Opinions
Joshua Varghese
European Residential REIT
ERE.UN-T
BUY
Oct 08, 2024
Stock price when the opinion was issued
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Dealing with higher interest rates. Rental markets are still strong with condos, but higher interest still eats into your cashflow. Underlying apartments are still performing well, income grows close to 10% on new rentals. Interest and mortgage expenses will increase over next 2 years, so income will be flat. Distribution safe, but won't grow.
Undervalued, great fundamentals. Going through strategic alternatives. A buy and hold strategy will reward you; either from selling off properties one by one, or by closing the gap between public and private market value. In the future, the company won't exist and you'll get back your capital, likely at a premium to where trading today.
Doing the right things, but public market is not rewarding it. Selling assets piecemeal until the REIT is liquidated, now about 50%, and distributed income to investors. Hold on, still lots of value. Could buy comfortably here as it's trading below $2.50 per share, but assets arguably are worth $3.
It's had a tough time gaining scale, further hampered by high interest rates. They tried a strategic review, but didn't attract buyer interest. In the past month, they sold half their portfolio for 750 million Euros, which crystallized value and increased analyst views of ERE. They are intent on monetizing assets, and the stock price has a good margin of safety.