Merz takes major shareholding in listed housing group Noratis AG
Merz Real Estate, part of family-owned Merz Group, is buying a 29.4% stake in small listed housing investor Noratis AG, and plans an investment of up to €50m in the company over the next four years. The move makes Merz the biggest shareholder in Noratis, with founder-shareholder Igor Christian Bugarski reducing his stake to 8.0%. The Frankfurt-based Merz is primarily known in Germany and worldwide as a pharmaceutical and healthcare company.
Noratis is now expected to increase its share capital from €3.6m to €3.854m by issuing new no par value shares, which are exclusively reserved for Merz, and will be granted with dividend entitlements from January 1st 2020, that is, the current financial year.
The basic idea is to secure the profitability of Noratis without permanent recourse to selling off properties bought and optimised by the group. The immediate likely effect of this is a planned fall in turnover. The injection of new funds will enable the group to invest afresh, boosting the size of its portfolio, and leveraging its incremental earnings potential. This also means rental income making up a bigger proportion of overall revenues, from its current 17%.
Noratis’ CEO Igor Christian Bugarski said, “With our positioning we occupy a niche with an attractive risk-yield profile, which is to combine the safety of a portfolio manager with the excess return of a project developer.” Dr. Henning Schröer, managing director of Merz Real Estate, commented: “The business model of Noratis AG has convinced us. This includes the multi-stakeholder approach under which the interests of all parties involved are taken into account at the development of the company, from the tenant, through the financing partner to the shareholders. In this way sustainable values with an attractive yield are developed. We see our commitment to Noratis AG as a long-term investment.”
Noratis listed on the Frankfurt Stock Exchange in 2017, trading in the then newly-founded Scale Segment for small companies, raising €17.25m in the listing organised by ICF Bank. At the time, CEO Bugarski said: “We continue to see great market and growth potential. Our focus is on properties with development potential, mostly housing estates, employee housing and quarters of the 1950s to the 1970s. There are around 18 million residential units built in these decades. We regularly identify structural and/or commercial value enhancement potentials in these assets. This can be years of maintenance backlog or a high vacancy rate. We address these issues with our development measures. In this way, Noratis preserves and creates housing with an attractive price/performance ratio for medium and small incomes.”
His colleague, CFO André Speth, told REFIRE: “After this strategically crucial step for our company, we now need to focus on our operational business. With the proceeds from the IPO we want to continue our growth over the past few years by successively expanding our real estate portfolio and benefiting from increased financial flexibility regarding acquisition opportunities. At the same time, we are planning to distribute about half of the annual net income to our shareholders."