Share Name Share Symbol Market Type Share ISIN Share Description
Speymill Deutsche Immobilien Co LSE:SDIC London Ordinary Share IM00B1W65B86 EUR0.05
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00 € +0.00% 0.063 € 0.00 € 0.00 € - - - 0 05:00:10
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Real Estate Investment & Services 144.8 -133.9 -39.8 - 21.25

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01/10/2016
09:20
Speymill Deutsche Immobilien Daily Update: Speymill Deutsche Immobilien Co is listed in the Real Estate Investment & Services sector of the London Stock Exchange with ticker SDIC. The last closing price for Speymill Deutsche Immobilien was 0.06 €.
Speymill Deutsche Immobilien Co has a 4 week average price of - and a 12 week average price of -.
The 1 year high share price is - while the 1 year low share price is currently -.
There are currently 337,229,573 shares in issue and the average daily traded volume is 0 shares. The market capitalisation of Speymill Deutsche Immobilien Co is £21,245,463.10.
23/7/2010
08:05
scburbs: Develica Deutschland results out. This company trades at a massive premium to NAV, has Derek Butler (SDIC director) as its Chairman and has an LTV of over 100% and negative NAV. This company desperately needs equity, but its share price relative to SDIC is very very strong. This is because people know that it can't raise equity. If SDIC dropped its equity raising rhetoric the share price would rise in my view. This is because whenever an overindebted company flags a potential equity raising the share price crashes. The fact that the share price crashes then massively increases the dilution that would occur if they then raise equity using that lower price as a starting reference. The market is very inefficient from this perspective and that is why it would be ludicrous to raise equity at this level if there are any other options. From Develica results "Banking Facilities and Group Cash Position As I previously outlined in the year's Interim Report, the Group's property valuation at that time indicated that the loan to value ("LTV") ratio would, in certain cases, exceed LTV covenants and, based on the valuation at 31 March 2010, that remains the same. However, at the year end date, some of these covenants as set out in the facility agreements remained untested by the debt providers. Through its subsidiary companies, the Company had eleven ring‑fenced loan facilities totalling €830.4m as at 31 March 2010 (net of unamortised loan arrangement fees) and through capital repayments, we reduced our debt position by €8.0m during the year. Each of these facilities has LTV and interest cover or debt servicing covenants which have to be met. As reported last year, the Group has been notified of two LTV breaches relating to the Group's loan facilities now standing at €113.7m. In each case, the lender has requested a valuation under the terms of the facility agreements and the Group continues to have positive discussions with the lenders to seek to remedy these breaches. No further notifications of LTV breaches have been served on the Group by its other lenders although we continue in discussion with all our lenders with regards to the loan facilities. The two facilities that have been notified of their respective LTV breaches have triggered cash traps. Excluding the five loan facilities with our largest lender Citibank International PLC that have currently amended LTV covenants, the remaining four facilities would trigger LTV breaches if the lenders were to request an external valuation. The gross LTV (gross debt against property assets) was 103.7% (2009: 98.4%). Loan interest and amortisation continues to be well serviced through rental income with only one exception. As I reported at the interim date, one of the smaller loan facilities has an Interest Cover Ratio ("ICR") covenant which is not being met. The Company continues in discussions with the relevant bank to remedy the breach. All other ICR covenants are currently being met. I mentioned at the interim date that we were hopeful to be able to announce further restructuring of some of our loan facilities with the intention of stabilising our Group's debt. We are still in negotiations with our lenders concerning the restructuring and will announce the outcome as soon as we can. Cash and cash equivalents at 31 March 2010 amounted to €23.9m (2009: €30.4m) with €17m under the control of the lenders (2009: €18.9m). None of the €6.7m cash held at Parent level was held in controlled accounts." http://www.investegate.co.uk/Article.aspx?id=201007230700098010P
25/4/2010
12:13
lagosboy: Shrubs Not sure I would characterise the recent share price collapse as due to a re-rating, I think more accurate to say the breach was a manifestation of much wider issues and totally at odds with the picture painted in the latest accounts. This has caused a total loss of confidence in the efficacy of the business model and a collapse in the share price. Selling properties is slow, it is not easy and is complex due to the funding, swap and collateral arrangements in place. Placings are a means of quickly raising capital for companies in distress. That is a fact, that is their role. Particpants in return for the risk they take naturally demand a higher potential return. If SDIC could sort this out with the banks, sell a few properties (as you beleive) to inflate the share price before undertaking a Placing....., Why would SDIC even need a Placing in those circumstances? I think you need to accept that SDIC has real problems and a Placing is not just another means for others to profit at your expense. It is a rescue, as Strolling said JM is prepared to follow is money....that is to rescue it and then hopefully turn things around. I still think SDIC should put itself up for sale but feel more certain than ever that a Placing will shortly be announced.
25/4/2010
10:20
scburbs: Here's a comparison of three companies. Any apparent similarity with SDIC is purely intentional, although the starting numbers are approximations only. All of the companies start with €1.44bn of property and €1.17bn of debt and a £71.5m swap liability. The company has a starting market cap of €45m (and an assumed NAV of €198.5m, just using 1440-1170-71.5 for simplicity) Company A decides to do a discounted placing at 50% of its then market price. It does a 2 for 1 offer in order to raise 45m. It uses the cash to repay debt and moves from an LTV of 81% to 78%. Company B decides to do a discounted rights issue (or placing and open offer with full clawback) at 50% of its then market price. It does a 2 for 1 offer in order to raise 45m. It uses the cash to repay debt and moves from an LTV of 81% to 78%. Company C sells €326m of property at book value. It closes swaps at a loss of €20m and repays debt of €306m. It moves from an LTV of 81% to 78%. The company then rerates from a c.77% discount to NAV to a 40% discount to NAV. How do the existing and new shareholders do? Company A - The existing shareholders see the share price increase by 8% from the pre-placing price (hoorah a profit! assuming you are not in higher than the starting price in which case you face a loss from a massive rerating!). The placees see their investment increase by 117% (hmmmm). Starting price assumed to be €0.1335 (shares 337.131m), placing price €0.06675. Market cap rises to (198.5+45)*0.6=146.1 or €0.1445 (shares 1011.393m) Company B - The existing shareholders see the share price increase by 8% from the pre-placing price, but also make 117% on their rights issue cash. A 62.5% profit overall (not bad, but still a massive dilution from company C). Company C - The existing shareholders see the share price increases by 165% (nice). Market cap rises from €45m to €119.1m (198.5*0.6). The company then comes to the market for equity in confidence and shareholders can choose whether to take up their rights rather than being forced to just because of the extraordinary level of dilution! All strategies degear by the same percentage, but provide very different levels of return if the company can prove the business model and get the share price to re-rate. I think it is obvious why I prefer company C! The less said about company A the better. Not far off a fraud on shareholders in my view (particularly with a placing to directors or chums) unless the company has absolutely no other options and will imminently go bankrupt without the placing. Company B is the middle ground (i.e. massive dilution in IRR, but overall returns still solid) and it is blatently apparent why any existing shareholders would not agree with any of the ludicrous theories that companies tend to spin about a placing being better than a rights issue because of speed, certainty etc. (again with the exception if the company is on the cusp of bankruptcy). If it is a placing and open offer with the majority of the placing shares being able to be clawed back under the open offer then I would buy these arguments, but otherwise they are a nonsense from the perspective of existing shareholders.
25/4/2010
10:01
scburbs: The current demographic in Germany is rising households (due to single person households) and very low construction starts. Whether Euro is strong versus sterling (or less weak might be a better description!) is a minor side show to the value of SDIC. Clearly SDIC is overleveraged the question is how to the solve that. It is pretty obvious they should be selling properties, getting rents up and vacancy down and who knows why they have made no steps to cut their management fees (so many competitors have renegotiated these down from bull market levels and SDIC board just seem to have been asleep at the wheel). They now face an ICR breach (but only on 1 facility). Would they be facing this if they hadn't put so many properties into the refurb programme? Would they be facing this if the board of SDIC had realised that they needed to cut costs (don't forget the Goal management fees go into the ICR calculation!)? These things go straight to the heart of the ICR cover so my guess is no they wouldn't been facing this if the SDIC board had been on top of these issues (or at least being awake enough to ape what others in the market were doing). In the short term they need to manage the potential covenant breach and in the medium term they need to manage the 2013 debt expiries. Come 2013 it is unlikely they will be able to refinance at 80% LTV (unless German house prices rise so it isn't 80% or banks get carried away). This means that at some point they need to raise equity. Equity costs much much more than debt. To issue equity when your share price is on the floor would be completely incompetent in my view (unless the only other option is bankruptcy - which clearly it isn't due to a covenant breach on one facility). As I have said many times before what you do is you show you can take the hard decisions, you make a progress on the business model yourself, you get the share price recognising the progress you are starting to make then you come to the equity markets. Not before. This means disposals, vacancy reductions etc. We have seen it with QED/CAL we have seen loads of SDIC less geared competitors selling (TAG Immobilien got new management in and turned around their business in 6 months), but the SDIC board has sat on their hands. To shareholders this has been baffling given the need for disposals was so glaringly in your face as was the need to cut the management fees. Hence the whole conflicts of interest debate. The responsibility of the SDIC board is primarily to serve the interest of existing shareholders of SDIC (it certainly isn't too serve the interests of SYG and it isn't too serve the interests of certain shareholders taking part in a discounted placing!). The question, of course, if whether the SDIC board actually realises this! It will not take much to prove that disposals are so much better, so I will post a comparison. Then once the share price has rerated then you can get raise some equity as well to deal with the medium term expiries. Any company should be looking to take steps to raise equity from a position of strength and at the very least they should make sure they do not raise equity at the time of maximum weakness!
06/4/2010
19:07
scburbs: WShak, Thanks. You may regret asking as I have many questions! The first few(!) that spring to mind are: 1. How does the SDIC board see the conflict of interest issue with SYG bearing in mind that SYG receive fees based on gross assets and Goal receives fees for managing refurbishment projects and rents. Does this result in too large a portfolio and too many flats being refurbished? 2. If there is a potential conflict of interest how is this managed and would this be better managed in a internal managed structure. 3. With Goal replacing local property managers across the portfolio is SDIC too dependent on SYG/Goal. How actively involved are the non-executive board. 4. When SYG was having financial difficulties what contingency plans did SDIC put in place to protect its business. Are contingency plans in place now. 5. How is the performance of Goal compared to that of the local property managers. How do the fees of Goal compare. 6. How do the fees of SYG compare to market rates. Has the board noticed the number of property companies which have taken steps to reduce their fees or internalise management. What steps have SDIC taken. 7. Why can't shareholders see any meaningful results of the overall refurbishment programme (i.e. excluding isolated case studies provided in the investor presentations). 8. Why was the refurbishment programme increased given the lack of clear results from the initial programme. 9. Has the increased programme resulted in a fall in income cover and is the refurbishment programme a factor in the potential DSCR covenant breach. 10. Why is SDIC's vacancy rate so high. Does the board consider that the acquisitions made were good well thought out acquisitions or just made quickly in order to spend the money raised as quickly as possible. 11. If there was a strategy to the acquisitions (type, location etc.) how would the strategy be described. Is it working and is it expected to work in future and why. 12. What is the rough range of current valuations compared to cost, assuming a base acquisiton value (including costs) of 100. Which type of properties have performed well and which ones not so well. 13. How easy are disposals to achieve at close to book value and why have more disposals not been made to date. 14. Has the German residential market improved in the last 6-12 months and what current trends are being seen in terms of values, rental rates, vacancies. 15. Does the board understand its responsibility to make the hard decisions in order to stabilise the business and not look to shareholders for equity when the share price is on the floor. If they need equity then make the hard decisions, stabilise the business and then come to the shareholders for equity. 16. Does the board understand that the responsibility to make the hard decisions lies with the non-executives. The responsibility can not lie with SYG (particularly if their is a conflict of interest) and in the absence of an executive board the responsbility clearly lies with the non-execs. 17. What is the current swap liability. How does the liability on the 31.12.14 expiry compare to the autumn 2013 expiries. Would the board focus disposals on the silo with the lowest swap liabilities. 18. Why don't the swaps expire in line with the debt amortisation. 19. When are covenants tested and how strong are relationships with the banks. 20. What is the view of the banks on SDIC's strategy and performance. 21. In the recent announcement reference was made to unsustainable amortisation rates. This seems unusual given the amortisation has been known since the facilities were taken out. Are the board paying attention. 22. Given the lower margin that applies to the bank facilities why would SDIC even consider negotiating now to refinance those facilities not at risk of covenant breach given the much higher margins prevailing in the market. Surely disposals will be a much more efficient way to deal with the amortisation as this will also naturally degear the portfolio as well. 23. Who does SDIC see as its main competitors and how does it assess its recent performance against these competitors. Where is SDIC stronger and where is it weaker.
05/4/2010
16:19
scburbs: How is a company with a market cap of under €50m and €1.18bn of debt supposed to carry out an equity issue with a meaningful impact? If you think any issue price would be significantly discounted from here then you might be asking the same question about a €25m market cap company. An equity issue here (at this stage) would be such a breathtakingly incompetent breach of Directors fidicuary duties. It would be like QED having done an equity issue when its share price was below 10p! What would have happened to the company if it had tried to do that. It actually issued equity at c.5 times its trough value. CAL also issued equity after a share price rise and did not issue equity anywhere near the bottom. Both of these companies took significant restructuring action prior to an equity raise. CAL sold stakes in Germany and did rights issues within its funds and sold properties. QED also sold properties and repatriated significant funds to the parent group. In summary, both took steps to show they were capable of managing their businesses and once the share price started to reflect their actions (and the improving UK real estate market for these two) only then did they issue equity. Bailing out failing companies by giving them equity without forcing them to make the hard decisions would be irresponsible akin to the risks bailing out failing banks! They must show first that they can take the actions needed to preserve their survival, i.e. disposals. Then, once the share price recognises their progress, they can come to the market for equity. If your response is that SDIC would have to sell properties at a discount (there is no evidence to support this contention) then (if the book value is not solid) why should anyone give them equity! They need to prove their business before asking for equity. This is more the case for SDIC than for other property companies as they can not blame the German residenial property market (at least CAL and QED could point to unprecedented falls in UK property values!). In my view there is a good business in their somewhere and I look forward to management (SDIC and SYG/Goal) proving it, but first they must sell and then they can come to the market for equity later just as CAL and QED did.
29/12/2009
02:16
paulypilot: Hi, In fairness to JM, his recent purchases of SDIC shares have been pretty insignificant compared with his existing investment. So personally I find the accusations here mentioned by one poster of him filling his boots cheaply pretty unsustained by the facts. He's just topped up a tad. It looks to me more likely to be small purchases to support the share price, and/or sending a signal to the market that it's as low as it should be. Who can say? But I do think the clear & massive conflict of interest for JM between SYG and SDIC does need to be sorted out properly. It's actually destroying value in BOTH companies. Never mind what the original SDIC shareholders agreed to, it's what current shareholders in SDIC want that matters. Also consider this - SDIC was set up in a modest bull market for German resi property, the portfolio was thrown together quickly, and perhaps not as carefully as would have been done now, but circumstances were different then in 2006, when there were loads of UK & Irish investors buying up anyting & everyting (geddit?!!). I've spent time in Berlin personally researching the German market, and my feeling is that SDIC probably did an OK job in the circumstances. However, they promised the original investors a whole load of stuff which has not happened, including attractive income stream, etc. It looks to many people as if the original assumptions made by SDIC were overly ambitious, and have been carefully edged out - e.g. the empty property rate target rising quietly from 5% to 7.5% Also, I think we can disregard the normalised portfolio value stuff, as there will always be properties requiring revamps, as they admitted themselves at our meeting, it's like painting the Forth Bridge - the revamps will never end. We're all grown ups, we know this kind of thing, let's be honest. The problem is that there is a whole layer of unnecessary costs in SDIC because of the inefficient structure with SYG being a big puss-filled zit sitting in the middle of things, making the whole thing (ie SDIC) look unattractive, when it would otherwise look very attractive. Let's lance that boil! Seriously. Get SYG out of the equation altogether, and then we can see some value created here for SDIC. Come on Jim, please Fix it for us to make some money on our SDIC shares!!! ;-) Regards, Paul.
06/11/2009
15:32
w1ndjammer: kibes the SDIC share price is so low because, with the strong euro its time to sell to the europeans not buy from them. its no good buying SDIC shares with such a poor rate of exchange then selling in 2 years time when we are at 1.50 euro / £1.00 you will take a double loss. WJ.
22/10/2009
10:12
kibes: paulypilot - very interesting report thanks. I don't like the SYG/SDIC setup either, my impression is that the intention in setting up SYG as a management company was to cream as much money as it can out of the SDIC portfolio without running any risk itself. However, it seems to have been been spectacularly unsuccessful in doing that to date and has a market capitalisation of only £8 million. It had to be bailed out with a cash injection not long ago. Like you I think it should be bought out by SDIC or otherwise SDIC should go it alone. I also agree that the current structure is probably what is holding the SDIC share price back, I don't think investors like this sort of opaque Maxwellian arrangement which seems to offer scope for hidden inter-company transfers (I'm not suggesting that any have actually taken place to date, only that the structure causes suspicion).
21/10/2009
16:16
paulypilot: Hi, Here are my impressions from yesterday's meeting. First off, many thanks to Davidosh here for arranging with Tavistock for a group of us private shareholders to attend the analysts presentation yesterday. I was one of the first to arrive, and on introducing myself as a private shareholder to the first Speymill Director there (Floris van Dijkum, Speymill Property Group (UK) Ltd's grandly titled Global Chief Investment Officer), he looked me up & down and asked me how I'd managed to get access to the meeting. Somewhat taken aback by this, I quickly replied that I'm a professonal investor, and frequently attend company briefings. But it wasn't a very good start. The Directors should have known that a group of private shareholders were also attending the meeting. It would have been a lot better to have a separate meeting really, as analysts presentations are usually a quick whizz through a presentation by management, followed by 2 or 3 quick questions from attendees. But instead we got bogged down in lots of detail questions, and there wasn't time to discuss important issues such as the potential for privatisations. Never mind, we did cover a lot of ground & it was an extremely useful meeting. What did strike me is that nobody from SDIC was actually there. Our Directors seem to be nominees on the Isle of Man with little involvement in SDIC from what I gather. Instead the guys presenting at the meeting (who all came across as professional & very knowledgable, as you would expect) were; Goal's CEO Andy ???? (Goal is SDIC's in-house property management company in Germany, but confusingly Goal is actually owned by SYG and not SDIC, which is a major anomaly in my view, but more on that later). Very impressive guy. CEO of Speymill, Bob McDonald - seemed a sensible, professional chap. He gave direct answers to questions, which I liked. described as the Fund's CFO, Nigel King - more quiet, but seemed on top of the numbers, as you would expect. What had already struck me by now was the confusing & illogical structure of SDIC which I now believe is the root of the problem's here, and needs to be restructured as a priority. Several times, the CEO of Speymill plc (SYG) referred to SDIC as a "fund". Herein lies the problem - SYG just see SDIC as a Fund which they manage, whereas SDIC shareholders rightly see SDIC as a separate company which uses SYG for some management services. Goal is SDIC's in-house property management company in Germany (SDIC is essentially Goal's sole significant client). But Goal is actually owned by SYG, and not SDIC. This is absolutely wrong, and creates a major conflict of interest. In my opinion SDIC needs to be urgently restructured, ideally so that Gaol is bought by SDIC for a modest amount (since Goal has no intrinsic value outside of its relationship with SDIC), and then Goal itself could be beefed up to take on the asset management side of things, as well as the property management, thus making SDIC a completely stand-alone company, totally independent of SYG. I would suggest this is the priority for SDIC shareholders, and will unlock the large discount to NAV. If management won't agree to do this, then we should follow the lead of Speymill Macau, where major shareholders booted out the entire Board & took control of the company themselves to restructure it onto a more satisfactory basis. I am planning on writing to the Directors of SDIC, SYG, and major shareholders in SDIC to suggest that this is the way forward, and the key to unlocking shareholder value. But anyway, back to the meeting. Management ran through a slides presentation which you can see find here; http://www.speymilldeutsche.com/financial-information (then click on 14-10-2009 Full Year Results Presentation) I won't repeat the whole thing here, but just report my notes on what I thought were salient points (and my comments in brackets); Results for y/e 30-6-2009 where as expected. FFO significantly improved (!!! from a loss to breakeven, hardly impressive!) 2008 figures don't include a full year for some properties, hence big jump in rental income in 2009 Bank Covenants - they keep in constant contact with Banks, and report quarterly on compliance with Covenants. None breached to date. Good relationship with banks. LTV Covenants are 87.5% on earlier borrowings, and 82.5% on last financing package (as conditions were toughening at the time). There are 4 financing packages in place. NIBC is main lender, Dutch. Ran into trouble, but recapitalised. In common with all banks, are currently seeking to repair their balance sheets where possible. Hedging (Swaps) matches lending periods exactly. Bank borrowings can be repaid early, agreement with Banks is that where disposals are made, SDIC repays the banks 110% of original lending on the property sold. Small package of disposals (E30m vs E1.5bn total portfolio) underway - chosen properties are ones which are e.g. cashflow negative, geographic outliers, etc. Disposals are under offer at slightly ABOVE book value, which is most encouraging, and given as evidence that the NAV is real, and conservatively valued. Disposals do require an equivalent payment to settle the relevant portion of the interest rate swaps liability, so large scale disposals not sought. (not an issue unless they breach Bank Covenants, doesn't seem likely. But Swaps potentially could be a real liability if large scale disposals required - worth noting, although not an issue at the moment) Financing at local level for German residential property is now improving, "in good health". 1 Bank will now finance deals up to E50m (was down to single digit deals a little while ago). Local buyers are returning to German market. But large Institutional buyers not around any more. The way SDIC's portfolio was built (i.e. lots of small purchases) is better suited to market conditions now if any disposals are needed. I got the impression from management that the original purchases of property were somewhat rushed, in a bull market (there was a mini-boom in 2006-7 of foreign buyers buying a lot of German real estate), and that the sorting out process is still underway (i.e. putting in place competent property management, etc. (but worked out OK, as NAV has been remarkably robust given the credit crunch) Refurb programme never stops. 10% of tenants leave every year, so have to refurb to whatever level required. Confident that ongoing maintenance-type refurbs can be met out of cashflow, Will always have a 7-8% vacancy rate, that is normal. Goal - has 351 employees, manages 40% of portfolio. Achieving better results by vertically integrating, so extending Goal to 80% of SDIC portfolio in next year. Poor property management by local companies leads to tenants leaving. Will take time to get property management sorted (but their strategy looks sensible) Goal business is being built as they go along - only has SDIC & 1 other client. (So why is Goal owned by SYG??? Surely it should be owned by SDIC???!!!) Goal had good results from providing a tenants 24hr call centre. Going to roll this out. Improved property management leads to better tenant retention rates. Property mgt "not complicated, but has to run like a military operaton" Where they've done this (e.g. Berlin) has worked very well. Scope to raise rents (average in Germany is E5.80, ours is E5.11), but some vendors raised rents to market rates prior to sale, to maximise value, as you would expect!. But remember rent controls in Germany - can only raise rents 20% over 3 year period. Expecting about 1.5% rent increases this year, 2% p.a. thereafter. Claimed that SYG interests are aligned with SDIC (since SYG owns Goal - no pun intended!) but I disagree. SYG clearly has major conflict of interest, to maximise charges to SDIC. Stabilised portfolio expected to only generate E5.5m FFO (I intervened at this point and said this was a totally unsatisfactory return for shareholders. Much to my surprise, SYG's CEO immediately agreed with me, and indicated they are actively looking at "every line" of costs with a view to boosting FFO. I was pleasantly surprised by this response, as I was expecting excuses as to why FFO is so poor. But instead they clearly recognise that shareholder returns are unacceptably low, and are addressing costs. One example of cost cutting possible, is on insurance, where they believe an annual saving of E600-800k is possible. I also pushed on management fees, as these clearly seem too high. Again, much to my surprise SYG's CEO also agreed with this point, and interestingly indicated that the Banks are also pushing for mgt fees to be reduced (very helpful!). He said there is a "need to come to an arrangement", and are in advanced discussions with Banks over fees. So there should be some good news on this front fairly soon I would suggest. (although it's a tad disconcerting that the Banks are pushing on this, given that no breaches of Covenants have taken place) Still an over-supply of properties in Germany (hence stagnant prices for 17 years) Demographics are reducing, but number of households rising (e.g. divorce, longevity, etc). More flats are being knocked down that built, virtually no new build in Germany, hence sooner or later prices must go up when demand begins to outstrip supply (when?? we don't know) Political environment moving in right direction - Angela Merkel looking at encouraging building through, eg REITS. Building cost is currently E1,500 per sq,m. SDIC bought at E850. So big upside long term. Strategy - to better manage properties (through vertical integration - seems a good strategy), and to drive down costs (hence improve shareholder returns whilst we wait for the longer term capital gains) Conclusion Overall I came away happy that the people running SDIC seem competent, professional, and have a clear & sensible strategy. They are focusing on the main operational requirements. However, this meeting has cemented my view that the problem with SDIC (and part of the reason there is such a deep discount to NAV) is that the STRUCTURE IS ALL WRONG. I think the structure of SDIC needs to be changed so that it becomes a properly stand-alone company, entirely independent of SYG. This would require either SDIC buys Goal from SYG (for e.g. E5m, as frankly Goal no intrinsic value since SDIC is it's only significant client). Or if SYG won't sell Goal to SDIC on acceptable terms, then we should buy or set up our own property management company in Germany, and move all the business over to them, leaving Goal with nothing. I believe Goal should then be beefed up with an asset management team (it only needs a few people) to take on the asset management side of things from SYG, which is currently charging around E14m p.a. at Fund level, which cannot possibly be justified) These issues should be put to management at SDIC/SYG/Jim Mellon, and if a solution can't be found, then I think shareholders need to work together to seize control of SDIC in the same way that shareholders did at Speymill Macau, and boot out the Board, and make our own arrangements for SDIC to operate as a standalone company. I believe this will unlock the substantial value in SDIC. Indeed, when shareholders went down this route at Speymill Macau, the share price almost doubled, and the discount to NAV at Macau is a lot narrower than with SDIC. So overall I feel the long term upside with SDIC is very exciting still, but short term it needs to be completely restructured as a stand-alone company, and that will unlock the discount to NAV. And before anyone gets in there first, yes I have completely changed my tune on this company's structure in the last few weeks. I was perfectly happy with the structure at first, but the more I've researched it, the less comfortable I've become, and believe it clearly now needs to be restructured to unlock the substantial discount to NAV. But with the recent example at Speymill Macau of shareholders also reaching the same conclusion there, and sorting it out themselves by booting out Speymill plc, I reckon management of SYG will be a lot more receptive to shareholder pressure at SDIC. Sort it out guys, or we'll do it for you, would be my message to management!!! Regards, Paul.
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