Bailed out of Land Securities

[TUK020]

I had two property ITs: Land Securities and a half stake SEGRO.
Sometime ago I had pulled out of BLand, thinking it was too oriented towards retail, and the long term future of this was starting to look a little shaky.

My own experience of remote working, and much commentary in the press about COVID accelerating a trend had started me thinking. Reading at the weekend that Looney at BP is starting a major review of office space requirements convinced me the commercial property for office/retail is unlikely to recover soon.
Feeling a mite uncomfortable that I have exited at a low point, but think I am probably better off elsewhere

Left SEGRO alone. Although not high yield, the SP seems to be recovering nicely. Very much oriented to industrial/warehousing, and doing well out of Amazon etc.

Redployed money into a couple of lower yield ITs that have been on my shopping list after reading about the benefits of following family money for security: RIT and Caledonia Investments.

Trading yield for security

[Dod101]

You are now reflecting where I am having held Caledonia for about 25 years and RIT for a little less. I also like and hold Segro and got rid of B Land some time ago for the reasons you describe and Brexit, (before Covid which of course just makes it worse. I would top up Segro as well if I were you.

Dod

[G3lc]

I still hold BLND, and at todays prices could consider buying more - I am also looking at TRY and PRSR, if you want to maintain an investment in property when its out of fashion.

[Charlottesquare]

I already left the more traditional property companies and gravitated to these:

Aberdeen Standard European Logistics yielding 4.72%
Urban Logistics REIT with 2.5% yield
Warehouse REIT yielding 5.4%

viewtopic.php?f=56&p=334084#p334084

[77ss]

I still hold BLND, and at todays prices could consider buying more - I am also looking at TRY and PRSR, if you want to maintain an investment in property when its out of fashion.

Not all property is out of fashion.

Segro has been mentioned - and last time I looked TRY had large holdings in the logistics sector across Europe (including SGRO).

[Arborbridge]

I've always thought BLND a pretty safe and fairly boring investment with its spread of superb office space - but then Covid 19 and the landscape is suddenly different. I do not feel so confident, but on the other hand, is the "working at home" mantra really going to be the new thing? We'll see how it develops, but my experience with companies whose employees work at home shows them to be dire and inefficient. I have no doubt many of them will learn as they go along, how to do it better, but I am far from convinced that talking to a dozen faces on zoom is a sensible or productive way of running a business.

Maybe I'm just out of time and old fashioned. It seems to me that there is no substitute for proper human interactions, whether that's in the office, design studio, management meeting or when shopping.

But, back to BLND - my faith in its future has been shaken but inertia keeps me, well - inert.

Maybe switching to SEGRO would be sensible, but then again, maybe I'd miss any recovery and regret it.

Arb.

[Charlottesquare]

I've always thought BLND a pretty safe and fairly boring investment with its spread of superb office space - but then Covid 19 and the landscape is suddenly different. I do not feel so confident, but on the other hand, is the "working at home" mantra really going to be the new thing? We'll see how it develops, but my experience with companies whose employees work at home shows them to be dire and inefficient. I have no doubt many of them will learn as they go along, how to do it better, but I am far from convinced that talking to a dozen faces on zoom is a sensible or productive way of running a business.

Maybe I'm just out of time and old fashioned. It seems to me that there is no substitute for proper human interactions, whether that's in the office, design studio, management meeting or when shopping.

But, back to BLND - my faith in its future has been shaken but inertia keeps me, well - inert.

Maybe switching to SEGRO would be sensible, but then again, maybe I'd miss any recovery and regret it.

Arb.

What I am tentatively hearing is some with offices are tending to still having an office but much smaller than before, staff come in sometimes etc, fewer "owned" desks, no more count staff, allow x sq ft per staff member etc. Now how this fits with Covid is slightly problematic as hot desking is not really that safe at the moment but some employers do seem to be viewing a future world with fewer employees coming in every day and are taking steps in that direction.

This is of course not new, there has been a trend this way for a while, a few people I know worked 80% from home before all this whereas 15-20 years aho they likely would have had their own desk (or even room), that trend just seems to have now accelerated.

We have had a steady stream of new letting instructions over recent weeks (wearing my other hat as Co Sec of a commercial property agency), people are giving up leases, now we are not talking about British Land type properties here, we are in the tertiary and secondary market, but each level of the office market impacts the others vis a vis demand.

If you want something more positive re property I suspect larger meeting rooms might be in demand in the future, rented by the day, where the whole team might gather-this could become a growing market, renting a space every so often when all are needed in to listen to the new plan/product launch etc.

[tjh290633]

I've always thought BLND a pretty safe and fairly boring investment with its spread of superb office space - but then Covid 19 and the landscape is suddenly different. I do not feel so confident, but on the other hand, is the "working at home" mantra really going to be the new thing? We'll see how it develops, but my experience with companies whose employees work at home shows them to be dire and inefficient. I have no doubt many of them will learn as they go along, how to do it better, but I am far from convinced that talking to a dozen faces on zoom is a sensible or productive way of running a business.

Maybe I'm just out of time and old fashioned. It seems to me that there is no substitute for proper human interactions, whether that's in the office, design studio, management meeting or when shopping.

But, back to BLND - my faith in its future has been shaken but inertia keeps me, well - inert.

Maybe switching to SEGRO would be sensible, but then again, maybe I'd miss any recovery and regret it.

Arb.

Maybe we should not be neglecting the possibility of the conversion of redundant office space to residential property. This has happened to the building in Crawley where I worked until 1990.

Regardless of use, bricks and mortar (or steel and reinforced concrete) still sits on valuable land. My feeling is that BLND is misunderstood.

TJH

[Arborbridge]

Maybe we should not be neglecting the possibility of the conversion of redundant office space to residential property. This has happened to the building in Crawley where I worked until 1990.

Regardless of use, bricks and mortar (or steel and reinforced concrete) still sits on valuable land. My feeling is that BLND is misunderstood.

TJH

Great companies adapt and I am not writing off BLND just yet!


Arb.

[G3lc]

Maybe we should not be neglecting the possibility of the conversion of redundant office space to residential property. This has happened to the building in Crawley where I worked until 1990.

Regardless of use, bricks and mortar (or steel and reinforced concrete) still sits on valuable land. My feeling is that BLND is misunderstood.

TJH

Great companies adapt and I am not writing off BLND just yet!


Arb.

When I was a director of a property company 40 years ago we built a 10,000 sq ft office out of a garage premises, it has just now been converted into flats, as you say companies can adapt when they have to.

[Charlottesquare]

I've always thought BLND a pretty safe and fairly boring investment with its spread of superb office space - but then Covid 19 and the landscape is suddenly different. I do not feel so confident, but on the other hand, is the "working at home" mantra really going to be the new thing? We'll see how it develops, but my experience with companies whose employees work at home shows them to be dire and inefficient. I have no doubt many of them will learn as they go along, how to do it better, but I am far from convinced that talking to a dozen faces on zoom is a sensible or productive way of running a business.

Maybe I'm just out of time and old fashioned. It seems to me that there is no substitute for proper human interactions, whether that's in the office, design studio, management meeting or when shopping.

But, back to BLND - my faith in its future has been shaken but inertia keeps me, well - inert.

Maybe switching to SEGRO would be sensible, but then again, maybe I'd miss any recovery and regret it.

Arb.

Maybe we should not be neglecting the possibility of the conversion of redundant office space to residential property. This has happened to the building in Crawley where I worked until 1990.

Regardless of use, bricks and mortar (or steel and reinforced concrete) still sits on valuable land. My feeling is that BLND is misunderstood.

TJH

For large scale sites this tends to be a very long process re planning, years in fact ,as often the first step is to sort the local plan to even permit residential in an area in the local plan currently zoned for commercial. Whilst one is doing this, transitioning, rents may be lower and voids are higher, and voids bring costs back to the landlord, it is not that uncommon that when a landlord say loses £10k of rents due to a void they pick up say £4,000 of costs, the double whammy cost of losing commercial tenants.

[Charlottesquare]

Maybe we should not be neglecting the possibility of the conversion of redundant office space to residential property. This has happened to the building in Crawley where I worked until 1990.

Regardless of use, bricks and mortar (or steel and reinforced concrete) still sits on valuable land. My feeling is that BLND is misunderstood.

TJH

Great companies adapt and I am not writing off BLND just yet!


Arb.

When I was a director of a property company 40 years ago we built a 10,000 sq ft office out of a garage premises, it has just now been converted into flats, as you say companies can adapt when they have to.

Yes, but one needs time to transition, one can transition bits of the portfolio at a time, but if the market takes a seismic shift regarding particular parts of the market, impacting all exposed companies to that sector at the same time, there can be problems.

We have over 100,000 sq ft of let space, luckily a good mix of studios, workshops, small warehouse units, offices and limited retail, we only have about 30% of our portfolio as offices/ leisure/retail and as these are mainly tertiary type units, in mixed use areas, local plans will likely not impact us, it will be unit by unit change of planning use should we need to convert some to residential (and like Ko Ko we already have a little list), but if one is sitting with business parks, retail shopping centres it is a whole different ball game, you likely need to get the whole area rezoned for say mixed use and with some of these, once occupancy rates drop and rates bills etc increase, you start bleeding cash whilst the planning process takes its time.

Imho, re parts of the commercial property market , it all depends on how much competition to buy there will be from those that are liquid (like some of the life offices), after 2008 the commercial market nearly froze, distressed sellers , banks unwilling to lend (they were the ones distressing the sellers) and few buyers, this time I expect some property sectors to be very badly hurt and others to soar, but how will the banks react if they have chunky commercial property lending on their books. (Though some like Nationwide have already walked away from new commercial property lending( a few years ago))

[jonesa1]

Maybe I'm just out of time and old fashioned. It seems to me that there is no substitute for proper human interactions, whether that's in the office, design studio, management meeting or when shopping.

It probably varies from business to business. Some businesses will see opportunities (wider geographic and more diverse recruitment pool, reduced costs, simpler business continuity planning) which motivate them to overcome any difficulties, others will find it more challenging and will revert to previous work patterns as soon as they are able. Many others will probably be some-where in the middle. But none of this is new, it's just more obvious (and potentially accelerated).

I worked for a large IT services company and started working largely from home in 2004, with a few spells of up to 3 days a week in the office or on client sites from about 2011. This was before video-conferencing, so we used a lot of tele-conferencing and by and large it worked OK. There were several business drivers which lead to WFH, initially it was forced by the confidential nature of a project I was part of (I needed to be out of the office for frequent lengthy conference calls), then encouraged by the business so it could reduce costs by closing office space, then followed many years of mostly working with remote colleagues without a travel budget (no point in travelling to the office to spend all day on the 'phone). The remaining UK employees of my previous employer (after many years of offshoring work and local redundancies there are relatively few of them) mainly work at home or on client sites.

As for shopping, I was an early adopter of internet shopping and only still do supermarket shops in person because I don't want others deciding on substitutions if my preferred choice is unavailable.

[Arborbridge]

As for shopping, I was an early adopter of internet shopping and only still do supermarket shops in person because I don't want others deciding on substitutions if my preferred choice is unavailable.

Quite - that's the point. Being able to go and choose exactly what one wants within the limits of what is available. No one can do that for you.

Arb.

[Charlottesquare]

As for shopping, I was an early adopter of internet shopping and only still do supermarket shops in person because I don't want others deciding on substitutions if my preferred choice is unavailable.

Quite - that's the point. Being able to go and choose exactly what one wants within the limits of what is available. No one can do that for you.

Arb.

I do see retail food doing okay but not sure regarding more general retail, what we are seeing from M & S, Debenhams, John Lewis is likely being replicated throughout the retail environment, maybe some smaller retailers can be quicker on their feet or already have decent online presence, but a fair few will not and they will expire.

If I have any prediction re retail it will be that larger units may get split or there will be more concession sub leases as the larger retailers downsize their own offerings.

Apart from food retailers, shoe shops ,DIY shops , the pipe shop for tobacco and the odd visit to model shops, I doubt I have been in that many shops in the last five years.

There is a distinct gulf opening between those that shop in the high streets and those like me who shop online .Even with DIY I am now buying more online, I certainly buy most model making stuff online, my last shoes were online etc and that was before March- I have not actually been in a shop since the early part of March and probably in the main will get by fine without high street shops, I suspect there are a lot more like me. (though I have never liked shopping so maybe I am an oddity)

These trends are not going away.

[jonesa1]

though I have never liked shopping so maybe I am an oddity

At the risk of introducing some gender bias (or maybe it's an age thing, my daughters' peers don't seem like I remember lads being when I was one ), most of the men I know dislike shopping and avoid it as much as possible, unless it's for toys (cars, cameras, bikes, that sort of thing) and most of the fun is in the internet research. I only know one man who actually likes shopping, as in visiting shops, but I know several women who think it's fun to spend a day traipsing around shops.

[Charlottesquare]

though I have never liked shopping so maybe I am an oddity

At the risk of introducing some gender bias (or maybe it's an age thing, my daughters' peers don't seem like I remember lads being when I was one ), most of the men I know dislike shopping and avoid it as much as possible, unless it's for toys (cars, cameras, bikes, that sort of thing) and most of the fun is in the internet research. I only know one man who actually likes shopping, as in visiting shops, but I know several women who think it's fun to spend a day traipsing around shops.

I have a mother in law who despite now being over 90 could be the manager of an international team of shoppers, if such a sport existed, and might possibly recruit both my wife and daughter for such a team- provided there were suitable scheduled lunch/snacks/drinks breaks, apparently to shop properly one has also got to waste money eating somewhere.

The bit that really gets me is the post game analysis (often on the following Sunday) when purchases, which shops visited and who ate and drank what gets analysed and discussed, usually at the Manager's house. (This is usually the time I slope away to the garden, at least Covid has reduced Sunday dinners attended)

[tjh290633]

I know several women who think it's fun to spend a day traipsing around shops.

We were in Nicosia in 1987 or 88 and our daughter was keen to look in every shoe shop we passed. That was until we found the street of a thousand shoe shops and I insisted that she visited every one. I think that the message got home.

TJH