Two years ago I bought a basket of Italian real estate funds with a simple thesis: they are all liquidating (because they all have a fixed end date) and they are trading at a big discount to net asset value. Since then that thesis has been playing out slowly. Back then there were a total of 24 funds with a total net asset value of €4.0 billion. Thanks to asset sales (and also some write-downs) there are now 21 funds remaining with a total asset value of €2.6 billion. The total market valuation is €1.4 billion for an overall discount of 46%, down just slightly compared to the 48% discount two years ago.
While the overall discount has remained roughly constant there have been some significant shifts between individual funds. I bought for example Europa Immobiliare N1 at a 54% discount, but thanks to some successful asset sales the discount is down to 14% (pro-forma for a large liquidation dividend that will be paid next month). Other stocks have seen their discount grow. Two years ago I thought that the Atlantic 1 fund was richly valued at a discount of just 24%, now it’s actually one of the cheapest funds with a 58% discount. I have strongly considered adding this one to my basket, but so far the relative high leverage (50% LTV) has been holding me back.
I did decide to sell Europa Immobiliare N1 though, and added a couple of other positions. A new addition to my basket is Amundi RE Italia. They haven’t made a lot of progress with liquidating so far and incurred some asset write-downs, but the discount is huge at 61%. My other additions are Securfondo and Socrate. Securfondo has been making good progress with liquidating and has only one building remaining, while Socrate also started with selling assets. A great site to keep track of what is happening in this sector of the market is this one. It’s Italian, but it keep track of asset sales, financial reports and other developments related to these funds.
My current basket of Italian REIFs and their performance so far looks as follows:
|Ticker||Purchase Date||entry||Sell Date||dividend||Price/Exit||Return|
|QFSEC.MI||Mar 27, 2017||260.10||–||–||259.90||-0.1%|
|QFARI.MI||Mar 27, 2017||725.50||–||–||724.00||-0.2%|
|QFSOC.MI||Mar 27, 2017||237.30||–||–||245.00||3.2%|
|QFAL.MI||Feb 26, 2015||1,150.00||–||97.00||1,329.00||24.0%|
|QFARE.MI||Feb 23, 2015||1,120.00||–||168.50||950.00||-0.1%|
|QFDI.MI||Feb 26, 2015||41.01||–||–||62.65||52.8%|
|QFEI1.MI||Mar 2, 2015||720.00||Mar 27, 2017||450.00||948.5||94.2%|
|QFID.MI||Feb 27, 2015||70.90||–||3.50||77.65||14.5%|
|QFIMM.MI||Feb 27, 2015||1675.00||–||–||1400.00||-17.4%|
|QFVIG.MI||Feb 27, 2015||1635.00||–||1395.45||850.00||37.3%|
Author is long everything in the table