German Residential Property – An Update

Tags

Adler Real Estate, BIW, Conwert Immobilien Invest, Deutsche Annington Immobilien, Deutsche Wohnen, Estavis, Gagfah, German property, Grand City Properties, GSW Immobilien, KWG Kommunale Wohnen, LEG Immobilien, NAV discount, Patrizia Immobilien, REIT, residential property, Stavros Efremidis, TAG Immobilien, Taliesin Property Fund, Youniq

It’s a year now since I completed my German residential property series (Parts I, II, III, IV & V, and the first part of this post offers a brief recap) so it’s a good time to take another look. With winter drawing in fast, why not whip up a plate of sauerbraten & pour a (very) large stein of beer, and we’ll begin:

I’m ignoring companies with non-English IR websites. This may be a personal prejudice, but sometimes it can be hard enough to decipher a company’s communications & (underlying) performance without suffering a language barrier too! For practical reasons, I’m also ignoring sub-10 million market caps, plus companies with a relatively minor German property allocation. [But here’s a fairly comprehensive list of these companies]. I’m kicking out Youniq (YOU:GR) (see comments below), plus Speymill (SYG:LN) which has disposed of its German property to Jim Mellon. However, I’ve added two big IPOs from earlier this year (Deutsche Annington & LEG), plus Adler who ramped up its residential portfolio this year (& added an English IR website). Finally, I’ll still treat Deutsche Wohnen & GSW as separate companies, even though the takeover of GSW’s now a done deal. [GSW may well remain a separately listed company]. This leaves us with 13 companies, a baker’s dozen – the vast majority of which are residential pure plays. They should serve as a good proxy for the entire sector:

Adler Real Estate (ADL:GR)

Conwert Immobilien Invest (CWI:AV)

Deutsche Annington Immobilien (ANN:GR)

Deutsche Wohnen (DWNI:GR)

Estavis (E7S:GR)

Gagfah (GFJ:GR)

Grand City Properties (GYC:GR)

GSW Immobilien (GIB:GR)

KWG Kommunale Wohnen (BIW:GR)

LEG Immobilien (LEG:GR)

Patrizia Immobilien (P1Z:GR)

TAG Immobilien (TEG:GR)

Taliesin Property Fund (TPF:LN)

Advertisement

KWG Kommunale Wohnen AG

Tags

BIW, Conwert Immobilien Invest, CWI, European sovereign debt crisis, German bunds, Germany, Grand City Properties, Hans-Peter Haselsteiner, home ownership, income/dividend bubble, Karl Ehlerding, KWG Kommunale Wohnen, Net LTV, residential property, Sirius Real Estate, Stavros Efremidis, Torsten Hoffmann

It’s six months now since I did a write-up on KWG Kommunale Wohnen AG (BIW:GR) (the ultimate post in a 5-part series). Actually, a recap’s in order here & probably the best introduction for this post:

Part I & II:   German residential property has been (recently) described as:

‘Perhaps one of the safest & most attractive asset classes in Europe, or even the world‘.

Its attractions include:

– Demographics:   German population growth is broadly neutral, but is experiencing pronounced trends in favour of urban migration, smaller households & increasing floor size per capita. Investor horizons are often limited when it comes to property – they’d do well to note Germany has the largest population in Europe, the 16th largest in the world & Berlin is the EU’s 2nd largest city with 3.5 million inhabitants!

– Supply & Demand:   Annual housing demand’s around 250-350 K pa, well ahead of housing completions which are now accelerating but only recently bottomed out at 175 K pa in 2009-10. Germany’s second-hand property also trades at a major discount – e.g. in Berlin, existing housing stock can be purchased at a 30%+ discount to new building costs.

– Home Ownership:   German home ownership is a lowly 46%, in stark contrast to the usual Western market rate of 60-65%+. This reflects the government’s long history of housing provision & rent subsidies/suppression, but in recent years authorities have increasingly opted for privatisation. Couple this with rising prices & rents, plus the desire for a safer long-term investment alternative (vs. equity/bond markets) – I think we can be confident of a slow & steady convergence towards Western home-ownership levels.

German Residential Property (IV)

Tags

Adjusted NAV, Austria, Berlin, catalyst, Colonia, commercial property, Conwert, Deutsche Wohnen, distressed assets, diversification, Estavis, Fortress Investment Group, Gagfah, German property, Germany, goodwill, Google Translate, Grand City Properties, GSW Immobilien, JK Wohnbau, MPC Capital, NAV discount, Net LTV, Patrizia, Peach Property Group, Petrus Advisers, Pretty Woman, residential property, risk management, Rolf Elgeti, Sirius Real Estate, Speymill, Strabag, student housing, TAG Immobilien, Taliesin, Unite Group, Youniq

Continued from here.

[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.]

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.