PDH - Premier Diversified Holdings Inc.

[nodnub]

How will the rents rise?

 

1) growth in income - there has been no growth in income plus the resource industry is hurting.

2) job growth - housing is already 7% of GDP. US is under 4%. I don't see where the job growth is going to come from.

3) shortage of rentals - every detached house seems to have 1 to 2 rental suites since the house prices are unaffordable. Where will the shortage come from.

4) immigration - slows down when there is a slow down in the economy. Check out the federal elections - 2 tiered Canadian citizenship or the discussion on Niqab's. It has already started. Or the talk that Asians are buying up all our real estate. This is all in reponse to a slowing economy where immigrants face a backlash.

 

It is a different story if you have property re-zoned, change it to high density, sub-divide, etc.

 

I tend to agree with those points.

 

However, I have observed rents in Vancouver core are rising significantly over the last 5 years.  (just acedotal, looking at various apartments/condos and neighborhoods).  I could be wrong on the whole... maybe my observations are skewed toward gentrifying neighbourhoods.

 

I note that few apartment buildings have been built in the last 20+ years.  Maybe been replaced by condos rentals...  but condo rents can be raised a lot faster in aggregate because they are individually owned and individual owners can more easily evict a tenant (couple legal methods) and then put it back in the rental market at a higher rent. In the apartment buildings the rent increases for existing tenants are limited to the govt approved increases (around 2-3% per year recently)... and it's hard to "renovict" tenants and not possible to use the immediate family member moving in type of eviction.

 

-- sorry I will stop taking this thread off-topic.

 

[Uccmal]

What Uccmal said is the second most popular local meme. However, for some reason the "lack of space" shows up only in housing prices, not in rents.  If the meme were actually true, then rents would be much higher.  Once you start looking at price to rent ratios, the bubble is pretty obvious.

 

(The key difference is--which I figure you in particular will appreciate--is that you can't borrow massive amounts of money subsidized heavily by the government in order to rent real estate.  You can do so in order to buy. Government interference has distorted the Vancouver market to a huge degree.)

 

I agree properties are highly priced and the price-to-rent ratio is high... I have been singing this tune for a long time.  The ratio might normalize by rising rents.

 

Rent control has alot to do with it.  A new unit is not subject to rental controls until its occupied.  Kingswood's website indicates they do property management.  Anyway, We dont have details. 

 

A cursory look at major cities in developed countries shows how the trend unfolds.  London, Manhattan, SF for example.  House prices dropped after the crisis but they are right back up.  The density increases.  The world population is not dropping.  Canada is not getting any less safe from a stable governance perspective.  So what if Van. is in a housing bubble.  If prices adjust downward 40% they will just turn around and start the march back up.  This has been going on in Van. for nearly 40 years.  My uncle was complaining 35 years ago about Chinese buying houses in Richmond, tearing them down and building monster homes on tiny lots.  Are the prices really outlandish when you compare them to London, or Manhattan, rather than comparing them to rural or small city Canada? 

 

I am seeing the same effect in Toronto.  At some point Toronto prices will correct, but it will be temporary unless The rest of the world suddenly gets good government.

[Parsad]

You guys...don't read too much into the investment.  This is as much an investment to see exactly how Kingswood operates, as much as it is an investment with a respectable rate of return we expect if the environment stays the same or deteriorates slightly.  How Kingswood executes will decide our relationship with them long-term.  This is a small investment and we may do a couple of these with them staggered over 18-24 months or so.

 

Overall, I've thought real estate in Vancouver has been in a bubble for years, but like any bubble...it can continue for many years past common sense!  We are preparing for the current environment, as well as what I expect to happen in the future at some point in time (just don't know when).  Our belief is that a partnership with Kingswood (presently as an investor, possibly as an equity stake in the future) would be good in this environment and even better if things become far cheaper.

 

Real estate when done right can be a very good investment long-term, simply due to the underlying leverage involved.  Finding people who really understand real estate through cycles, like we understand equities through cycles, is tough.  You guys should view this not that differently than Fairfax's investment in Kennedy Wilson...a long-term partnership with some smart people with very good skill sets.  Cheers!

[RichardGibbons]

Rent control has little to do with Vancouver's high price-to-rent ratio. Landlords can charge whatever they like when a new tenant signs a lease. Thus, rental ads represent the highest amount of rent that landlords believe they can get for a unit.

[ERICOPOLY]

What Uccmal said is the second most popular local meme. However, for some reason the "lack of space" shows up only in housing prices, not in rents.  If the meme were actually true, then rents would be much higher.  Once you start looking at price to rent ratios, the bubble is pretty obvious.

 

(The key difference is--which I figure you in particular will appreciate--is that you can't borrow massive amounts of money subsidized heavily by the government in order to rent real estate.  You can do so in order to buy. Government interference has distorted the Vancouver market to a huge degree.)

 

I agree properties are highly priced and the price-to-rent ratio is high... I have been singing this tune for a long time.  The ratio might normalize by rising rents.

 

Rent control has alot to do with it.  A new unit is not subject to rental controls until its occupied.  Kingswood's website indicates they do property management.  Anyway, We dont have details. 

 

A cursory look at major cities in developed countries shows how the trend unfolds.  London, Manhattan, SF for example.  House prices dropped after the crisis but they are right back up.  The density increases.  The world population is not dropping.  Canada is not getting any less safe from a stable governance perspective.  So what if Van. is in a housing bubble.  If prices adjust downward 40% they will just turn around and start the march back up.  This has been going on in Van. for nearly 40 years.  My uncle was complaining 35 years ago about Chinese buying houses in Richmond, tearing them down and building monster homes on tiny lots.  Are the prices really outlandish when you compare them to London, or Manhattan, rather than comparing them to rural or small city Canada? 

 

I am seeing the same effect in Toronto.  At some point Toronto prices will correct, but it will be temporary unless The rest of the world suddenly gets good government.

 

I would think rent controls would drive advertised rents higher, not lower.

 

Anything that hurts the property investor would make him less interested in property investment -- this would lead to fewer apartments developed if fewer investors are interested.  In theory anyway.

 

Fewer apartments for rent means higher rents.  Therefore, rent controls drive rents higher.

[Uccmal]

Rent control has little to do with Vancouver's high price-to-rent ratio. Landlords can charge whatever they like when a new tenant signs a lease. Thus, rental ads represent the highest amount of rent that landlords believe they can get for a unit.

 

I didn't know that the rent to price ratios were calculated from advertised rates.  I guess I am wrong. 

[TwoCitiesCapital]

You guys...don't read too much into the investment.  This is as much an investment to see exactly how Kingswood operates, as much as it is an investment with a respectable rate of return we expect if the environment stays the same or deteriorates slightly.  How Kingswood executes will decide our relationship with them long-term.  This is a small investment and we may do a couple of these with them staggered over 18-24 months or so.

 

Overall, I've thought real estate in Vancouver has been in a bubble for years, but like any bubble...it can continue for many years past common sense!  We are preparing for the current environment, as well as what I expect to happen in the future at some point in time (just don't know when).  Our belief is that a partnership with Kingswood (presently as an investor, possibly as an equity stake in the future) would be good in this environment and even better if things become far cheaper.

 

Real estate when done right can be a very good investment long-term, simply due to the underlying leverage involved.  Finding people who really understand real estate through cycles, like we understand equities through cycles, is tough.  You guys should view this not that differently than Fairfax's investment in Kennedy Wilson...a long-term partnership with some smart people with very good skill sets.  Cheers!

 

Thanks for the color!

[RichardGibbons]

I didn't know that the rent to price ratios were calculated from advertised rates.  I guess I am wrong.

 

As far as I know, "official metrics" are based on surveys of actual rents and actual sale prices.  However, rkbabang's examples were comparing asking sale prices to asking rent prices, which is what I was referring to.

 

I think that "asking to asking" still makes sense as a metric, since, if you're buying real estate as an investment, you're probably buying it for close to asking price and renting it for close to asking rents of comparable buildings.

 

(OK enough cluttering up the PDH thread.  Sorry everyone.)

[redhots]

Premier bought more Sequent for 4X the original purchase price.  Anyone have any insight into this transaction?

 

Premier Diversified Holdings Inc. ("Premier" or the "Company") (CSE: PDH) is pleased to announce that on November 3, 2015 it acquired 158,000 common shares of Sequant Re Holdings Limited ("SRHL") at USD$2.00 per common share for total aggregate consideration of USD$316,000

 

http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00030626

 

 

[ourkid8]

They are buying stock to offset dilution to keep their original percent ownership. Since it has gone up 4x, the original purchase was $1,505,000 and it is now worth $6,020,000.  This will be a nice bump to book value!

 

http://www.thecse.com/CNSX/Securities/Diversified-Industries/Premier-Diversified-Holdings-Inc.aspx

 

Premier currently holds approximately 32.37% of the issued and outstanding common shares of SRHL. It is acquiring additional shares to allow it to maintain a similar equity position in SRHL and reduce dilution of its holdings

 

 

 

Premier bought more Sequent for 4X the original purchase price.  Anyone have any insight into this transaction?

 

Premier Diversified Holdings Inc. ("Premier" or the "Company") (CSE: PDH) is pleased to announce that on November 3, 2015 it acquired 158,000 common shares of Sequant Re Holdings Limited ("SRHL") at USD$2.00 per common share for total aggregate consideration of USD$316,000

 

http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00030626

[Jurgis]

Is SRHL listed/public? Or is it private and the prices are determined through gentlemen's agreement?

[ourkid8]

Private and I would hope there is a bit more analysis to determine the price then a gentleman's agreement  :) 

 

Is SRHL listed/public? Or is it private and the prices are determined through gentlemen's agreement?

[Jurgis]

Private and I would hope there is a bit more analysis to determine the price then a gentleman's agreement  :) 

 

Is SRHL listed/public? Or is it private and the prices are determined through gentlemen's agreement?

 

I am sure there is. :)

Thanks.

[ourkid8]

Sanjeev, when will you be releasing year end results?  Based on my understanding Sept 30th was the end of your fiscal year. 

[LesPaul]

Sanjeev, when will you be releasing year end results?  Based on my understanding Sept 30th was the end of your fiscal year.

 

I believe January 28th is the latest they can file - check out the link here: https://www.osc.gov.on.ca/en/Companies_filing-calendar_index.htm

[Parsad]

Sanjeev, when will you be releasing year end results?  Based on my understanding Sept 30th was the end of your fiscal year.

 

I believe January 28th is the latest they can file - check out the link here: https://www.osc.gov.on.ca/en/Companies_filing-calendar_index.htm

 

Correct.  We plan on filing before that, but that is the official deadline.  Thanks!

[goldfinger]

Sanjeev,

 

Aren't buy backs making sense at these prices or you have much better options besides the ones we already know of at this time?

[Uccmal]

Sanjeev,

 

Aren't buy backs making sense at these prices or you have much better options besides the ones we already know of at this time?

 

I have never piped in before, preferring to leave Sanjeev to run the business.  I dont care for buy backs, but I would really like to see at least a 20:1 stock consolidation.  A 0.18 cent stock price is ridiculous, and its going to take years to get it above $2.00 where it counts toward margin in your account. 

 

How about it Sanj?  Seems a stroke of the pen should do the job. 

[Uccmal]

Speaking of margin.  Someone with a Scotiabank account had to do some panic selling yesterday.

[OracleofCarolina]

my brokerage company(which I have to use for compliance purposes) will not even let me buy PDH. They do not allow any buys of stocks priced less than $1. It would be nice if at least we could do a reverse share split like UCCMAL proposed.

[ourkid8]

Al, I would personally prefer Sanjeev not to waste shareholder capital on unnecessary actions such as a reverse split.  In time the stock will cross the $2 mark where you can count it towards margin in your account.    The amount that would be required for lawyer fees/sending out shareholder material etc. required to do the reverse split would be better used to grow their imaging business in China through new partnerships, invest in the current re-insurance business (which has grow by 4x in the first year), purchasing stock on the open market or worst case used to repurchase stock.  All those items would create additional shareholder value then burning it in a reverse split. 

[benchmark]

Al, I would personally prefer Sanjeev not to waste shareholder capital on unnecessary actions such as a reverse split.  In time the stock will cross the $2 mark where you can count it towards margin in your account.    The amount that would be required for lawyer fees/sending out shareholder material etc. required to do the reverse split would be better used to grow their imaging business in China through new partnerships, invest in the current re-insurance business (which has grow by 4x in the first year), purchasing stock on the open market or worst case used to repurchase stock.  All those items would create additional shareholder value then burning it in a reverse split.

 

Completely agree. Patience, patience folks. :)

[Parsad]

Hi Folks,

 

I have to be careful what I discuss with you guys, but I will try and give what color I can:

 

- in terms of buybacks...because we have a certain burn rate at head office and with Sequant Re, buying back shares is only useful to us if we can buy back those shares at below cash/share where it is accretive, as we will need that cash for at least the next year or so.  Once the company is fully profitable, then we can consider using excess cash to buy back shares.

 

- in terms of a reverse split...a lot of the original investors have a negative mentality when it comes to reverse splits, so we are hesitant to do this at the moment...it also won't help us or our shareholders significantly while on the CSE.  A reverse split will improve trading and associated costs, etc once we list on the TSXV or even directly on to the TSE big board.  Also as mentioned, each time we do an information circular and have to involve Computershare and Broadridge, our cost is around $50-80K...like the tender for Russell.  We only want to spend that money if it will meaningfully benefit shareholders and the company.

 

- I cannot espouse patience enough for our shareholders...some years we'll be very busy and some years quiet, but underneath a lot is happening.  We've had three deals go sideways this year simply because negotiations at the highest levels couldn't come to agreement.  We have to do what is right for our shareholders first and make sure we always have a huge margin of safety.

 

- As mentioned, our goal is to make sure the company is fully profitable and that we are increasing shareholder value.  Last year, we got our Burnaby clinic up and running, and now it is thriving and we are seeing the success of those efforts.  There is a tremendous amount of work being done at Sequant...it is becoming a world-class start-up and I expect 2016 to show considerable fruits from the Sequant team's hard work.  You will hear about the progress finally making headway in China...as well as what is happening at Russell...and we hope to certainly close on at least 2 deals in 2016...all of this will be discussed in our annual letter, at the AGM and in Toronto.

 

In the meantime, here is a story in Canadian Business Journal on PDH.  Enjoy!

 

http://www.cbj.ca/EMAG/2015/Dec/CBJ.php#114

 

All the best,

 

Sanjeev

[TwoCitiesCapital]

Hi Folks,

 

I have to be careful what I discuss with you guys, but I will try and give what color I can:

 

- in terms of buybacks...because we have a certain burn rate at head office and with Sequant Re, buying back shares is only useful to us if we can buy back those shares at below cash/share where it is accretive, as we will need that cash for at least the next year or so.  Once the company is fully profitable, then we can consider using excess cash to buy back shares.

 

- in terms of a reverse split...a lot of the original investors have a negative mentality when it comes to reverse splits, so we are hesitant to do this at the moment...it also won't help us or our shareholders significantly while on the CSE.  A reverse split will improve trading and associated costs, etc once we list on the TSXV or even directly on to the TSE big board.  Also as mentioned, each time we do an information circular and have to involve Computershare and Broadridge, our cost is around $50-80K...like the tender for Russell.  We only want to spend that money if it will meaningfully benefit shareholders and the company.

 

- I cannot espouse patience enough for our shareholders...some years we'll be very busy and some years quiet, but underneath a lot is happening.  We've had three deals go sideways this year simply because negotiations at the highest levels couldn't come to agreement.  We have to do what is right for our shareholders first and make sure we always have a huge margin of safety.

 

- As mentioned, our goal is to make sure the company is fully profitable and that we are increasing shareholder value.  Last year, we got our Burnaby clinic up and running, and now it is thriving and we are seeing the success of those efforts.  There is a tremendous amount of work being done at Sequant...it is becoming a world-class start-up and I expect 2016 to show considerable fruits from the Sequant team's hard work.  You will hear about the progress finally making headway in China...as well as what is happening at Russell...and we hope to certainly close on at least 2 deals in 2016...all of this will be discussed in our annual letter, at the AGM and in Toronto.

 

In the meantime, here is a story in Canadian Business Journal on PDH.  Enjoy!

 

http://www.cbj.ca/EMAG/2015/Dec/CBJ.php#114

 

All the best,

 

Sanjeev

 

+1 Sanj!

 

Thanks for the color

[goldfinger]

Hi Folks,

 

I have to be careful what I discuss with you guys, but I will try and give what color I can:

 

- in terms of buybacks...because we have a certain burn rate at head office and with Sequant Re, buying back shares is only useful to us if we can buy back those shares at below cash/share where it is accretive, as we will need that cash for at least the next year or so.  Once the company is fully profitable, then we can consider using excess cash to buy back shares.

 

- in terms of a reverse split...a lot of the original investors have a negative mentality when it comes to reverse splits, so we are hesitant to do this at the moment...it also won't help us or our shareholders significantly while on the CSE.  A reverse split will improve trading and associated costs, etc once we list on the TSXV or even directly on to the TSE big board.  Also as mentioned, each time we do an information circular and have to involve Computershare and Broadridge, our cost is around $50-80K...like the tender for Russell.  We only want to spend that money if it will meaningfully benefit shareholders and the company.

 

- I cannot espouse patience enough for our shareholders...some years we'll be very busy and some years quiet, but underneath a lot is happening.  We've had three deals go sideways this year simply because negotiations at the highest levels couldn't come to agreement.  We have to do what is right for our shareholders first and make sure we always have a huge margin of safety.

 

- As mentioned, our goal is to make sure the company is fully profitable and that we are increasing shareholder value.  Last year, we got our Burnaby clinic up and running, and now it is thriving and we are seeing the success of those efforts.  There is a tremendous amount of work being done at Sequant...it is becoming a world-class start-up and I expect 2016 to show considerable fruits from the Sequant team's hard work.  You will hear about the progress finally making headway in China...as well as what is happening at Russell...and we hope to certainly close on at least 2 deals in 2016...all of this will be discussed in our annual letter, at the AGM and in Toronto.

 

In the meantime, here is a story in Canadian Business Journal on PDH.  Enjoy!

 

http://www.cbj.ca/EMAG/2015/Dec/CBJ.php#114

 

All the best,

 

Sanjeev

 

Really exciting!

 

Thanks Sanjeev for the feedback.  ;D