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Post by andrewrt on Sept 30, 2020 22:10:38 GMT
One of the things that always attracted me to PP was the amount of disclosure then give on the properties when initially listed. However, this was a bit lacking when it came to actual performance (they continue to publish 'expected' performance even when you have a few years' actuals). I'm glad therefore that they've announced today that they're going to start publishing actuals (from next month) and have published the net cash surplus/deficit presently in each SPV: www.propertypartner.co/blog/september-2020-announcements/Whilst the mechanism has always been disclosed, I have been really surprised at the extent of cross-subsidy that has been happening. I have properties that has surpluses >10% of the share value, and others with deficits that size as well. Does anyone else feel the same? |
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Post by scepticalinvestor on Oct 5, 2020 10:14:59 GMT
@andrewt Definitely agree that the financial performance of individual properties was a glaring omission from the data that they shared. After all, us investors invest in the property not PP as a whole. While the current surplus/deficit information is welcome, I am looking forward to the disclosures they have promised on Oct 30th with details of rents received and expenses on each property.
I have observed the same as yours albeit to a lower level - surpluses and deficits ranging from 3-7%. Unfortunately, only about 20% of the portfolio is in surplus, the rest are all carrying deficits.
Sorry if I am missing something obvious, surely there is no cross subsidisation among properties, is there? Isn't the surplus/deficit ring-fenced to that individual property?
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Post by longjohn on Oct 5, 2020 13:11:28 GMT
Each property pays 1% of its value into a SPV Central Fund which is used to support the poorer performing properties until they can be made more financially stable. Usually by reducing the dividend!
When a property is sold its contribution to the SPV Central Fund is repaid so there is no actual cost in the end.
So overall the surplus/deficit is ringfenced to each property however during PP's ownership surplusses are used to cover deficits.
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Post by andrewrt on Oct 5, 2020 16:48:16 GMT
...Sorry if I am missing something obvious, surely there is no cross subsidisation among properties, is there? Isn't the surplus/deficit ring-fenced to that individual property?
Just to be clearer, the "cross subsidy" is a temporary thing- loss making properties can borrow from the central fund that properties who have a surplus lend to. As noted below, this is repaid on sale. At the root of the problem I suspect is that PP somehow got it into their head that we had bought a fixed income investment and they had to do what they could to pay the "promised" dividend rather than flex it when the actuals didn't support.
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