Summit Germany eyes new acquisitions after IPO

Summit Germany, an AIM-listed property company focusing on high-yielding German commercial assets, is on the prowl for new acquisitions after going public.

'We decided to raise capital to finance new deals and we currently have a pipeline of assets in exclusivity,’ chairman Zohar Levy told PropertyEU in an interview.

The company raised €35 mln in an Initial Public Offering in February 2014 on London's AIM market which valued the business at £160 mln. Following the fund raising, Summit Germany invested the proceeds in a portfolio of 11 properties with a gross rental yield of 13.7%. The company paid around €45.5 mln for the loan, representing a discount to the face value (€73.5 mln) of 38%.

Following the purchase, the EPRA NAV is expected to reach €230 mln and its shares are trading at €0.66, reflecting a 15% discount to EPRA NAV of €0.78.

To finance new acquisitions, Summit Germany plans to borrow equity from its parent company, Summit Real Estate, which owns 79% of the company after the listing. 'In 2006 we floated on London's AIM, in 2009 we were acquired by Summit Group and delisted, and now five years later we listed again,' Levy explained.

Commenting on the results of the year to date, Levy noted that the company was able to reduce leverage from 63% to 54% at present. 'We expect to continue to deleverage to below 50%,’ he added .

In the full year to end-December 2013, Summit Germany posted a net profit of €23.8 mln. The company, which owns a 750,000 m2 portfolio producing €46 mln in net rents a year, has also announced its first dividend payment of half a cent per share. ‘We intend to distribute dividends on a quarterly basis and in the second half of the year we should be able to lift dividend payments as we will get rid of legacy swaps,’ he added. The company expects to generate annual returns for shareholders of 7%, which will be fully covered by rental profit.

Levy: ‘We focus primarily on acquisitions of distressed properties. Over the past years the financial industry was not available to lend for these assets but this is now changing. Lenders are backing the market once again and we are seeing a recovery in property values. Yields remain high and there are several distressed properties we intend to acquire in the near future.’