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SOGEN FUNDS'
JEAN-MARIE EVEILLARD ET AL.
(continued from preceding
page)
OID: But it gets better.
Eveillard: Yes, indeed. Looking next at EuraFrance, about 35% of its adjusted NAV is accounted for by its stake in Gaz et Eaux, another 35% or so by its holdings in publicly traded insurance businesses in Europe, 20% or so by cash and 10% by a variety of unlisted companies.
And thanks in part to the fact that Gaz et Eaux itself sells at a discount to its NAV, at its current price of FF2,500 per share, EuraFrance is selling at a discount of a little more than 46%.
OID: You're starting to get warm...
Eveillard: And continuing up the chain, the next holding company is Immobiliere Marseillaise. There, about 75% of its asset value is accounted for by its stake in EuraFrance, 21% or thereabouts by real estate in Marseille, and the remaining 4% or so by net cash.
OID: May I ask you how you value their real estate?
Eveillard: Elizabeth Tobin did that calculation. And I don't recall how. But knowing her, she probably used a conservative value. Let me get her to tell you.
OID: You don't have a more aggressive analyst - perhaps an ex-broker or ex-newsletter editor?
Elizabeth Tobin: They own 260,000 square meters of apartment properties. And we valued it at FF4,000 per square meter, based on conversations with people who I believe are knowledgeable about that market.
OID: For the metrically challenged among us, what would that be equivalent to in dollars per square foot?
Tobin: A meter is 39.37 inches. So one meter is equivalent to just under 3.3 feet. Therefore, one square meter would be just over 10-3/4 square feet. And at current exchange rates, FF4,000 would be roughly equal to $645. So in U.S. dollar terms, we've valued their real estate at about $60 per square foot.
OID: That sounds reasonable.
Tobin: We think so.
Eveillard: And, again, it's comforting to us, at least, that real estate in France - including Marseille - has been depressed for six or seven years. It's done terribly. So we're not exactly talking about overheated real estate.
And when we add up the value of its stakes, Immobiliere Marseillaise's current stock price of FF7,900 represents a discount of about 67% from adjusted NAV.
OID: Super. But are those figures before or after tax?
Eveillard: They're before tax. However, the tax rate in France on long-term capital gains is only about 20% currently. And so, after-tax, Immobiliere Marseillaise is still selling at a discount of more than 60%.
OID: Excellent.
Page 7 of 20
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