COVID-encumbered Deutsche Euroshop re-finances €154m of loans
Embattled shopping centre investor Deutsche Euroshop (DES) managed to put in place three new credit agreements in June for three loans maturing this year. The refinancing for the loans totalling €154 million has interest rates of between 1.18% and 1.64% and a term of ten years.
The SDAX-listed DES has traditionally had conservative financial structuring compared to other European players in the sector. DES is the only public company in Germany to invest solely in shopping centres in prime locations. Heavily affected by the COVID pandemic, it has struggled recently with a collapse in operating profits, while a further decline in sales and operating results is projected ahead.
However, its loan-to-value (LTV) ratio is still favourable compared to peers, standing at 32.9% (2019: 31.5%). Based on the Group's pro-rata share in joint ventures and subsidiaries, its overall absolute LTV ratio was 35.8%, which is still conservative in a sector comparison (2019: 33.7%).
The company currently has investments in 21 shopping centers in Germany, Austria, Poland, the Czech Republic and Hungary. The portfolio includes the Main-Taunus-Zentrum near Frankfurt, the Altmarkt-Galerie in Dresden and the Galeria Baltycka in Gdansk, among many others.
In a statement on the new financing deals agreed, DES's CFO Olaf Borkers said: "The ongoing pandemic is also affecting the financing market. However, due to the quality of our center portfolio, our robust balance sheet structure and our good liquidity position, our financing partners are continuing to provide us with long-term loans, even in this challenging and exceptional situation.
"We are also pleased that several of our loans are now counted by the financing banks within the green bond-eligible portion of their assets. It helps that all our centers have been awarded gold or even platinum certificates by the German Sustainable Building Council (DGNB). The DGNB certification system is considered one of the most advanced in the world and is internationally recognised as a 'Global Benchmark for Sustainability'."
Another bonus for DES is that the company has been classified as "eligible" by the Deutsche Bundesbank for several years. This is a form of high rating of its creditworthiness by the BundesbankCompanies which enables DES to be treated by Eurosystem central banks in the same way as companies that have been assigned "investment grade" by recognised rating agencies. This means that credit claims against Deutsche EuroShop qualify as collateral for monetary policy operations conducted by Eurosystem central banks.
CFO Borkers said this gave him confidence that future loan re-negotiations would also work to the company's benefit. "Only the extension of a loan for €30.0 million is pending in 2021. Three additional loans totalling €226.0 million must be extended in 2022, one loan for €209.1 million in 2023, no loans in 2024 and one loan for €58.7 million in 2025. Given the portfolio quality and the much-improved pandemic situation, I am confident that we will get good deals for these as well."