I see intererst rates under pressure and real estate thus not as an investment case stock wise. Some markets might become interesting in the near future like Germany in maybe 1 year but atm I´d not invest into them.
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@Keineui hi, it is very interesting your opinion. Why do you say is not a good investment?
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@investron can´t speak about Paris REIT. But German real estate market (residential) such as LEG is currently difficult. Valuations drop, interest rates uncertainty plus invesment demand for ESG all lead to a situation where I would not want to invest in these companies as such. Yes, fundamentals and dividend looks nice. But to me the market needs a correction. Affordability in rents is another topic. Although rents are rising the political pressure is enormous. Just look at Berlin. Just not confident enough this is a good investment.
Yes, housing is something that is in demand always. Notably this thesis can change in the new year, but atm I would keep caution.
Yes, housing is something that is in demand always. Notably this thesis can change in the new year, but atm I would keep caution.
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@Keineui thanks! It is much appreciated
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•@investron Attached is a news item fresh off today's ticker:
Exit Pressure from Private Equity Could Drive Residential Transactions
The German residential investment market could receive additional momentum in the coming years from recapitalizations and secondary transactions. This became clear at the “JLL Living Talk.” According to the discussion, numerous closed-end private equity funds launched between 2016 and 2018 have so far realized less than half of their exits. Specifically, funds from the 2016 cohort have so far distributed less than 50% of their volume to investors; for the 2017 cohort, the figure is approximately 40%, and for the 2018 cohort, approximately 30%. The majority of the assets therefore remain in the funds, awaiting exit events. As a result, increasing selling pressure is building up in these funds. Instead of full sales, investors are currently increasingly exploring alternative capital measures. These include incorporating debt into the capital structure to “take some equity out,” said Johannes Gruss, Head of Real Estate Investment Banking DACH at JLL. Partial or full sales of portfolio holdings are also an alternative. “This will be the year of recapitalizations and secondary transactions,” Gruss added.
Summary: Private equity needs to exit the residential sector in the coming years, and thus pressure on prices is likely
Exit Pressure from Private Equity Could Drive Residential Transactions
The German residential investment market could receive additional momentum in the coming years from recapitalizations and secondary transactions. This became clear at the “JLL Living Talk.” According to the discussion, numerous closed-end private equity funds launched between 2016 and 2018 have so far realized less than half of their exits. Specifically, funds from the 2016 cohort have so far distributed less than 50% of their volume to investors; for the 2017 cohort, the figure is approximately 40%, and for the 2018 cohort, approximately 30%. The majority of the assets therefore remain in the funds, awaiting exit events. As a result, increasing selling pressure is building up in these funds. Instead of full sales, investors are currently increasingly exploring alternative capital measures. These include incorporating debt into the capital structure to “take some equity out,” said Johannes Gruss, Head of Real Estate Investment Banking DACH at JLL. Partial or full sales of portfolio holdings are also an alternative. “This will be the year of recapitalizations and secondary transactions,” Gruss added.
Summary: Private equity needs to exit the residential sector in the coming years, and thus pressure on prices is likely
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•Thanks for the info @Keineui ! I've been thinking some time about it. It's true that a lot of the funds launched ~10 years ago (2016-2018) on cheap money are now reaching the end of their life and will have to sell.
Even so, I'm not sure that hits LEG negatively. Their AFFO payout is 11%, FCF coverage is 3.56x, and they already fixed the balance sheet with the 2024 dividend cut. I don't think they're a forced seller — if anything, they could buy cheap, since they can afford new debt at higher rates.
Most importantly: even if this delays the re-rating for a while, the dividend is covered on current numbers. And you know me... I'm here for the dividends.
Let me know if you think otherwise!
Even so, I'm not sure that hits LEG negatively. Their AFFO payout is 11%, FCF coverage is 3.56x, and they already fixed the balance sheet with the 2024 dividend cut. I don't think they're a forced seller — if anything, they could buy cheap, since they can afford new debt at higher rates.
Most importantly: even if this delays the re-rating for a while, the dividend is covered on current numbers. And you know me... I'm here for the dividends.
Let me know if you think otherwise!
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