Member Info for steph

personally I think we are in for at least a "technical exit" where we are not members but adhere to all the rules. A technical exit does give us unamigusolsy freedom to negotiate free trade agreements with third parties although implementation of that may need to wait until the final deal with the EU is agreed and has a implantation date fixed. It may well turn out that in this "technical exit" we discover that the fabulous additional free trade agreements we can get that we do not already have as EU members is a chimera. With that new information pubic opinion might shift and re-joining the EU may be politically viable. If public opinion is solidly over 60% in favour it might as Cameron originally intended put the issue to bed for a generation or two and UKIP will not come back from the dead as the population will be better informed and Aaron Banks will thus have less influence with his money. Maybe even the Murdock family will feel guilty about the racist mess they encouraged the USA to get into and might kennel the more rabid dogs they have in their tabloid kennels. Already many tabloids have a lot of ink used on Brexit induced labour shortages in the NHS and key industries rather than the immigrant bashing they normally do. ON the whole EU immigrants work more than UK averages so there is obviously a loss to the system somewhere. Personally I don't see a political pathway to avoid a "technical exit" at the moment -although this is now a fast moving issue so who knows what 2020 might look like. For TEF a technical exit will not be overly damaging but the uncertainty will affect the growth rates of the London jobs market somewhat. I am not expecting TEF to catch up to it's "enterprise value" until all this Brexit uncertainty clears. That may be 5 years away or more. Luckily TEF will have ever improving numbers in this 5 year period of Brexit uncertainty so our SP should rise in proportion to our EPS and volume growth in spite of it all.

I do think this Labour announcement is a game changer. It has come earlier and with more clarity than I was expecting. It was only a few months ago that Corbyn threw 3 members of his shadow cabinet out for saying exactly the same thing. As I have posted here consistently the end game of Brexit will likely end up with some Norwegian arrangement -perhaps dressed up differently in some face saving formula. Economic logic will drive all parties towards this -in the Tories case probably kicking and screaming. The really interesting delta will be the role, or lack of, of the European Court in commercial disputes. Trade resolution mechanisms (which have a nuclear button of withdrawal if you don't like the ruling) are not as good as being mutually subject to the European court for business conflict resolutions. The EU court keeps the commercial dispute localized to the issue at hand and without escalation into a fight between sovereign nations. The UK has used the European court and won more to protect our interests than has happened in reverse. That is mostly because protecting our trade in the service industry is more subtle than protecting trade in goods. As we a have huge export oriented service industry there is much to protect. The slow education of our politicians of all parties in the intricacies of trade and conflict resolution within trade agreements is a painful thing to watch. 40 years without having any other experience except the European Court to resolve conflicts has left a whole generation of politicians with no living memory of how it used to work and why having a court that can immediately enforce in a judgement in a competitors jurisdiction was so useful to have in the first place. Ask Canada and Mexico how agile is the conflict resolution procedures under NAFTA even when the judgement of the independent arbitration goes in their favour. The USA can effectively ignore the judgement against them for years and goad Canada or Mexico to withdraw from the trade agreement if they don't like it. When you sleep next to an elephant you sometimes get hurt.

3.5 x to 7x not 3.5% to 7x

The risk of a hard cliff edge Brexit (followed by a TEF damaging hard recession) recede by the day. Both the waffle of policy papers from the Tories which cover the main range of opinion in the Tory party rather than a single position and now a much clearer "soft Brexit" position coming from the "radical" Labour party. Brexit angst is now causing a flirtation with a technical recession but nothing like a real deep recession that can damage TEF's business model or even profit projections. We edge towards EFTA membership or equivalent. Job losses in London that are directly Brexit related will likely be modest enough to not reverse the robust well paid jobs growth driving the TEF market. For the city some sharing of financial risk with the EU on bank failures or wholesale money market clearing failures is necessary and inevitable. Indeed our banking sector can grow to Swiss levels as a proportion of GDP cover (from 3.5% bank liability's over GDP to circa 7x) if these safeguards are in place. The real speed limit of our banking sector growth is the risk as a nation we are willing to take to have them (or their clearing activities or bankruptcy risk) register in our jurisdiction. Happy ISA days for me. https://www.thetimes.co.uk/edition/business/the-truth-behind-the-eus-city-power-grab-tr6jrjlqh https://www.thetimes.co.uk/edition/news/labour-becomes-soft-brexit-party-cmrxvbnkv https://www.thetimes.co.uk/edition/comment/theresa-mays-plan-a-avoid-supermacs-euroflop-88qwlpzqh

Yes a little unusual for short term indicators of relative value (which will not normally show TEF as no 1) and long term strategic analysis of value (that for me consistently show TEF as the best long term buy) will be aligned. TEF SP is due a leg up but that could be at any time over the next 12 or 18 months based on ever improving results and not necessarily in the next few months when Brexit uncertainty will be at it's peak. At least we seem to be edging away from the self imposed cliff edge towards some messy compromise. May is probably the most incompetent PM in our history -exceeding North's loss of the American Colonies. Same as North -former home secretary to boot and from relatively humble financial background for a PM at that time. Crowd pleasing unsustainable jingoism on issues she/he had little strategic understanding when what was required was diplomacy and preparing parliament and party for the inevitable compromises ahead. An unsustainable hard line before a collapse. The cost back then was a costly and unnecessary war plus a loss of international prestige. I trust this time it is just a loss of international prestige. Strictly's observation that TEF pre crash was trading at a remarkable multiple of PBV help answer my question as to why with all the post crash improvements in volume TEF has struggled to get past the pre crash high when dilution is accounted for. IN short pre crash TEF was being treated by the market as a growth share and was priced accordingly. Currently the market is not pricing any UK builders as growth shares TEF included. Sentiment has changed. More fool them I say as I top up my ISA at prices I really should not be able to get. Earnings are earnings and the SP will rise from any lagging fair value point if earnings go up. If volume doubles at similar margins every 4 to 6 years SP will follow in due course.

London will always have a diverse set of buyers driven by a structural shortage of homes. Conversely long term I just don't see the job creation drivers for the midlands to want to be long term in a builder supplying that market. The midlands and other regions do not have primary net job creation drivers in the emerging economy. The regionalization of builders (not to mention the lack of internationalization) is due to high cost and time involved of establishing workforce that is cost competitive in each region. Outside London it is a bit or a muchness but there is a step change for London in the cost of the long term workforce. That means workers who live locally and do not need overnight travel costs are "cheaper". As TEF said at their AGM to me they have a London specific crew of direct labour and contractors which give them a competitive advantage in London to new comers. Establishing the equitant is a barrier to entry. Takes time and money to do so. Plus local knowledge and relationships on land purchase, planning permission, infrastructure upgrades and assembly. More barriers to entry. TEF is actually a knowledge and skills based industry in London behind the big beefy builder image and associated low P/E ratio. The P/E ratio is as if a competitor can easily do the same thing as TEF and TEF is vulnerable to increased completion in it's patch. The solid growth potential to double volume at the same margins every 4 to 6 years for the next 20 years Is simply not priced in.

http://www.homesandproperty.co.uk/property-news/buying/house-prices-in-england-and-wales-slow-for-summer-but-emerging-crossrail-hotspots-in-east-london-a112986.html http://www.rightmove.co.uk/news/house-price-index/

As mentioned I was told by a TW Board member they would be taking a cautious strategy on volume post crash and thus it has turned out for all major builders. As you mentioned they were all left out to hang even as the government said there was a housing crisis and even as logic dictated the construction sector if properly funded could be countercyclical in the middle of a recession. Once burned twice shy. All the majors have been remarkably conservative post crash and above average leverage and buy outs non existent. Big change from pre-crash. TW had volume of 20,000 pre crash (including 5,000 in NA) and now I think it is now about 12,000. While there have been nibbles no major foreign house builder has dipped their toe in the UK market either. Barriers to entry seem to be higher than for the commercial sector which is more diverse with foreign developers quite active.

CLuttons all the latest evidence is pointing to modest house price inflation in TEF's patch probably a touch over RPI inflation over the next 5 years. This is down form the 5 to 6% expected before Brexit so a substantial impact but not catastrophic and nothing near large enough to change the predictions of TEF earnings and volume growth. I was advised by TEF management at the special AGM to approve the capital raising that further dilutions to raise capital were unlikely for the foreseeable future. I suspect that is now hard wired in due to events after that. There are only so many ways a builder can grow. The speed limit in the UK model is the ability to fund a land bank. Retained profits can only add so much net plots above the yearly "burn rate". TEF has cleverly increased the speed limit by retaining 2/3rds of profit, forward sales and now by Partnership with Greystar. Historically TEF's partnerships with housing associations rear loads or avoids entirely land purchase. I think they already have their foot to the floor (doubling volume every 4 to 6 years) and I prefer they do not get tempted to raise capital through dilution again to raise the unit growth rate further but at the expense of EPS. That unit volume growth is fast enough as the market gap TEF can fill over the next 20 years is not going away if TEF does not grab it early. Once TEF approached a "mature" size no doubt they will release more dividend income as a percentage. Perhaps in time 100%. For now retaining those earnings to fund growth is the best mechanism combined of cause with judicious credit facilities and a rear loaded land assembly model. I have high hopes my TEF ISA holding will give me a substantial retirement income on it's own if I am patent enough for the natural growth to increase earnings sufficiently. A divi over a quid 10 to 15 years out is quite within reach for the those who can wait.

Brendon Thomas, MRICS, Tower Hamlets, Hackney, City, Newham, Southwark, Oakland Surveyors, b.thomas@ oaklandsurveyors.co.uk - A urry of activity the last few weeks even at £1m+. Encouraging to see people ‘getting on with it’.

I'm the guilty party who has predicted 20 quid in 10 to 20 years time. I've stated my reasons. Basically a growth stock that will deliver increased sp and divi over a 20 year window of opportunity to apply their growth model in the regenerating bits of London without limiting competition from peers nor any glass ceiling of TEF's volume exceeding 20% of niche market size

As you know I believe Brexit is quite damaging for any play on the London residential property market. Accordingly I've trimmed my buy to let's and any leveraged TEF position. However I've remained fully concentrated in TEF in my ISA , added 20k worth of shares april6 and will do the same next year. The reason is that I believe the London jobs market can take the hit of some degree of stupid economic policy. All governments do stupid things from time to time that hurt the economy. Ours is no exception. The regional office policy we did in the 50's and early 60's was far more damaging to the London jobs market than even the craziest Brexit I can imagine. Londons population actually went down as a result of deliberate government policy. So yes we have a massive black swan parked on our lovely TEF positions and the uncertainty created will not clear for 5 years or more. However for any long term holder this just creates better buy in points. I've given the odds of a chaotic Brexit as 5%. A chaotic Brexit is the only Brexit to give us some actual decline rather than a decline relative to where we would have been. The last 2 weeks have seen government policy shift significantly away from a chaotic Brexit. Yes it will be messy like Dunkirk was but some sensible way forward will be found as well.

http://www.londonsroyaldocks.com/future-development/

upstream of the housing sector for London is the office sector and it remains in rude health. That is why I believe TEF's business plan and forecasts will survive even a bad (but not chaotic) Brexit. Corporate office owners -especially but not exclusively sovereigns or "red chips"- generate their own demand for occupiers as much as they cannibalize existing London tenants from more fragmented existing accommodation. The Chinese investment on the Royals is thought to be nearly exclusively targeted back in China for tenants. They even like accommodation options being packaged up with office space -as is possible with the Royals development. Different type of investor with different anxieties than a French or American firm. They like a one stop shop on all but their core business. China is starting to export serious amounts of capital both private and related to the state. It is a deliberate "silk" road" strategy to reach out and to create a global business network with China as the central hub. Long term but steady. London without Brexit was the destination of choice by a wide margin (few Chinese speak any other Latin language except English). Still is a destination of choice and so long as we have a reasonable agreement on services and skilled immigration with EU post Brexit EU HQ's of growing Chinese companies will still disproportionately locate in London.

there is a Brexit risk in that it could affect the high paid business and financial jobs but not the backfill which may be other sectors (or the lower paid more mundane bits of business and financial services) that pay less like culture and creative or much of ICT. SO we could have hardly any statistical effect on London jobs growth trajectory but a shift away from the very top paid segments. This will affect BKG more than TEF as they are bonus driven and we tend to be worker driven demand for housing product but impact might trickle down.

yes of course for the UK affordability measured by multiples of the backwards looking statistics of local income averages is the ultimate driver (or cap) on demand when combined with mortgage rates, accumulated savings rates and lending criteria. However for TEF's regeneration London patch those rules do not apply due to "churn". Age and income groups that can't afford (or don't want) the TEF product are leaving for other parts of the UK and younger better paid workers are moving in who can. The churn for London as a whole is quite phenomenal and it is even stronger for the regeneration bits TEF specialize in. It is the great lament of regeneration that it may physically save the area but not the residents who used to live there. Older owner occupiers get a windfall and move by choice but those who were renting privately just get priced out (unless they get some of the scarce affordable homes to rent or buy). Any backwards looking statistic of affordability is not relevant. Bigger forces are at play. One odd element of this in London is that as affordable housing is mainly financed by cross subsidy from at profit build. Thus the more the "regeneration" the more new affordable housing is built. SO at least many local renters do directly benefit from the regeneration. Much more brutal in the USA when regeneration occurs. The "churn" occurs much faster and more brutally than in London. That is capitalism for you.

https://www2.deloitte.com/uk/en/pages/real-estate/articles/crane-survey.html https://www.constructionnews.co.uk/data/new-build-resurgence-boosts-london-office-pipeline/10019950.article upstream of the TEF housing market is of course the new office space construction market. This remains in rude health. Of course new offices can be built and then not filled. Many are pre let though and even those built on spec will have promoters who can fill them. Prime example is the Chinese on the Royal Docks. NO doubt they can fill those with Chinese firms not yet in the London market. Also London is the global hub for many companies and when they trim staff they tend to concentrate the remainder in London. Employment at Canary Wharf actually went up during the great recession of 2008 in spite of econometrics predicting a sharp decline. For the sector nationwide employment levels did decline but the geographical distribution of that favoured Canary Wharf with it's long leases and agglomeration benefits. There was churn as well with one very high paid staff on 200 sq foot offices being replaced by two still well paid staff on 100 sq foot offices (or more likely open plan). Even more clients for TEF product during the great recession of 2008as it turned out rather than fewer. Plus quite sharp trend globally but especially for London for less and less sq foot per employee (open plan and hot desking) so even without new office growth there are more and more well paid workers every year. Plus serviced offices, rentable conference rooms and all sorts of ways of getting more workers and GDP into a tight expensive first tier city urban space. Even the upper end of Brexit job losses for London are not necessary actual job losses due to backfilling of the same office by other staff within the firm or by other firms with a different business model. I remain 100% invested in TEF in my ISA believing that London will muddle through Brexit and TEF"s business plan to double volume every 4 to 6 years will run for 20 years or so. HS2 and crossrail 2 will help. As no parking is going in to any new London offices there is no limit so long as the rail based public transport links continue to improve. Basically the value of inner London office space (in competition to its' global peers) is proportional to the catchment of skilled workers within a 45 minute commute. London still expanding this catchment as many global cities due to traffic congestion are having theirs contract. It's a win for London and thus a win for TEF.

all the signals are (and this includes almost all professional forecasts) is that we are heading for a fairly flat year in terms of HP inflation UK wide with regional variations. It is expected to pick up a bit and to show something in the order of 3% HP inflation over the next 5 years. In other words a stable market that should support TEF's stated EPS and growth objectives. TEF's regeneration patch in East London will likely outperform that -especially the crossrail and Olympic Park supported bits. A substantive transition period where free movement is not halted helps of course the London market but many firms still need certainty on the long term arrangements to make investment decisions on hiring so jobs growth for market that buys TEF will be more moderate over the next 5 years than the last. Still a massive shortage to cover and still unit growth will be a lot less than new demand growth in London. So even with slower jobs growth the deficit will still be expanding not contracting. London is a diverse economy and only some sectors (and within those only some parts of those sectors) affected by Brexit directly. Of course a chaotic Brexit would cause chaos and a sharp recession but we seem to be moving away from that risk where even hard liners like Gove and Fox accept there will need to be a substantive transition period and there needs to be an orderly exit. My poor Corbyn all over the map but I suspect his get out clause will be to consult members or listen to resolutions at conference which will soften the Labour line.

I'd love to find a Brexit hedge through other EU financial centre residential builders and I wish I had the confidence of Strictly in the long term jobs markets outside London to diversify into other UK builders. I don't and TEF remains the best compromise of multiple factors. I don't like Brexit but I think baring a chaotic exit the London jobs market in the skills and salary bands that buy TEF product will continue their upwards trajectory -maybe just at a slower pace than they might have. I am buckled up for volatility for a few years though. IN TEF's case I believe the volatility will be on a rising curve of SP so I remain fully invested.

I'll need to research more. They don't seem to be focussed on near prime Dublin as TEF are on near prime London nor do I understand near prime Dublin. I would expect mostly high tech city centre apartments and not town houses but Dublin is a lot smaller than London and maybe those townhouse are an easy commute to the city centre. The rest of Ireland is not form me just as the rest of the UK is not for me. I just don't see where the jobs are going to come from outside of Dublin.