ
Unsure when Balfron completes this FY ?Could be this FY. Reckon TEF.s 25% share of the action could be £8m and bearing in mind Steffy got caught out last FY unliklely to have been includedin the forecast So could be something he has kept up his sleeve?
In addition the 1st completions at Gallions could just sneak into FY 20 .Steady as she goes
thanks
SO to my uneducated eye profits should surge forward when switching to BTR and lag when switching back.
I really don't understand this 2019 2020 dip. I am pretty much taking it on faith that 21 and 22 will make up for it giving us a overall upwards curve with a dip in the 2019 2022 middle. which means pre tax profit in 2021 and 2022 needs to be north of 70m or so to maintain the growth curve.
Guidance soon that this is indeed expected would be much welcomed. At the moment all that anybody talks about is 19 and 20 down but 2021 will be up but not by how much.
>I thought as a build to rent contract progresses profit is probably booked proportionally at each drawdown and not at the end -as in speculative build.
That's right. Profits are brought forward by switching current developments to BTR.
The opposite will apply if TEF change their policy in the future and rely more on open market.
I think 2020 was always going to be a poor year. Either that or the Analyst estimates way off.
£5m from 2019 moved into 2020 and £15m from City North moved into 2021. That's a net £10m drop but as you say profits from BTR brought forward into 2020 if land sale and pay as you go BTR payments due in the financial year.
"I really don't understand why Build to Rent decreases in the near term booked profit. I thought as a build to rent contract progresses profit is probably booked proportionally at each drawdown and not at the end -as in speculative build. Thus profit realized earlier not later. Must have this assumption wrong somehow. "
In forward funded deals like BTR the developer draws down from monies for construction during the project which attracts interest A payout of profit at the end ,If a site purchase involved this element usually paid upfront by negotiation . The funder keen to minimise this to avoid paying extra stamp duty
However for accounting purposes the profit is booked at each drawdown proportionally . Just a question of cashflow
yes good podcast.
I really don't understand why Build to Rent decreases in the near term booked profit. I thought as a build to rent contract progresses profit is probably booked proportionally at each drawdown and not at the end -as in speculative build. Thus profit realized earlier not later. Must have this assumption wrong somehow.
Margins differential between BTR and open market mean TEF need to achieve about a 25% higher unit build per annum to be even in terms of pre tax profit. Freeing up so much finance shod make this possible but gearing maybe needs to be similar. Also means that the riskiest bit (which is site purchase, land bank and planning) will still usually rest with TEF and not the BTR partner until deal signed. Need a land bank to attract partners. I suppose that is why TEF can earn a 12% margin. Where TEF a pure builder with no land or planning risk margins must be substantially lower as I believe was the case when building directly for the housing associations.
So 18%+ if you build and speculate on future sales, 12%+ if you have a BTR partner once you get planning and 7%+ if you are a pure play builder with no land or planning risk.
Of course the last 2 are very valuable in any recession. TEF can have the same gross profit under 2 vs 1 so long as it gets volume up by 25%.
Come on TEF when will you be a 2000/unit per year builder?
A walk around TEF's patch !!!
https://alondoninheritance.com/london-buildings/new-deal-for-east-london-bromley-by-bow-to-poplar/
Thanks Just listened to that .The analysts must feel very comfortable talking with both Steffy and Katie who have a very open style
Said they just sold1 at Calders Wharf for £900k yesterday which must be number 6 marked up at top of the shop £920k which is still showing as available. Nice little H1 booster !
On the whole, the final numbers (in particular gross revenues, EPS, margins and NAV per share) were better than I expected, based on the March 2019 Edison forecast, although PBT was slightly lower. Like others, I also noted the material increases in admin and selling expenses. I hope that Edison will now produce an updated note.
Aside from the points already made in the various posts, a few things not mentioned in the final results or the presentation/analyst briefing struck me:-
1. Radio silence on the circa 700 home deal with a major land owner in East London announced back in October 2018, where we were told in the interims that further details would be announced "in the near future". If it happens, it would the biggest scheme aside from Nine Elms, so I was surprised that nothing was said about it.
2. Apart from the indication that pretty much anything other than Greenford is now a candidate for BTR, no detail as to any selected sites and rough timetable. Most of the schemes on the books are under 200 homes (once affordable housing is stripped out), so it looks as if new sites will need to be acquired to feed Invesco.
3. The timetable for signing the build contract with Greystar for Nine Elms has slipped still further, although the presentation talks about signing being imminent, so hopefully there will be an formal RNS in the next few days.
For those who have the time, the audio webcast of the analysts meeting this morning (link on the TEF website as well as in the RNS this morning) is worth a listen, particularly the Q&A which followed the formal presentation.