Liquidations Watchlist #3

A mix of UK/Canadian Investment Trusts and REITs. Bonus: preference share redemptions.

Liquidations Watchlist #3. See previous Watchlist #1 here and Watchlist #2 here.

With the big underperformance of the UK market in recent years, its become a fertile hunting ground for liquidations and wind-downs. This presents an opportunity for relatively low risk and high single digit to high teens IRRs. You can also be tactical and trade around liquidations.

Canadian REITs have come up on the list, with their 10 year moving from 3.5% to 3% this year, real estate is starting to look like an attractive asset class and you can start to see money flowing into this market.

Some of the following stocks are very illiquid and might suit a smaller account size.

Note: NAV is reported NAV, book value or my estimate. Timeframe is based on my estimate. Both could change.

Palace Capital (LON:PCA) owns UK real estate. It's been winding-down since 2022. They have 8 properties left to sell, a mix of office, leisure and residential. Activist investor Peter Gyllenhammar owns 16%. NAV £2.52. Timeframe 1 ½ years.

Real Estate Investors (LON:RLE) a Midlands, UK REIT. They own mixed-use commercial property aimed at private investors or owner occupiers. It's been in wind-down since January 2024. They’re open to a sale of the whole portfolio. Individual assets have been sold at an average of 7% above book value in 2024. NAV £0.52. Timeframe 3 years.

Miton UK Microcap Trust (LON:MINI) is an investment trust that invests in listed UK micro caps. After a significant increase in the annual redemptions in 2024, the board has decided to wind up the fund and offer shareholders a cash out or roll their shares into Premier Miton UK Smaller Companies Fund. This is quite an interesting short term play if you can get a fill and be bothered doing the paperwork with your broker to cash out. NAV is £0.489. Timeframe <3 months.

European Residential REIT (TSE:ERE.UN) is a European focused multi-family residential REIT. Majority of assets are residential units in the Netherlands. Vote passed in January giving board authority to sell all assets of the REIT and distribute proceeds. Paid a large distribution in January this year. NAV is $3.09. Timeframe 1 year.

London Finance & Investment Group (LON:LFI) is a UK investment company that liquidated all of its assets on 4th November 2024. It is now proposing a return of capital and wind up of the company. They have irrevocable undertakings from 20% of shareholders to vote in favour. I own a small position. This is an interesting short term trade if you can get a fill. NAV £0.71. Timeframe <3 months.

Schroders Capital Global Innovation Trust (LON:INOV) is a closed end fund that invests in early stage and growth private and public companies in the UK. Following shareholder consultation, the board put a vote to wind up the trust which passed in February. Araris Biotech, a portfolio company, recently announced it had been acquired, increasing NAV by 10%. This will be a long wind down due to the illiquid nature of some investments. Will return £0.035 in capital via a tender when Araris Biotech transaction settles by H1 2025. NAV £0.221. Timeframe 7 years.

Aberdeen Property Income Trust (LON:API) is a diversified UK REIT which has sold most of its assets and paid out over £0.52 in capital returns. What’s remaining is the last few puffs of the cigar- cash (£0.063), forestry grants (£0.007) and forestry land (£0.026). The land is proving difficult to sell. You can read this article for a bearish view. NAV £0.096. Timeframe 1 year.

LMS Capital (LON:LMS) mentioned in Liquidations Watchlist #2 as a potential liquidation, has announced they will put a vote to shareholders to start a managed wind down. 35% of NAV is in cash and they’re exploring an initial distribution. The portfolio is mostly private, illiquid and some assets look to be impaired so liquidation could take a few years. NAV £0.448. Timeframe 3 years.

The following two are not liquidations but redemption on preference shares. These can be good low risk, high IRR trades if you pick them up at the right time.

EJF Investments (EJFI) Zero Dividend Preference Shares 2025 (LON:EJF0) the preference shares are due to mature on 18th June 2025 at £1.40. EJFI hold a diversified portfolio of debt issued by smaller US banks and insurance companies. Very illiquid but if you can pick up some with a cheeky bid you will make a nice IRR.

Aviva (LON:AV.B) is an insurance company offering to tender or cancel the 8.375% preference shares. You can make a nice return if you vote on the proposals. Offering up to £1.472 per share with payment end of May.

Potential Liquidations

Life Science REIT (LON:LABS) is a UK based REIT that was floated in 2021 to convert regional office space and lease to the life science sector. So far only 55% of rent is derived from the life sciences, so you could say it has not been successful. 14th March they announced a strategic review which may include a full sale or managed wind down. NAV £0.744.

Dream Residential Real Estate Investment (TSE:DRR.U) owns multi-family residential apartments in the Sunbelt and Midwest regions in the USA. They announced on 19th February they were initiating a strategic review and on 12th March they appointed a financial advisor. NAV $13.39.

First Property Group (LON:FPO) I wrote this up as a activist play. Trading at a 55% discount to adjusted NAV, if management and the board can be rolled, this might be a liquidation or a bid by activist investor Peter Gyllenhammar. NAV £0.318.

Conclusion

Let me know what you think about these names?

Do you have any other interesting liquidations you own or on your watchlist?

I’m looking everyday for liquidations and wind downs. I will post another watchlist next month.

Disclaimer: The content in this write-up is for informational purposes only and should not be construed as financial or investment advice All opinions expressed are my own. Please do your own research or consult with a professional before making any investment decisions.

Disclosure: I, or members of my family, hold shares in LON:LMS, LON:API and LON:LFI and could potentially hold shares in any of the mentioned companies in the future.