Subject of the analysis is the bearer bond (Stern bond) with a coupon of 6.25% issued by Stern Immobilien AG (issuer) located in Grünwald, Germany. The bond has a total nominal amount of EUR 20 million and matures in May 2018. The collateral structure provides the pledging of shares of the subsidiary Stern Real Estate AG. In this subsidiary objects are pooled, which are supposed to be kept in the long-term. Furthermore, claims of Stern Immobilien AG against Stern Real Estate are pledged to the bondholders.
Stern Immobilen AG’s business focuses on optimizing value and earnings of high quality residential and office buildings as well as properties with the intention of subsequently selling them. The subsidiary Stern Real Estate AG generates additionally current revenue from selected high-return properties that are in stock in the medium-term.
From a qualitative perspective, Scope highlights the continued positive market trend in addition to the many years of industry experience and an existing local network. By outsourcing the processing of individual foreign markets to established partners, the Stern Immobilien AG demonstrates that it is a flexible market player. However, the issuer is exposed to fierce competition from other real estate companies, which poses a risk from the qualitative point of view.
Regarding the quantitative analysis, the earning rates analyzed from 2010 to 2012 (3 years period) are considered positive. All profitability figures, return on equity, return on assets and return on sales are at a very high level. The company increased its profit after tax of EUR 2.3 million in 2010 to almost EUR 5.8 million in the last year of the analysis, 2012. On the negative side Scope notes the high sales volatility, the low diversification and the short-term structure of the company’s liabilities.
The company will use the proceeds from the bond issue to become more independent from banks and other lenders, and thus be able to act faster and more flexible in the implementation of new projects. Moreover the capital base’s significant expansion is supposed to strengthen the company’s position within the competitive environment.