WOOD Flash – Graphisoft Park: 3Q20 – writes down 8% of value of properties, FFO in line

Graphisoft Park published its 3Q20 results yesterday evening (10 November). The company surprised us with a EUR 17m write-off booked in 3Q20, reflecting the expectation of the external appraisers regarding yield expansion. While we were caught off guard by the timing – we would have expect it be recorded during the year-end results – the magnitude is broadly in line with our estimates (we were pencilling in a EUR 21m write-down for the full-year). The vacancy has increased slightly over the summer, to 5% (from 3% previously). The FFO came in broadly in line with our estimates, and the company seems to be on track to reach our full-year estimates. Management also reiterated its full-year guidance. We appreciate what we perceive as a conservative approach to the valuations. We cannot rule out that a temporary period of weaker leasing demand, coupled with the completions of developments, could result in pressure on the effective rents in the offices across Budapest office. That said, with its unique product, and a number of IT and biotech firms among its tenants, Graphisoft Park seems well-positioned to maintain high occupancy and rent levels, in our view. Trading at 0.6x P/B and an 11% FFO yield on our 2020E, we believe the stock is attractive at the current levels. The key trigger for a rerating would be a potential takeover bid for the company, in our view.