Grand City Properties surges ahead on strong profitability

The Luxembourg-based Grand City Properties, which focuses on turnaround opportunities in German residential property, was one of REFIRE’s nap selections last summer for subsequent strong performance, along with VIB Vermögen AG. Both have performed very strongly since then, and we’ve been encouraged by what we’ve seen since from both companies.

Early last year we interviewed Christian Windfuhr, the CEO of Grand City, who had ambitious plans for the recent stock market debutant. Since then the company has grown dramatically, increasing its housing portfolio by 120% over 2012 to 28,000 units. Revenue has increased to €170m, up 181% year-on-year, while rental and operating income topped €100m, up 150%. Funds from operations rose 233% to €38.1m, EPRA net asset value rose by 154% to €859m, while the company’s loan-to-value ratio of 35.7% is well down on last year’s 44.2%.

The listed Grand City has largely been funding itself through bond issues, and with liquid cash resources of €167m, boosted by an additional €150m through an oversubscribed convertible bond issue in February, it says it has “the financial flexibility and firepower to finance the immediate pipeline”.

The company has been identifying undervalued residential assets with improvement potential and acquiring portfolios where it can. The portion of units in the ‘stabilised’ stage, with a vacancy rate of less than 5%, grew last year to 33% from 25% in 2012, while those in the early turnaround stage, with vacancies above 15%, fell to 23% from 42%. It recently bought its own asset and property management company, currently managing 18,000 properties for third parties, which it plans to develop into a platform for managing its own and other company’s property portfolios.