Just sold out of my position in Invista European Real Estate prefs.

The company has recently sold one of its biggest assets Heusenstamm for a discount of 18% to NAV.

It sold a Spanish property for a discount of 10%.
Two Belgian properties were recently sold for a discount of 27% to NAV.

In a recent RNS the company said it would not be able to realise the NAV of its assets without raising additional capital.

These facts make me doubt the reliability of the NAV. So if I assume that the realisable value of the portfolio is 20% less than the NAV based on the December 2014 accounts adjusting for held for sale gives a value of €234.4 – if we assume a 20% discount this gives €187.52, less debt of €163.8 (assuming all assets sold applied to reduce debt). This gives a remaining asset value of €23.72m. The ordinaries are wiped out and the preference worth about 70% of face value.

I actually now think it will be worse than this – the company has still not reached the interest rate step down – and sales at 80% of NAV make it difficult for the company to hit the LTV of 70% criteria necessary to hit the interest rate step down… LTV has actually increased to 77.33% from 69% in March 2014. And while this is not hit value is flowing out – particularly after the sale of Heusenstamm – 25% of the rent received.

There has been a slight tick up in the price of the prefs so I am getting out here.

It is still possible I am wrong in getting out – if the remaining assets can be sold at (say) a 10% discount to NAV all will be fine. This is looking unlikely to me so I am taking my medicine and getting out.

Lesson learnt was to be even more sceptical of NAVs than I am usually. My usual test on things like this is to see what assets are actually being sold for before I invest. There were mixed signals on this test – prior to investing a Czech asset was sold for NAV and a vacant French one at a 50% discount to NAV.