Subject: UTG - wow, the buybacks are getting interesting!
https://www.investegate.co.uk/...

Wow!

Unite bought back 1M shares yesterday, at a great price.

They only have 540M shares in issue for the whole company.

At this rate, they would buy back the whole company in 2 years if the price didn't move.

That is quite unusual, I think.

It's great to see management doing what I'd be doing in their place.

And they still have plenty of capital pre-allocated to buybacks.

They could keep this rate of purchase up for the next few weeks using the initial £100m buyback allocation.

And behind that £100m, there's plenty more new cash becoming available from the new asset sales on Tuesday.

This was a real delight to see in the news this morning.

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Buybacks at REITs, when the share price is far below NAV/share, have two interesting effects.

1. They push NAV/share up alongside any effect they have on pushing up the share price in the short term.

So in principle you can start with a company with price 500p, NAV 1000p, and end up with one price 550p, NAV 1050p... which has just as much reason to keep buying back despite the price being up.

2. You can use it to manage the debt profile if interest rates have gone up.

It's worth doing the maths on an example REIT, e.g. 4 buildings of £3m each, with £1m debt on each building and £2m net asset value in each building, and a market cap 50% of the NAV of the company. What happens if you sell one of the 4 buildings and retire lots and lots of the shares? If the price stays low during the buyback, it gets interesting very quickly.

And what happens if one of the buildings had a loan at a 6% interest rate, and the others had been bought with long term loans at 2% rates?

If you were able to retire the 6% debt early, (for example, by not renewing it as it comes due), how does that change the profit at the REIT?

TRS