Deutsche Konsum balance sheet approaches €500m on focused retail
Deutsche Konsum REIT AG, the small listed specialist focused on Fachmarktzentren or retail parks, has just invested €29m in buying five separate properties, on top of a recent investment spree that has seen its real estate portfolio grow by 18 properties or around €69m in the first quarter of its latest financial year. The company is controlled by well-known German real estate manager Rolf Elgeti.
It now owns 108 properties with a total rental space of more than 635,00 sqm, and has a balance sheet of about €490m, generating an annual rent of around €42m. The company focuses on the acquisition, rental, inventory management, and sale of retail properties, especially in regional centers and micro-locations in the northern and eastern part of Germany.
In its latest investment drive it bought the shopping centre "Coens-Galerie" in Grevenbroich (North Rhine-Westphalia) with around 12,000 sqm of rental space housing anchor tenants Netto (EDEKA), DM-Drogeriemarkt, as well as C&A Mode, Medimax and CCC Schuhe. The total property currently has a WALT of 4.5 years with an annual rent of €1.1 million, but with a vacancy rate of 36%, which according to the company offers ‘significant value creation potential’. The seller was Gazit Germany Asset Management, advised by NAI Apollo Group partner Immoraum Real Estate. It also bought a "toom" Baumarkt (REWE) in Ritterhude (Lower Saxony) with a leasable area of 7,000 sqm. The property has a remaining lease term of more than nine years and is fully let. The annual rent is € 0.5 million. The other assets were a hotel, retail, office and service centre in Greifswald with 6,100 sqm producing a rent of €0.5m, another retail centre (5,900 sqm) in Lünen (NRW) and a Metro Gastro wholesale market in Goslar (Lower Saxony) with 4,900 sqm, both generating a total of €0.6m annually, with an average WALT of three and six years.
REFIRE met up with Mr. Elgeti at the recent EPRA gathering in Berlin to catch up on the company’s activities since its launch on the stock market in December 2015. Then, Elgeti had described the new company’s strategy as "buying local retail properties for everyday needs across the country in sustainable micro-locations including in B- and C-cities, with at least two main anchor tenants." This has remained the company’s policy since then.
The earlier acquisitions, around eastern Germany not far from the company’s headquarters in Potsdam, were bought for an average multiple of 7.8 times annual rent, which Elgeti says is because he's looking for assets with short remaining lease terms, or even high vacancy rates, or those requiring high initial capex, or whose loans are non-performing. The goal is to get existing tenants to extend their leases because of new investment in the asset, and so to attract new high-paying tenants to join them.
Since then, individual investment size has been between €500,000 and €37m, with €20m the most paid for any single asset. Most fall below the €10m mark.
With Germany having very few REITS, Elgeti explained why he had chosen the REIT format for the company. "Establishing the company as a REIT has to do with more than just tax efficiency. The structure is particularly suitable for granular and cashflow-strong commercial property portfolios like ours, while at the same time the strictly-defined REIT regulations send out a signal about the kind of quality we're offering to our investors."