1Wk·

Cibus at 10.70 euros

$CIBUS (+0.72%) For 10.70 euros? The price dropped quite a bit in September.

The price drop is likely linked to concerns about interest rates and fears that refinancing existing loans could end up being expensive. I always find such arguments from real estate professionals a bit far-fetched, since these scenarios are, of course, always carefully modeled in advance. Moreover, loans aren’t immediately rolled over at higher interest rates; existing financing has to actually expire first. If that’s the reason for the decline, it’s really just scaremongering and nonsense. Of course, a rise in interest rates has an impact—but only after a delay. Especially with commercial real estate, there’s actually enough margin to cushion this additional burden.

Perhaps the stock market also disapproves of the issuance of new shares in connection with the acquisition of Forum Estates. However, this isn’t just about issuing new shares; the issuance also brings in a massive new portfolio of highly profitable properties. According to Cibus, this deal will increase earnings per share directly by 3–5%—so there is effectively no dilution effect.

What am I trying to say? I believe the drop in the stock price is unjustified. I actually wanted to stick with 400 shares, but I’ll probably take advantage of this “offer” again as soon as I have some spare cash.

(Graphic generated with lovart.ai, modified in Photoshop)

17 Comments

Chris@Multibagger

1Wk

Even though I'm not exactly an expert in technical analysis, I've been observing a perfectly intact downtrend for a year now, one that could be approaching its lower boundary and will then either reverse or break through it.

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Smudo@Smudeo

1Wk

@Multibagger "9 euros is a fair price"

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🏊🏻‍♂️ • 🚴• 🏃‍♂️ Endurance Life@MozartsGeist

1Wk

Thanks for your post. 👍 I also think the current phase is a good opportunity to buy more.

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Keineui@Keineui

1Wk

So anyone who doubts the connection between rising interest rates and falling real estate valuations (and thus falling stock prices of real estate companies) and claims that all of this has already been priced in anyway should perhaps invest their money in other sectors instead. That’s just my opinion.

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NichtRelevant@NichtRelevant

1Wk

@Keineui Of course, there is a correlation between interest rates and real estate valuations. You can see that quite clearly in the local residential real estate market.

Nevertheless, it’s not the case that a rise in interest rates immediately calls the entire business model of a real estate company into question. After all, refinancing occurs gradually, so the higher interest rates only translate into actual costs for the company over time. Most financing arrangements run for at least 10 years, but I can imagine that companies like Cibus lock in interest rates for even longer periods. In the commercial real estate sector, margins are significantly higher than in the residential sector, and leases are also typically indexed (usually linked to inflation). When interest rates rise, it’s usually in response to above-average inflation, and that’s when the clauses in commercial lease agreements kick in. What I’m saying is: I believe the impact of a moderate rise in interest rates on operating business is being overestimated here.

As for the valuation of the properties held, it’s true, of course, that higher interest rates put downward pressure on realizable sales prices. In particular, the hidden reserves generated by sales of existing properties diminish somewhat as a result. However, overall valuations are naturally supported by the standard purchase price factors in income-based real estate valuation.

Is it all negative, or is there anything positive? Refinancing and new financing are becoming more expensive, so one must be even more selective when making acquisitions. At the same time, with high supply, the pool of bidders has shrunk significantly, and purchase prices for new properties are now suddenly much more negotiable—at least that’s the impression I’ve gotten lately.

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Keineui@Keineui

1Wk

@NichtRelevant Come check out Expo Real in Munich next week. You'd probably end up deleting that last paragraph right away…

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NichtRelevant@NichtRelevant

1Wk

@Keineui I’m not invested in new-construction properties; after all, the Expo is primarily for property developers, project developers, and investment firms. Things are tough for them right now.
However, when it comes to buying existing multi-family residential buildings, there are some really good deals out there right now, because as a buyer you’re pretty much on your own and there’s plenty of supply. Sellers have now realized that the prices from 3–4 years ago are a thing of the past, and the notarized sale prices are generally well below the asking prices listed in property listings.

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Raketentoni@Raketentoni

1Wk

I don't see a bottom until around 100 SEK, which is about 8.85 €.
If it drops below 9 euros, I'll buy more.
Best regards from 🇩🇰

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NichtRelevant@NichtRelevant

1Wk

@Raketentoni Are you basing that assumption on technical analysis?

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NichtRelevant@NichtRelevant

1Wk

@Raketentoni If that happens, we'd have to buy EVEN more right away! 👈

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Raketentoni@Raketentoni

1Wk

@NichtRelevant Yes, you need to keep an eye on the Swedish market; bond yields have risen in Sweden, Cibus is relatively heavily indebted, and the real estate market in Scandinavia is generally under pressure. That’s why I believe, now that we’ve fallen below 120 SEK, we’ll head toward the 100–105 range before we make a real turnaround.
If the ECB raises interest rates again, I wouldn’t rule out further lows, because refinancing is becoming increasingly expensive.

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NichtRelevant@NichtRelevant

1Wk

@Raketentoni Hmm. In principle, lower interest rates are, of course, a good thing. But I don’t think that will have an immediate impact on operations, since companies like Cibus certainly don’t use variable-rate financing. Margins on commercial rents are significantly higher than on residential real estate and are often (at least that’s the case in Germany) indexed to inflation. Interest rates rise in response to inflation, and commercial rents then automatically follow suit to some extent, partially offsetting the rise in interest rates.

Fine. Whatever—I’ll buy more of these as soon as I have the money.

My only problem is that I’m currently doing a lot of construction myself and investing money in bricks and mortar. So there isn’t much left over for new investments in the stock market right now.

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Raketentoni@Raketentoni

1Wk

@NichtRelevant Cibus is my second-largest holding. I'm pretty familiar with the situation at Cibus; of course, the rents are tied to the inflation index, but they've just secured new financing through 2031.
It's a good company and worth buying more of, but wait until the market bottoms out.

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NichtRelevant@NichtRelevant

1Wk

@Raketentoni Buy when the cannons are booming 😉.
Maybe you're right about the market bottoming out. Still, from a fundamental perspective, I think the current price level is good, since the business model works and (in my opinion) you just have to wait until it goes back up. Leasing commercial space to discount grocery stores and the like is basically a license to print money.

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Raketentoni@Raketentoni

1Wk

@NichtRelevant And Toni goes shopping every week at one of these real estate agencies here in Denmark 😂

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Smudo@Smudeo

1Wk

The first position can be bought at 9 euros

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NichtRelevant@NichtRelevant

1Wk

@Smudeo Let's see if it actually happens. But of course, that would be an even bigger incentive to buy more.

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