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Irish REITs

  • 08-06-2016 11:15pm
    #1
    Closed Accounts Posts: 2,379 ✭✭✭ newacc2015


    Which is considered the better of the Irish REITs? Both Green REIT and Hibernia REIT are very similar. Their market cap is pretty close ( 1bn versus 880m). Their earning per share adjusted for different share value price is almost the same. Their ROI and ROE are almost identical. They have slightly different dividend policies. But both seem on paper also identical. Both have similar balance sheets. Is there is a real difference in either? They look so similar it is ridiculous. I know Green has a fair bit of hoarding around D2 with new office blocks they are building.

    IMO they seem like value considering commerical properties have risen significantly in the last year and so has rents. But their share prices are either down or marginal better than the previous year


Comments

  • Registered Users Posts: 241 ✭✭ 1st dalkey dalkey


    The REIT is a relatively new beast in Ireland and hasn't had time to evolve really.

    They both started within a few months of each other and, given that they are growing in the same environment, it is not surprising that they are similar on paper. A few decades and a few shocks will see them react differently and eventually become very different.

    I have a little HBRN but in no rush to increase exposure. They are still small by international standards and too focused on Dublin. Also waiting to see how their dividend and expense policies evolve.


  • Registered Users Posts: 71 ✭✭✭ NickSantigo


    Has anybody looked at IRES or Hibernia REIT lately. Correct me if I am wrong but they are trading at way below their book value. Hibernia in particular looks to have a strong balance sheet.
    Most of the properties in both portfolios are in well sought after areas iirc.
    I would be looking at investing for a minimum of three years not to buy and flip them in a month.
    Appreciate peoples thoughts and feedback


  • Moderators, Business & Finance Moderators Posts: 7,827 Mod ✭✭✭✭ Jim2007


    Has anybody looked at IRES or Hibernia REIT lately. Correct me if I am wrong but they are trading at way below their book value. Hibernia in particular looks to have a strong balance sheet.
    Most of the properties in both portfolios are in well sought after areas iirc.
    I would be looking at investing for a minimum of three years not to buy and flip them in a month.
    Appreciate peoples thoughts and feedback

    Property is already one of the highest risk categories you can add to a portfolio. Any Irish REIT is too small and to limiting to be a serious contender for most people's portfolios...


  • Registered Users Posts: 12,289 ✭✭✭✭ Mad_maxx


    ires dipped under a euro in march , dividend yield was 5% plus at that point , made it compare very favourably with real bricks and mortar

    they will likely become much more popular going forward with so many " small " landlords exiting the business


  • Registered Users Posts: 71 ✭✭✭ NickSantigo


    My take and feel free to correct me is they both are trading at way below their value.

    Take IRES for example.
    They're long term debt is 560m minus 7m cash leaves 553m debt.
    They're Investment Property is Valued at 1,359m.
    Minus the debt is 806m of property.
    That divided by the number of shares leaves something like 1.55 per share of property
    Meanwhile they are trading at 1.25

    As Irish investors we know that the locations of these properties are well sought after.
    Is there something I am missing?

    That and the fact that as the market cap is below 1 billion means the big boys can't invest yet. If one was to invest and hold for 3, 5 or more years the portfolio should grow to an area where the bigger funds start investing and push up the value of your investment even more. In the meantime you get to enjoy the dividends a REIT normally pays out


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  • Registered Users Posts: 12,289 ✭✭✭✭ Mad_maxx


    My take and feel free to correct me is they both are trading at way below their value.

    Take IRES for example.
    They're long term debt is 560m minus 7m cash leaves 553m debt.
    They're Investment Property is Valued at 1,359m.
    Minus the debt is 806m of property.
    That divided by the number of shares leaves something like 1.55 per share of property
    Meanwhile they are trading at 1.25

    As Irish investors we know that the locations of these properties are well sought after.
    Is there something I am missing?

    That and the fact that as the market cap is below 1 billion means the big boys can't invest yet. If one was to invest and hold for 3, 5 or more years the portfolio should grow to an area where the bigger funds start investing and push up the value of your investment even more. In the meantime you get to enjoy the dividends a REIT normally pays out


    IRES is indeed cheap but it was 25% cheaper a little over a month ago , id wait a week or so , may is usually a poor month for stocks

    IRES holds hard assets in prime locations and the biggest player involved is a long established canadian outfit CARPREIT

    REIT,s are yet to capture the imagination of the irish property investor yet but with landlords finding the traditional market increasingly onerous with regulation , REIT,s would appear to have a bright future


  • Registered Users Posts: 241 ✭✭ 1st dalkey dalkey


    I last commented on this in 2016, my comment above.

    I still have that small holding in Hibernia mentioned in that post.

    I took another little nibble a couple of weeks ago at around a euro.

    I have looked at ires, but am reluctant in the current political environment.

    As the name suggests they are into residential property only and given the politics of that at the moment I stayed away.

    Hibernia is mostly into commercial property and I felt less threatened by politics.

    Covid, however, might change that too. There is much pressure now to offer forbearance on rents for business.

    I will wait and see what the new government brings.


  • Moderators, Business & Finance Moderators Posts: 7,827 Mod ✭✭✭✭ Jim2007


    Covid, however, might change that too. There is much pressure now to offer forbearance on rents for business.

    Covid is likely to make CEOs look at a few aspects:

    - The dramatic increase in office space per employee needed to meet social distancing rules
    - The cost of financing the last mile for home office support
    - The likely hood of future lockdowns in the coming months and years.

    I only have feedback from one company, based in Zurich city, they have quadrupled their WAH capacity to about 12k workers and the trade off is going to be office space in Zurich, which is very expensive.

    I suspect it is way too early to start drawing conclusions on what the new normal is going to look like for commercial REITs.


  • Registered Users Posts: 541 OttoPilot


    Also in reply to previous poster re: book value of assets, how do you know they are not impaired and hence trading at a premium to true book value?


  • Moderators, Business & Finance Moderators Posts: 7,827 Mod ✭✭✭✭ Jim2007


    OttoPilot wrote: »
    Also in reply to previous poster re: book value of assets, how do you know they are not impaired and hence trading at a premium to true book value?

    A good point, but what kind of model would you suggest using? You don’t have a functioning market to use as a comparison... it’s difficult to do any kind of DCF for the same reason...

    Some times you have to accept that a situation is too difficult to value realistically.


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  • Registered Users Posts: 541 OttoPilot


    Jim2007 wrote: »
    A good point, but what kind of model would you suggest using? You don’t have a functioning market to use as a comparison... it’s difficult to do any kind of DCF for the same reason...

    Some times you have to accept that a situation is too difficult to value realistically.

    Yeah I agree it's too difficult to value unless you were working in the fund and knew how much vacancy rates went up, how much rents were decreasing etc. Just pointing out book value can be outdated :)


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