Deutsche Konsum REIT-AG has sold seven retail properties for €47.2 million to a German institutional fund.
The sub-portfolio, comprising of a total rental area of 28 000m2 in Bad Harzburg, Verden, Bergen, Krempe, Niesky (Rothenburger Straße), Krakow am See and Altentreptow (Fritz-Reuter-Straße). have reduced existing vacancies and/or extended leases.
DKR acquired the properties individually between 2015 and 2019 with an average initial yield of 11% with a remaining lease term of 4.5 years on average. At the time of acquisition, the vacancy rate was around 3%. During the holding period, the properties generated rental income of approximately €14.4 million.
The properties currently generate an annual rent of €2.6 million with a remaining lease term of approximately nine years. With the sales price 18 times the annual rent, transfer of benefits and encumbrances of all properties is expected to take place during January 2022.
Half of the company’s capital gains realised in the financial year 2021/2022 will be used to purchase new food-anchored retail assets in micro-locations with the other half, subject to shareholder approval, to be distributed as an additional dividend for the 2021/2022 financial year.
The REIT has approximately €120 million plus the net inflows from the property disposals, available for further acquisitions.
“These sales underline that price and capital discipline are very important to the Company in all directions. This applies to purchases but also to possible sales. Moderate and opportunistic recycling of capital can lead to high increases in shareholder value and will therefore be pursued by us where it seems sensible. The question of whether the current share price adequately reflects the value of the Company may also be discussed in this context. We are continuously reviewing potentially useful measures in this regard”, commented CEO, Rolf Elgeti.
Despite difficult trading conditions, DKR closed its 2021/2022 financial year with a stable operating performance with the level of incoming rent continuously high, reaching a low level of 92% in January 2021.
Furthermore, the company was able to realise the purchase of 13 food-anchored properties with an investment volume of more than €120 million and an annualised rent of approximately €11 million, resulting in a yield of 9.1% as well as successfully completing its revitalisation projects in Rostock, Drebkau, and Hohenmölsen over the past financial year.
On the debt site, DKR is working on refinancing or prolonging expiring financing instruments of around €10 million at significantly lower interest rates which is expected to result in optimisation potential of up to €1 million per annum, which directly increases funds from operations. Moreover, the current low interest rate level is to be secured in the long term through extensive fixed interest rate agreements.
While the results of its past financial year (2020/2021) as well as its audited annual financial statements and earnings forecast is scheduled for publication on the 16th of December 2021, the company anticipates its dividend for the upcoming financial year to be approximately 25-euro cents per share.