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IDP's HYP as of 22 Sep 21.

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idpickering
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Re: IDP's HYP as of 22 Sep 21.

#445022

Postby idpickering » September 24th, 2021, 1:05 pm

idpickering wrote:
MDW1954 wrote:Briefly jumping in, here. Dividend cut? There's the small matter of a global pandemic to consider. Q2 of 2020 saw lots of decisions made from an abundance of caution. I may be wrong here, but didn't even BBOX shave a sliver off the dividend? And that's a £4bn company renting to the likes of Amazon -- who, you may recall, had quite a good pandemic.

The premium is more problematic. I like buying REITs on a discount -- see the list in the post above, for instance. From a diversification and resilience perspective, I have no issues with Ian's purchase. Could he a chosen a better entry point? Arguably yes. But I doubt he'll regret his decision.

MDW1954


Thanks for your informed and considered post Malcomm.

Tbh, I’m of a mind to have another look at the list of shares you’ve kindly put up, again. I appreciate your input. Ok, my timing re my LXI buys might be out, but as you say, I don’t regret them.

Ian.


Sorry about misspelling ur name Malcolm. I seemed to have developed a stutter in my index finger. Correct the error if you so wish?

Ian.

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Re: IDP's HYP as of 22 Sep 21.

#445041

Postby MDW1954 » September 24th, 2021, 1:56 pm

idpickering wrote:Tbh, I’m of a mind to have another look at the list of shares you’ve kindly put up, again. I appreciate your input. Ok, my timing re my LXI buys might be out, but as you say, I don’t regret them.

Ian.


Ian,

Don't just look at that list -- some of them are very, very small; they were simply chosen as REITs that I (mostly) own that are on a discount, as opposed to even a tiny premium.

Look also at the longer lists that I've sometimes posted, over the years. I think that I most recently posted a list like that in the recent JohnyCyclops thread?

Malcolm

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Re: IDP's HYP as of 22 Sep 21.

#445045

Postby idpickering » September 24th, 2021, 2:06 pm

MDW1954 wrote:
idpickering wrote:Tbh, I’m of a mind to have another look at the list of shares you’ve kindly put up, again. I appreciate your input. Ok, my timing re my LXI buys might be out, but as you say, I don’t regret them.

Ian.


Ian,

Don't just look at that list -- some of them are very, very small; they were simply chosen as REITs that I (mostly) own that are on a discount, as opposed to even a tiny premium.

Look also at the longer lists that I've sometimes posted, over the years. I think that I most recently posted a list like that in the recent JohnyCyclops thread?

Malcolm


I hear you Malcolm. I recall you having done so. Thanks for your continued input on this matter.

Ian.

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Re: IDP's HYP as of 22 Sep 21.

#445099

Postby Alaric » September 24th, 2021, 5:01 pm

idpickering wrote: Ok, my timing re my LXI buys might be out, but as you say, I don’t regret them.


For what it's worth LXI have a track record of regular Open Offers. That seems not uncommon among infrastructure companies. Opinions may differ on whether this has an adverse effect on those not able or willing to take up the offers.

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Re: IDP's HYP as of 22 Sep 21.

#445157

Postby JohnnyCyclops » September 24th, 2021, 9:48 pm

I looked at LXI a few days ago following MDW's post about REITs to me. I randomly picked LXI from a list of 20+REITs on the LSE with market capital >£1bn. I too spotted the dividend 'trim' for Covid but also the short history to go on, only since 2017.

Foolishly I read through some early (2017!) RNS when they were on a spending spree initally. They do seem to churn their properties. There was also a curious note in the financial reports that the board was subcontracting trust management to another LXI company. That company took over £4m in fees in 2019 (last year available on Companies House), but only had miniscule costs from (presumably) running the trust. The bulk as a £3m+ dividend was passed on up the line to another company sitting above them both. That's ~15% of the dividend the Plc shareholders received. Yet it's the shareholders, not the management company, taking the risk.

I mention all this because often with equity investment the firm being invested in is at the "top of the tree". There is no parent company sitting above. Think Vodafone or Tesco. With REITs (and it's possibly true of the pair we hold SGRO/BLND) it's a bit more unclear and in this case the nested management structure seems to be soaking ~15% of the profits with none of the risk. Now, that might be common for REITs for all I know and I'm unfairly singling out LXI. It just seemed a bit rich, and slightly whiffs of the 'wise' for my liking.

If I was a shareholder I might be asking question of the Plc board over whether they get value from the advisor? Or, for the £800k advisor COST each year, could the Plc board do better and save paying out £4.3m?

Sometimes, even with HYP, it's perhaps worth taking a 20 minute look at a company before deciding to invest.

DETAILS
The listed REIT you can invest in is LXI REIT Plc. https://find-and-update.company-informa ... y/10535081

The Annual Report to March 2021 talks about the "Investment Advisor" and makes it sound like some arm's length or specialist expert, whereas it's actually LXI REIT Advisors Ltd. Why split into two firms? Why not just run the Plc with the same people who staff the 'advisor'? https://find-and-update.company-informa ... y/10537567

The Investment Advisor's fee isn't based on effort. Rather, on the Plc market cap. So, the more people invest the more the advisors make.

From Plc 2021 annual results:
The investment advisory fee is calculated in arrears in respect of each month, in each case based upon the average market capitalisation of the Company on the following basis:

(a) One-twelfth of 0.75% per calendar month of market capitalisation up to or equal to £500 million; and

(b) One-twelfth of 0.65% per calendar month of market capitalisation above £500 million.


In turn, LXI REIT Advisors Ltd last published accounts for 2019 showed turnover £4.3m (fees from the Plc), and costs of only £0.8m leaving net profit after tax of £2.7m (net margin of 63% - nice work if you can get it!). A dividend of £3.3m was paid out, presumably to Alvarium Re Ltd that has a controlling interest in LXI REIT Advisors Ltd and shares many of the same directors. That dividend is around 15% of the dividend shareholders in the Plc received.

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Re: IDP's HYP as of 22 Sep 21.

#445163

Postby MDW1954 » September 24th, 2021, 10:50 pm

Johnny,

The situation that you're describing is fairly common. Many of these REITs use "advisers" who are firms of asset management/ investment management specialists. You'll see that at Tritax Big Box, for instance, where the firm is Tritax. (At Greencoat UK Wind, to choose another example, the adviser is Greencoat Capital.) The REIT itself is tiny, and LXi will probably have just five "employees" -- the board of directors. It is the "advisers" who actually do all the work.

What is different about LXi is that the larger firm of asset management/ investment management specialists has actually carved out those of its people who work on LXi into a separate group, called LXi Advisers. Greencoat and Tritax don't do this -- they say that the investment adviser is Greencoat and Tritax, respectively. Why it happens at LXi, I have no idea.

As you say, the firm of asset management/ investment management specialists in LXi's case is Alvarium Fund Managers (UK) Limited. As Google shows, many of the senior people in LXi Advisers are actually partners or associate partners in Alvarium.

Your broader point, regarding the justification of LXi Advisers' fee, is well made. It is up to us as investors to decide if we are happy with both its size and its methodology. The size of LXi's premium -- 10% -- indicates that many investors are. I am happy to be one of them.

MDW1954

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Re: IDP's HYP as of 22 Sep 21.

#445181

Postby Arborbridge » September 25th, 2021, 8:12 am

JohnnyCyclops wrote:I looked at LXI a few days ago following MDW's post about REITs to me. I randomly picked LXI from a list of 20+REITs on the LSE with market capital >£1bn. I too spotted the dividend 'trim' for Covid but also the short history to go on, only since 2017.

Foolishly I read through some early (2017!) RNS when they were on a spending spree initally. They do seem to churn their properties. There was also a curious note in the financial reports that the board was subcontracting trust management to another LXI company. That company took over £4m in fees in 2019 (last year available on Companies House), but only had miniscule costs from (presumably) running the trust. The bulk as a £3m+ dividend was passed on up the line to another company sitting above them both. That's ~15% of the dividend the Plc shareholders received. Yet it's the shareholders, not the management company, taking the risk.

I mention all this because often with equity investment the firm being invested in is at the "top of the tree". There is no parent company sitting above. Think Vodafone or Tesco. With REITs (and it's possibly true of the pair we hold SGRO/BLND) it's a bit more unclear and in this case the nested management structure seems to be soaking ~15% of the profits with none of the risk. Now, that might be common for REITs for all I know and I'm unfairly singling out LXI. It just seemed a bit rich, and slightly whiffs of the 'wise' for my liking.

If I was a shareholder I might be asking question of the Plc board over whether they get value from the advisor? Or, for the £800k advisor COST each year, could the Plc board do better and save paying out £4.3m?

Sometimes, even with HYP, it's perhaps worth taking a 20 minute look at a company before deciding to invest.

DETAILS
The listed REIT you can invest in is LXI REIT Plc. https://find-and-update.company-informa ... y/10535081

The Annual Report to March 2021 talks about the "Investment Advisor" and makes it sound like some arm's length or specialist expert, whereas it's actually LXI REIT Advisors Ltd. Why split into two firms? Why not just run the Plc with the same people who staff the 'advisor'? https://find-and-update.company-informa ... y/10537567

The Investment Advisor's fee isn't based on effort. Rather, on the Plc market cap. So, the more people invest the more the advisors make.

From Plc 2021 annual results:
The investment advisory fee is calculated in arrears in respect of each month, in each case based upon the average market capitalisation of the Company on the following basis:

(a) One-twelfth of 0.75% per calendar month of market capitalisation up to or equal to £500 million; and

(b) One-twelfth of 0.65% per calendar month of market capitalisation above £500 million.


In turn, LXI REIT Advisors Ltd last published accounts for 2019 showed turnover £4.3m (fees from the Plc), and costs of only £0.8m leaving net profit after tax of £2.7m (net margin of 63% - nice work if you can get it!). A dividend of £3.3m was paid out, presumably to Alvarium Re Ltd that has a controlling interest in LXI REIT Advisors Ltd and shares many of the same directors. That dividend is around 15% of the dividend shareholders in the Plc received.


And we buy shares directly in companies because we hold the belief that OEICS and ITs are expensively run by "managers" who demand expensive fees! Mein Gott!!
In either case, it is naturally the end performance which counts, but what you describe is more obscurantist than even normal funds: I find that shocking. Perhaps we should be careful about investing in ordinary shares to avoid "The Wise" as they will always find a way of dipping their hands in your pocket while hoping you haven't noticed. They are white collar pickpockets.

Arb.

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Re: IDP's HYP as of 22 Sep 21.

#445196

Postby JohnnyCyclops » September 25th, 2021, 9:20 am

Arborbridge wrote:And we buy shares directly in companies because we hold the belief that OEICS and ITs are expensively run by "managers" who demand expensive fees! Mein Gott!!
In either case, it is naturally the end performance which counts, but what you describe is more obscurantist than even normal funds: I find that shocking. Perhaps we should be careful about investing in ordinary shares to avoid "The Wise" as they will always find a way of dipping their hands in your pocket while hoping you haven't noticed. They are white collar pickpockets.

Arb.


I think it's that a REIT is still just an investment trust, a collective, with managers who need paying. HYPsters should be aware of that.

HYP is supposed to be simple, for "Doris". Direct investment in a small bunch of known big firms, which if they stumble then the shareholders (or board, as proxy) will replace the management to 'do better'. Better to trust the long-cycle corporate process than trust ourselves to be able to pick 'winning' management teams. Those processes can include mergers and aquisitions.

I have no problem having REITs in our HYP. Though I might want to go and poke at Segro and British Land a little now :-)

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Re: IDP's HYP as of 22 Sep 21.

#445198

Postby JohnnyCyclops » September 25th, 2021, 9:31 am

MDW1954 wrote:Johnny,

The situation that you're describing is fairly common. Many of these REITs use "advisers" who are firms of asset management/ investment management specialists. You'll see that at Tritax Big Box, for instance, where the firm is Tritax. (At Greencoat UK Wind, to choose another example, the adviser is Greencoat Capital.) The REIT itself is tiny, and LXi will probably have just five "employees" -- the board of directors. It is the "advisers" who actually do all the work.

What is different about LXi is that the larger firm of asset management/ investment management specialists has actually carved out those of its people who work on LXi into a separate group, called LXi Advisers. Greencoat and Tritax don't do this -- they say that the investment adviser is Greencoat and Tritax, respectively. Why it happens at LXi, I have no idea.

As you say, the firm of asset management/ investment management specialists in LXi's case is Alvarium Fund Managers (UK) Limited. As Google shows, many of the senior people in LXi Advisers are actually partners or associate partners in Alvarium.

Your broader point, regarding the justification of LXi Advisers' fee, is well made. It is up to us as investors to decide if we are happy with both its size and its methodology. The size of LXi's premium -- 10% -- indicates that many investors are. I am happy to be one of them.

MDW1954


Hi Malcolm. All true, and thank you for the pointers on other REITs. I wasn't surprised by LXI (other than perhaps how the 'parent' earns its share). I get that it's how the world works. I suppose buried in Tesco's account will be fees to advisers, etc. for services, but typically I'd expect that to be with unrelated third parties. With Tesco the buck should stop with the CEO and Chair. There are no 'higher' bodies, other than the shareholders. Back to HYP, and a "keep it simple" approach, I guess it's whether REITs fit the bill.

On LXI itself, I actually rather liked their approach around the properties they'll invest in. Reminds me of a global property management firm I did some work with years ago. Their offices were plastered with big photos of properties, and under each was shown the value and the yield. It was all about the "deal". I see that with LXI. They do seem to have sold on a few properties already in their four year lifespan (despite them being on 20yr+ leases to tenants), so I'd want to know a bit more about churn and cost, but overall the numbers look very healthly. I do sense they'll call for more capital from time to time. With such a high level of distribution, they won't seemingly be able to retain surpluses to buy the next properties, so any growth needs to come from new funds, which dilutes existing shareholders, etc. It's possibly they 'plateau' and go 'ex-growth' either because they've acquired 'all' the available/suitable property, or they can't attract further new investment.

I'll still give LXI and REITs a pass for now in the HYP (sector balance, what ho!) but it's possible (off topic) we look at REITs and ITs for other purposes.

Thank you for alerting me to the new cluster of REITs.

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Re: IDP's HYP as of 22 Sep 21.

#445200

Postby Dod101 » September 25th, 2021, 9:39 am

JC has made the point I was going to make. REITs have become the latest fad at least for some. Like all investments, beware! At least PHP for instance has rather belatedly brought its management in house, and those REITs (like LXI apparently) who keep raising funds are as usual diluting existing shareholders unless they keep subscribing. Furthermore it is a good idea to take a look at the track record and where they are actually investing.

IDP is in danger of becoming a stamp collector again if he is not careful, IMHO only of course.

Dod

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Re: IDP's HYP as of 22 Sep 21.

#445206

Postby idpickering » September 25th, 2021, 9:59 am

Dod101 wrote:JC has made the point I was going to make. REITs have become the latest fad at least for some. Like all investments, beware! At least PHP for instance has rather belatedly brought its management in house, and those REITs (like LXI apparently) who keep raising funds are as usual diluting existing shareholders unless they keep subscribing. Furthermore it is a good idea to take a look at the track record and where they are actually investing.

IDP is in danger of becoming a stamp collector again if he is not careful, IMHO only of course.

Dod


I hear you Dod, but I do think you’re being a bit harsh maybe? Although I acknowledge your words of caution thank you. I have no desire to ‘stamp collect’. Just buying what I think are nice fits for my HYP. I will listen to the advice of others, but the investing decision is mine alone.

Ian.

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Re: IDP's HYP as of 22 Sep 21.

#445208

Postby Dod101 » September 25th, 2021, 10:05 am

idpickering wrote:
Dod101 wrote:JC has made the point I was going to make. REITs have become the latest fad at least for some. Like all investments, beware! At least PHP for instance has rather belatedly brought its management in house, and those REITs (like LXI apparently) who keep raising funds are as usual diluting existing shareholders unless they keep subscribing. Furthermore it is a good idea to take a look at the track record and where they are actually investing.

IDP is in danger of becoming a stamp collector again if he is not careful, IMHO only of course.

Dod


I hear you Dod, but I do think you’re being a bit harsh maybe? I have no desire to ‘stamp collect’. Just buying what I think are nice fits for my HYP. I will listen to the advice of others, but the investing decision is mine alone.

Ian.


It is of course entirely up to you and best to ignore my comments and decide for yourself, as I know that you do anyway.

Dod

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Re: IDP's HYP as of 22 Sep 21.

#445270

Postby idpickering » September 25th, 2021, 2:29 pm

Dod101 wrote:
It is of course entirely up to you and best to ignore my comments and decide for yourself, as I know that you do anyway.

Dod


Don't put yourself down sir. I value what you say, and I have learnt a lot from you over the years. I've no doubt other HYPers have too.

Respectfully,

Ian.

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Re: IDP's HYP as of 22 Sep 21.

#445277

Postby MDW1954 » September 25th, 2021, 2:53 pm

Dod101 wrote:At least PHP for instance has rather belatedly brought its management in house....

Dod


I think this point is central. As investors, we have to decide if we feel happier with in-house management, or external management. I like the lean stance of many of these newer REITs, who are tiny (effectively just a board of directors), and who buy in the expertise that they need, as they need it.

Look at Greencoat, Tritax, Foresight and most of these groups (Gresham House would be another one), and you see considerable domain expertise. Tritax spotted an opportunity, and made it available to investors. As an ordinary investor, I'd have no chance of owning 'big box' assets without Tritax's involvement -- now, I own both BBOX and EBOX, its European equivalent, and I'm glad of the chance to. I've enjoyed a considerable capital uplift, and earn a decent income. What's not to like?

What LXi and these others do is no different from what Aberdeen Standard's clutch of REITs do, and have done for years.

MDW1954

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Re: IDP's HYP as of 22 Sep 21.

#445287

Postby Dod101 » September 25th, 2021, 3:53 pm

MDW1954 wrote:
Dod101 wrote:At least PHP for instance has rather belatedly brought its management in house....

Dod


I think this point is central. As investors, we have to decide if we feel happier with in-house management, or external management. I like the lean stance of many of these newer REITs, who are tiny (effectively just a board of directors), and who buy in the expertise that they need, as they need it.

Look at Greencoat, Tritax, Foresight and most of these groups (Gresham House would be another one), and you see considerable domain expertise. Tritax spotted an opportunity, and made it available to investors. As an ordinary investor, I'd have no chance of owning 'big box' assets without Tritax's involvement -- now, I own both BBOX and EBOX, its European equivalent, and I'm glad of the chance to. I've enjoyed a considerable capital uplift, and earn a decent income. What's not to like?

What LXi and these others do is no different from what Aberdeen Standard's clutch of REITs do, and have done for years.

MDW1954


I am not really knocking it Malcolm because for a smaller REIT it is probably best to pay a manager to work on the portfolio, alongside other work and so keeping costs down. As the REIT grows such as happened with PHP they can buy out the manager and thus save the management company's profit.

Segro is my great investment in that area

Dod

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Re: IDP's HYP as of 22 Sep 21.

#445504

Postby Arborbridge » September 27th, 2021, 7:23 am

JohnnyCyclops wrote:HYP is supposed to be simple, for "Doris". Direct investment in a small bunch of known big firms, which if they stumble then the shareholders (or board, as proxy) will replace the management to 'do better'. Better to trust the long-cycle corporate process than trust ourselves to be able to pick 'winning' management teams. Those processes can include mergers and aquisitions.



A timely reminder, JC. Although I've indulged occasionally in what in HYP terms used to be viewed as "smaller companies" in my HYP (CSN and GNK, for example) in generally, I prefer to stick to the knitting and not have too many. Buy big companies, best in class with as much diversity as necessary and hold for as long as possible. Simple really - but I do sometimes get tempted away from the central tenets, being only human. However, to follow Luni's dictums, I try not to go stamp collecting or to do something for the sake of doing something. I have set of self imposed managing guidelines and try to go along with then as much as possible.

Easier said than done!


Arb.

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Re: IDP's HYP as of 22 Sep 21.

#445510

Postby idpickering » September 27th, 2021, 7:58 am

Arborbridge wrote:
JohnnyCyclops wrote:HYP is supposed to be simple, for "Doris". Direct investment in a small bunch of known big firms, which if they stumble then the shareholders (or board, as proxy) will replace the management to 'do better'. Better to trust the long-cycle corporate process than trust ourselves to be able to pick 'winning' management teams. Those processes can include mergers and aquisitions.



A timely reminder, JC. Although I've indulged occasionally in what in HYP terms used to be viewed as "smaller companies" in my HYP (CSN and GNK, for example) in generally, I prefer to stick to the knitting and not have too many. Buy big companies, best in class with as much diversity as necessary and hold for as long as possible. Simple really - but I do sometimes get tempted away from the central tenets, being only human. However, to follow Luni's dictums, I try not to go stamp collecting or to do something for the sake of doing something. I have set of self imposed managing guidelines and try to go along with then as much as possible.

Easier said than done!


Arb.


Wise words from both of you, thank you.

I have no desire to ‘stamp collect’ either. I’m in no rush to buy anything else right now.

Ian.

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Re: IDP's HYP as of 22 Sep 21.

#448201

Postby idpickering » October 6th, 2021, 5:34 am

idpickering wrote:Returning to this thread if I may, my LXI share purchase happened today, and they weigh in at 2.3% in capital value terms, of my now 28 share HYP. I'm buying more HICL next month, but I'll confirm that nearer the time. Things change.

Ian.


Quoting myself here, coming back to this thread if I may, that top up of my HICL holdings I mentioned above is happening today, thereby doubling their capital value weighting in my still 28 share HYP. I might buy more of these in the future, we'll see?

Ian.


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