Summit Germany, Gateway pave the way for re-IPOs to tap fresh capital

The AIM-listed commercial property group Summit Germany Ltd. is exploring a 2019 share sale to raise money for new investments and make it easier to trade its stock, according to a recent Reuters report.

Citing ‘people close to the matter’ the report said “The majority owner will offer shares, new shares will likely also be issued”, adding more than 25% of the company’s share capital is expected to be offered in the sale. The sources were quoted as saying that no firm decision has so far been taken on the size of the share sale, which may take place in the second quarter, while another source said the listing would likely take place on the Frankfurt stock exchange.

Investment bank Citi is organising the deal, while an independent IPO adviser is also helping prepare the offer, the sources said.

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 2017, it doubled its net profit to €113m, while in the first nine months of 2018 profit was flat at €96.4 million. The group’s net asset value was €667.5m at the end of September.

So far this year, Summit has purchased commercial properties from buyout group Fortress for €86m as well as a controlling stake in GxP German Properties AG. It bought real estate assets, mainly used by Volkswagen, worth €100m from Dazzle Capital a year earlier.

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 the year, which were subsequently listed on the Luxembourg Stock Exchange. At the current share price, Summit Germany has a €516m market capitalisation.

Separately, German real estate developer Gateway is also exploring a possible 2019 share sale with the help of Credit Suisse, according to market insiders.

Gateway later said in a statement it was considering raising capital and listing on the regulated market in the first half of 2019. The company is currently listed on Deutsche Boerse’s over-the-counter market.

The €100m market cap company and its majority shareholders last month pulled a planned share placement, citing volatile markets, at the same time seeing the departure of new CEO and experienced financial director Andreas Segal, who arrived as the top man as recently as March from listed residential developer Buwog. In a sign of turbulence at the top, fellow board director Holger Lüth, who likewise had only arrived in August and had worked together with Segal at Buwog, also announced he is leaving the company with immediate effect.

Back in August, the hitherto relatively unknown Gateway Real Estate took a significant leap into the upper leagues with its takeover of Düsseldorf-based project developer Development Partner, for an enterprise value of about €500m, and the arrival of new heavyweight top management in the form of Segal and Lüth.

Gateway, whose shares are listed on the Stuttgart Stock Exchange, said then it planned to fund the takeover via a capital increase backed by hard assets, which would result in a quadrupling of its market capitalization of currently €74m. The company is 94% owned by investor Norbert Ketterer and his family, who also own a stake in fellow-listed Corestate Capital, which recently bought Ketterer’s mezzanine finance fund manager HFS. Ketterer’s Ketom AG also holds small stakes in blind-pool commercial property investor Godewind (3%) which listed on the stock market in March of this year, and in German project developer Gerch Group.

The two share sales (of Summit and Gateway) are expected to be organised as so-called re-IPOs, whose preparation and marketing efforts tend to be as extensive as those for an initial public offering.