Value Investigator Profile picture
Apr 21 21 tweets 6 min read Twitter logo Read on Twitter
Once in a life A Once in a Lifetime Opportunity in German Residential Real Estate Stocks🏘️💰🇩🇪

1/ Vonovia, $LEG, $TAG, $GCP currently trade at a 67% discount to NAV, with a potential 200% mid term upside. It's a rare opportunity to buy into this market at a bargain price. Image
2/ Key stocks to watch: Vonovia, LEG Immobilien, TAG Immobilien, and Grand City Properties. They're trading at deep discounts to NAV, providing an attractive entry point for investors. Image
3/ Historically, these stocks traded close to their NAV. But today, they're trading at an average 67% discount, offering residential real estate in Germany at a two-thirds discount. #valueinvesting #opportunity
4/ The current NAV discount is unprecedented, even during the Global Financial Crisis, residential real estate stocks only reached a 50% discount. This is a unique chance to buy into the German residential market. #marketcrash #investing
5/ Cash Flow Perspective: German Residential Real Estate stocks offer potential 10% dividend yield!

Historically, these stocks traded at a 3-4% yield, reflecting the safety & strong fundamentals of the German residential market. Image
6/ However, since August 2021 the share price of these stocks has been in free fall:
· LEG Immobilien lost 61%
· Vonovia lost 70%
· TAG Immobilien lost 75%
· Grand City Properties lost 69% Image
7/ As a result of this drawdown the four stocks currently trade at an average yield of 10.00% relative to their 2021 dividend. Note that for the year 2022, all stocks except Vonovia have suspended dividends as a precautionary measure to strengthen their balance sheets.
8/ Based on their underlying FFO, German residential real estate stocks have the potential to re-establish their 2021 dividends. Based on normalized dividend yields of 3-4%, these stocks have 200% near term upside.
9/ Underlying Strength of the German Residential real estate market:
While the German residential real estate market had a good run over the last few years, inflation adjusted home prices are still at about the same level as 40 years ago, leaving strong upside. Image
10/Rents are among the very lowest by international standards: Image
11/ Strong population growth due to immigration Image
12/ Record low vacancy rates even before 1.2 million Ukrainian refugees arrived in 2022. Image
13/ Steady rental growth, entering steeper stage.

Rents in Germany have increased 1.8% in Q1 relative to Q4 2022, and they have increased 5.8% year over year.

According to online-platform Immowelt, asking rents for Berlin in Q1 have even increased 23%(!) in Q1. Image
14/ Balance Sheets are Healthy

LTV ratios are low
Interst Coverage ratios are high
Interst rates are fixed
Loans on average mature only in 6.5 years Image
15/ Debt maturing in 2023 and 2024 is well covered by cash reserves plus near term cash flow. Image
16/ With the 2022 level of FFO, the companies could pay back about 5% of the debt each year. After 5 years, the total level of debt could hence be 25% lower. This could actually a counteract any nominal increase in interest rates.
17/ Short Term Investment Case

50% short term upside to close the NAV discount to a still draconic -50%
18/ Mid Term Investment Case

About 200% mid-term upside to recover to their NAV per share or normalized dividend ratios. How fast this scenario arises will largely depend on the interest rate trajectory. Inflation in Germany and Europe is now already sharply trending down.
19/ Long Term Investment Case

I believe this is a generational opportunity to diversify the portfolio into German residential real estate, which is as solid of a long term investment as it gets. I am locking in this investment at just one third of the fundamental value...
20/...long term:
Locking in a 10% dividend yield on today’s share price alone is a 100% return over a decade. Add to that 200% from the recovery to NAV, gives a 300% return over 10 years. Another 50% from growth in NAV and dividends is possible -> 18.5% CAGR
21/ full writeup below 👇 (link in bio) Image

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Value Investigator

Value Investigator Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @value_invest12

Mar 20
First Republic bank down 26% today. New low.

FED still fighting symptoms without any success.

How many more banks have to die until the @federalreserve grows a brain?
This banking crisis will not end before the FED pivots hard
Read 4 tweets
Mar 12
Deep Dive:
US Banking System Destabilized After Unprecedented Rate Hike Cycle -
The failure of Silicon Valley Bank is exposing systematic vulnerabilities that will likely force the FED to pivot.
modernvalueinvesting.substack.com/p/the-fed-has-… Image
Banks borrow short term to lend out long term. This transformation of maturities relies on the stickiness of customer deposits.
While short term interest rates have increased above 4.5%, the average annual percentage on deposits is 0.23%.
What is going on? Image
After more than a decade of ZIRP, the average yield on bank loans and securities is only 3.5%, significantly less than short term risk free interest rates of 4.7%.

The FDIC data in the graphic below show how unprecedented the situation is. Image
Read 25 tweets
Feb 28
AI Investments by $META are finally paying off in a big way.
„Significantly boosting performance“
Outperforming business as usual „out of the gate“
Read 4 tweets
Jan 15
Great Meta writeup:
$META

wedgewoodpartners.com/_files/ugd/d2a…
WhatsApp Penetration Rate
WhatsApp for Business
Read 7 tweets
Nov 12, 2022
„In the last twelve months, Facebook spent $32.6 billion on R&D, making it one of the largest corporate spenders on research and development in the world“

$META aswathdamodaran.blogspot.com/2022/11/meta-l…
Profitability:

„…the online advertising business remains a money machine, generating sky-high margins.“ Image
Pricing:

„…comparing Facebook's PE ratio to the PE ratios of non-tech companies, for consistent comparisons, you should be using the adjusted net income of $42.5 billion, which results in an adjusted PE ratio of about 6.“ Image
Read 5 tweets
Nov 11, 2022
Carvana is extremely path dependent at this point. Imo, could be anything from zero to 10 bagger next 12 months.

I believe with the surprise inflation data from yesterday, it’s now the short sellers that are sitting on the hot seat…at least until Q4 numbers in Feb 23.
$CVNA
1/7
Until yesterday, Carvana was quickly approaching $6 and less - an implied market cap that would have made any equity raise pointless.

But that path has potentially changed yesterday.
2/7
With the 7.7% inflation surprise, including annualized core inflation ex shelter of just 1.8%(!), a 75bps hike in December is off the table.

And so is Powell’s threat of higher terminal rates than previously expected.
3/7
Read 10 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!

:(