I'm a few cents behind you, mate. I'd be around $1.95, having bought in halfway through 2020. With 20.5c per distribution per year it works out to about a ten percent yield with a 70-odd percent capital gain as well. It is much easier to hold onto a stock which has fallen off its highs when you're already sitting on a reasonable capital gain and those cheques are arriving like clockwork every three months. I only wish I'd bought more at the time (I'm sure these words have been stated by every investor who ever lived!).
This stock has hardly had a green day this year. On days where the property sector has done well, it's been down. On days where the market has been down heavily, it's been up. I can't work it out. Volume has been low. Today, HDN was down when I looked early this morning. The overall market then faded a lot and gave up most of its early gains. However, HDN decided to rise all day and finish up 3.4%. Aventus was flat this morning, but as the market declined, it rose and finished up 2.2%. Scentre was down, CQE was down, Vicinity and GPT were flat, RFF down. We have one of our strongest days since December. There is not rhyme or reason to it. We shouldn't have been heavily other days and shouldn't have been up today. I've stopped trying to attach meaning, or understand it.
I feel annoyed that this specialty large format retail REIT is being absorbed into a smaller, just-listed-on-the-ASX company. AVN investors were convinced to change to an internally-managed structure before the pandemic. Now we're back being externally-managed again -- by HMC -- a company I know nothing about. We were sold a fantasy that our compensation would be $3.82, based upon HDN's share price, which was around $1.60 at the time. AVN senior management have received jobs with more responsibility (pay raises?) and assets under management at a bigger company. Two investment banks have received advisory fees. The independent auditor would have been paid handsomely. Brett Blundy sold down his holdings two days after the merger vote was approved -- no surprise there. I think he's living on his boat in Singapore. HMC will receive yearly fees from this new entity as a result of absorbing Aventus and a large multi-million dollar 'acquisition fee'. What do the retail investors get? Vague promises of synergies and a "Last Mile Logistics Network". More undeveloped land -- so what?! Greater exposure to "every day needs" -- garden-variety retail which I try to avoid. The carrot of $3.82 which was always going to be dependent entirely on HDN's share price and seemed so misleading. As I wrote yesterday, our fortunes are tied to HMC's share price just as APT's were tied to Block's after the acquisition was confirmed.
The issue which annoys me the most, is the following:
This is from pages 3 and 5 of HDN's 12th November "Presentation to Retail Broker Networks" ASX release. It looks like the new entity starts with 50% Large Format Retail but they plan to reduce that to 30% of the REIT, to increase "Health & Services" to 20% but so-called "Daily Needs" increases from 34% to 50% of the portfolio. Given the success AVN has had with an internal management structure and strong focus on LFR, I don't know why we would agree to be taken-over by a smaller REIT (with no take-over premium for retail investors) to have LFR eventually diluted to a third of the portfolio, in favour of a category which I still don't really understand. Essential retail? No K-Mart, Target, Big W or hairdresser or nail salon shops? The presentation says 84% of the tenants will be "National Tenants" but that still leaves 16% which are not. Smarter people than me have been working on this proposal and AVN (from its latest annual report) had a significant percentage of "Daily Needs" tenants. I liked the Aventus REIT with a sole focus on LFR and an internal management structure. I got burnt with a retail-focused REIT in 2008/9 and have avoided retail ever since. I suspect my fears are mis-placed and this will prove to continue to be a good investment.
As I mentioned yesterday, If the share price continues to flounder, I would be happy to increase my holding by 33% if the yield gets towards 7%. A 20.5 cpu at $3.00 per unit is 6.83%; and apparently the combined entity will have stronger distributions than if the two entities remained independent. My plan had been to put this money into my CLW REIT holding but my greed and procrastination here got the better of me. I think in the end, the worst thing that can happen with AVN/HDN is continuing to receive quarterly cheques until the share price picks up again. Although if that happens, I am still not completely convinced I will be able to hit that "Sell" button! Under-valued share prices can rebound quickly. Three or four days of strong gains and suddenly It's back in the $3.50s or $3.60s.
I'm all set for the half yearly results briefing. I am confident some of my merger concerns will be addressed at this meeting. Once there is more certainty and clarity I imagine a share price re-rate will happen fairly quickly. I advise all investors to get on that conference call because the recordings of these calls (speaking from my experience with other stocks I own, not necessarily AVN) are often NOT uploaded anywhere afterwards. One gets a much clearer picture of the situation from these conference calls and Q&A sessions with financial analysts afterwards than from the Powerpoint material released by the company.
Please excuse the long post. I am having a quiet evening and thought I'd spend an hour reflecting on this stock and try to better understand my own motivations and plan for my AVN holding.
AVN Price at posting:
$3.28 Sentiment: Hold Disclosure: Held
