Sectors > Top Reports > Corestate Memo 101220

Corestate Memo 101220

Corestate. HFS / Stratos II – A Forensic Assessment
PUBLISHED: 10 December 2020
PAGES: 189
SUBMARKET: Corestate, Top Reports, Top Reports,


Why Read?

  • Understand the extent to which HFS and its major Stratos II fund are so important for Corestate’s EBITDA and liquidity
  • Understand Stratos II’s mezzanine lending portfolio risks – ultimate borrower group concentrations; related party lending and development project acquisitions and disposals; mezzanine loan maturity extensions / restructuring; length of time for which projects have been in planning phase; extent of reliance of concentrated borrower groups on Stratos II as dominant source of their mezzanine borrowing
  • Understanding Corestate’s contingent liquidity risk from Stratos II / HFS funds – extent of funding shortfall between Stratos II’s fund distributions and cash realised result; extent of accrued interest built up on mezzanine loan portfolio
  • Understand the German real estate development mezzanine lending market

What’s New?

  • Forensic assessment of Stratos II
  • Financial projections, valuation and sensitivities

Questions Answered

  • Looking through to ultimate ownership of development project companies, how concentrated is Stratos II’s mezzanine loan portfolio by ultimate borrower group (and by individual projects)?
  • Why do Consus’ recent project disposals matter for Stratos II?
  • What is the maturity profile of Stratos II’s mezzanine loan portfolio?
  • How far away from completion are the development projects backing Stratos II’s mezzanine loan portfolio and what % are still in planning phase after several years?
  • Besides mezzanine loan holdings, which other securities does Stratos II appear to trade intra reporting periods?
  • How do the Stratos fund coupon participation fees work and what other expenses could Corestate re-charge to the Stratos funds?
  • Excluding net investor inflows, how much cash does Stratos II generate, how much of a funding shortfall does this leave vs the distributions it pays to its investors and why does Corestate likely need to stand by to finance funding shortfalls at Stratos II if these are not financed by third party net inflows into the fund?
  • How can we assess how much accrued interest has been built up over the years in Stratos II?
  • What are investors withdrawal rights from Stratos II?
  • What are Stratos II’s mezzanine loans secured by and do lender and borrower disclosure reconcile here?
  • What break-up of Corestate could Mr Norbert Ketterer and Mr Ralph Winter (777 / W5) consider?
  • What signs might there be that Stratos II investor flows have improved?
  • How much did Corestate pay for HFS in FY 17 and on what valuation?
  • How has Corestate’s EBITDA declined in Q3 20 LTM even without material pressure on HFS / Stratos II contribution?
  • How do Corestate’s Adj EBITDA, cash flow, liquidity, capitalisation and valuation look if we stress HFS fund volumes and coupon participation fees? 
  • What is recovery on Corestate’s SUNs and convertible SUNs, maturing Apr-23 and Nov-22 respectively, absent some wildcards?
  • What are the fundamentals for German residential real estate and is this really what Stratos II is exposed to?
  • Similarities and differences to the Bankgesellschaft Berlin development project lending property funds in the mid 1990s and early 2000s

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