Grand City aims for upgrade on Frankfurt exchange, MDAX listing

Frankfurt-listed German housing investor Grand City Properties (GCP) said it plans to change its listing from the less-demanding Entry Standard to the higher level Prime Standard of the Deutsche Börse, "probably by the end of this year 2017 at the latest". The move is likely to bump the housing provider up to merit inclusion in the MDAX, the index for mid-sized companies, which would put it on the radar screens of a wider range of investors.

The company has grown rapidly over the past few years, and was a zealous tapper of the bond markets for fresh capital, but the company says market conditions have now changed for a company of GCP's size. CEO Christian Windfuhr said, "Today the only residential portfolios for sale are much smaller, which means we don't have to raise as much money so quickly. We now expect our growth to be much slower over the next two to three years."

GCP, founded in 2004, is an opportunistic investor in apartments in densely populated areas in Germany, mainly Berlin and North Rhine Westphalia, which in September 2016 raised €200m in perpetual subordinated notes paying 2.75% for further expansion. It specialises in buying undervalued apartments in need of renovation, refurbishing them, and letting them out at higher than previous rents. GCP owns 84,000 apartments and manages a further 13,000 for third parties. 50,000 of those apartment were bought in the last two years, and a further 8,000 are planned for this year.

Meteoric growth over the past three years has seen the GCP share price rise by 130%. With much slower growth now in sight, the company is increasing its dividend payout to its shareholders in compensation for the slowdown in capital appreciation. It plans to pay out half of the 2016 full-year operating FFO I of an estimated €160m, rising to maybe 60-70%, according to Windfuhr.

With lowered vacancy rates and rising rents, Windfuhr says he estimates that the net asset value of the current holdings without further expansion should rise from €2.6bn to nearly €4bn. However, the company does plan to increase its holdings by about 10% annually, which could raise its AUM to closer to €6bn. The company's major shareholder with 33% is the Cyprus-based Aroundtown Property Holdings, itself listed in Frankfurt and on the Euronext, and indirectly the investment vehicle of Israeli businessman Yakir Gabay.