In 2023 we purchased Vonovia, the largest residential landlord in Europe that was trading at a 50% discount to its tangible book value. At the time there was concerns about maintaining “investment grade” on their debt as apartment prices dropped 10% and the LTV approached 50%.
Management embarked on a strategy to sell down a part of their portfolio at book value to repay debt and maintain their LTV below 50%. Keep in mind their book value was €31 per share while the stock traded at €16. As the market began to see assets sold at their marked to market value the equity closed the gap on its tangible book value per share. This all happened because housing in the West is structurally under build since GFC and the tight conditions maintained strong asset price valuations.
Interestingly, the aircraft industry find themselves in a very similar situation that’s not an easy fix. The grounding of Boeing 737 MAX in 2019, COVID shutdowns in 2020, a shortage of labour and new strict regulations have ensured these conditions last for the rest of the decade.
Content
Supply Demand Dynamics
Impact to asset values
Valuation considerations (AerCap)
Balance sheet and leverage (AerCap)
Air Lease Corporation
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