Convertible Bond Case Study
Situs Investment Insight helped client realize Significant Return
Convertible bond offering to finance a large real estate portfolio of commercial and residential units was thoroughly reviewed by Situs and processed successfully for 150% return.
Client wanted to originate a €40 million convertible bond offering to finance the acquisition of real estate assets. Assets included more than 16,000 residential and commercial units in more than 120 properties across 50 cities with a leasable area of more than 1,25 million square meters. The majority of assets were acquired through value-add and opportunistic approach and were scheduled for refurbishment. Client was challenged by the lack of valuation capabilities.
Situs reviewed the real estate documents and third party valuation reports. From there, Situs conducted a sample valuation, including site inspections, that exceeded 80% of pool value. From the sample valuations, Situs created a SWOT analysis for potential opportunities and challenges, as well as reviewed claim management process and systems.
Situs recommended the client to buy the convertible bonds of the company, as the analysis demonstrated that even the most pessimistic valuation of the real estate assets had a loan-to-value ratio below 40%. Two years after the convertible bond offering, the company’s share price increased by more than 150%, confirming Situs’ analysis.