Hiccup in steady progress at Summit Germany, share price probe

Volatile share price movements over the past few weeks at the AIM-listed Summit Germany are a reflection of uncertainty surrounding an investigation into insider trading in Israel, including the offices of the company’s major shareholder Summit Real Estate Holdings being searched by the Israeli Security Agency.

In a statement the company said, “The company understands that this is part of a broader investigation into an individual’s securities dealings in a number of companies listed on the Tel Aviv Stock Exchange and does not directly involve Summit Germany.” Summit Germany managing director Zohar Levy has reportedly been interviewed as part of the investigation.

Earlier in January the company said that it was exploring an initial public offering of its Summit Luxco unit on the Frankfurt Stock Exchange. The listing of Luxco, which holds all of Summit's German real estate business, including asset and property management operations, would be subject to market conditions, the firm said. The share sale would be to raise money for new investments and to make it easier to trade its stock.

Summit is also considering a private placement of shares in Luxco. In a statement the company said: "Summit is considering the listing to provide investors with the opportunity to invest in Summit's German real estate business and to facilitate Luxco's growth in Germany.”

Summit, which will continue to be a major shareholder of Luxco, said it would diversify its real estate business and pursue investment opportunities throughout Continental Europe and other markets.

Summit Germany Ltd. is a 50.1% subsidiary of the Tel-Aviv headquartered and listed Summit Real Estate Holdings, controlled by chairperson Zohar Levy, who is also managing director. It has a market capitalisation of €526m, is incorporated in Guernsey and listed on London’s AIM market, but invests mainly in German office, retail, logistics and storage properties.

In 2018, rental income at the company rose 11% to €67.4m from €60.5m the year before. The annual run-rate rental income as of December 2018 stood at €81m.

Net asset value jumped 51% to €866m from €572.9m in 2017. This led to per share NAV rising 54% to €1.89 from €1.23 a year earlier.

The net market value of its portfolio stood at €1.5 billion from €1.03 billion six months earlier. The value increase, according to the company, reflected "continuing positive momentum in the German commercial real estate market, strong demand and limited supply of office and logistics properties, and to improvements in the company's property portfolio driven by active asset management".

Summit Germany currently owns more than 80 properties, mainly offices, logistics buildings and shopping centres, mostly in or near the major German cities, with a total of 910,000 sqm and a value estimated at €939 million at the end of the first quarter. The assets are managed by DRESTATE Services GmbH from offices in Berlin and Frankfurt. The company raised €300 million in unsecured bonds at 2% interest at the beginning of 2018, which were subsequently listed on the Luxembourg Stock Exchange.

The company also announced a proposed name change to accompany a new strategy which would see the group diversify beyond the German market into other European markets. The new name, Summit Properties Ltd. was designed to reflect these new ambitions, the company said.