Summit Germany (SGL) owns a well-diversified commercial property portfolio, located in Germany's main commercial centres. Its strategy is to actively manage its assets to improve net rent and capital values, and grow portfolio scale through acquisition.
Indeed SGL recently reported two acquisitions that will potentially commit a significant proportion of the c €95m being held awaiting investment post February's €120m placing (at 70c/share). That cash currently earns only a negligible return on deposit, so completion of the two transactions should significantly enhance EPS and dividend cover, and may accelerate growth in distributions.
They agreed to buy a Stuttgart office park for €55m, with a 7.5% net initial yield, and comprises 63,000 sqm of lettable space (95% let, nine year weighted average unexpired lease), plus rights for 55,000 sqm. This portfolio adds long term cash flow at an attractive yield, with material upside potential from future development.
Additionally there is a binding agreement on a loan facility to gain a Telecom portfolio. This debt is secured on a portfolio of six German commercial properties which it previously owned, over which it will regain full control. The portfolio consists of 63,000 sqm of aggregate net lettable space in German cities such as Dusseldorf, Heidelberg and Potsdam. The current 72% occupancy generates c. €5.5m pa aggregate net rent, a 13.8% rental yield on cost.
For now, we hold our forecasts pending completion of the two acquisitions, probably towards the end of Q3 2015 and contributing to revenues from early Q4. It is difficult to be precise regarding the impact on profit and earnings until the deal structure is announced. However, the two combined will add a projected €9.6m pa to net rent vs an assumed near zero return on cash, providing potential for growth in both EPS and NAV per share.