Surprised no interest in this one.
Excellent fundamentals in the Berlin property market.
Also a larger player, TPF recently taken out by Blackstone.
I think this is an exciting proposition. Interested in other thoughts.
Thanks and I agree
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MGerard
21 comments
JohnWigg
I'd support all the remarks to date here - my error was to sell half of my holding last year!
But why does the share price stubbornly refuse to trade significantly above its EPRA NAV?
I may have the answer: it does trade well above the book net assets (IFRS) but EPRA net assets are calculated by adding back some liabilities, one of which is the 'performance fee reserve. Since the fee is to be satisfied by a share issue, the effect on assets per share will be a fall of about 8%. So the share price is, in effect, already discounting the dilution.
I'd be pleased if anyone could corroborate or refute this. In any case it's probably not all that relevant ... except for those perople who expect a repeat stellar performance!
Petrox
I agree that you would think that it should perform better than it does. Also, I notice that Woodford Investment Management has a 3.9% interest. Although The official notices can be read both ways Maybe they have sold 3.9%! Does anyone know how to read the official notices?
Albertos
If you're a follower of Woodford this one isn't for you.
They've sold down from 21% in April to below 5% at the last notification I've seen.
This is probably a big factor in the depressed share price at present. Personally I'm hoping for a good interim valuation this week or next (everything I've read suggests Berlin is still booming) and this share overhang can finally be removed.
Time will tell, time will tell.........
Phil
ken mitchell
fwiw I think JohnWigg has posted the most likely reason for the poor share price performance since last results. Also German and Berlin property is little understood by many investors, so perhaps current disappointing share price not noticed by enough to bring some buying to change that?.
Property prices have been much lower than other major European Countries and Cities but that's changing fast and PDSL updates confirm that. High chance that the next (imminent?) valuation update will be impressive and good chance share price will respond accordingly. As long as no more greedy reward packages or some other way of shooting themselves in the foot.
NAV and share price progress since launch have been very impressive so far, and for a while PSDL was among the top performing Investment Trusts. But there have also been dull spells like the current one with the share price stuck... followed by a good bounce. Next bounce coming with the next update hopefully,.
John Cannadine
Intersting comment from TRY in their monthly factsheet on the German market:
"German residential names enjoy a strong month. The Berlin focused businesses both Deutsche Wohnen (+5.2%) and ADO (+5.1%) were particularly strong."
Albertos
Dealing with incomplete information here, but, looking at ADO - their properties (LT Investments) were valued at 3.28bn euros at 31/12/17 - according to a early July brief this is now 3.82bn - a rise of 16%. This has the health warning that I have no information on additions and disposals and other such - but it does look promising - especially when leveraged up by debt.
Phil
Petrox
Thanks everyone, you've made some very interesting comments. I do not follow Woodford but the fact that they are selling down their position may well have helped to depress the share price. I think it is worth holding on to see what happens next.
JohnWigg
This isn't the place to discuss Neil Woodford and his funds, but his dealings recently are perhaps a false signal, in that his open-ended funds have been suffering heavy redemptions so that he has been a forced seller of a number of lines.
ken mitchell
Agree that’s the likely reason for Woodford selling down his large PSDL stake. It’s also a key reason why I much prefer Investment Trusts to open ended funds/Unit Trusts. Manager has to sell when their investors sell even if they don’t want to as unlike Investment Trusts they can’t borrow, and always trade at NAV. If heavy selling of an Investment Trust then no forced selling by Manager required, and the Trust likely to go to big NAV discount....which can sometimes be a great buying opportunity.
Anyway key reason for this post is I decided to do the obvious today and find out from them the date for next valuation update. No date fixed yet, but likely to be mid August.
jonesj
I haven't checked the accounts properly, but the reported profit is roughly in the same ballpark as the increase in the value of their properties. So I presume this is booked as profit.
After lagging behind other global cities, Berlin property prices rocketed ahead in 2017. +20.5% according to one survey, putting the growth rate ahead of many other cities.
So the questions then arise:
Is Berlin property fairly valued ? and Where is their property market heading ?
My answers are not good enough to look into this properly (so far).
I know one theory suggested Berlin has plenty of space in the city and around it. so that should not be a constraint like in other European capitals.
matylda
Just remembered this from a while back, not sure if it helps - https://www.citylab.com/life/2018/03/berlin-airbnb-vacation-rental-regulation-law/556397/
JohnWigg
jonesj is correct: changes in property values are entered as income under IFRS which means either that you ditch PER as a useful metric for these companies, or look at 'underlying' earnings. A lot of property companies helpfully provide this figure.
Albertos
Do find it intriguing that Phoenix Spree has fallen 16% this year, whereas ADO and Deutsche Wohnen have gone up 12% and 13%.
JohnEustace
Don't think so. The last RNS I saw had Woodford down from 7% to "less than 5%"
I'm waiting for him to be finished selling too.
Albertos
I'm still hopeful - 6.4% of the company's share capital appears to have been traded today - essentially in three slugs.
Perhaps there will be a holdings RNS tomorrow. But I suspect you're right (hope springs eternal)
Am I right in thinking Woodford doesn't have to disclose any further disposals now he's under 5%?
Phil
JohnEustace
I can't quote the regs but I believe he will have to report if he crosses 4% and 3% thresholds. Below 3% the requirement ends.
