The Investment Case for German Residential Property (part IV)

Saturday, Nov 03 2012 by
3

Continued from here.

No commercial propery aversion...

BTW, the residential focus here doesn't imply a commercial property aversion. Sure, it may be more economically sensitive than residential, but many of the positive factors I've highlighted equally apply. In fact, I've only one complaint about German commercial property - my exposure to it unfortunately limits my exposure to residential property!

I track listed commercial property companies also - but not as closely, and I've no plans to write a similar series. For me, Sirius Real Estate (SRE:LN) (a 3.3% portfolio holding) stands head & shoulders above its peers in terms of its risk vs. reward proposition. Its current property valuation & yield, occupancy rate, colossal 66% discount to NAV, plus the presence of multiple activist investors on its board/register, all offer significant operational & share price upside potential. SRE does have significant debt maturing in the next year, but its latest Net LTV of 61.3% equals the peer average & doesn't appear to present any real re-financing (or other) threat to shareholders. Fresh news of property sales would quickly push Net LTV to sub-60%, highlight the current NAV discount & attract new investor attention.

Keep an eye on the headlines!

OK, first, it’s goes without saying: Keep an eye on the headlines! As the German land grab continues, and rising property share prices attract increased investor & media attention, you’ll see more companies keen to list. Peach Property Group (Deutschland) AG is currently pricing up its IPO. This is a spin-out from Peach Property Group (PEAN:SW) - Immofinanz (IIA:AV) has talked about something similar. Other stand-alone IPOs (mostly from financial sponsors) are rumoured also – such as Deutsche Annington & LEG.

Next, we’ve a bunch of German property companies with patchy/non-existent English news/reporting. Sigh, I don’t fancy wading through German (& Danish!) language sites. Yes, I’m biased, but it’s a valid complaint. English is the international language of business, and the potential cost of timely/precise translation would likely be dwarfed by the impact of some new foreign investor buying.

I’m intrigued, but puzzled, by investors who relish decoding foreign language reports/websites. I salute them, but personally I consider foreign language stocks – how shall I put this – the ‘homely’ girls of the market, at best! Yes, those girls have their defenders…we…

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About Wexboy

Wexboy

My personal investing career began with an emerging markets obsession. Investing in individual emerging market stocks was a much taller order then than today, so I gravitated towards investment fund shares and warrants. Little did I know that (despite the volatility involved) this would turn out to be a very fortunate approach – it pretty much saved me from the consequences of poor/misguided stock analysis, chasing stock tips and investing in garbage stocks all the way down to zero.... Only when I learned of value investing did I finally discover a quantitative approach, plus a set of tools, that appealed to me and equipped me better for investing. And I guess it appealed to my mathematical background and perhaps my natural scepticism. It also tempered my lust to dive into investment trends – in fact, I’ve come to realize that any decent secular trend will take many many years to play out and there will be cycles of booms and busts in any related stocks to exploit, so hold your horses, stick to value investing and your chance will come…!  more »


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