The turmoil in the credit markets are having a devastating impact on property shares as investors run for the hills worrying that property investment companies are not going to be able to refinance their debt. On top of this there is a general realisation that a credit squeeze will turn into a depression. Depression means companies going bust and therefore not paying rent to landlords, such as the property investment companies.
Having said this, we know that things are rosy in the property investing garden, but have markets gone too far, pricing in the risk and then some. I think they may have.
Take for instance one company, which I have been watching for some time.
Dawnay Day Trevaria (DTR). This company invests in German retail property. The German economy is generally better placed than UK Plc because Germans who prefer renting their houses (owner occupation I believe is less than 50%) are not so leveraged with property debt.
This company was originally set up by the ill feted DAWNAY DAY outfit which has since gone into administration.
Their recent interim results to 30th June highlighted the following:
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Property assets of €2,221 million, after revaluation, as at 30 June 2008 (31 December 2007: €2,333 million) reflecting a decline in valuation of 6%
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€79.2 million of property disposals notarised since 30 June 2008 at a 10% premium to the 31 December 2007 valuation
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Gross rental income for the period rose 34% to €79.8 million (2007: €59.3 million)
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Adjusted profits after tax* of €17.4 million (2007: €20.3 million)
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Adjusted EPS* for the period of 2.85c (2007: 2.86c)
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Adjusted NAV* per share of 91.2c, a decrease of 19.2% from 112.9c as at 31 December 2007
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Total cash position of €152 million as at 30 June 2008
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Strategic review now focused on strengthening the Company's balance sheet and new management arrangements progressing
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Proposed name change.
The shares have fallen from a year high of 90cents to 8cents and are now trading at around 10cents being up strongly today.
The market clearly prices them to go under having breached some of it's banking covenants. However, with net assets of over 90c per share cash of over €150 million and more importantly a positive income of about €44million a year, I think it has a chance of surviving.
Ian Henderson, Chairman of Dawnay, Day Treveria PLC, said: "We retain a substantial and diversified portfolio of retail assets in Europe's leading economy. With a cautious approach to the use of our cash, stabilisation of the capital base, a co-operative relationship with our lenders and a targeted sales programme, we are positioning the Company in a way which should enable it to weather the current economic storms and to benefit as market conditions improve."
He is not the only one who thinks that Dawnay Day may live to tell the tale of the 2008 credit crunch and eventually pay a decent income. Activist funds have been secretly buying. Montpelier Investment Manager LLP have accrued a stake of over 10% as have Taube Hodson Stonex Partners LLP being upping theirs to just under 10%.
Only for the brave this one, but when the credit bubble dust clears and if the company has survived, it could prove a very shrewd investment.
Next time I will pick a more conservative property investment stock
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