River Rat

The extent of say government intervention is a key uncertainty that they will intervene is certain.

New rule some tenants won't survive the lockdown.

Okay let's take the comments into the rules. 1. Tenants are unable to pay their rents and the number varies from 0 -50% during the lockdown or directly thereafter. 2. Tenants are renegotiating their lease. 3. The banks are willing to renegotiate the terms of the loans. 4. Lockdown will be in effect to at least 16th April.

Okay let's start the first thing we have to do is determine the rules of the game let's start with some categories. I have Political - government interventions Finance - what can we expect from the banking community Legal - this is both existing agreements as well as new state of disaster ones. Sociology - will our behaviours remain the same or change. Labour- how will the work force react. Any additions to this?

The clue is that the tenants are effectively asking to renegotiate their leases by asking for rent relief.

The valuation is based on post lockdown dynamics and it is the annual rental divided by the capitalization rate of 11%. So it stands to reason that a lower future rental would mean a lower valuation if 11% remains the same. Mostly upgrades are a function of both churn, leases ending, new tenants, upgrades to existing tenant facilities and communal property.

As it is now or changes over time.

q's are fine.

Easy tiger let's start with the rules of the game, trust the process. See you at 18h00 or 5 your time.

Usually 5% of the property value so R6.5 million.

Hold your horses you're solutioning way ahead of time. This is an option which is only in step 3.

Purely a figment of my imagination.

The Business This is a property owned by us consists of 10 000m2 of lettable space with the following Anchor tenants Spar, Dischem, ABSA and Ackermans representing 65% of the income , the rest of the space is made up of restaurants, hardware, bottle store and other small entrepreneur driven tenants. 10% of the space is first floor offices with lawyers, doctors, estate agents and financial planners as tenants. It is based in Pretoria and it services a market with a similar socioeconomic base to that of the Bikehub. The monthly rental income equates to R1.2 mil and the loan repayment is R920k per month. Running costs such as management, security, cleaning, insurance etc is R80k per month. The property was recently valued at R130mil and the outstanding loan amount is R48 mil to be repaid over the next 5 years. The property is due for an upgrade/ refurbishment in 2023 and this is vital because there is a large regional shopping mall being developed within 5 km of the property scheduled for completion in October 2023. We have R3.5 million in cash available and we were expecting to pay a dividend of R2 million to shareholders upon approval of February 2020 year end accounts, this was scheduled for the board meeting of 23rd April 2020. Since lockdown the legal firm, doctors, Spar, Dischem and ABSA have all indicated that the want a reduced rental, while virtually all the other tenants have indicated that they won’t pay any rental during lockdown and have asked for a rent reduction post lockdown. The impact during lockdown is that total income will reduce to 45% or roughly R540k per month which after running costs leaves only R4260k to service debt. We have approached the bank which coincidentally happens to be ABSA to discuss loan repayments and they have asked us to make presentations of our plan going forward. Edit: Added budget for Refurbishment R6.5million

I think we are being sidetracked by the "commitment" issue, all I am looking for is that you agree to the rules not that you participate at every session . You are welcome to comment ad hoc as and when you have time. The 18h00 tomorrow is the kick off time where we will start the process and the first issue is to decide on the rules of the game. I doubt that we will finish it but we'll get the discussion going and hopefully collate what we have by 18h00 on Wednesday. We'll then review whether we can make a decision or not and move on to the next rule or step in the process.

I am getting a sense that having a "meeting" at 10h00 is problematic thankfully because people still have day jobs . So I'm happy to shift the time to 18h00 if that helps.

I think you are going to like the "business" that we are going to examine, it's a traditional property ownership with retail and offices in it's portfolio.

Exactly this, I am hoping that we can engage constructively in developing possible scenarios. If it follows the same path as my other organizations you have an at best, at worst and a most likely scenario that sits in between. The latter is the one that shapes your decisions (as opposed to strategy) taking cognizance that the trend (of key uncertainties) could be towards either of the first two. As more information becomes available you adjust your decisions in accordance with the trend. So it's not the decision that is important it's the process that rules.

Only one meeting scheduled so far that's 10:00am tomorrow and as said before I expect the engagement to be irregular so don't fret too much about being there every meeting.

I fully expect that we won't have continuous engagement, with Hubbers effectively weighing in on an irregular basis. This is going to make the process interesting and unique, but it should not prevent you from participating.

My apologies this is a long post inviting you to join me in developing a strategy for a company post lockdown. If it doesn’t interest you don’t read further, if you don’t like the rules of the thread please don’t post on this thread. So what is the purpose of this process? It’s not about the strategy at the end, it is about creating a methodology to deal with an uncertain future. It is about creating a semblance of control when the very foundations of our lives have been changed beyond recognition. It is about creating a positive outlook when negativity abounds. It is about rebuilding our future. Okay let’s get at it. Congratulations we are 10 days into lockdown and you don’t have the virus or perhaps you did but you are asymptomatic . If you think about it this is about the only reliable fact that we have available to us considering what happens when the lockdown is lifted. In this fact we are all in the same boat however, what we do next will be different for each one of us but one other similarity is that not one of us knows what future awaits us. So what now? For my sins I chair a number of organizations, we are using the free time during the lockdown to try and position ourselves for an uncertain future post lockdown. I must say in my 25 years at an executive management level I have never had the luxury of this amount of time to ponder and plan the next moves, it’s a curse and a blessing. The curse is that too much time leads to analysis paralysis and the blessing is that none of us have ever been faced the time and latitude to deal with an event of this magnitude or uncertainty. Across all our organisations we have adopted a scenario planning technique to help guide us through this process and I am watching how it has helped focus these organisations on the right things. For the record these span the following fields airport security, power generation, property, medical and education. The latter is an NGO which adds to the diversity. I have watched the commentary on the various Coronavirus threads and the negativity that the uncertainty creates. So how do we change this? I could share some of the outcomes of our other processes with you but that would have no context nor will it be applicable to the majority of you on the Bikehub. I have had a chat with admin and with their consent I am going to run an interactive scenario planning exercise on the Bikehub. What I need to do this is a group of participants that are committed to a constructive process that leads to an outcome that allows a business (in this case fictional one) to position itself when the lockdown ends (or not) on the 16th April 2020. Before I get your commitment here’s what you are signing up for, first the process I have been using the book The Mind of A Fox co-authored by Chantell Illbury and Clem Sunter as a guide. It’s best described by using this matrix. We start in numerical order and I will describe each phase in a bit more detail but the description used in the book is quite concise: “You are driving down a main road and there is a crossroads ahead. You are on the main road, logic and law dictate that you have the right of way (this is the rule of the game). However, on the minor road travelling at right angles to you and towards the intersection is another vehicle that, theoretically should stop. This action is out of your control, cannot be guaranteed and is, therefore, uncertain (this is a key uncertainty). In your mind you play out different scenarios: The driver of the other car sees you and slows to a halt, allowing you to travel through safely. The driver of the other car doesn’t see you, drives straight through the intersection and you have a near miss. The driver of the other car doesn’t see you, drives through the intersection and you crash.Based on these scenarios, you have a number of options: Maintain your speed on the assumption that the driver is eventually going to see you. Slow down because you worry that the driver is not going to see you. Speed up in the hope that you may get through the intersection before the other car arrives.Your appetite for risk will be the element that will lead to your decision in this regard. “ This is how the matrix works but you can see it is not finite for example a cop arrives at the intersection to direct traffic which changes the rule of the game or the other driver might slow down or speed up which immediately changes a key uncertainty. This means that you start the process over again and develop new scenarios , options and decisions. If you want to join in I need you to agree to the following Rules of the Thread and we may have to add to these because I have never run this process in an online forum, as a general rule think of yourself as a member of the board and behave accordingly: I am the Chairperson, my job is to drive the process towards decisions. It may require me to decide on behalf of the group but you can expect me to allow a debate first. If it needs a vote I will take it there. As stated I have never done this process on this type of platform so I expect to make mistakes so let me apologise upfront. Treat the exercise seriously, there are more than enough other threads where you can troll and joke. If you feel the need please do it there don’t clutter this thread, admin have agreed to keep an eye on this thread and will deal with any errant poster in terms of the Bikehub guidelines. But again have respect for your fellow Hubbers and you should be fine You have to be willing to engage with other viewpoints despite it being the exact opposite of yours (a diversity of views is vital to a robust outcome). Articulate your viewpoint with as many facts as possible and expect to be challenged. If you challenge a viewpoint articulate why, again with as many facts as you can. Don’t be disruptive try and seek consensus. Most of all trust the process. I have run this 4 times over the last 3 weeks with great success it is worth it, despite the inevitable wobble along the way. By liking this post you are effectively signing up to this process and are agreeing to abide by the rules of the thread, see it as your letter of employment. If you don’t sign up we will ignore your input so you’re either in or you’re out. If I get 5 likes or more our first strategy meeting is at 10:00am tomorrow, don’t be late!

You can open an account directly with Vanguard, my trading account is with IG and I use FNB for local and global stocks.

Vanguard they have very low fees but you'll have to pick your own poison https://investor.vanguard.com/etf/list#/etf/asset-class/month-end-returns

Yes you can but I would go on a course first, this is as good as any www.traderscorner.co.za. Beware this is highly technical and very risky. I stopped day trading very quickly because it requires continuous monitoring so I now simply use it to arbitrage my long term investments in times of volatility.

At the start of the year I had some free cash (Euros) that I needed to invest into the market. My foreign investment strategy is relatively simple I look for ETFs that give me a dividend yield of 3% and above. Why ETFs as opposed to ordinary shares? I find that my news feed on companies in the US, Far East and Europe to be either delayed or sometimes very patchy, so it is difficult to monitor these and an ETF gives me an inherent spread in terms of risk. I have been sitting on the cash for somettime now earning no interest but I was waiting for a dip to previous support levels because the market was too rich for my blood and not meeting my hurdle rate of return. So 2 weeks ago I put orders in on three different ETFs at levels that would give me the minimum dividend yield. By Monday last week I was fully invested as the first crash hit us, by Wednesday I was in the money as the market went up again but the volatility was massive so I shorted my shares. I couldn't find a direct short for the specific ETFs so I took shorts on the DOW, the DAX and Shanghai as proxies for my investment spread. As things stand I have an unrealized profit on the shorts but an unrealized loss on my ETFs, on aggregate I am in the black. This shows that the Beta of my ETFs are lower than the markets I have invested in which is another plus. This strategy has worked in this instance and my only decision to make is when to take profit on my short trades. However, my local share portfolio has been reduced to mostly cash as my 10% stop losses kicked in so there's a question about when to reenter the market. Unfortunately my RAs are down roughly 20%. I have been trading on the stock market for over 20 years with well honed strategies that work for me but I am not so sure they're applicable in this market so for what it's worth I would be very cautious about doing anything rash right now. I am sitting on my hands.

Just a note both reserves have been closed on instruction from Provincial government with immediate effect.