Aroundtown and Grand City raising capital, pushing up rents

The Luxembourg-headquartered Aroundtown, currently the largest listed German commercial real estate company, raised gross proceeds of €606m by privately placing 95 million new shares at €6.38 in a recent capital increase.

The company said the proceeds will be primarily used to fund the company's growth strategy, which has been at almost breakneck speed over the past three years. Aroundtown listed on the Prime Standard of the Frankfurt Stock exchange in October last year, when it raised a further €450m in fresh funding. Earlier this month the company was included in the MDAX index of medium-sized German companies, after its recent inclusion in the FTSE/EPRA and GPR indices, which will give the company wider visibility among institutional investors.

As of April, Aroundtown is valuing its commercial property portfolio at €10.1bn after a series of acquisitions and revaluations which has added €1.7bn to its holding value since September 2017. The company says the additions are primarily office and hotel assets located in Aroundtown's strategic target cities such as Berlin, Frankfurt, Munich, Dusseldorf, Cologne, Hannover, Essen, Amsterdam and Rotterdam.

In the MDAX, Aroundtown will join its 38%-owned subsidiary Grand City Properties, which has also been assiduously tapping the capital markets. Grand City has just posted FFO1 figures for 2017 which are 11% up on the previous year to €178m. It is targeting €196m to €201m for 2018, and is aiming to pay a dividend of up to €0.79 per share, up from €0.73 for 2017.

Grand City has grown rapidly by buying residential properties in need of refurbishment, upgrading them and pushing through sizeable rent increases. It currently owns and manages 87,000 apartments mainly in North Rhine-Westphalia (28%), Berlin (24%) and in the Rhine-Main region around Frankfurt am Main.

The company said in its annual report it still sees considerable value-add potential in its residential portfolio, with projected annual rents still having the potential to rise by up to 30% to reach market levels. In 2017 the company was able to raise its like-for-like rents by 3.5% to €5.65 per sqm/month, and boosted its portfolio value by 33% to €6.4bn.