European Real E Share Discussion Threads

[flyfisher] 23/7/2015 08:05

This extract from the prospectus sheds some light on potential tax issues.

Some of the Group’s real estate was acquired in the form of property holding companies. If the Group were to dispose of the direct real estate interests held by those companies, rather than the companies themselves, the tax base cost for calculation of the capital gains generated on disposal of the real estate may well be lower than the tax base cost of the property holding company, therefore increasing the capital gains tax liability for the Group on the disposal.

[colonel a] 20/7/2015 07:51

Not the kind of game changing news that we might hope for but consistent with clearing the decks for a change of ownership ?

[colonel a] 01/7/2015 13:17

I'm not an accountant and don't know the anything about RICS Appraisal and Valuation Standards.
However, they claim to be estimating "Market Value" which to me implies some attempt to give a realistic figure.

I would also expect them to provide more than just numbers, specifically some detail on any issue they felt could not be adequately covered in the valuation.

Perhaps ERET should provide more information from the valuers in the RNS ?

[flyfisher] 01/7/2015 13:02

Why would you expect the accountants to recognize something that has not yet happened.
K/l lease change has not yet completed. Panrico approach is just an approach.

[redhill9] 01/7/2015 12:34

Although I thought your expectations were too high (by which I mean too soon for the increased prospects to be recognised), I too am surprised that the total property valuation hasn't increased.

We probably won't know any detail until the half-yearly report (published last year in late August) but I'd guess that neither the Kaiserlautern lease improvement nor the Panrico takeover prospect have been recognised at 30 June. I can't see that a reduction in the French property value (probably already factored into previous valuation?) would offset any increase in the German and/or Spanish properties as when these happen they should be significant.

Back to waiting I suppose.

[sleepy] 01/7/2015 12:24

The property world moves much more slowly than the equity world

[colonel a] 01/7/2015 12:14

Well, how wrong can you be.
Only plausible if a fall in France is balancing the improvements elsewhere.
Ho hum.

[colonel a] 01/7/2015 07:44

janvrot,

Disappointingly, nothing published yet.

But where do you get the value from ?
The rent seems consistent with the £ rate in the results but I have never seen a France/Spain value split.

The high yield on the Panrico properties is based largely on the risk of default. The approach from Bimbo is not the only reason to think that this risk is now much reduced.
But I agree we don't know exactly what weight the valuers will put on the various factors.

[janvrot] 01/7/2015 00:36

I believe the value of the Spanish properties are valued at EUR17.2mil. The new rent is EUR2.46 implying a yield of 14.3%.

I doubt that there will be a new valuation for Spain as the deal with Bimbo's seemed to have a lot of conditions attached to it. I think some of the conditions were linked to the retrenchment of staff which Panrico failed to do in their latest restructuring. I may be wrong on this as I had to use Google translate to translate the Spanish into english and was able to understand every second sentence. Looking forward to comments from anyone more fluent in Spanish for a more accurate assessment of the deal.

[colonel a] 30/6/2015 09:41

Can't see any reason why the valuation will not come out tomorrow.

Regardless of the result I think the "crisis" will drag on and on but with less and less impact, outside of Greece.
Cheap oil and growth in the bulk of the EU will hopefully calm the other indebted countries and eventually provide the funding to restore Greece to some semblance of normality.

Expect that £ will weaken against the € as uncertainty about our forthcoming ref bubbles up.

[redhill9] 30/6/2015 09:22

Thanks colonel A for Kaiserlautern %. Waiting with eager anticipation.........

[redhill9] 30/6/2015 09:19

That is one scenario, but an alternative is if Greece leaves the question will be "who's next?" and that could hang over the euro for some time, pushing it even weaker against Sterling and US$.

Certainly the prospect of some EU turmoil is already priced-in at the current exchange rates and clarity about Greece finally leaving might stabilise/strenghen the euro in the short-term as you suggest, but personally I think it's more likely to go the other way.

Redhill

[loldemort] 30/6/2015 07:24

I'm guessing that if Greece actually does leave the euro, the net effect on the currency, after perhaps a few weeks of kerfuffle, would ironically be to strengthen it, in an f/x sense?

[colonel a] 28/6/2015 17:40

redhill9,

From the last results Kaiserlautern was 38% of total and there is no official split France/Spain.

I think Kaiserlautern should show a decent increase and Panrico a very substantial increase but whatever the result all that we'll see next week {from previous examples} is a total figure.

In the event of disappointment I will sulk and blame Hellenic intransigence.

[redhill9] 28/6/2015 14:26

Interesting post Colonel A, by your deduction approach you are looking for the properties to have increased (all other things being equal) from €53.7 to €67.7m, or around 26%.

I am away from home at the moment and don’t have access to my ERET spreadsheet but from memory weren’t the German properties around half the total property value with combined France/Spain (no split available I think?) the other half? Assuming the German lease amendment is recognised in the imminent revaluation, how much is this likely to increase the relevant Kaiserlautern property value – I’ve no idea but say, 10%? If my geographical recollection of 50/50 is broadly right, that would require Panrico and La Gaude to increase jointly by around 42% to achieve your target of €67.7m, with presumably Panrico providing most of that increase (assuming the Bimbo prospective takeover news is recognised at this early stage).

I’ve no doubt such % value increases are quite plausible as events become recognised but I’m still unsure whether they will be just yet – I’m looking forward to being shown to be too cautious and in that event will gladly applaud your victory!

Redhill

[colonel a] 27/6/2015 10:13

Redhill9,

I have forgotten one tiny detail.
We won't get a NAV figure next week, just a property valuation.

Working from the last property and NAV figures here's how I think the wager translates.

Dec 31st property valued at €53.7 - holds until replaced on Tue.

Redemption valuation on March 20th was £1.68
At that time there were 29.65m shares and there were 1.37 €/£

£1.68 * 29.65 = £49.8 value for company.
€53.7 / 1.37 = £39.2 value for prop.

==> Cash and other assets of £10.6

£3.6 Million was returned and number of shares reduced to 27.51m

So cash of £7m remained.
If we guess that there will still be £7 million of cash etc
IE. That rent in cancels expenditure and exchange rate losses.

Then:
£2 NAV requires a total value of £27.51 * 2 = £55.02m
Less the guestimated remaining £7 means that the property has to be worth £48.02

Which at an exchange rate of 1.41 = €67.7m

So unless somebody points out an error with my sums I shall be exultant in victory if the portfolio valuation exceeds €67.7m and contrite in defeat if it does not.

[janvrot] 27/6/2015 00:37

There is also a tax liability which could be resolved. Is anyone betting on another special dividend/buyback? I wish they would buy back in the market so that willing sellers can get out and help the nav for those who stay behind.

[redhill9] 26/6/2015 11:45

> £2, a sportsman's bet?

Agreed, and it's a bet I hope you win!

[colonel a] 26/6/2015 10:54

The lease extension is notarised, but not complete.
And the Bilbo is not a certainty.

But the low valuations in place as of end 2014 are based or the probabilities calculated by the valuer at that time.

The changed {or changing} status of both Kaiserlautern and Panrico is in the public domain and I would expect the valuations to increase as a result.
By how much ??

> £2, a sportsman's bet?

[redhill9] 26/6/2015 10:35

Colonel A, while agreeing with your overall view I'm not sure that the imminent update in NAV will reflect either/both of the Kaiserlautern lease extension (is it yet signed and in place?) or the improving Panrico prospects (Bimbo takeover announced but some way to go before formalised). Hope I'm wrong, but maybe we'll have to wait for those to be included?

Regarding not selling in the market, I'd agree that I'm also happy to wait for value to unwind in the form of cash distributions but if the discount should unwind sufficiently with La Gaude still unclear (e.g. discount of single figure %, unlikely I know unless both German and Spanish properties sold) then I might be tempted to sell.

[colonel a] 25/6/2015 19:43

We should get the new NAV on Wed/Thu next week looking at previous years.

From the last property valuation the falling Euro had dropped the NAV to about 168 on 20th March {last redemption} at which time the Euro was about 1.37 per quid.
Which gives a starting point of about 1.64 for the current NAV with the Euro at 1.4.

In the last 6 months.
Rental income £2.5m
Dilapidation indemnity of €2.5m contributes to the value of La Gaude
Kaiserslautern is now on a long lease and so hopefully more valuable.
Panrico seems not to be in any danger of going bust and should be considerably more valuable.

The lease extension cost €0.5m and there are obviously running costs.

La Gaude is the big X but it is not valueless.

I think we could see £2 even if La Gaude slips further but regardless of the actual figure we don't expect to a detailed breakdown.

And of course as I don't plan to sell in the market at all, I should not care about the share price
Easy to say.

[colonel a] 25/6/2015 08:35

hxxp://www.just-food.com/news/bimbo-confirms-deal-for-panrico_id130397.aspx

So that's official.
With good news across the board {Euro excepted} I'll be disappointed if we don't see the NAV above £2 next week.

[colonel a] 23/6/2015 12:44

What do you mean by cap rate ?

We don't actually know the specific valuation of the Spanish properties within the overall 2014 figue.
Flyfisher estimated €14.3m {post 434} for Spain and with the rent at £1.9 {perhaps £1.7x at current exchange rates} a doubling of that estimated valuation would still leave them on a pretty hefty yield.

But the takeover process will take months and the improved trading figures we have seen for Panrico are not, as far as I know, published yet.
What will the valuer take into account ?

Would certainly help if the Greek situation could be stabilised by the end of the week allowing the Euro to man up a bit vs Sterling.

[janvrot] 23/6/2015 11:13

I wonder what the new cap rate will be for spain? Could the value of these properties double?