Four years ago I bought a basket of various Italian real estate funds because I liked the combination of a 50% discount to NAV and the fact that these funds all have a fixed maturity date. When I started tracking these funds there were 24 different entities with a total NAV of €4.0 billion. Two years ago that number had shrunk to 21 different funds with a NAV of €2.6 billion and now just 14 funds are remaining with a total NAV of €1.5 billion. It’s taking quite some time to sell the assets of these funds, but they are liquidating. At the same time the average discount of the remaining funds has shrunk a little bit, but is still quite high at 41%:
So far my investment in this basket has worked out to my satisfaction. As of today my internal rate of return stands at 14.7% which I think is pretty okay for real estate. While all the funds I bought have appreciated in price, most of the return can be attributed to just two funds that have now been fully liquidated. While things have worked out for me, just blindly buying all these funds would probably have been a bit less successful. Most funds have been quite successful in slowly selling their assets close to NAV, but some have sold them at sizable discounts. The Obelisco fund liquidated this year, writing down their NAV to zero, and without making a single distribution to shareholders…
Another fund that is close to liquidating is Unicredito Immobiliare Uno. In the latest annual report the management company reports that they have received offers from multiple investors to acquire the remaining real-estate portfolio of the fund. I think it’s quite likely they will be able to sell their remaining assets close to NAV, and thus with the discount remaining above 20% I think it’s an attractive bet. It’s my only new position in my basket of Italian real estate funds, all the other ones in the list below have been in my possession for multiple years:
| Ticker | Purchase Date | entry | Sell Date | dividend | Price/Exit | Return |
|---|---|---|---|---|---|---|
| QFUNO.MI | Mar 1, 2019 | 727.00 | – | – | 765.00 | 5.3% |
| QFSEC.MI | Mar 27, 2017 | 260.10 | – | 66.5 | 248.00 | 20.8% |
| QFARI.MI | Mar 27, 2017 | 725.50 | – | – | 860.00 | 18.4% |
| QFSOC.MI | Mar 27, 2017 | 237.30 | – | 27.00 | 244.15 | 5.5% |
| QFAL.MI | Feb 26, 2015 | 1,150.00 | – | 278.00 | 1,457.00 | 26.6% |
| QFARE.MI | Feb 23, 2015 | 1,120.00 | – | 575.50 | 860.00 | 23.4% |
| QFDI.MI | Feb 26, 2015 | 41.01 | – | 85.18 | – | 107.5% |
| QFEI1.MI | Mar 2, 2015 | 720.00 | Mar 27, 2017 | 450.00 | 948.50 | 93.8% |
| QFID.MI | Feb 27, 2015 | 70.90 | – | 3.50 | 95.25 | 18.4% |
| QFIMM.MI | Feb 27, 2015 | 1675.00 | – | 1002.00 | 1,256.20 | 34.6% |
| QFVIG.MI | Feb 27, 2015 | 1635.00 | – | 1,751.95 | 554.00 | 40.9% |
Disclosure
Author is long everything in the table that hasn’t liquidated yet
Why don’t you hold Atlantic 1, the fund with the biggest discount?
Because it also has the highest amount of leverage and if there are asset write-downs they will hurt a lot more because of it.
“The Obelisco fund liquidated this year, writing down their NAV to zero, and without making a single distribution to shareholders…”
What happened here? How can you have a discount of 50% to NAV and lose?
Leverage. Never followed the fund very closely, but at the end of 2016 they had for example 75M in real estate on the balance sheet and 64M in debt. That doesn’t leave a large margin of safety… but of course, things had been going bad in the years before as well…
Do you mind sharing your debt or leverage data please ?
It’s all in the annual reports.
discount of only 20%-25%….tax on dividends in Italy are 26%…no gains for taking risks…
Luckily interim liquidation distributions aren’t taxed
skimmed through a couple. really liked the one managed by BNP (QFID). Regarding the QFUNO, why do you think they extended the period of liquidation a second time?
If it turns out like QFAL (Fondo Alpha), where they extended the period until 2030, it becomes less appealing I would say. Sorry for double commenting
Fondo Alpha has a stated goal to liquidate before the end of 2020 I think, so that’s pretty okay I think.
QFVIG liquidated. Time for an update blog on IREIFs?
Perhaps I should do a final update. Took some years, but now almost all the funds are liquidated.