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Euro PIN Fund - One Good Apple Stops The Rot in Q1

Peter Hemple reviews our fictional fund of property-related shares across Europe

During the first quarter (1 February to 30 April) our Euro PIN Fund, a fictional fund consisting of property-related listed companies in countries that use the Euro, made an overall return of 0.8%. This compares to the French stock market falling by 8.4%, the German stock market falling by 10.5% and the Italian stock market falling by 11.3%, during the same period.

However, the Fund would have made a quarterly loss of 2.1% were it not for the agreed takeover of our Irish Hibernia REIT by Canadian giant Brookfield. On 25 March, Brookfield agreed to pay €1.634 in cash for each Hibernia share, which is partly made up by a dividend of €0.03 per share, and together values the REIT at just under €1.1bn.

Danny Kitchen, chair at Hibernia, said: “Despite significant progress against its strategic objectives and a track record of successfully recycling capital into value accretive opportunities, Hibernia REIT has traded at a persistent discount to its prevailing EPRA NTA (net tangible assets) per share. The acquisition recognises the company’s prospects and the quality of its portfolio of assets and delivers an acceleration of the value we expect to be created from completion of Hibernia REIT’s major office development projects.”

Hibernia, which owns mainly office buildings in the Greater Dublin area, claims that its shares have been trading at an average discount of 21% to the net tangible value of its assets over the last five years, and closer to 30% consistently over the past three years, so it was no big surprise that a much larger company seized the opportunity to buy it at the end of a two-year Covid lockdown that has pushed down office rents and capital values.

Fortunately for our Fund, the Hibernia shares were bought 21 months ago at €1.14, and they have accumulated dividends of €0.09 since then also, which takes the total cash out price to €1.72 per share, a profit of just over 50% in less than two years. Followers of our UK PIN Fund might remember a similar scenario when Zoopla was purchased and delisted. As in that instance, another company will be brought into the Fund at the standard £10,000 entry allotment (€11,900 at the current FX rate) and the remaining profits from Hibernia will be allocated to the four worst performing shares in our Fund.

In this case, that is Gecina and IRES, plus the two late entrants to our Fund, Cofinimmo and Wereldhave. Each will be allocated €1,212 from the Hibernia sale and those funds will be used to buy more shares in each company at the current share price. These adjustments have been made in the table. 

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