In mid-2020, real estate giant AroundTown resolved a share buy-back program for its stock with an amount of up to €1 billion.
The largest shareholder, Yakir Gabay ( יקיר גבאי ), was a supporter of the asset sales strategy, in conjunction with large share buybacks at a deep discount to NAV.
During 2020, the group signed over €2 billion of disposals of non-core assets. The active disposals were carried out through multiple deals and follow the ongoing strategy of AT to dispose of mature assets that have mainly been lifted, as well as non-core assets that lie beyond the target locations and types of assets of the company.
Via various transactions and at a profit above book value and a net rent multiple of 19x, the disposals were sold. Disposals are primarily retail and wholesale properties, which are mainly distributed throughout Germany in different locations. With the increased emphasis on top tier cities, disposals of non-core assets above book value improve the quality of the overall portfolio.
At least some of the characteristics of AroundTown SA are frequently correlated with two powerful drivers of return on investment: good quality and a relatively cheap valuation. One of the efficiency indicators for AroundTown SA is that the Piotroski F-Score passes 5 of the 9 financial tests. The F-Score is a world-class checklist for identifying stocks with an improving trend in financial health dependent on accounting. A good F-Score shows that the business has reliable quality metrics.
After the efficient execution of its disposal pipeline, AroundTown raised the signed annual disposal volume to over 2 billion Euros (‘Disposals’). Moreover, the group is in advanced talks for further disposals amounting to half a billion euros.
AroundTown is now Prime Standard of the Frankfurt Stock Exchange, a top-rated Germany real estate company. The property conglomerate generated asset sales of approximately EUR 2 billion above its book value. This is a considerable achievement, mainly because these sales were made amid the worst international economic downturn since the Second World War. Another significant achievement is that these sales were mainly retail and wholesale properties in the non-core asset groups. The company raised its overall share buy-back volume to EUR 1 billion in conjunction with the large asset sales.
According to the most recent balance sheet results, AroundTown had liabilities of EUR 1.42b due within a year and liabilities of EUR 14.6b due after that. It had cash of EUR 3 billion as well as receivables valued at EUR 494.6m due within 12 months, offsetting these obligations.
The uniqueness of the AT strategy is its powerful management team that mobilized its team from high volume acquisitions into high volume asset sales during the lockdown crisis. This is also proof of the high quality of AT’s assets and conservative book prices of its assets sold at a premium to book NAV even during a severe economic downturn.
Under the leadership of its’ founder, property magnate Yakir Gabay ( יקיר גבאי ), the real estate conglomerate AroundTown has ultimately reported a solid output throughout 2020, despite global lockdown measures. This is certainly due to its underlining strong portfolio diversification and mature management strategy.