Aroundtown

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See also: Investment Ideas:Rejected | Aroundtown:Sources | Aroundtown:Expert Opinions | Aroundtown:Questions | Banking Industry | Commercial Real Estate: Europe

Work in progress Sheet: Aroundtown

Work in progress Sheet: Overview Real Estate Companies

Investment Position

We do not hold any investment position in Aroundtown.

The idea was rejected due to legitimacy worries around property valuations and challenging commercial real estate situation. For more see explanations on Discord.

Bull & Bear

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8 Redemption of debt substantially below par value Its LTV at the end of 2022 was 40% when only senior debt is included, but when hybrid bonds are added, LTV rises to 55%-above what its closest competitors have (40-45%)[1].
The fact that it was able to sale assets worth €1.6 billion in 2022 show that its assets have good quality and its valuations are conservative[1]. Aroundtown expects its office vacancy rate to rise to 5.5% in 2023(2022:4.9%). This will put pressure on rental income[1].
It has enough liquidity to cover its bond and loan maturities until 2025. Besides, majority of its assets are free from debt; hence it can raise additional loans if needed[1]. It is expected that Aroundtown will fail to call its future hybrid bonds. This will see a rise in borrowing costs, which will negatively impact earnings[2].
Aroundtown expects its property values to decline by 5% in the next 12-18 months, which is positive and optimistic considering the current macro environment[1].
Aroundtown is able to raise office rent given that majority of its tenants are are large corporates and governments(around 75%)[3][4]. Office units account for 43% of its investment properties[5].

The redemption of debt below it's par value allows the company to profit partially from of the changing interest rate environment. In it's 2022 Annual report Aroundtown stated it's LTV compared to the fair value of it's debt at 26%. [6]

History

Portfolio

Annual report pg.26: https://www.aroundtown.de/fileadmin/user_upload/04_investor_relations/downloads/2022/AT_FY_2022.pdf

ASSET TYPE OVERVIEW Investment properties Area EPRA Vacancy Annualized net rent In-place rent per sqm Value per sqm Rental Yield WALT
DECEMBER 2022 (in €M) (in k sqm) (in €M) (in €) (in €) (in years)
Office 10,796 3,474 11.2% 466 12.1 3,107 4.3% 4.4
Residential 8,342 3,685 4.0% 356 8.3 2,264 4.3% NA
Hotel 4,660 1,531 3.9% 237 13.3 3,044 5.1% 14.7
Logistics/Other 423 449 9.5% 24 4.8 942 5.6% 5.6
Retail 1,489 618 11.6% 68 10.1 2,407 4.6% 4.4
Development rights & Invest 2,271
Total 27,981 9,757 7.6% 1,151 10.3 2,635 4.5% 7.5
Total (GCP at relative consolidation) 24,188 8,136 8.2% 995 10.8 2,706 4.5% 7.6

1.Majority of the portfolio is in Office buildings, but portofolio do offer some diversification

Indystry Share
Office 43%
Hotel 18%
Logistic and other retail 2%
Retail 5%
Residential 32%

2. Location:

Region Share
Berlin 26%
NRW 14%
London 8%
Frankfurt 7%
Munich 7%
Dresden 7%
Weisbaden 3%
Amsterdam 2%
Others 26%

3. Tenant Quality:

  • Commercial portfolio with approxx 3500 tenants, residential with granular tenant base
  • Top 10 tenants: less than 20% of rental income
  • Wide range of industries. Public sector, multi national and large domestic corporations: 75% of office tenants
  • Major tenants, as of 2019, are Siemens AG, METRO AG, Daimler AG, Pierre & Vacances, Allianz AG, Deutsche Bahn AG, Orange SA, Deutsche Telekom AG, KPN B.V., VBG Verwaltungs-Berufsgenossenschaft, R+V Versichereunungen, und Regierungsstellen. [7]

4. Green building certifications, this is important as demand for class green buildings is increasing [8]

  • 55% of dutch portfolio is certified with BREEAM (30% in 2021)
  • 9% of the commercial portfolio is diversified (5% in 2021)

5. Maintenance and CAPEX

Due to the current market environment, Aroundtown was more selective in its commercial portfolio and spent less capex. Pg.63

  • During 2022, AT invested €408 million in capex, reflecting a ratio of 1.4% over average investment property value (including properties held for sale), lower in comparison to €433 million and 1.7% in 2021. Excluding GCP, total capex was approx. €265 million in 2022, lower compared to approx. €375 million in 2021.
  • Maintainance amount to 51 million from 38 in 2021.
  • Expansion capex accounted for 48% of the capex in 2022.
  • Tenant improvements accounted for 24% of the capex in 2022
  • Other capex accounted for 28% of the capex in 2022.

Energy efficiency and property regulation

Property

Berlin:

Empty as at April 3, 2023

The total amount of property that is up for rent in Immoscout24 is 163k sqm. This includes property that is available for renting in the near future. For instance, 20k sqm of a building in Karl Liebknecht Strasse 31,33/ 31/33 will be available in Q1 2024. Therefore, the total space that can be rented immidiately is 98k sqm[9]. In total Aroundtown owns 1,491k sqm of property in Berlin and has a vacancy rate of 6.3% and therefore 94k sqm of empty space.[10]That means the current vacant space given in Immoscout24 deviates from the vacant space given by Aroundtown by 4%. The deviation is probably due to their classification of property availability.

Prime buildings:

  • 24k sqm, Alexanderplatz Karl-Liebknecht-Straße 31 [11][12]
  • 34k sqm, Alexanderplatz Karl-Liebknecht-Straße 32. [13][14]
  • 6k sqm, Alexanderplatz Karl-Liebknecht-Straße 32. [13][14]
  • 2k sqm, Alexanderplatz Bernhard-Weiß-Straße[15]
  • 55k sqm, Alexanderplatz Alexanderstraße[15]
  • 9k sqm, Hackescher Market Dircksenstrasse 42-44.[16][15]
  • 11k sqm, Alexanderplatz Rathausstraße[15]

People

Risk: Core people don't seem very transparent. Might be due to the fact that more infos are in Hebrew.

  • Yakir Gabay. Founder. Holds 15%.Sold property in join venture deal with Yitzhak Tshuva. [17]
  • Yitzhak Tshuva
  • Barak Bar-Hen. CEO. Worked for Yitzhak Tshuva before. Fast career rise. [18]
  • Amir Dayan. Largest shareholder of TLG briefly before merger with Aroundtown. [19] Backgroundstory. [20]

Aroundtown news

December 6, 2022: Aroundtown was criticized for reporting low LTV. In November 2022, Ash Nadershahi, senior analyst at Creditsights said in a note to clients, “Aroundtown reported an artificially low LTV ratio of 40%. This is because the company does not include hybrids in their calculations, adds in cash from yet-to-be completed asset sales and, in our view, applies generous assumptions to its property valuations.”[21]

References

  1. ↑ 1.0 1.1 1.2 1.3 1.4 https://seekingalpha.com/article/4591130-aroundtown-earnings-depressed-valuation-no-rush-to-buy
  2. ↑ https://www.investmentwiki.org/wiki/Aroundtown:Expert_Opinions
  3. ↑ https://www.aroundtown.de/fileadmin/user_upload/04_investor_relations/downloads/2022/AT_FY_2022.pdf(page 14)
  4. ↑ https://seekingalpha.com/article/4591130-aroundtown-earnings-depressed-valuation-no-rush-to-buy
  5. ↑ https://docs.google.com/spreadsheets/d/1WszlZ36Yy_7hmpzcwaDBHvO_SnFq5W78koXVCXW6tJo/edit#gid=670693869
  6. ↑ https://www.aroundtown.de/fileadmin/user_upload/04_investor_relations/downloads/2022/AT_FY_2022_financials_presentation.pdf p.8
  7. ↑ https://www.aroundtown.de/fileadmin/user_upload/04_investor_relations/TLGMerger/Aroundtown_SA_Wertpapierprospekt_20191217.pdf
  8. ↑ https://www.colliers.com/en-gb/news/blog-esg-fuel-flight-to-quality-office-space
  9. ↑ https://docs.google.com/spreadsheets/d/1Ky5xKOCUFWRTa5PUEnTvxWQedWBN2yxkBQf8cHrOf80/edit#gid=1292907826
  10. ↑ https://www.aroundtown.de/fileadmin/user_upload/04_investor_relations/downloads/2022/AT_FY_2022.pdf(page 40)
  11. ↑ https://www.aroundtown.de/index.php?id=72
  12. ↑ https://www.immobilienscout24.de/expose/139136800#/:~:text=gesamten%20Geb%C3%A4udes%20als-,Single%2DTenant,-ist%20ebenfalls%20darstellbar
  13. ↑ 13.0 13.1 https://www.aroundtown.de/fileadmin/user_upload/04_investor_relations/downloads/2022/AT_FY_2022.pdf(page 2)
  14. ↑ 14.0 14.1 https://www.immobilienscout24.de/expose/140171844?referrer=EXPO_SIMILAR_OBJECT#/ https://www.immobilienscout24.de/expose/140171464?referrer=EXPO_SIMILAR_OBJECT#/
  15. ↑ 15.0 15.1 15.2 15.3 https://www.aroundtown.de/fileadmin/user_upload/04_investor_relations/downloads/2022/AT_FY_2022.pdf (page 2)
  16. ↑ https://www.aroundtown.de/index.php?id=120
  17. ↑ https://www.beverlyhillsmagazine.com/yellowstone-sells-star-properties-for-1-75-billion/
  18. ↑ https://ir.tlg.eu/websites/tlg/English/3241/news-detail.html?newsID=1781223
  19. ↑ https://en.wikipedia.org/wiki/Amir_Dayan
  20. ↑ https://www.rnd.de/wirtschaft/amir-dayan-vorwurf-steuerhinterziehung-immobilien-mogul-wieder-auf-freiem-fuss-EH2QIIB7CJAMJNIULPZWZKW72Q.html
  21. ↑ https://www.bloomberg.com/news/articles/2022-12-06/end-of-easy-money-era-sparks-questions-over-landlords-true-debt-loads
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