Duet Real Est Share Discussion Threads

[westcountryboy] 10/1/2016 15:00

Excellent news about the 14.93p return - I feared they might hold more back but they have reserved just £250k for working capital and possible buy-backs.

My calculation is that the NAV was 27.22p after the payment of the latest dividend to which one should add 2.91p ps additional valuation on this latest realisation, minus 14.93p = a residual NAV of 15.2p after 21 January, without any intervening adjustments for interest payments or problems.

There are four outstanding loans of which about 55% is the Columbus Courtyard property discussed above, and we all have to take our view about that. One of the other ones is a senior loan backed by an office and warehouse portfolio in the Netherlands. As a senior loan the value has been declining gradually and I don't see why it should be considered risky. The Brussels office loan mentioned above by scburbs is the other mezzanine loan.

Finally there is a CMBS backed by a portfolio of private hospitals, most recently valued at £4.8m. I can't see any reason for concern about that either, though I note that the other original CMBS loan did not originally repay in full (only about 60%) - subsequent instalments were reported in half-year results and then stopped being reported, though I hope they were still made!

It will be interesting to see whether there is further price increase on Monday. It will also be interesting to see what the price is after 21 January. That may be another buying opportunity, since as Skyship says the discount might still be large.

To answer Skyship's question in the Pub, yes, I did get in before the increase, though I had been buying for a few months before that, alerted by the excellent posts here. So cheers!

[langland] 09/1/2016 08:53

There we are.............14.93p

[skyship] 08/1/2016 16:44

"The Company will issue further details concerning the return of capital over the next few working days."

Also:

"...any future updated NAV of the Company will also take into account numerous other factors and updated information."

The lack of negativity in the latter statement suggests to me that there could be further good news; whilst "the next few working days" might suggest an RNS on Monday/Tuesday.

Might be too late to add; but thinking I should have done so as, with an NAV of 30.43p, a 15p repayment (say) would result in an equivalent share price of 10p versus a prospective net NAV of 15.43p. So the discount climbs to 35%.

Anyone else have any thoughts on the likely quantum of the next repayment?

[scburbs] 08/1/2016 15:13

Hi Erstwhile2,

For reference my numbers for the £107m refinancing are:

£77m senior loan
£15.4m junior A loan (DREF Master Fund)
£7.6m junior B loan (Partners Group)
£7.7m preference share funding (Partners Group)

The PIK element on the junior A loan is 6.75% which after c.5 years of PIK takes you to c.£21m.

The senior loan has a small amortisation on it (£770k p.a., but not starting from year 1). I have assumed senior is currently around £75m, putting DREF in the 57-73% LTV tranche based on asking price.

Whilst the ultimate controlling party is disclosed as Blake O'Donnell the current Directors are primarily representatives of Partners Group who have the junior debt and senior equity tranches.

The maturity date of the loan was July 2015, but it has been extended to 31 December 2016 to facilitate the sale of the asset/SPV.

"In July 2015 the Master Fund successfully secured the extension of the facility on mezzanine loan investment 2 beyond the initial termination date of July 2015 to December 2016. The sponsor had approached its lenders for an extension of the facilities in order to market the property and maximise the sale price over the extension period. The cash interest and payment-in-kind interest rates remain unchanged and the investment has benefited from an extension fee."

[mad foetus] 07/1/2016 11:22

One of my biggest holdings is in a Kennedy Wilson fund, KWE. That 2012 loan predates the launch of KWE, but if Kennedy Wilson is the counterparty I can't see much/any credit risk to DREF.

[scburbs] 06/1/2016 10:56

Langland/erstwhile2, Glad you were able to add yesterday. Thanks for the extra info on 17 Columbus Courtyard - very interesting and not something I had clicked through to yet.

The information on the other Credit Suisse leases and where the rent per sq ft sits compared to other buildings is very useful to know as is the projected 38% increase in Canary Wharf rent per sq ft to 2019. I will have a more detailed look when I have time.

Current price still looks low as at 26.5p it implies over 25% discount to NAV on the residual portfolio post capital return of which the Canary Wharf loan is buy far the largest and is accruing interest at a rapid rate.

[skyship] 06/1/2016 08:52

Nice to start the year with a holding top on the leaderboard. Just wish it wasn't my smallest holding at only 3.5% allocation!

[langland] 06/1/2016 08:21

I was already a holder here but a big thank you to scburbs since his post yesterday gave the confidence to buy a lot more.

[yieldsearch] 05/1/2016 18:50

notice out confirming hotel loan repaid and improvement in NAV:

The Company's share of proceeds realised by the Master Fund totals £11.0 million, equivalent to 15.29 pence per share. This represents a premium received by the Company of £2.1 million in excess of NAV as at 30 September 2015, equivalent to 2.91 pence per share, relating specifically to Loan 12. The last reported NAV as at 30 September 2015 was 27.52 pence per share; any future updated NAV of the Company will also take into account numerous other factors and updated information.

[yieldsearch] 05/1/2016 12:46

hm ok thanks for this. So why the asset manager is not providing that information? better disclosure would help reducing the discount?

[scburbs] 05/1/2016 12:19

Fully disagree, the loans have repaid at a rapid rate and the remaining portfolio looks sound, especially the two largest loans thereby reducing the impact of concentration risk. A lot of further info is available on the two largest loans if you look for it.

76% of the latest reported loan portfolio constitutes:

17 Columbus Courtyard (Canary Wharf office) - 28% of portfolio. Here it is on the market for £132.3m. The DREF loan represents a mezz tranche between 57-73% LTV based on this asking price and yields 13.25% (including 6.75% PIK). Not a risk free loan, but it is yielding 13.25% to more than adequately compensate for that risk and the underlying asset is on the market for sale at an asking price which would comfortable see the loan and interest repaid in full.



20 German Hotels - 48% of portfolio.

Not too much to say on these other than they appear to have been sold in December 2015 at a massive profit to the shareholder so would expect DREF loan and interest to repay in full. Some form of announcement must be imminent.

"Fattal Hotels, owned by David Fattal, together with its British partner Leopard Group, has signed a deal for the sale of 18 hotels in Germany, with a total of 3,415 rooms, to Swedish hotel chain Pandox AB for €400 million (NIS 1.7 billion).

The hotels in question are 18 of the 20 Holiday Inn hotels that Fattal bought together with partners in 2013 for NIS 1.2 billion. The deal gives Fattal Hotels a 322% return on equity."



The completion of this sale was reported yesterday.

"Pandox’s acquisition of 18 hotel properties in Germany, which was communicated 5 December 2015, has been completed. The acquisition strengthens Pandox’s position on the important German market."



Here is the original loan in March 2013.

"The Company is pleased to announce that the Master Fund has completed the penultimate transaction of its investment programme, having today provided a €37.5 million mezzanine loan backed by a portfolio of 20 hotels located across Germany.

The portfolio consists of fifteen Holiday Inns, four Best Western Hotels and one Queens Hotel and has been acquired by a consortium led by Fattal Hotels."

[yieldsearch] 05/1/2016 11:17

Fully agree. The disclosure on performance and characteristics of underlying investment is very limited. I would be comfortable with only portfolio level disclosure on a granular portfolio with diversified exposure but here the concentration is v high.
and would agree that it seems strange that the underlying loans are not prepaying faster. The lending market has improved significantly since the loans were drawn, at market level the property value have increased and loan margin have decreased so really the equity should refinance the debt faster.. not clear to me why the loans are still outstanding.

[westcountryboy] 04/1/2016 11:01

I have written briefly about DREF in the Pub:

[skyship] 04/1/2016 10:43

SB - a very well-timed purchase. Cheapest offer now @ 21.85p; and in only 10k!

[spittingbarrel] 04/1/2016 09:04

Still easy enough to buy, just got 40,000 at 21p

[eeza] 29/12/2015 11:28

Discount, to last stated NAV, now ~22%.

Big enough, yet?

[eeza] 18/12/2015 10:19

MM's got plenty to give away, again.

[westcountryboy] 18/12/2015 09:14

Just picked up another 15,000 at 21.65p. I am reassured to find that even after eleven separate purchases I still have an insignificant holding out of the 73 million shares. I guess they are just holding on.