BondGuide in conversation with Thomas Olek, founder and CEO of publity AG, about the unsatisfactory situation in convertible bond and share price, healing options and nonsensical speculation.
BondGuide: Mr. Olek, the current year figures for 2017 were in need of explanation. In your own words, how exactly did they look like?
Olek: According to preliminary figures, we closed the financial year with a net profit according to HGB of around EUR 11.2 million and assets under management of around EUR 4.6 billion. We have worked very profitably and increased our assets under management by around 50% – but still missed our targets ourselves. We differentiate ourselves from many of our competitors by not earning the vast majority of our revenues and profits from ongoing fees, but 30% and more of our revenue is profit sharing from real estate sales.
BondGuide: In short: fluctuations are priced in. What was the situation in 2017 that you saw a so-called profit warning a few weeks ago?
Olek: That’s right – our forecast for 2017 did not work out at some point. We planned larger portfolio sales for our customers, and these could not be realized by the end of the year. We are confident that we will be able to implement these sales in a timely manner, but we were simply lacking in sales and earnings in 2017. As far as Assets under Management is concerned, we see that the area of the real estate market relevant for us has become much narrower. That the prices we now have to pay in purchasing or which we are still willing to pay for our customers have increased significantly. This narrows the choice of real estate or makes the search more time consuming.
Board member Thomas Olek
publity board member Thomas Olek
BondGuide: As an asset manager, publity has larger international clients, including a well-known American hedge fund. Falling returns on real estate investments are certainly nothing a hedge fund likes to hear …
Olek: We continue to be friendly and in contact as usual – but in the current environment we can not generate returns of 15% or more as we once did. Certainly, we will continue to make property purchases for this customer and investor mentioned by you in the future, but possibly only opportunistically, ie on a case-by-case basis. A large part of the real estate portfolio that we manage as an asset manager still belongs to this hedge fund. The business relationship is therefore intact, but in the future we will be more likely to make sales than purchases for this customer, as it tends to realize profits with its return claims in the current price environment for real estate. On the positive side, of course, we profit generously from the profit sharing. On the other hand, when purchasing we have to attract new investors with more moderate returns than our clients. We are working on that and I am quite confident here.
Would that be a problem? Above all, the share price of publity praise a lot – minus two-thirds within a year.
Olek: Higher returns between buying and selling would also be preferable to us. But the facts are up-to-date as they are: we actively counteract this by strengthening our research and deepening our database of potential objects. We have built up a very extensive and detailed database in which we have recorded almost all properties in Germany that are of interest to us and our customers. This puts us a step ahead of less active competitors. It must remain our goal to acquire and sell more properties than single deals than our competitors. But everyone has to adjust to lower yields in the German office real estate sector in the meantime. That’s a fact.