Member Info for TheTrotsky

Monk, I think you are missing something (perhaps). The declared NAV as at 6 April was 101.25p (cum dividend) and the 9.2m new shares have been issued today at 103.28p. After the issue of the new shares, the revised NAV as of today (assuming no change in the previous NAV during the interim) would be 101.276p (cum dividend) i.e. existing shareholders would only (theoretically) be worse off if the increase in NAV during the interim plus the costs and expenses of the new share issue exceed c£187k. That said, unless they use part of the proceeds raised to proportionally increase the dividend pot that would otherwise have been paid out prior to the issue then shareholders will receive a slightly lower dividend per share than they would have done otherwise e.g. if they were originally planning to pay out (say) 3p per share then they'd have to add £276k to the dividend pot. Have existing shareholders lost out by receiving less dividends per share? In theory not; it's just a case that the NAV (ex dividend) would be slightly higher than it would otherwise have been.

I still think that we will receive a minimum of 3p per share (i.e. there's enough surplus income already in the distribiution pot to pay the enlarged shareholder roll at least 3p per share without having to add any of the proceeds raised to cover a shortfall - otherwise their declaration in February looks misplaced) but that any extra, over and above that amount, that might otherwise have been distributed to us prior to the new issue will now be reduced by between c0.04p (assuming 3p per share is now paid) and c0.05p per share (assuming 4p per share is now paid). Hardly earth shattering.

I think the c£187k certainly ought to be enough to cover the costs and expenses of the new issue but I'm none the wiser as to whether the NAV has risen or fallen in the interim. You'd like to think that the issue price was computed based on either today's or yesterday's NAV plus the expected costs and expenses (such that existing shareholders were no better or worse off after the issue) but that's probably a pipe dream (I suspect that at best the costs and expenses will have been factored in).

My original post should have said ex-div on 20 April (not payment).

I'm sure that the price will drop ex-div but I'd be surprised if it's by the full dividend amount. The dividend payout arguably should have little or no impact on NAV over time as we see the unwind of the discount to par value of the underlying bonds.

When the share went ex-div on Thurs, 20-Oct the price dropped from 96p to 95.6p (the close on Weds, 19-Oct compared to the close on Thurs, 20-Oct) and if you look at the price at the start of the week compared to the end of the week there was actually no movement at all (the price was 94.6p at the close on Fri, 14-Oct and at the close on Fri, 21-Oct). No change on the week plus a 1.75p dividend into the bargain but, if you'd bought on Thurs, 12-Oct when the dividend was declared, the price would have been up 0.2p (comparing the price at the close on Thurs, 13-Oct to the price at the close on Fri, 21-Oct)

On the other hand, when the share went ex-div on Thurs, 19-Jan the price dropped from 99.8p to 99p (the close on Weds, 18-Jan compared to the close on Thurs, 19-Jan) and if you look at the price at the start of the week compared to the end of the week there was 2p fall (the price was 100p at the close on Fri, 13-Jan and 98p at the close on Fri, 20-Jan). 2p down on the week against a 1.75p dividend but, if you'd bought on Thurs, 12-Jan when the dividend was declared, the price would only have been 1.2p down (comparing the price at the close on Thurs, 12-Jan to the price at the close on Fri, 20-Jan).

There's no hard and fast rule but, if the last two dividends are anything to go by, buying tomorrow, when the dividend is declared, should mean that you are up on the transaction when the share goes ex-div, all other things being equal.

MrMaths, there's something you're not telling us. You can't have a combined income well into six figures and not be paying more tax. Capital gains aren't generally income for tax purposes (in some limited circumstances some capital losses can be offset against income) and can be mitigated by both the annual capital gains tax allowance and brought forward tax losses (which does rather skew the analysis); so if you are including those in your combined incomes then you are misdirecting us. Likewise if you have personal and state pensions, and savings income, then it's highly probable that you'd be paying at least some income tax at 20%. Even if your only income (excluding capital gains) was dividends and you each received £50,270 you'd still be paying an effective rate of tax of c6.6% (£12,570 @ 0% + £37,700 @ 8.75% = c£3,300, which equates to c6.6% of £50,270).

And you thought you were OCD ;-) Don't get me started; I'll never stop ;-)

I'd take it with a pinch of salt. Like CC, it's quite likely that a few ISA allowances (or parts there of) have been invested since last Thursday and a share price rise wasn't therefore totally unexpected (even a breakout like today's). The same is true of the rest of the market too. It remains to be seen whether news is actually imminent (I've given up on this BoD keeping us updated in a reasonable timeframe) - we've been here before many times over the last 6 weeks or more - or whether this rise can be sustained without news. I hope you are right (and the the news is positive) but I'll only believe it when I see it; I'm not a LTH but this share seems to be able to turn anyone into a cynic in double quick time ;-)

MrMaths, You said that your (joint) income was "... well into into six figures ..." (your words not mine) which would suggest that your joint incomes were into higher rate tax, if not additional rate tax. Higher/additional rate tax payers, subject to (say) gift relief, can expect to pay 33.75%/39.35% on at least part of their dividend income. Also, since you are retired, you may potentially be paying tax on private pensions (especially if you are claiming state pensions) and (at least) basic rate tax on any savings income (after any savings allowances). Now there might be some disparity in the tax rates if you and your wife didn't have the same mix of income (even if the income was more or less equally shared). So, I say again, how do you arrive at 4.2%? Methinks you are either overstating your joint income or underestimating your effective tax rate.

By comparison, my wife and I pay a combined c£240 a year on our ISA accounts without any additional tax to pay on any of our ISA dividend income. Do the maths ;-)

Am expecting a dividend announcement either today or tomorrow pm for payment on 20 April. Based on the RNS issued on 24 February announing an increase in the minimum annual dividend, I am expecting a minimum dividend of 3p (making 8p in total for the year ended 31 March 2023).

"For 2022/23 our combined income is well into six figures and we pay only 4.2% tax on that income - all within the rules"

MrMaths I think your decimal point must be in the wrong place. If you hold a portfolio of dividend paying shares outside of ISA and SIPP wrappers, and aren't investing into venture capital schemes, then I can't see how you could possibly be paying only 4.2% tax "within the rules" (assuming you are including any tax deducted at source, not just any additional tax that you might have to pay).

Obviously your effective rate of tax will depend on your pensions, royalties, capital gains, interest and dividend etc. mix but, unless you have brought forward tax losses or are claiming income tax relief on venture capital investments, none of those sources of income (whether they arise within or outside the UK) are exempt from UK tax (assuming you are resident in the UK).

Please enlighten us as to how you are able to achieve an effective rate of tax of just 4.2%, within the rules.

I had first hand experience of hot desking and open plan offices and can definitely say that they were an absolute disaster; really affected my productivity. I'm not saying that there isn't a place for hot desking, particularly when staff are spending (say) 90% of their time out of the office but my job involved spending over 90% of my time in the office! Another one of my bugbears was a clear desk policy; we weren't even allowed to leave reference books on our desks overnight! A lot of these policies were being touted by HR people who had absolutely no experience of actually dealing with real clients (but used to love to tell us how to do our jobs all the same) or by partners who should have known better (they didn't apply clean desk policies to their own offices); I used to joke that that our HR department actually used to think it was a profit cerntre!

Having the appropriate amount of office space is important but too often people think that one size fits all; it doesn't. WFH has definitely added a new dynamic and, as a person who has now been WFH for over 10 years, I'm definitely a fan but I also think that it does have some serious potential drawbacks, not least from a training and learning perspective, and I think it's important for businesses to strike the right balance otherwise their future knowledge pools will be (severely) diminished. One shouldn't discount the knowledge gained from first hand experience e.g. those office discussions which provide you with that nugget of information that you didn't realise up to that point you were missing (that new angle that you didn't realise existed or had never considered; the bits the books or articles often miss out). Also, the knowledge networks built on chance office conversations with other colleagues.

Clearly if a person only comes into the office once a month then they don't need a dedicated desk; just a dedicated in-tray for any paper correspondence (even if it's scanned it does no harm to peruse the paperwork before it's sent to storage or the shredder) and a laptop to plug and go but reducing office space shouldn't always be the be all and end all. Open plan can often be a conversation killer (technical discussions can dry up) or the opposite (a free for all, often on non-work related topics). Quiet rooms and internal meeting rooms are a great idea in principle but often in practise one can become abused whilst the other can become under-utilised because you can't formalise spontaneity.

We're all different and IMHO the most productive workplaces tend to be the ones that try to, within reason, accommodate everybody's foibles rather than try to shoehorn them all into a one size fits all. Also, what might work well for one person in one type of job will not (and should not) be expected to work well for another person in another type of job e.g. what might work well for (say) a saleperson should not be expected to work well for (say) a bookkeeper.

Terry, The only quibble I would have with your statement is that buy backs are often accompanined by a reduction in the total dividends paid by a company e.g. say a company had 1m shares in issue and was paying £100k dividends buys back 100k shares (10%) and then proceeds to pay £90k (10% less). In this instance, the buy backs are effectively being used to increase the EPS and reduce costly "debt" with a view to getting a corresponing increase in the share price (usually to the benefit of the directors bonuses). However, AV have stated that, subject to the normal caveats, they will be increasing the dividend pool for the forthcoming year (c£915m as compared to c£870m for FY22) and that this dividend pool will be paid out regardless of how many shares are in issue.

QED the more shares AV buys back the more dividends per share you'll receive. So, despite whether or not the buys backs are directly benefiting the market value of your AV shares (on paper they should but that doesn't always appear to be the case; unfortunately nobody knows how the share price might have performed without the buy backs or, indeed, whether the £300m had instead been used to pay a special dividend) you will directly benefit from greater dividend income going forward.

Let's be honest, in the current market you are damned if you do and damned if you don't. Everybody likes a bit more cash but despite the shares already trading on a prospective dividend yield of c7.86% (based on the 2,789m shares currently in issue and a current prospective dividend per share of 32.81p) there has been, at least until yesterday, a stubborn resistance to an uptick in the share price.

Candid, Firstly, RGL already has sufficient unrestricted cash at 31 March 2023 (c£40m, after allowing for service charges) and undrawn credit facilities (c£5m) to pay c50-65% (after allowing for working capital requirements) of the £50m that's coming up for renewal at the end of August 2024. Secondly, RGL completed a number of property transactions in 2022 and, as the new acquisitions continue to be bedded in, it's likely that both occupancy levels and letting income will marginally improve in 2023. There is already some LFL rental income lag from new agreements struck in H2 last year and, without the inevitable distraction caused by large acquisitions and disposals, RGL should be able to concentrate on raising occupancy levels from the mid-80s to the high-80s. Finally, although LTV is higher than desirable, even a further (say) 20% fall in NAV should mean that LTV is still below 60% and within most, if not all, of their existing covenants (and, if NAV was to fall another 20%, I would suspect that NAV would then be approaching replacement cost, which should put a floor on further declines).

Personally, I think all of the above issues are manageable without a firesale, but there is one risk that is completely outside management's ability to control. In the 2008 banking crisis ALL of the large UK banks were very short of liquidity despite the BofE intervention and so, coupled with new solvency regulations that meant that commercial loans were virtually the worst form of debt that banks could hold, in desperation the banks chose to unilaterally rewrite their banking covenants (they increased both the interest cover and LTV requirements). The situation was extreme and it wasn't an action that the banks took lightly; many commercial landlords became forced sellers despite, in some cases, their net rental income exceeding the new interest cover requirements and it did irreparable harm to many of the banks' longstanding business relationships (which has impaired their ability to generate business since). The recent problems at SVB and Credit Suisse have, in some people's minds, raised the spectre of another 2008 banking crisis. IMHO the problems now are not remotely comparable to 2008 and the UK banks are much better capitalised, and have far greater liquidity than they did in 2008 BUT if people panic and there is a general loss of confidence in the UK banks then anything is possible.

Still a lot of sales early doors. I think I'm going to hold off to see whether this goes any lower today (perhaps early next week) before adding a few more.

Just a thought, another reason why more people might have been selling is to crystallise tax losses in their trading accounts before the change in the annual capital gains tax-free allowance which comes into affect from today (dropped from £12,300 per annum to £6,000 per annum from today and due to reduce to £3,000 per annum from 6 April next year).

If not tomorrow, then likely Tues/Weds next week if past TU are anything to go by

Bit bizarre really. I used to hold DEC in my ii ISA until I "saw the light" and "bed and SIPP'd" (why pay 15% withholding tax when you can pay 0%); effectively transferring all of the DEC shares held in my ii ISA into my AJ Bell SIPP (I sold MNG in my SIPP to buy DEC and vice versa in my ISA).

However, ii used to automatically convert my USD dividends into GBP (because you can't hold foreign currencies in an ISA). It therefore seems rather daft that ii can't/won't automatically convert USD dividends received in a SIPP or trading account on request! Furthermore, AJ Bell have "elected" (on its clients' behalf) to receive DEC dividends in GBP (the dividends are always paid at DEC's notified dividend rate) whereas ii did not make an election and the dividends were instead converted from USD to GBP at the rate applying on the date of receipt (sometimes it worked in my favour, sometimes not).

Gazzleberry, Are you talking as an investor or an employee?

With the continued movement away from active to passive (tracker) funds and the corresponding reduction in fees, wealth management has increasingly become a numbers game (AUM and economies of scale). Smaller size funds are increasingly finding it hard to compete with the market titans e.g. Vanguard and are cosolidating to survive (which inevitably leads to fewer jobs). We reap what we sow. Active fund managers, such as Neil Woodford, going "off piste" to try and boost returns, have done the industry no favours.

Where are the new Anthony Boltons? Indeed, where are the younger Neil Woodfords? Woodford did originally have a good reputation as a value investor but, like a lot of us value investors, he never really adapted to the new world order. Personally I continue to think, like Woodford once used to, that the mind boggling valuations of a lot of these overhyped, high growth, pertpetually loss making companies are, inevitably, going to come crashing down when people eventually realise that they can only hope to make the returns that their share prices imply if they are allowed to operate in a monopoly or cartel i.e. the money they are putting in one pocket, they are nicking out of the other ;-)

bb143 commiserations. I'm afraid it's just yet another sign of the times. We decry the demise of bricks and mortar shops as we quite happily order goods online. Unfortunately the rise of the passive tracker fund and the corresponding reduction in investment fees was only ever going to have one outcome further down the road (consolidation and job losses).

This may be par for the course for long term holders but, as a newbie, I have to say that the lack of any news, one way or the other, has now become farcical.

If they were having problems, one would have thought that they would have had to say something before now (because of the potential impact on the share price); saying nothing and by implication allowing the share price to slowly decline is not informing the market (as they are obliged to do). One is therefore left to believe that the lack of news implies that things are progressing albeit slowly but the continued void is disquieting (and costly).

In the continued absence of any news, the share price appears to be heading south of 5.5p today/tomorrow ;-(

Both my gut and logic tell me that this price fall is overdone and yet there is still that small, inevitable, nagging doubt (that same nagging doubt that can start to become self-fufilling if everbody simply follows the consensus, right or wrong).

I do wonder whether tomorrow, with the quarterly dividend payment and the start of the new ISA tax year, we might start to see an uptick. All property REITs appear to be suffering to a greater or lesser extent at the moment and I do wonder whether some potential investors at these levels, like myself, have already used up their ISA limit for the current tax year (which isn't giving the share price the support it might otherwise have garnered over the last few weeks or months). Just a thought.

There do appear to be some "real" sellers (rather than simply bot trades) and I for one would be interested to hear from anybody who has sold recently and their reasons for doing so. All of the concerns have been fairly well articulated (LTV, potential dividend reduction etc.) but it would be interesting to know whether the sellers have been driven by fear that those concerns may prove to be well founded (agree or disagree, caution and/or a rigorous investment approach should never be discounted) or whether they have more specific evidence (beyond simply reacting to the the trend or not wanting to buck the market).

Citywire could have also added that the replacement cost of buildings in the regions as a percentage of market value tends to be a lot higher than in London e.g. in Wales the replacement cost of buildings is often actually higher than market value (and the "gap" has to be bridged by grants from the Welsh Government). Bottom line, given the decline in NAV that we've already seen, the market value of RGL's portfolio is probably a lot closer to replacement cost (i.e. the cost of acquiring land and building a new office) than it would otherwise be in (say) London and there is limited scope for the market value to fall further before it meets the replacement cost support (it can go negative but, apart from areas like Wales, Northern Ireland and certain "remoter" parts of England & Scotland, that rarely lasts long).

Also, I think Citywire overdoes the "weakness in the bottom line"; it overlooks the quality of RGL's larger tenants, RGL's WAULT, and where the bulk of the portfolio is located. That doesn't mean there can't or won't be bumps in the road (the leases on 14.5% of the portfolio are up for renewal in the next 12 months) but IMHO it's far too early to assume that most tenants won't renew and/or will renew on less favourable terms.

Will some tenants want to downsize (like Guitarsolo has suggested)? Perhaps, but I don't think anybody really knows what the full impact of WFH is just yet (the dust still hasn't really settled and businesses still have to determine whether happier staff translates into higher productivity - at best the jury is still out on that one) and, as a result, I don't think businesses will want to commit to downsizing office space on long term tenancies just yet, until they know for certain that WFH is going to be financially beneficial for them in the longer term. I would suggest that, for example, WFH does not really appear to work well for call centres - it's contributed to longer delays in calls being answered, slower processing times due to connectivity issues, additional IT costs and, perhaps most importantly of all, greater risks to data security and exposure to cyber attack (by creating more potential "points of entry" into a firm's IT systems).

For larger tenants, when talking about downsizing, we're generally not talking about just one room or two but, potentially, whole floors and, if they downsize too much, it can mean that they've locked themselves into a building that might prove, in the fullness of time, to being too small for their purpose and, in turn, forcing them to move to a new, larger building with all the additional costs and inconvenience that might involve. Generally, it's (comparatively) easier to sublet excess space than to add extra space within the same building at a later date; they might sublet at a loss until they can exit/amend the tenancy agreement but that cost would likely be a drop in the ocean compared to the cost of being forced to break a lease or move to a new, larger building.

Guitarsolo, I just disagree with some of your assessment. Is EPS under pressure? Yes, it's fallen compared to pre-Covid, but part of that is due to interest costs having risen (pre-Covid RGL would have been paying interest below it's hedge cap) and also recent investments which have increased the number of shares in issue and are yet to reach their full potential rental yield (fiscal drag). EPS has remained constant at 6.6pps and there is actually a realistic prossibility that it could increase in FY23 (interest costs can't get any worse and properties brought on board in FY22 should now deliver a full year's income in FY23). So, from a REIT perspective, I don't see there being much risk of the dividends being reduced in FY23 or FY24 unless they decide to pay out 90% rather than 100% (an impact yes, but hardly a tsunami).

As regards occupancy, when you are churning properties it's difficult to maximise occupancy. Assuming that they don't acquire any new property portfolios in FY23, then I see an opportunity to improve the occupancy rates of their existing portfolio. Obviously the economic backdrop isn't good but, given that all of their key tenants remain tied in throughout FY23, it then becomes a question of revolving doors and whether new tenants coming in exceed old tenants going out. Smaller tenants may want less space (because of WFH) and there may be some pressure on pricing but there is a floor to both.

Bottom line. I think there is a lot of doom mongering at the moment based on worst case scenarios and RGL's share price is suffering as a result. Ideally RGL's LTV could be lower but I doubt that NAV could fall much further before its starts reaching replacement cost (even if NAV fell another 20% in the short term, LTV would still be below 60%), which should provide a floor. Obviously falls in NAV could ultimately feed through to lower rental income but, in the short term, I think RGL's share price, like a lot of REITs, is being determined by expectations (founded or otherwise) of further falls in NAV, rather than any immediate decline in earnings/dividends (don't forget that one year dividend lag underpinned by REIT rules).

There is nothing to suggest that this is 2008 all over again.

It has always been the case that periodically banks collapse due to specific reasons that pertain to them, or their sector, alone (think, Savings & Loans, Barings etc.). SVB was, in my view, just such a bank. It was holding inapproriate, unhedged, assets for sale (it doesn't seem to be a coincidence that they started to invest in these products just around the time they lost their Head of Risk). SVB not only misread its market niche and its need for short/medium term cash but had invested its liquidity into unhedged long-term, rather than short-term, investments.

As for Credit Suisse, don't get me started! When a bank announces (which pre-dated SVB's collapse, and totally unrelated, by just a few days) that its financial accounts cannot be relied upon then it really doesn't take much to tip it over the edge. Credit Suisse had been a walking disaster since before 2008; it seemed to sleep walk from one fiasco to another. The jitters that followed SVB's collapse meant that the "market" was looking for the next likely candidate to collapse (like Signature; it's niche was cryptocurrency, which has its own problems) and it was inevitable that Credit Suisse would be in the cross-hairs (personally, given the announcement it made to the market about its accounts, it's quite feasible that Credit Suisse would have collapsed even without SVB - banks rely on confidence and Credit Suisse's costs of doing business, insurance etc. were going through the roof in the days following the announcement and other banks were already reducing their exposure).

Most of the large banks, certainly here in the UK (and also in the US) are currently awash with cash; liquidity is good.

Understandably markets remain jittery but there's no sign of further contagion in the banking sector and, if there are some problems, the Fed, BofE et al are dealing with them behind closed doors (a collapse of the banking sector does nobody any favours and short/medium term liquidity issues are addressable if identied in time - that's one of the main purposes of central banks).

I do think however that there is more to the SVB collapse than meets the eye. It strikes me that SVB would, even at the 11th hour, surely have realised that they had a major problem and, given the size of the capital shortfall if they sold their for sale assets, would have first approached the Fed before determining on selling its for sale assets and trying to raise additional capital. If that is the case, then it would seem that the Fed was asleep at the wheel and has a number of awkward questions to answer. On the face of it, SVB wasn't too large to fail (so the Fed might normally have been happy to feed it to the wolves) but that over simplistic assessment would appear to have underappreciated SVB's niche client base. There would appear to be a number of lessons to be learnt from SVB's collapse.