Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Although after the Enhanced Scrip Div (which becuase the cash alternative is so awful is in effect a bonus issue) the NAV will drop to c78p, all other things being equal.
How these sell will be an important read across for the wider portfolio valuation.
From Propertyweek
"Savills has been mandated to sell a trio of shopping centre assets, Property Week can reveal.
The agent is selling The Spires Shopping Centre in High Barnet, north London, for £25m; The Newlands Shopping Centre in Kettering, Northamptonshire, for £8.5m; and The Royals Shopping Centre in Southend, Essex, for £13.4m.
The Spires Shopping Centre, which is owned by Canadian investor AIMCO, spans 195,222 sq ft and is anchored by a 33,687 sq ft Waitrose food store. Its tenant line-up includes H&M, Savers and JD Sports. The shopping centre is being sold as a redevelopment opportunity, with plans already drawn up to transform the 4.85-acre site into a mixed-use residential-led quarter.
Overall, the shopping centre produces an annual rental income of £2.2m. The Spires is the main high street shopping centre in Barnet, which is one of London’s fastest-growing boroughs. Hunter Real Estate Investment Managers acquired Spires on behalf of AIMCO for £40m six years ago.
The 257,349 sq ft Newlands Shopping Centre has a community and convenience tenant-led line-up, with occupiers including Poundland, H&M and Boots. It is anchored by a 31,234 sq ft TK Maxx store, which is on a long lease expiring in May 2025. As well as the shopping centre, a single-let office building called Lahnstein House is part of the sale. The asset produces a total gross income of £1.7m.
Finally, The Royals Shopping Centre, which spans 282,062 sq ft, is anchored by a 121,045 sq ft Debenhams store, which could be redeveloped into alternative uses. The shopping centre also has development potential to add 250 residential units."
The only option I can think of is if you sell them cum (scrip) div and then buy them back next day ex (scrip) div - the price should fall by 2p to account for the change in status, so you'll but 5% more shares at a cheaper price.
To cover yourself for market movement on top of the dilution you could always open a spread betting account to replicate your position (the price will be automatically adjusted for the change in status).
Not ideal and you would need extra capital to fund the margin (c 20% of the full position) but that's a Heath Robinson way of not losing out.
I use AJ Bell and they give you the option of taking the cash or scrip and their charges are very reasonable.
I suspect that they make their own luck!
Short term, who knows, there are forces operating which are counter to the fundamentals.
You have to remember that retail real estate assets have been constantly marked down for the last four or five years.
A year ago the NAV was 112p and now, during a pandemic with most shops closed, it is 82p.
I think that for the sort of assets that Hammerson owns, that must be at or near the bottom, so there is stabilisation or upside there.
Then look at the discount to NAV that REITs trade at, and a few trade at a premium but for most it varies between 10% to 30%.
At 31.4p, that is a discount of 62%.
So we have a NAV which is probably overly pessimistic and a massive discount to that NAV on the share price.
There's an awful lot of upside spring there once investors see that reopening is happening and people still like shopping centres and the like.
It's possible that short sellers will force the price lower, but come early April, everyone will want to play the recovery.
Finally, the only thing that would make me doubt the above is if there was a going concern risk - i.e. you might lose all of your money because the business runs out of cash.
The most recently results have allayed those fears as the Rights Issue, the RCF and the debt maturity profile show that that isn't an issue for a good couple of years. Something which we had no visibility over until the FY 2020 results were published.
Sell now and the shorts win the day and their Treeshake strategy works.
I'm holding, as the best thing about the last week or so is that it shows that North of 40p is eminently possible.
25%+ fall in two days on no news.
Very fishy.
I saw several 250,000 sell orders go through in quick succession which looks like shorting activity.
That's what I have had with AJBell on similar transactions such as Rights Issues and the like.
I think you may be double counting there.
The 82p is the net position of the RICS Red Book valuation of the properties plus other assets minus liabilities.
RICS Red Book is an industry standard methodology which uses comparable metrics for recent transactions but has at its heart a DCF approach to rents and risk.
The rental income is fully reflected in the 82p valuation.
It allows them to keep their favourable tax status without actually parting with much cash, but the idea you are getting more shares and so it's valuable is just an accounting fiddle. As long as very few people take the cash and dilute themselves the share price will drop by c5% but you'll have c5% more shares.
Or if the enhanced Scrip Div is 2p per shre, simply divide 2p by your estimated share price on the Ex-Div date and apply to your holdings.
It's a smoke and mirrors job in reality, unless lots of people opt for the 0.2p cash alternative and thus get diluted.
If everyone takes up the Scrip then the pie remains the same size it just gets sliced thinner but you have more slices to compensate.
The 10 year treasury blowing out to 175 bps is clearly not what the Fed wants at the moment and we make get Operation Twist or outright Yield Curve Control to being it back in line. Short term, I don't see it as a problem but clearly it will impact upon growth stocks alot more which rely on discounted future cashflows and profits to support their valuation.
(Tesla is toast as soon as the fanbois on Reddit run out of stimmies.)
For HMSO, although there's a lot of debt IIRC it's mostly fixed rate and due in the medium term, so there is a refi risk although if the business gets turned around in the next couple of years despite rates being a bit higher it will have a stronger covenant and so the risk premia should move the other way. Net net a nothingburger.
The thing to remember about real property and inflation is that if inflation takes off in a big way, you want to be owning real assets instead of fiat. That's net positive to HMSO although the ensuing recession is good for no one.
If things turn bad, HMSO will be one of the taller midgets, and starting from a low base is helpful.
So, IMHO, although it's flavour of the day, it's not the biggest risk to HMSO - there are plenty more rakes on the garden path to avoid first!
By Liz Hamson Fri 19 March 2021
"The industry may not quite be full of the joys of spring yet, but it appears finally to have left the winter of discontent behind it.
Property Week’s latest sentiment survey, conducted a year on from the start of lockdown one and this extraordinary working from home experiment, reveals almost 80% of people are more upbeat about the future than they were three months ago. While the outlook is not universally sunny, there is renewed optimism even in the sectors hardest hit by the pandemic, including retail and hospitality.
There is still concern about the future of offices, which is hardly surprising considering the sector has experienced a full-blown existential crisis over the past year, but that concern is largely reserved for traditional offices. Most think flexible workspace will emerge from the pandemic relatively unscathed, a finding supported by new data from Kontor showing a 110% uplift in enquiries about flexible workspace since September.
The feeling is that while we will see more occupiers radically downsize their office requirements, others will simply switch from traditional to flexible workspace or expect more flexible terms on their traditional workspace.
Interestingly, Kontor does not see the hub-and-spoke model gaining as much traction as originally predicted. Me neither. While we may have changed the way we work forever, I think this will manifest itself as fewer days in the office, not a shift to suburban offices, unless by suburban offices you mean homes (and that’s the main reason the office is not dead – who wants to WFH five days a week?)
There is more evidence this week that the industry is finally taking its foot off the brakes. Southampton City Council has approved Sovereign Centros’s proposals for the £250m Leisure World scheme in Southampton and Hammerson has submitted an application to convert the Debenhams in Highcross, Leicester, into housing.
On the subject of Hammerson, it is great to hear how bullish its new chief executive Rita-Rose Gagné is about the future despite a miserable set of results. She also clearly possesses a sense of humour. How much of the estimated £250bn consumers are expected to spend when we emerge from this does she want Hammerson to grab? “All of it,” she quips. I like her style."
Just had a look in the Reddit forum - too much "HMSO go Brrrrr!", "Diamond hands" and people being stop lossed out to be much use. Or maybe I'm just old!
One of the 'investors' over there thinks that HMSO is a good buy because the NAV is 570p according to the 31/12/19 numbers.
Itrader - have you considered Reddit?
"The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. "
Matt Taibbi - Rolling Stone Magazine 2010.
Learn elsewhere.
Yup, I tend to agree.
The writer of that article's bio is "Tim Worstall is a wholesaler of rare earth metals and one of the global experts in the metal scandium."
He knows nothing about commercial property.
HMSO has suffered for years with the spectre of Amazon et al destroying their business model, it's why it has traded at a whopping discount to NAV for ages.
I think recently that a load of things have happened which means that this is a stock on the upward path.
Change of leadership - Chairman, CEO & CFO all changed or changing
Rights Issue - took away the fear of bankruptcy
Shorters - they depressed the share price way below what was sensible soon to be banished
Valuations - there has been a double hit with rents falling and a yield **** shift outwards (the presentation disaggregates the impact)
Hammerson's ownership structure of its various assets - a confused mess
The lockdown magnified all the negatives and as we come out of it the reverse will happen.
I work as an FD in the City for some very old money including several hundred million pounds of commercial property, mostly offices but some retail. What I hear from our professional advisers and see in our portfolio is that secondary and tertiary retail is on a hiding to nothing but shopping centres and destination retail will fare much better. There will be a move to turnover leases rather than the standard 5 year upwards only leases which will align tenants and lanlords interests thus making rent forecasting much less predicatable but should entice tenants to take space as it variablises a major cost. Whether we see the yield element of valuation come back in again is anyone's guess but I would have thought it wouldn't drop anymore, particularly if HMSO reposition their offer correctly.
Shopping (rather like our love of the hydrocarbon) hasn't died, it's just changed. If you offer a high quality experience with parking, leisure and F&B, people will still want to come as an activity, the real loses are the sub-regional high streets with no parking, traffic and a paucity of choice.
In terms of SP, I can see this pop to 50p on reopening (still a 35% discount to an artifically low NAV) with a gentle climb to 60p to 70p by year end as RRG sets out her plan, cuts the debt, restructures HMSO's ownerships and the NAV by 31 Dec 2021 will probably go back to c 110p where it was on 31 Dec 2019 with discount of 25% - 30%.
I groaned when I saw that there was to be some kind of online tax.
If the motive is to level the playing field, then why not just reform and reduce Business Rates?
"We've taxed and regulated the High Street so much that they can't stay in business and are being out competed by online merchants. What to do? Let's hobble the online competition and hit the consumer in the pocket once again."