Invista EUR Prf Discussion Threads

[rjmahan] 02/9/2014 07:15

Results Out
Nav down 9.3% but portfolio value down only 1%.

reasonably confident to me but I am not overly happy about NAV fall...

[rjmahan] 27/8/2014 21:11

scburbs - few points

It isnt 25% of lease expiries - it is 25% hit break points -
depending on the contract this could or could not be a concern. It
is a worry regardless.

I am also not sure if you should compare the fall in values since
IPO or since the last quarter / over the last few years. This was
launched right at the top of the market - although I would accept
losses still have been horrendous. I would think the 5.3% fall in
the value of the property in the last 6 months would be the most
likely (negative) position going forwards...

The co is cashflow neutral with existing portfolio - it gets better
the more it sells (obviously depending on price).

I expect to get my money back on the prefs through liquidation of
the portfolio.

Sale news was a bit slow - but who knows we could get news
tomorrow!

[alanji] 27/8/2014 09:46

Good points scb. One of my concerns is the length of time it is
taking to bring the properties "under offer" at 31 March to
completion.

[scburbs] 27/8/2014 09:21

The prefs should certainly trade at a discount as the dividend is
not covered by profits and is not being paid, plus there is
currently no realistic means of IERE settling them on expiry.

A very simplistic valuation. If you assume you would want a 15%
p.a. return in order to hold a preferential equity interest with no
current dividend and you assume it will redeem for 100 in 5 years
the current valuation should be around 76. If a 20% return would be
correct then it would fall to 62. Clearly this is very simplistic
and highly linked to the repayment date.

Whilst the dividend is uncovered and there is no realistic means of
repayment the prefs do not look vastly undervalued, although the
return they could produce is attractive.

[scburbs] 26/8/2014 18:53

The last sale of Alovera, Spain for €12.2m went for 55%
less
than its 2007 IPO valuation of €26.75m.

Looking at how their largest 4 remaining properties are doing
compared to
IPO.

Heusentamm - down 45%
Riesa - down 35%
Cergy - down 21.75%
Sun - down 14%

The fact that the prefs are still well in the money despite
some
pretty horrendous write downs is positive. However, it is clear
that the valuation volatility on the type of assets they are
holding is very high.

Heusentamm is a concern. This property was let on a 14 year
lease
to Deutsche Telekom. It is now on a 7 year lease to Deutsche
Telekom. If Deutsche Telekom do not renew there could be some
large
additional write downs.

The other main concern is the 25% of 2015 expiries. This will
hit
both valuations (although the short lease lengths will have
already
generated significant write downs so any extensions could
mitigate
valuation impact) and income. The current interest margin of
7.7%
is only just covered, not sure what would happened if
income fell materially before they have achieved a step down.
Did
the company publish whether the new loan has any covenants?

The prefs are tempting, but it is unclear to me how near they
are
to achieving the step down and what those disposals will do to
the
margin of safety for the prefs. I am just following for now.

"As at 31 March 2014, two more of the 14 assets being marketed
for
sale were under offer, for total expected proceeds of
approximately
€54 million."

This sale is likely to be either Heusentamm or Riesa plus
another
asset. As they are clearly trying to shift a chunky asset to
get
most of the way towards the step down amount actually getting
this
done is key.

Any information on the Heusentarum property would be well
received
if any German speakers can get anything from google. A fall of
45%
on a well let asset in Germany seems excessive, unless there is
a
significant non-renewal risk and the asset is just being
written
down as the lease length shortens (which would imply
further significant write downs).

[rjmahan] 26/8/2014 18:33

Alan Ji we arnt so far away on figures - asset sales I have
penciled in probably account for difference...

[alanji] 26/8/2014 17:12

Very comprehensive spreadsheet rjmahan. Afraid RSI in shoulder is
severely restricting my use of mouse and keyboard so cannot reply
at length. I switched my remain ing Ords to thre prefs today and am
at a 8% allocation in IERP and looking to increase to my 10%
maximum. My much simpler spreadsheet shows:
Potential profit on prefs 70% (ignoring divs)
Profit on ords at current nav 275%
Profit on ords with 10% fall 55%
Fall of about 12.5% - break even on ords
Fall of about 17% wipes out ords
Fall of just over 22% - break even on prefs
Fall of almost 30% to wipe out prefs.

As I hold both I have used current bid values of 65p and 4p
I have ignored income. Agree if co can reduce interest margin pref
dividend will be covered so another 14% pa to add to return

[flyfisher] 26/8/2014 17:10

Skyship, They are at the current price because of the
probability
that the company will not earn sufficient income to be able to
pay
for the prefs redemption. In my opinion their will most likely
be
some form of fundraising / prefs conversion / prefs extension or
they could sell more property than they are currently planning
for.
Also the recent results from alph would suggest that French
property values are still falling.

I am a cautious bull of the stock..

[cwa1] 26/8/2014 16:37

I'm guessing that you only need to look two names up from your
post....

[rjmahan] 26/8/2014 16:16

Who is Alan ?

[skyship] 26/8/2014 13:34

(LOL or whatever!)

Anyway, yes, added a few; and also emailed Alan for his take on matters.

[alanji] 26/8/2014 12:51

I don't think you should bring Sky's personal habits into it BT

[badtime] 26/8/2014 12:30

Have u dabbled sky :)

[skyship] 26/8/2014 11:19

rjmahan - agreed re IERP. On the face of it they look so well covered by IERE's assets, that even with further Euro weakness they look really cheap at 68p.

With redemption at par in, say, 3 years - INCLUDING THE ACCUMULATING DIVIDENDS - then c85% upside looks a given. so why are they still down here offered at 68p?

Seems anomalous...

[rjmahan] 26/8/2014 10:40

Done quite a bit of work on IERE and IERP on my blog (hxxp://deepvalueinvestments.wordpress.com/2014/08/26/invista-european-real-estate-prefs/). I have built a model which allows you to work through the various potential drivers.
hxxp://deepvalueinvestments.files.wordpress.com/2014/08/iere.xlsx

Conclusion I have come to is that IERP offers less upside but with more protection than IERE.

IERE will take quite a bit of wiping out but IERP remains quite solid as I play with assumptions.... Potential 90%+ return within a couple of years on IERP not to be sniffed at....

[skyship] 20/8/2014 15:39

...and down again!

[skinny] 20/8/2014 13:32

And above average volume.



Net Asset Value

[badtime] 20/8/2014 13:23

Movement up!

[flyfisher] 07/8/2014 10:29

The breds loan has increased from E220m to E222m at the point of being split into senior and mezzanine debt. Would that be due to accrued interest or iere being liable for the costs of the transaction.

Seemingly another E2m wiped off the nav.

[envirovision] 15/7/2014 18:04

European property ipos now running at a 8 year high reported in ft.

[spittingbarrel] 08/7/2014 14:36

Looks more like some kind of put through being done for nothing, 2 trades of 150,000 at the same price 12 seconds apart.

[envirovision] 08/7/2014 13:35

I take it the 300,000 trade being buys above bid

[badtime] 03/7/2014 19:25

Toying with buying back in

[envirovision] 03/7/2014 16:15

Added here.