I guess we can say that if, even with this selling pressure, deals were closed with only a 5% discount, then the valuation has certainly been spot on. In a free selling environment, we would probably have even exceeded the book value?
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Who or what makes this current environment closed or restricted?
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Strictly speaking, 9% of the Care Fundâs properties have now been sold by number, not 10% as someone claims. The sold properties account for 5.1% of the value of the properties owned by the fund. The relative change in square meters will be known immediately at the beginning of January.
However, it seems quite clear that as a result of the sale, the average unit size, average square meter price, and average lease term of the properties owned by the fund increased.
From the sale, Titanium will receive a 2% sales commission, likely still in 2025. If the received sale price is used to pay redemptions, Titanium will receive approximately a 1% redemption commission for the payment of redemptions in 2026. The feared âsignificantâ decrease in commission revenues in these respects will materialize net in the fiscal year 2027.
Owners of Care Fund units have enjoyed solid cash yields and even a small appreciation during the worst real estate market turbulence of recent decades. The world is not perfect; redemption payments have been delayed. But perhaps it can now be stated that it would have been quite foolish, both for the soon-to-be former fund owners and for the remaining owners in the fund, to sell care properties off at half price during the worst market turmoil?
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The appraiserâs task is to determine the market value of properties. If transaction prices deviate significantly from the values in appraisal reports (whether up or down), then yes, the appraisal reports have been wrong. In addition, the fund has had plenty of time to find a willing buyer for the properties.
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A few compiled comments:
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The market is not restricted by any measure. Titanium has now had 18 months to sell the properties (at the end of June 2024, there was information that redemptions would be paid in January '25). This has certainly been the best possible price currently available on the market.
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Real estate valuation is very far from an exact science. In my opinion, hitting that 5% range corresponds very well to valuation reports. @Lisko1âs comment on this is very apt.
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The transaction fee is a good point. According to our calculations, the company has not fully taken this 2% transaction fee historically, although it is possible that we have an error in our Excel. Because of this, I donât dare to directly input that return into Excel. Redemption fees will certainly be mostly at 1%.
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A good challenge from @gearloose1 regarding the timing of the sale. Of course, this ultimately depends on what price was available last spring. On the other hand, eQ was able to sell hundreds of millions worth of properties to the market at reasonable valuations during the last 18 months.
Then, finally, a bit of scenario analysis. In my comment, I already painted the best-case scenario, which is that this 35 MEUR sale would be enough to clear the table. A bad, but realistic, alternative is that the company announces it will pay the overdue redemptions from 1/25 in January 2026, but does not comment on their scale. In this scenario, the investor does not know how much of the \~50 MEUR buffer will be used for this, and at the same time, redemptions for 7/25 and 1/26 are in the backlog. Of course, the scale will be seen in the February monthly review, but this would unpleasantly leave open the risk that redemptions are +100 MEUR. If the company only pays a portion of the overdue redemptions, it would be desirable for the company to clearly communicate which portion is being paid (cf. eQ).
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Considering demographic development, itâs quite a good move to sell the daycare properties to Norwegians. The residual value risk in the portfolio decreases.
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Due to selling pressure. The buyer is very well aware of the situation Titanium has been in regarding redemptions over the last 18 months. I think itâs very naive to think that this has had no impact on the price at all.
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Itâs probably still too early to strongly predict the start of new sales for Hoiva, but could this news about property sales even trigger new redemptions?
Some investors have likely been quite passive in taking any action, as there has been no information about the timing of redemptions. Even a partial start of redemptions might activate those who had intended to redeem.
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