Regional REIT 4.5% 2024

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  • Thx Paddy. I have not found anything yet to suggest the bond is not par for the course. So even though I find it amazing UK inflation stays low, will apply for a few
  • It seems fairly safe, at first sight.
  • Yes appears reasonable but it is noted that the ords of most REITS have moved downwards and some below issue price over the last few months.AEW Long Lease down some 13-14 pct and even Regional down 4-5 pct from issue. I know bonds are different to ords and should act differently but think this could limit the fairly immediate upside, if any, for capital growth on the bond. I might be tempted for a small amount to hold to maturity.
  • It may just be me, but 4.5% doesn't seem over generous. In their 2015 IPO prospectus the company just promised "sustainable dividends" and have paid just 7.65p (2016), 7.85p (2017) and have just increased the dividend for Q1 2018. With the current ordinary share price at just under 100 if I'm tempted at all I think I favour the equity rather than the bond.
  • Yes think you're right Geoff maybe 75% ords/25% bonds to give an underlined stability. The difference of income between the two is a fair gap though no guarantee at all on the ords if things get at all tricky.
  • Sussexmade, are these falls premiums turning to discounts or NAVs dropping
  • Hind it's a bit mixed of the two. Also sentiment seems to have changed a bit given the early entrants such as Tritax Big Box and Segro etc. were trailblazers and bought sites well there's a feeling the later/latest entrants have paid full value/overpaid. Market starting to feel a bit saturated with these issues. AEW suffering from high upfront and agents fees etc and drag of income timelapse ( though they are roughly on time with divis as forecast so far). The 'above forecast minimums' might not happen in the near future.
  • Last published NAV per share back in December, used in Citywire estimates, is 103 but that puts its discount at just under 10%. I bought some quite recently after the falls in the spring. Given my exposure to the shares already, I don't think that I will be putting in an order but would have done so otherwise.
    It's quite normal for trusts to drift downwards to a discount of around that level in the months / years after issue and given the current property climate it is probably quite reasonable. The share price fall should not necessarily be taken as a judgement of that trust in particular. There is a paragraph on RGL in the following article:
  • AJ Bell don't yet have this on their website as an IPO. Apparently admin are waiting for a bit more information and I should try Monday. Unbelievable! Their name is on the prospectus!
  • Bell seem to suffer from trying to be bigger than their boots , it often amazes me the online size they are unable to deal in , when speaking I have had the impression a number of staff really do not know the business they are in .
  • Only recently invested in the ords of RGT will stick with those at the yield on offer hopefully for the longer term , but go for a quick punt on the bonds .
  • A J Bell are now able to process applications.
  • Doesn't appear that reasonable to me with six years to maturity and 4.5% yield and interest rates supposedly on the up.

    OK, I know bonds are safer than the shares but with many REITS trading below NAV and having, as you say, recently come off highs and yields of:

    New River Retail - 7.88%
    Custodian - 5.70%

    I'm already fairly exposed to commercial property with the above plus others and a big chunk of Notes from the Co-Op so will be giving this one a miss.
  • Agree philips curve says inflation should be rising, but its not. If get a slow down post brexit then suspect boe be even less keen to raise rates. As for this bond value I tend compare with the risk free yield curve , in this case 5 year gilts 1.05% and so is the risk fair for 3.25%. Rather than comparing with these newer geared reit returns (seem higher gearing at 50% vs old school like blnd 4.7% divi) which in a down turn with voids have a reasonable chance of default and then the bond holders are the owners, so become equity holders at the lows.
  • It is good that we have a bond with a maturity of only 6 years - a rare event on the ORB market, and for an organisation with a net worth of a third of a billion pounds. The market price is unlikely to decrease greatly should inflation start to rise at some time in the future.
    I think it is safer to invest in the bonds than seeking higher yields on equity REITs, they may continue to trade below "net asset values". The coupon seems a reasonable rate for the 6 years. Therefore I have placed an order for a reasonable holding
  • Oliver commented a little earlier today and can be found herein under Analysis and comments and then Bond of The Week. Pretty bullish and declares he also holds the Ord Reits. Happy reading. Think i wll go for a few but not as much as i normally would.
  • I went for the equity and I may or may not go for the bond. No spare cash in my AJBell ISA so I would have to sell something else.
  • Oliver - thanks very much for another excellent appraisal. Have already put in an order for the bonds. Will now perhaps join those who have invested in the ords

  • Thank you for the analysis. Was interesting they originally tested the water at 4%. A figure that would not have got an application from me either.
  • Periodically I review my existing holdings, in particular those maturing 12 to 24 months.
    Yesterday sold a partial holding in Unite UTG1 @ 1.05665 which was only yielding 3.0%, and added another order to Regional REIT.
    Those who hold CLD Holdings 5.5% Ticker CLS1 should be receiving their money back in the few days (by 31st July?), thus further money may be available for investment.
    Hind, I agree that 4% coupon would not have tempted me, despite it only being for 6 years (good investment period) . As indicated before, stormy weather ahead, keeping my paddles (kayak) dry at the present moment for non new-bond purchases.
    Interestingly the LSE have not sent me an alert for this new bond, last email received was for the 16/3/18 Lendinvest, and time before that 30/11/17 BlueZest.
    I have re-registered to see if it makes any difference.
    Oliver, many thanks for your brilliant write-up, much appreciated by us all!
    May perhaps review the Ord shares should they go further into discount territory.
  • Gliderpilot: Interactive Investor were not listed on the prospectus. After checking with them for a few days in case they did have them I gave it up as a lost cause for my ISA. Today I discovered they were being offered. I wonder if their problem was similar to A J Bell’s. I now ponder if there apparently being no early closure indicates bad news for the post-closure price! Probably not.

    It appears you were ill-informed in your comment on May 25 in the thread “Belong Ltd” where you stated that Interactive Investor no longer handled bond issues. Which is very good news for me.

    Anyway, if anybody else is with Interactive Investor time is exceedingly short.
  • Roger I’m glad you’ve had a good result here. I made a formal complaint to interactive investor about this and they informed me they wouldn’t offer the bond issue because of uncertainty about when it would close. No they both said to you that going to get another complaint. I have bought through AJ Bell and even then I had to speak to the company direct to get AJ Bell to offer it as the staff at AJ Bell knew nothing at all about it .
  • I put an order in, I think that the reason the bond hasn't closed is the choice between the ords and the bonds.
  • Anyone know what happened to this issue?
  • The offer closed at 12 noon today and £50million were subscribed for. According to the original prospectus "The amount of the bonds to be issued..... will not exceed an aggregate principal amount of £105million" which presumably explains why the offer didn't close early and also suggests, perhaps, that there is unlikely to be any significant premium when dealings start.
  • If I remember rightly, the main purpose of the issue was to repay the ZDP's (c. £39 million) and replace them with this lower-cost capital so that's a success from the point of view of the shareholders (of which I am one).
  • Thanks geoffp and no great surprise but at least it got reasonable backing so maybe opening spread 100.75-102.00 ?
  • Issue trading this morning at 100.25 bid on WI terms.
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