European Real E Share Discussion Threads

[nigelwestm] 18/10/2013 09:58

Alan. How can you have lost money in MERE? I got on board when the shares were around 40p and just held on because it was paying dividends in excess of 10% back then as well...

You must have been trading it too much. Follow my strategy. Buy a chunk when the discount to NAV is about 70-80% and then, when it inevitably rises, topslice but keep a core holding... When there is any significant fall back - like during the spring of this year - top up again. It's the easiest share to make money on this one, but don't try and trade every day. One big trade every few months is enough, and make sure you keep a core holding that you never sell because share price is going to converge with NAV at some point in the near future as Schroeders carry on selling properties!

[alanji] 18/10/2013 09:52

I am a relative newcomer to ERET although I managed to lose a bit of money (as MERE) in 2008 and 2011. I topped up yesterday following the rns. This is my take on things.
The published nav at June was 194p. This includes 7pps liability on the interest swaps but as they expire in Jan one can assume 201p. The sale on 1 Oct was 2% above book value so perhaps another 3pps.
The Co's largest tenant, Panrico (£3.2m contracted rent), sought protection from creditors recently although ERET holds one years rent guarantee. Also Panrico was rated high risk in the 2012 accounts so the value should already have been considerably reduced - euro25m was written off in the 2012 accounts. Its book value based on contracted rent would have been about £32m, but only if a good credit risk. Maybe the current book value is not much above £20m or about 60pps. Reducing the nav by 50% of that gives an adjusted nav of 174p, a discount of 37% to last night's closing offer price of 109. The remaining 8 largest tenants are rated negligible to low-medium risk, although 5 leases are less than 2 years. 7 are in Germany and one in France.
Cash flow this half should be positive increasing the nav but with the major assets now sold rental income going forward will be much reduced - the swap expiry in January will help cash flow.
Even if the Spanish properties let to Panrico are worthless (surely they must be worth something) the adjusted nav is still 144p - IF my assumption is correct.
The other big risk which has held back the share price is the loan maturities in January. With the ltv, after sales, down to about 30% it should not now be a problem, although I think most of the benefit was priced in following the 1 Oct sale.
The shares were at 60p earlier this year - unfortunately I did not have the necessary intestinal fortitude to buy, although I did dip my toe in at 87.

[mozy123] 17/10/2013 19:31

Carlos Gila appointed new first executive to undertake restructuring
The Board of Panrico, the food company specialized in pastry products and sliced bread, has appointed the economist and lawyer Carlos Gila, as first executive of the company.

Carlos Gila is a restructuring expert, member of Panrico Board, graduated by Harvard School and associate professor at IE Business School. He has been, among other positions, Executive Vice President of La Seda Barcelona, and board member of Azucarera Ebro Agrícolas.

From his new position, Carlos Gila will work closely with Panrico management team in order to provide the necessary instruments which must allow the implementation of a business plan that will guarantee the future of the Group in the middle of a very complicated market context.

This business plan will need support from employees, suppliers, customers and financial entities, and requires being flexible enough to adapt the company to the hard market conditions.

During the whole process consumers will continue receiving the product in the same way Panrico has been doing since 1962.

[profitaker] 17/10/2013 16:08

The Spanish props (Madrid, Murcia, Cordoba, Valladoid) were bought in March 2007 for £ 35.7 when the GBP/EUR was about 1.47, so they paid about EUR 52.5m.

I'm assuming a 50% decline (gotta assume something !) in their Euro value and todays GBP/EUR of 1.18

I make their value about £ 22.2M sterling now, with a rental income of £ 3.2M gives a yield of about 14.4%, which won't be too far away from reality IMO.

It doesn't help that all 4 units are let to a single company presently in administration (although their rent is cash guaranteed until June next year). Best result here would be for Panrico to go bankrupt, the leases become forfeited, and Schroders are free to market the 4 Props individually.

[smithie6] 17/10/2013 15:42

Panrico
...personally I would value Spanish indust. props. at around 0.
...partly since I think the props. are located in countryside ind. parks....which are imo struggling with excess of empty property...
(ind. parks close to cities are much better off)
...Panrico has no future imo.....expensive cottonwool bread that the mkt does not want to buy....and high distribution costs...since Spain is big
(own label bread is big seller from successful smrkt chains... 1.2E for 0.8kg vs 2E for Panrico....or no label sliced bread at 0.8E, lower quality perhaps but people are stuck for cash)

(they should have moved into artistic bread, granary, etc...but too late now imo....and the mkt is not educated yet to artistic wholesome bread....)


Fagor has announced that gone into 1st stage of administration....6000 workers
and similar status with other large companies imo.


------
"Worst case scenario is a 50% fall in value, but still booked at cost. But even then, with the fall in the £ that equates to about £ 13m off the NAV, or about 39p. As I say, I cannot find out what the Spanish props are booked at in the accounts. If anyone knows, do post it up here please.

Not bothered about the Panrico events and neither is the market."

---



"Kimboy2
3 Oct'13 - 21:07 - 108 of 130 1 0



The valuation yield on the whole portfolio is about 10% and the Panrico properties are classified as 'high risk' - the rest being low/medium.

It wouldn't surprise me if Panrico are on a valuation yield of about 20% which would put their value at about £16m in the accounts."

[nigelwestm] 17/10/2013 13:22

Used to. Doesn't any more. The people running it prefer to return cash to shareholders via share buy backs these days...

[boystown] 17/10/2013 13:01

Hello - can anyone tell me if ERET pays a dividend?

[jonwig] 17/10/2013 12:51

Profitaker - thanks. Yes, I remember the compulsory purchases.

[sharpshare] 17/10/2013 12:49

If the discount narrows to 25% within the next few months then the share price could rise to 148p.

Remember Schroders is selling all the assets and returning the cash to shareholders so the discount will reduce to zero over time.

[profitaker] 17/10/2013 12:13

Jon

"In fact, they have authority to make market purchases of up to 15% of the equity.

They do, but they've never used it as far I know. The last return to shareholders (2/4/12) was by way of compulsory purchase, buying 4.07% of the shares in issue at the (then) NAV of £ 2.46.

The next return will depend on what re-finance deal they can get. But if they could get a reasonable rate at 55% gross LTV then they'd have scope to return about £ 14m to shareholders. Or compulsary purchase 20% of the shares in issue at NAV (£1.94) for £ 13m.

[nigelwestm] 17/10/2013 12:03

Maybe I should scan various German business Web sites I follow for news about Kaiserslautern...

[nigelwestm] 17/10/2013 12:01

So did my post the other day force ERET to issue that RNS then? I wish they would just announce stuff as it happens...

[jonwig] 17/10/2013 11:54

Profitaker, I don't understand your statement:

I'd be disappointed with less than 20% of the shares in issue bought back at NAV

Do you mean a tender offer to shareholders?

In fact, they have authority to make market purchases of up to 15% of the equity.
Wouldn't that be preferable?

[horndean eagle] 17/10/2013 11:45

To dampen the enthusiasm a little the company are selling off the family silver at present. The problem assets are the ones left and will more than likely require further write downs. You need to factor in some form of discount for those.

[profitaker] 17/10/2013 11:27

The retail unit at Kaiserslautern next to go then, I suspect.

Then we'll then have to wait and see what sort of re-finance deal they secure before we know how much they'll be returning to shareholders.

But I'd be disappointed with less than 20% of the shares in issue bought back at NAV.

[zangdook] 17/10/2013 10:45

The spread is a pain though.

[sharpshare] 17/10/2013 10:42

Wow! Schroders is doing a really good job. Three big properties all sold above book within the last few months.
Latest net loan to value now around 33%!
Share price now 95.5p to 103p
Est NAV 198p
Discount to NAV at offer 48%
Looks exceptionally good value compared to all other listed property companies.

[badtime] 17/10/2013 10:36

some hav woken up to that sale

[n1mgn] 17/10/2013 10:20

Not any more , surely this has to rocket !!!

[profitaker] 15/10/2013 18:03

ERET own the Dusseldorf City Nord Hotel, leased to NH hoteles for 15 years.

[nigelwestm] 15/10/2013 17:37

Unfortunately I only have rather poor schoolboy German, having studied it a bit at school and then later at university, so please take what follows with a pinch of salt. But this piece from a German publication, Deal Magazin, suggests that the NH Duesseldorf Hotel has already been sold:

"Zwei größere Hoteldeals im 3. Quartal – Stabile Renditen in allen Assetklassen
Die beiden größten Deals im 3. Quartal sind der Assetklasse Hotel zuzuordnen. Die Hotels NH Düsseldorf City Nord und das Meliá Düsseldorf wurden für jeweils mehr als 35 Millionen Euro an Offene Immobilienfonds / Spezialfonds veräußert."

www.deal-magazin.com/index.php?cont=news&news=34176

ACTUALLY, SCRUB THAT!

After doing a bit more digging, it turns out that NH Hoteles has two hotels in Duesseldorf! One is designated "City" and the other "City Nord"...

But the fact that one of these buildings has been sold recently is a good sign...

[stupidboypike] 15/10/2013 16:58

Profitaker,

Do you mind saying why you believe we are close to closing two further sales?

Best regards SBP

[profitaker] 15/10/2013 15:50

I do believe that they are very near to closing a two further sales. Looking at the portfolio and their brief to achieve maximum shareholder value, I'd say it's highly likely to be the Dusseldorf Hotel and the retail unit at Kaiserslautern.

[profitaker] 10/10/2013 09:16

Sharpshare

They'd probably have to pay down the Interest & Exchange rate derivative liabilities from the sale proceeds, pro rata about 4.5m GBP. I make the gross (post Duren) LTV about 54%, net about 51%.

I'd like to think that once a Finance deal is done they'd make a return to shareholders. They could buy-back 10% of the share capital at NAV and still have a comfortable gross LTV of 58%, net 55%.

Given the low gearing and portfolio yield, the discount to NAV on this one is quite staggering !

[sharpshare] 10/10/2013 08:57

The EUR 138.6m loan from Lloyds should be reduced by around 41% to about EUR 81.6m following the EUR 57m latest sale.
If Shroders keeps up the selling pace there may not be any ERET loans left to shift in Project Hampton.
With net LTV now around 48% and falling monthly due to accretive circa 9.3% rental income, ERET should get much better terms for any new short term loan required from January 2014.

Price today 95p to 102p.
Latest NAV est around 198p.
Discount to NAV a whopping 50%.