immofinanz group eres 2013 - 4 july 2013. 2 5 years after the crisis – sustainable business models...
TRANSCRIPT
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IMMOFINANZ GROUP ERES 2013 - 4 July 2013
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5 Years After The Crisis –
Sustainable Business Models For The
Listed Sector In Real Estate
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Strategy• Value creation
• Acquisition oriented
• Relying on yield compression
Financing• Equity and equity linked as the primary source
– Huge capital increasesExamples: IMMOEAST, IMMOFINANZ, MEINL, etc.
• High (structured) leverage Examples: Eastern European Developers
IVG
• Extremely low margins on debtExample: IMMOFINANZ “FOREST FINANCE” CMBS 25 – 42 bips
BUWOG-Financing: 7bips
BUSINESS MODELS BEFORE THE CRISIS
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Profits through appreciation
• Cash flow: irrelevant!!!
• “Economic laws” were abolished like in the internet boom (“value creation” became
the successor of the “Cash-Burn-Rate”)
GOALS
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• Starting with 2007 and reaching its peak with the “Lehman Collapse” in
September 2008
• Massive revaluation of (Eastern European) properties
• Liquidity disappeared from the financial system
• Cash became king (once more again)
• The Eastern European real estate market collapsed
“CRISIS”
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• Normality is back
• Boring German residential is everybody’s darling
• Interest rates are extremely low
• Bank margins are extremely high
• Debt is very cheap, especially including hedging costs
2013 – FIVE YEARS AFTER THE CRISIS
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• Characteristics:
– Simple(st) business models (e.g. “triple pure play” of GSW)
– (Moderate) dividend yields
– Riskless and boring
• Why:
– To replace asset classes like money market funds
– Safe, with a little upside for appreciation
– Inflation protected
– Structural upside potential
Low housing spending as a percentage of disposable income
Positive demographics (household figures grow faster than population, migration, urbanisation)
• “Disadvantage / Danger”– Business model becomes unattractive as soon as growth is back and interest rates
rise again
STOCK LISTED SECTOR 2013: HIGHFLYER GERMAN RESIDENTIAL I
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• “Breaking News”:
– Deutsche Annington has cancelled the IPO!
• Reasons?
– Pricing (foreground)
– Limited business model (background)
STOCK LISTED SECTOR 2013: HIGHFLYER GERMAN RESIDENTIAL II
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• Simplicity
– (very) limited number of asset classes
• Dividends, i.e. cash flow generation
• Limited leverage
• “Safe harbours” – “Köpenick” instead of “Krasnodar” or “Cluj”
respectively “Berlin” and not “Budapest” or “Bukarest”
REQUESTS OF RE SECTOR INVESTORS FOR BUSINESS MODELS
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• IMMOFINANZ portfolio consists of
– Four asset classes
– Eight countries
– More than 50% of the portfolio is located in Eastern Europe
• Portfolio does not comply with the ideal of investors
• Therefore IMMOFINANZ had to create a sustainable cash flow generating business model of its own: “The Real Estate Machine”
WHAT DOES THAT MEAN FOR A COMPANY LIKE IMMOFINANZ?
Development
Stabilisation
through active asset
management
Cycle-optimsed
sale
Cash
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Development
Stabilisation through active
asset management
Cycle-optimsed
sale
Cash
650 500 550
220180
THE REAL ESTATE MACHINE
Figures in Mio EUR
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• Listed real estate companies have to develop specific business models,
which are capable to convince investors
(1) that these business models can survive at least two real estate cycles
(2) that the company provides sound and secured dividend yields (ie. has
sustainable cash flows over the cycles)
(3) that the leverage does not trigger covenant breaches during the lower parts of
the cycles.
CONCLUSION