Property Shares

[piccadilly]

British Land,Land Securities and Great Portland Estates share prices have fallen recently.

Does anybody think they will recover in the near future?

Thank you.

[brightncheerful]

The question is what would they be recovering from? The short answer is overpriced.

The sp of quoted pro cos tend to be linked to NAV and prospective NAV.

The Commercial property investment market overheated a while back and whilst auction sales continue to be strong, in my opinion and I daresay shared by others most property has gone ex-growth: the market driver currently is a decoupling between capital growth and yield compression. In other words, private investors (mostly) are chasing yield regardless of property fundamentals.

The quoted prop co sector however is the domain of professionals for whom the fundamentals are essential. The only reasons to pay more than NAV are demand/supply factors for the shares themselves and that the current NAV would be considered too low. Projecting NAV is risky at the best of times so I think quoted pro cos sps have fallen back not because they are now too cheap but because they were overpriced previously.

When you assess the sp it's important to consider the NAV and whether the quality of the assets in the company's portfolio justifies that NAV. Since NAV is a matter of informed opinion, one must also consider the nature of the valuation surveyors, some being more conservative than others.

As for rental income and dividends, most of the quoted prop cos are keen on development projects. Development consumes a lot of cash (and debt) before producing anything of its own. Development is also risky, despite anticipation, the demand might not be there when the scheme is completed.

Long-term I'd be thematic. Hammerson had the right idea a few years when it decided to concentrate on shop property.

[Backache]

The half year results came out today for Land. They are increasing the dividend and the NAV is approx £1400 per share so you're getting the property at quite a discount and a reasonable dividend yield plus fairly low debt level (c20%) Not the worst time to buy IMV.

[piccadilly]

Thank you for the comprehensive answers.

The reduced NAV of £14.49 makes the current price of LAND £10.02 look cheap? - but perhaps we should expect further declines in NAV with the uncertainty of BREXIT.

The brokers seem to have mixed views.

[brightncheerful]

Before the (recent) advent of REITS - I say 'recent' because REITS have been in existence since the 1890s - pro-co sps were usually at a discount to NAV, around 25-40% not uncommon. The discount reflected tax considerations and delay in liquidating the asset.

I wonder whether the 2016 freeze by property funds on redemptions is interpreted by the market as an omen that notwithstanding the valuation opinion for the NAV the liquidity of the asset is an issue.

Comprehensive NAV revaluation is not always annually, sometimes it's only a few properties in the portfolio that are valued. The date of the last revaluation of the entire portfolio might be a factor.

[piccadilly]

Anybody thinking of investing in Alpha Real Trust Limited?

At 100p still some upside?