New Europe Property Investments plc?

BrockStoker

http://www.nepinvest.com/

Can anyone tell me anything about this fund?

I can't find very much info about it, but would like to know more about fees/charges.

I'd like to include it as a small percentage (3.6%) of my total investments. It does look like a very risky investment, but it would be held for at least 5-10 years (possibly longer - 15-20 years is possible) as part of my fairly well diversified portfolio of less risky funds.

TCA

Fees for what? You need more details than those given in the PDF downloads from the link you supplied?

http://www.nepinvest.com/pdf/nepi-results-h2-2014-en.pdf

BrockStoker

TCA wrote: »

Fees for what? You need more details than those given in the PDF downloads from the link you supplied?

http://www.nepinvest.com/pdf/nepi-results-h2-2014-en.pdf

Thanks for the reply TCA.

I can't seem to find any info about anual managment charges, perfomance fees (if there are any), and entry/exit fees (if there are any).

If they are buried in the PDF you linked to, I could not see them.

TCA

Not sure there are any. I admittedly only glanced at it, but I think they're self-managed by a board of directors. Perhaps there's no management company as such. But I did only glance at it.

BrockStoker

It's possible that there are no charges/fees? Seems a bit too good to be true if so!

bowlhead99

It's a company that owns properties and rents them out and maybe sells them on. Like Tesco is a company that owns and leases properties and uses them to sell groceries. Or Lloyds is a company that has branches and computers and borrows money from depositors and other banks to lend out to individuals and businesses for interest and fees.

If you buy an ownership share in Tesco or in Lloyds and become their shareholder, what is the 'charge', what is the 'percentage management fee'? They have running costs which appear in their financial statements. If you looked at their accounts for the half year to last August, Tesco turned £34 billion of revenue into £0.6bn before one-off items. So, you could say their running costs were 98% of income. Does that sound bad? How much do Tesco charge you as an 'entry charge' when you buy a share from a previous owner of the share on the stock exchange? Nothing. Does that sound good?

So, the fact that a company that owns properties does or does not have another company charging its owners an explicit fee based on the value of its assets for advice on what to do with those assets, is not what makes it a 'too good to be true' investment opportunity.

If you look at NEPI's accounts (or the snapshot from TCA) they started 2014 with €0.7 billion of shareholders' funds, issued €0.4bn of new shares and made €0.1bn of profit. Some of the profit is unrealised valuation gain, some of it is income. The total adjusted net asset value at the end of the year is owned by all the shareholders of the business (270 million odd) resulting in a value of 4.5 euros a share. If you want to go and buy or sell share on the stock market, the going rate is 10 or 11 euros a share which is rather more than the underlying assets represented at year end. Presumably people think it is worth paying more than the underlying assets based on their perception of future prospects. They paid about 32 cents a share dividend for 2014 and as they grew their empire over the year they expect to have distributable earnings of about 17-18 cents for the first half of 2015.

You can use these figures (plus all the other ones in the financial statements and the information they publish about specific individual properties) and your own knowledge of the Romanian commercial property sector and your views on the outlook for the Eastern Europe macroeconomy relative to our own, to decide whether an investment might be suitable.

In five to ten years time they may be thriving or they may be bust. The share price might reduce closer to, or below the balance sheet value of the assets, and the balance sheet value of the assets might increase significantly or it might reduce. What you can say with certainty is that if you are going to buy it you would have done better by buying it last summer at only 6 euros a share instead of closer to 12 euros a share as it is now. Of course back then it was a smaller operation and maybe you feel the risks have reduced and prospects improved so it is worth more money.

masonic

BrockStoker wrote: »

It's possible that there are no charges/fees? Seems a bit too good to be true if so!

You seem to be labouring under the misapprehension that this is a fund. It is not, it is a small property investment company with 16 employees and you are buying shares in the company. You may be interested in reading this article. The blurb at the top would be enough to put me off:

Recently I was looking at New European Properties (NEPI + ), which is a complicated beast, having listings in London, Johannesburg and Bucharest and an investment focus on Romanian shopping centres.

The shares trade close to twice asset value, a 100% premium. This seems extraordinary to me when you think that the UK equivalent, Intu Properties (INTUP + ), trades around asset value.

bowlhead99

Of course, paying twice net asset value for the company might be a screaming bargain if you can't directly buy the relevant Romanian shopping centres or whatever yourself and you believe they will quadruple in value over the next 10 years and then you can sell out for at least par.

Buying property investment holding companies, just like investment trusts, is all about supply and demand.

masonic

bowlhead99 wrote: »

Of course, paying twice net asset value for the company might be a screaming bargain if you can't directly buy the relevant Romanian shopping centres or whatever yourself and you believe they will quadruple in value over the next 10 years and then you can sell out for at least par.

Buying property investment holding companies, just like investment trusts, is all about supply and demand.

Well yes, and I don't know what the prospects are for Romanian shopping centres, but I'd wager neither does the OP, so the old saying about not investing in things you don't understand might hold some water here.

BrockStoker

Thanks for your wise words bowlhead and masonic.

As usual you've both pointed out very relevant facts that I would have completely missed.

It does seem to be very overvalued, which I'm not keen on (to say the least), and as you both suspected I don't really know much about Eastern European shopping centers. My guess is that Romania etc still have a long way to catch up with more developed parts of Europe, so the value could easily keep going up, but there is also a long way to fall if things go wrong.

I don't think I'll be buying into it at least for the time being, but perhaps if the share price drops significantly I might at some point.

Thanks again!