AIM-listed Summit Germany buys majority of GxP from Consus

Summit Germany Ltd, the AIM-listed German commercial property investment company, has agreed to buy a 72% controlling interest in German real estate company GxP from German firm Consus Real Estate for €45 million.

Summit Germany Ltd. is a subsidiary of the Tel-Aviv headquartered and listed Summit Real Estate Holdings, controlled by chairperson Zohar Levy. GxP owns and manages 12 office buildings with a total of 107,000 square meters, mainly in Frankfurt, Berlin, and other cities, worth a total of €166 million.

At the end of March, rent on the properties held by GxP totaled €11 million a year, reflecting a 6.6% return on the value of the properties and a loan-to-value (LTV) ratio of just over 59%. The figures published by Summit also show that the occupancy rate for GxP's properties is 89% with a 3.5-year average lease period. The acquired company's total after-tax profit in 2017 was €15.5 million.

Under the terms of the deal, Summit Germany will pay €40 million when the deal is completed and the remaining €5 million when GxP publishes its second quarter reports, "subject to meeting preset minimal targets."

In a statement Levy said, "The acquired properties are being purchased at an attractive price of €1,500 per square meter. In addition to a stable cash flow from a large number of tenants, the properties have substantial upgrading potential resulting from the leasing of open spaces, saving on management costs, and a rise in rents to the current market prices."

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 $530 million market capitalisation.

The Israeli company Summit Real Estate Holdings owns a 50.01% controlling stake in Summit Germany. In addition to its German business, summit in Israel owns and manages about 20 property assets, mainly offices, shops and logistics.

A year ago Summit Germany bought a €100m portfolio of commercial properties in the Volkswagen city of Wolfsburg and leased mainly to the carmaker, paying a net rental yield of 7.9%. At the time, chairman Harry Hyman and managing director and controlling shareholder Zohar Levy said, "We are encouraged by the German market, which has been strongly driven by the 'interest free' environment, turning Germany into an ever-appealing investment market. Demand for the group's properties continue to be strong and we believe that an increase in rent levels in Germany could have a future boost effect on the value of our portfolio when yields may be tightening."

"Though the increasing demand for German real estate offers interesting acquisition opportunities, the expected future yield compression will force us to maintain a disciplined approach towards new acquisitions in an ever demanding market.”