Corestate raises fresh capital, revises full-year outlook after Corona fears
The listed, Luxembourg-headquartered Corestate Capital Holding has increased its capital by 19.5% and placed the shares at the market price of €17.82 in a private placement to long-term investors, raising €75m in net proceeds.
The company said it would use the proceeds primarily to reduce short-term debt, and make inroads into the company’s debt pile.
Against a very changed outlook for the company since the start of the year, Corestate has been engaging in a major efficiency drive, paying down debt, adapting its product range and seeking synergies between its business divisions Financing and Real Estate Funds. The company has recently had to drastically revise its full-year forecasts as it’s been turning in results far worse than expected.
It now forecasts revenues for 2020 of between €185 million and €210 million and pre-tax earnings of between €55 million and €80 million. Adjusted net income is expected to settle at between €25 million and €50 million. All the foreseeable negative impact of the Covid 19 pandemic has been taken into consideration, said CEO Lars Schnidrig, adding that he expects the return of significant market growth next year.
Last year, the company booked a pre-tax profit of €175 million and generated sales of €303 million.
In March this year, Corestate was still expecting sales of around €330 million and an adjusted net profit of around €150 million for the current year. One month later, it was forced to retract its forecasts.
On the deal front, the company is investing over €300m in a forward fund deal to buy a German mixed-use asset for giant occupational pension fund Bayerische Versorgungskammer BVK. The asset is The Q, the main part of the Trophy city quarter development in Nuremberg, with Gerchgroup as the seller
Lars Schnidrig, CEO of Corestate Capital, said: “This urban district development is currently one of the largest in Germany and is a good example of new types of use of city building sites in top locations in combination with the increasing demand for innovative mixed-use concepts for housing, infrastructure and commerce on the customer side.
“Here we develop sustainable and profitable investment solutions for our institutional clients on the basis of our excellent product access to large real estate projects in A-cities and our very broad experience in active asset management.”
Marc Thiel, CEO of the Gerchgroup, said: “A sale of this magnitude in these turbulent times is proof that quality always prevails in the end and we are very pleased that we have succeeded in selling the first construction phase of this quarter development despite the circumstances.“
REFIRE: Corestate’s share price has been pretty much in freefall over the last three years after an initial phase of euphoria following the company’s IPO in late-2016, and its performance over this time is worse than any other listed peer except for the beleaguered Deutsche Euroshop, whose total exposure to retail has been its downfall.
Corestate had had to do a rapid about-turn and is in full crisis-management mode since the outbreak of the virus. Slashing costs and boosting liquidity by all possible means has been the byword, as the company’s institutional investors have suddenly slammed on the brakes. As the dividend was pulled and CEO Lars Schnidrig drastically revised the year’s outlook, the stock crashed anew and has yet to stage any meaningful recovery.
Schnidrig has been more optimistic of late, suggesting that the worst is over for Corestate, which manages a real estate fund volume of meantime €28bn. Much of Corestate’s real income comes from commissions and fees on transactions, which have largely dried up. Hence the immediate need for a bulwark against looming short-term liabilities.