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Trust Insider: can German property trusts be rehabilitated?

by James Carthew on Apr 15, 2014 at 00:01

Trust Insider: can German property trusts be rehabilitated?

A few weeks ago I was surprised to see a familiar name readmitted to AIM, Summit Germany (SG). SG, which is managed by Zohar Levy, invests in commercial property in Germany. It is a fund that I used to hold in the portfolio of Advance UK .

Listed in May 2006, SG raised €80 million (£66 million) at €1 per share. It was then expanded twice, issuing 75 million shares in October 2006 and raising a further €150 million by issuing 120 million shares at €1.25 in June 2007.

It built up a portfolio of offices (plus some associated retail and logistics space) worth well over €900 million. Then, as we know, things started to fall apart in the leveraged property sector.

SG had taken some precautions against this, having planned for the fund’s launch since 2004, when German property was in recession. From day one, it concentrated on ensuring that it had a strong tenant base on long leases.

It had leverage on the special purpose vehicles that held the properties but loan to value (LTV) ratios were not as extreme as other leveraged property funds and the maturities of these loans were relatively long (out to mid-2014, on average).

Cash pile

SG also had a substantial pile of cash (over €100 million) and, using interest rate swaps, had fixed its debt at what then looked an attractive 4.2%.

Investors were panicking however, which is why, in October 2008, I was able to buy 3.5 million shares for Advance UK at 12.5 cents each – what looked then like an 88% discount.

Fast forward a few months and Levy could buy sufficient shares in SG to take his holding in the company up to 29.98%. In April 2009 he made a bid for the rest of the company at 21 cents per share.

In February this year, SG was readmitted to AIM at 63 cents per share, raising €30.7 million of fresh capital in the process so I thought I would have a look to see if it looks attractive at that level.

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