European Real E Share Discussion Threads

[colonel a] 23/6/2015 08:38

Flyfisher,

IMO, La Gaude has been the key since the debt was paid down and three cards were left to play.

Kaiserslautern has always been the banker and Panrico fringe player.

Recent developments mean that both of these are much stronger than they were, particularly Panrico, but the massive uncertainty remains the IBM site.
When fully occupied it had a yield based value well in excess of the current ETET market cap. But what floor on it's value today ?
There's a few months rent remaining and the recent bonus of the dilapidation indemnity but other than that ???
If La Gaude is either rezoned or reoccupied then the return from ERET could be very good indeed.

But happily, it now seems very likely that the other two will return a profit from the current share price on their own.

Next week's valuation will hopefully be positive and informative.

Needless to say I am not an unbiased observer.
GLA.

[flyfisher] 22/6/2015 10:41

Mexican multinational Bimbo signed an agreement to acquire the Spanish Panrico, which produces the popular Spanish Donuts. The decision, which will be officially communicated next week, will strengthen the leadership of the Mexican company to achieve a close to 50 percent market share in the sector of bread.

Panrico adds one chapter to a tumultuous and controversial decade. The company currently owned by Oaktree, U.S. Fund which took control of Panrico since Apax venture capital society left in the hands of the creditor bank the Spanish company, which it had acquired by 900 million euros in 2005 to the Costafreda family.

In an internal statement, Panrico recognizes the agreement and mentioned that the purchase is subject to certain conditions, as the result of an operational audit, which will be held in the coming weeks. The operation also requires the approval of competition authorities. The Spanish firm indicates that the union of Bimbo and Panrico will mean creating a leader in bakery and pastry in Spain and Portugal.

Also the purchase of seven Spanish plants and the two Portuguese must have the approval of the National Commission of markets and the competition (CNMC). This approval is another of the three conditions that the purchase is subject. According to sources of the operation, this will depend on the economic offer that ends up making grupo Bimbo.

Panrico sources explained that the operation will take months to close, probably at the end of the year. "The union of both groups will allow to create a leader in bakery and pastry in Spain and Portugal, ensuring the sustainable viability of Panrico," the company said in the statement addressed to its staff of more than 2,000 employees.

After the operation, the Fitag-UGT Union has moved to representatives Bimbo his desire that the operation is "an opportunity of growth of the two companies and their business lines", since this will be "a guarantee of future" for workers in the same.

He has also told the address will be "attentive and observing" the development of events to "ensure the rights and interests of our clients".

The direction of Bimbo in Spain has not entered into the details of the operation and said "its commitment to the Spanish market of Bimbo and his aspiration to make the new company a company marquista and leader in the two main lines of business, sliced bread and sweet pastries," according to Fitag-UGT. "If the operation is definitely closed, will again meet to further discuss the project Bimbo with perpetrators," concluded the trade union organization.

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[flyfisher] 22/6/2015 10:35

The change of ownership of panrico should be the catalyst for eret to commence marketing of the Spanish properties once the deal completes, perhaps later this year or early next year. With the last valuation being done at a time of restructuring, their is a good possibility of a premium to book being achieved due to improved accounts and a more secure tenant. With the current rental yield around 17%, their would seem to be a good chance that the new owner would seek to buy the freeholds.

Kaiserslautern is currently being marketed, with the benefit of an extended leasehold, so again a premium is possible, and a sale would enable wind up of the german subsids and a resolution of the german tax investigation which was limiting the last cash distribution.

That would leave la gaude as the final asset to dispose. It was described in the prospectus as 'Four buildings on a site of 150k m2 - built area 37k m2' and has been in planning discussions for some months now.

Thoughts on la gaude anyone?

[colonel a] 22/6/2015 08:12

Has anybody found anything in the UK press ?
Should we expect an RNS from ERET ?

[flyfisher] 20/6/2015 19:11

just google bimbo panrico and you will come up with several links.

[langland] 20/6/2015 12:50

Flyfisher,

Can you provide a link please where this transaction is covered. I can't seem to find anything. Many thanks.

[flyfisher] 20/6/2015 10:42

Wikipedia - Grupo Bimbo, S.A.B. de C.V., known as Bimbo, is a Mexican multinational bakery product manufacturing company headquartered in Mexico City, Mexico. It operates the largest bakeries in the United States, Mexico and Spain, and has some of the widest distribution networks in Mexico and the United States. It was also the ninth largest company of Mexico by revenues in 2013.[1]

Bimbo reported revenues of US$ 14.1 billion for 2014. It has approximately 128,000 employees and 167 manufacturing plants in 22 countries in the Americas, Europe, and Asia. It operates more than 100 trademarks, among which are: Bimbo, Tia Rosa, Marinela, Barcel, SaraLee, Mrs Baird's, and Oroweat.[2]

Bimbo is listed on the Mexican Stock Exchange since 1980 and is a constituent of the IPC, the main benchmark index of Mexican stocks.

[colonel a] 20/6/2015 10:33

Great spot.
Can't find anything in English, anybody with decent Spanish care to précis one of the weightier articles ??

I'm surprised they have not gone for the property at the same time.
Has to be good news for ERET.

[tiltonboy] 20/6/2015 10:28

That looks great news for ERET; a better covenant and a little more certainty.

[flyfisher] 20/6/2015 09:54

The Mexican group Bimbo yesterday signed an agreement to acquire 100% of Panrico from the venture capital fund Oaktree.

With the parent of panrico changing from a venture capital group to an international bakery group. The covenant strength of panrico may now improve sufficiently for eret to commence marketing of the property.

[colonel a] 16/6/2015 11:30

Indeed, IBM of old very much dark suits and white shirts.
They must have mellowed under the influence of fine wines and long holidays.

However, a not insignificant sum, and whilst the valuation should include all items covered by the contract, it will be conservative on items like this.

In the valuation at the end of this month I think that both German and Spanish property valuations should have improved. Nice however will be very difficult for CBRE, given the uncertainty going forward, but this agreement can only help.

ps. congrats to whoever picked up 25k at 103, nice timing.

pps. With 27,513,901 shares and 1.396 Euro / Quid that's another 6.5p per share which is not at risk.

[zangdook] 12/6/2015 11:34

2.5 million - they must be planning a wild moving-out party

[janvrot] 03/6/2015 10:11

As I understand it was difficult for potential buyers to get "cheap finance" for kaizer because of the ground rent. It seems like Schroders has done a good job negotiating a 99 year lease and it is now possible to do a proper job getting the building sold.

[redhill9] 03/6/2015 09:21

Thanks flyfisher. I must have been thinking of some other company which used that tighter definition, or maybe it just happened that tighter definition fitted specific circumstances at the time rather than being standard policy.

It still seems as though a sale may have fallen through though as ERET used the term "re-marketed", implying a second attempt. Hopefully our patience will be rewarded!

[flyfisher] 03/6/2015 08:44

Redhill, this extract from the accounts may clarify your understanding.

'Properties held for sale are those which, at the year end, were available for immediate sale, being actively marketed and expected to sell within twelve months'.

[redhill9] 29/5/2015 08:58

Ah, thanks I missed the important "re-". So presumably they had a sale lined-up that fell through, although I thought "Properties held for sale" in the balance sheet meant "contracts signed, not yet completed".

Overall, still happy to hold and would buy more if I could get over my annoyance with the spread.

[colonel a] 28/5/2015 22:53

Is now being re-marketed.

But yes, all done and dusted this month would have been good.

FWIW I think Schroders are normally very cautious in the way they describe things and in that light I thought their comment on Panrico pretty +ve.

[redhill9] 28/5/2015 18:57

This part was disappointing:
The high street retail property in Kaiserslautern, Germany is fully income producing and generates a stable revenue for the Group, supported by a long weighted average lease length of 8.0 years. The Group has negotiated an extension of the ground lease at the property in order to improve the liquidity of the asset in the investment market. This transaction, which will change the ground lease from a renewable 10 year arrangement to a fixed duration of 99 years, at a total cost to the Group of €0.5 million , has now been notarised with completion expected in July 2015. The property is now being re-marketed for sale.

I'd interpreted previous comments on the lease extension as meaning it would be completed in May, but more to the point if Kaiserslautern "is now being marketed" what does the £16m of "Properties held for sale" at 31 December Balance Sheet represent if not Kaiserslautern?

[colonel a] 28/5/2015 16:50

Missed the IMS.
Not too much in it, certainly nothing radical.

Next property valuation, end June, should be interesting, last year they announced the figures on July 1st.

[redhill9] 22/5/2015 14:54

Colonel A, regarding your chicken and egg analogy, I'd turn it round and suggest that Market Makers are in business to make a market - if there is no trade in a stock they should try to generate some (and some income for themselves) by reducing the spread to encourage buys and sells. Inertia because no-one is trading means they won't make much out of being a MM.

Like you, I feel there could be activity (hopefully starting shortly) in the form of further redemption(s).

[colonel a] 22/5/2015 10:47

Yes it is.
Even for a low market cap co. the spread is ridiculous.
But there is a chicken and egg element.
With very few trades, one or so a day plus the occasional on isdx why should the MM's bother to try to find an accurate price.
But with a 7% spread why would anybody buy unless they are prepared to hold almost indefinitely.

I have bought quite a lot and have had two blocks bought back by the company.
Hopefully there will be several more buy backs before the finale.
Kaiserlautern is currently the focus.
I think Schroders have done very well with the property disposals so far and I don't think they will be suffering from the same impatience as some holders.

[redhill9] 22/5/2015 09:59

Just revisiting this comment in the accounts:
The Group has committed to an extension of the ground lease at Kaiserslautern. This will change the ground lease from a renewable ten year arrangement to a fixed duration of 99 years, at a total cost to the Group of €0.5 million. There will be no other changes to the ground lease and the rent payable to the freeholders remains the same. This extension is expected to improve the liquidity of the asset in the investment market. The lease extension is expected be completed in May 2015.

If, as believed, this amendment of the lease is the trigger for sale of Kaiserlautern then maybe we should hear something soon (or within a few weeks anyway).

I've been thinking of buying more in anticipation of this event being a positive and generating a cash distribution but am a little put off by the current bid offer spread - this morning I was quoted 100.5p/107.8p respectively. Paying 107.8p may turn out to be cheap in due course, but the spread is outrageous.

[colonel a] 07/5/2015 16:27

Thanks both.
Patience is clearly the answer but clearly not my strong point.

[flyfisher] 07/5/2015 15:41

I have 14.3m euro for spain and 18.8m euro as the value for france, but they are approximations.

[redhill9] 07/5/2015 15:22

Colonel A, I tried to identify that split when the December 2014 accounts were published but couldn't find it. Odd that there isn't at least the usual geographical analysis of assets in the accounts, which of course would give the answer.

The Investment Manager's report on Page 5 (and Note 5(c) on page 23) gives the split of annual rent by property as being £1.9m each for Panrico and IBM, so if the yield on each was the same and all other things being equal that would imply around £12.85m asset value each, but with Panrico described as High risk and IBM s Negligible risk, the lease periods being very different, and with the other individual aspects of those two sites and tenants affecting the yield it's difficult to draw any precise conclusion.

Redhill