German Residential Property (Part III)

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absolute return, Austria, dividend yield, financial crisis, financial derivatives, German bunds, German property, Germany, home ownership, income/dividend bubble, intrinsic value, land grab, Leverage, Margin of Safety, Mr. Market, NAV discount, Net LTV, Price/Book, REIT/MLP sector, relative value, rental yield, residential property, safe-havens, special situations

Continued from here.

OK, now we’ve looked at German residential property fundamentals. The current supply/demand & home ownership rate, rental yields, safe-haven status, and particularly the low valuations, certainly appear to offer a persuasive investment case. So, how do we exploit it?!

As I’ve said, I’m perplexed by the general investor obsession over direct property investment. What a hassle! And let’s correct a key misconception: People say they prefer direct investment as they can leverage it up – something you can’t, or shouldn’t, do with an equity investment! Yeah, sounds logical…but it’s complete rubbish! That coveted (?!) leverage is already embedded in listed companies (and far more efficiently/cheaply than you could obtain).

Let’s say you’ve a spare 300 K knockin’ around. You could buy a 1 mio property, with the help of a 70% mortgage (and years/decades of property/tenant headaches to come!). Or you could invest in the equity of a listed property company that owns 1 mio of property (with the same 70% leverage). All at the click of a button & an occasional read of their financial reports. What an easy choice… OK, but who knows where the hell the share price might trade?!

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German Residential Property (Part II)

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arbitrage, Berlin, commercial property, correlation, Debt/GDP Ratio, Deutsche Mark, Eurobonds, Europe, European sovereign debt crisis, Eurozone, GDP growth, German bunds, German property, Germany, Highway to Hell, Leverage, Manhattan, Margin of Safety, Net LTV, quantitative easing, rental yield, residential property, safe-havens, unemployment rate

Continued from here.

Economy:

Germany’s by far the largest & strongest (major) economy in Europe, with an average real GDP growth rate in excess of +3.3% in 2010 & 2011. Growth remains positive in 2012, while 2013 GDP growth’s forecast to be +1.7%. Far better than most EU growth rates in the same period…

It’s one of the few countries with a primary budget surplus. Actually bested by Italy, what a surprise! Germany’s Debt/GDP ratio at 81.6% isn’t much better (also surprising) than the EU average of 88.2%. But the majority of citizens (& investors) remain supremely confident in Germany’s ability to manage its own finances – and rightly so, I believe. [An important point to make: Now, really, an 88% Debt/GDP ratio? What crisis..!? I think not. I’d venture we can trace the current market hysteria squarely back to the bumbling & foot-dragging of Europe’s politicians. A clear message for US politicians as they merrily race down their own fiscal/debt Highway to Hell. An inability to learn from history’s unfortunate, but perhaps forgivable – an inability to learn from today’s headlines, however, just makes you a complete f**king idiot,sir!]

German Residential Property (Part I)

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commercial property, developed markets, Europe, Eurozone, German bunds, German property, home ownership, Margin of Safety, real estate agents, residential property, safe-havens, stock tips

German residential property’s been described (particularly recently) as:

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

OK, seems like typical talking-head hyperbole! But in this instance, I’d really have to agree… In fact, I’ve agreed with that thesis for the last couple of years now, and v profitably too! Whenever somebody I meet tugs my sleeve for an investment tip, that’s exactly what I offer up (in all good conscience): German residential property is a safe & compelling long term investment. Hmm…it’s amusing, and extraordinary, how rapidly most people lose interest in such a dull recommendation! Which just goes to show:

i) I guess most people are truly just looking for a tip…in the v worst sense of the word. Perplexing..!? Do they have some bizarre faith I can conjure up, at will, a stock that’s sure to double for them within a week!? Is this really how some people think investing works? In the end, it illustrates how few people walk the talk – they just don’t apply themselves & follow through consistently with their investing. Often, when they actually decide to invest, it seems like their decision may just boil down to the persuasiveness of the ‘tipper’, rather than the merits of the actual stock thesis!

Livermore Investments (I)

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activist investors, Baker's Dozen, CLOs, closed-end funds, delisting risk, Everest Capital, intrinsic value, investment companies, Leverage, Livermore Investments, NAV discount, Net LTV, Owner-Operator, principal-agent problem, private equity funds, real estate, safe-havens, share buyback, TER

Livermore Investments Group Ltd. (LIV:LN) is one of my 2012 Baker’s Dozen stock picks. And doing v nicely too…up +79% YTD! This post isn’t just specifically about Livermore – LIV also offers great perspective on owner-operators, share buybacks & shareholder value. Oh, and – shhh, draw the blinds – I’ll whisper it: De-listings...

LIV is a London-listed (closed-end) investment company. Its portfolio is focused on 3 different investment areas:

i) Real Estate:   The major holding is $38.2 mio (net of related debt) invested in Wyler Park, a commercial/residential Swiss property. It’s fully let, on a gross 5.1% rental yield, with development potential for another 37% of floor space. The other significant investment is $14.7 mio of convertible debt in SRS Charminar, an Indian real estate company. Unfortunately, the stake’s been subject to long-running litigation. But with ample initial over-collateralization, and an agreed settlement this year, continuing uncertainty’s now hopefully related to timing & expenses, rather than recovery value. Net of interest rate swaps, total net property investment is $45.9 mio, or about 32% of NAV.