WCM tops €500m in assets, DIC Asset takes 20% stake

Germany's SDAX-listed WCM Beteiligungs- und Grundbesitz-AG saw its gross asset value exceed €500m after a spate of acquisitions last year. It has since added a further two retail parks and a DIY store not included in its end-of-year valuation, worth a further €48m.

The minnow was once one of Germany's more prominent listed companies before filing for insolvency in 2006, and then relaunching as a debt-free company in 2014. Since then it has been expanding rapidly, with CEO Stavros Efremidis aiming to build a €1bn portfolio by buying core-plus and value-add assets in Germany's A- and B-cities.

As REFIRE reported in these pages three months ago, WCM raised €155.8m in a rights issue last year to fund new acquisitions, including the €92m Main Triangle office in Frankfurt, and an office portfolio in the Rhine-Main region and Dresden for €116m. It also took a majority stake in a fund to be set up by Dublin-based Greenman Investments to hold a portfolio of German supermarkets worth €95m.

WCM's activity has attracted the attention of larger listed German companies. Last week the listed DIC Asset said it had acquired more than 20% of WCM, and did not rule out increasing its stake. At the current then share price, this likely involved an investment of about €70m.

In a letter to shareholders, DIC explained its rationale: “Through its equity interest, DIC Asset will participate in the future growth of the company and in its attractive commercial real estate portfolio. One of our objectives in taking this approach is to expand DIC Asset’s footprint in Germany’s commercial real estate sector.” There were strong overlaps with DIC's own investment footprint, it said.

DIC pointed out the attractions of WCM's swiftly-built portfolio. Average net yield of 6.3%, with an average WALT on lease contracts of 9.2 years, financed by average loans of 6.4 years duration at an average interest rate of 2.1%.

However, part of the attraction of WCM in battling its way out of insolvency, instead of just winding itself down, was its ability to write off up to €500m in deferred corporation and business taxes arising rom the insolvency. Were DIC to increase its stake to more than 25%, REFIRE understands that these write-offs would no longer apply.

CEO Efremidis took over the helm at WCM at its relaunch in September 2014, and kicked off its recovery with the €100m acquisition of four commercial properties in Frankfurt, Berlin, Bonn and Düsseldorf. Efremidis had come from listed KWG Immobilien, where he had boosted KWG's housing portfolio from about €3m to more than €400m, with more than 10,000 residential units and a gross lettable area of 600,000 sqm. With equity of €170m in the balance sheet, he subsequently sold 60% of the company to acquisitive Austrian residential investor Conwert Immobilien.

Now at WCM, Efremidis is trying to repeat the trick, and says the timing if perfect for the commercial office sector. "In contrast to residential, not much has happened the past few years. We're also finding very good lending terms out there", he says.

Thanks to the corporate and commercial tax loss carryovers, WCM can benefit from very favourable tax treatment of its profits, and in particular can make generous dividend payments to shareholders without the deduction of any withholding tax (capital gains tax). First dividend payouts are planned for 2017.

In November WCM placed shares with institutions at €2.20, raising €24m. The current share price is about €2.80 after a run-up with DIC buying its stake, but has held up firmly since then and throughout the current market sell-off, where most of its peers have suffered. This suggests robustness.