REFIRE
Few numbers command as much ritual respect in the German listed property market as Net Asset Value (NAV) - and few have been challenged as directly as by long-term REFIRE reader Hubert Bonn of Initiative Immobilien-Aktie 2.0, whose recent post questions the metric’s near-religious status. Analysts still cite NAV as the definitive yardstick of what a company is “worth.”
Yet, as Bonn argues, it is no oracle. It is a static snapshot, shaped as much by interest-rate assumptions and valuation timing as by underlying substance. “NAV tells you little about operational profitability, cashflow stability or how management deploys capital,” he writes. “Substance and earning power are equal pillars of corporate strength.”
At its core, the NAV formula - fair value of assets minus net debt - looks disarmingly simple. The European Public Real Estate Association (EPRA) refines the concept with its three recognised versions: NRV, NTA and NDV, corresponding to replacement, tangible and liquidation value. All rest on the same logic, but each produces a different result depending on the lens and the market context. When interest rates move 200 basis points, a company’s supposed value can appear to evaporate overnight.
For that reason, many professionals see the NAV discount in German listed real estate - often hovering between 50 and 70 percent - as less a buying signal than a risk premium. As investment banker René Parmantier commented under Bonn’s post, “Refinancing remains the decisive issue for many firms. Once that’s resolved, several of these stocks will be worth buying again—but investors need courage and patience.”
Others, like veteran portfolio manager and adviser Thomas Körfgen, observed that the gap between the NAV of a listed property company and that of a comparable open-ended fund can be strikingly wide - in fact, often “worlds apart.” Why, he asked, should investors buy an open-ended retail fund at NAV when listed retail REITs with similar portfolios trade at half that? Add cheaper capital-market financing and no acquisition fees, and the logic of listed exposure becomes hard to ignore.
Still, as consultant Maksimilian Shusel noted, “In the end, it’s not NAV that decides, but cashflow, management and market trust.” That view finds sympathy among many who have watched big German listed landlords - from Vonovia to TAG and LEG - trade at persistent discounts despite robust occupancy and dividend yields. NAV remains a useful indicator, but one that says more about sentiment than solvency.
The debate sparked by Hubert Bonn’s post highlights the gulf between book value and market confidence. For a sector struggling to regain credibility with the capital markets, transparency and operational delivery will do more to close NAV discounts than any amount of balance-sheet recalculation.