A developer/investor in German commercial property, where the market has none of the signs of significant stretch or overheating so evident in much of the rest of Europe, particularly the UK and Iberia. Net margins appear stable, and with some scope to rise. However, the significant level of borrowing may prove difficult to refinance on the highly favourable terms of even six months ago, and the whole sector is likely to be dragged lower by considerable recent risk aversion to almost all forms of geared property investment, hence our sale.
Dawnay Day Treveria IPO'd on AIM in December 2005 with the sole intention of acquiring a portfolio of German retail real estate assets. It is chaired by ex Land Securities boss, Ian Henderson. It is targeting EUR2.3bn of assets within 18 months, and by end September 2006 had EUR 1.9bn secured, so will likely exceed its target. The properties are a mixture of high street shops, in-town shopping centres and retail warehouses, primarily in western Germany. The company recently raised its dividend payout ratio from 85% to 90% of recurring net income, which means it is likely to deliver a 2007 dividend yield of 5.6%. Current net rental yields in German retail real estate are over 6.5% compared to a cost of debt of around 4.7% - a highly attractive proposition to any property investor! Together with anticipated rental growth of just 2% in a recovering German economy, the reduction in net rental yields should deliver 18% compound growth in the company's property portfolio net asset value. Assuming the stock trades at a 10% discount to forecast portfolio net asset value, this still means there is over 20% upside plus a substantial dividend yield. A cheap play on recovering German retail and real estate property.
| Sedol |
Type |
Price |
Date |
| B0RFL71 |
Sell |
EUR 0.791 |
20/12/2007 |
| B0RFL71 |
Buy |
EUR 1.304 |
17/01/2007 |
|
