Net Rental Income of €375 million for Grand City in 2021

Grand City Properties S.A has seen an increase in net rental income during the 2021 financial year. Net rental income increased to 375m Euros from the 372m Euros it recorded during 2020.

The Reason for Growth

Net rental income was improved due to a mixture of organic growth alongside a 2.8% rental growth on a like-for-like scale while the company also made acquisitions that totaled to more than 700m euros across the year, all of which was offset by both 2021 and 2020 disposals and during 2021, that had a full year impact. Throughout 2021, the company also acquired more than 6,700 units that had an 18x multiple average in cities such as Munich, Dresden and Berlin. As part of the acquisitions, GCP was able to experience a full consolidation as part of a raised stake in a joint venture. There was a total of 360m Euros generated through disposals in 2021 which came with a premium of 22% above book values and this was met with a profit margin above total costs of 39%. The disposed assets consisted of non-core properties and these were positioned in eastern Germany along with cities in NRW. 

Improvements and Increases

The adjusted EBITDA  for 2021 totaled 299m Euros, which when compared to 2020 is stable. There was a total of 186m Euros for FFO I for 2021 which was an increase of 2% when compared to 2020. The main driver of FFO I growth was improvements made to the financial profile which in turn, helped to reduce financing costs while the strong operation of the company helped to support this. There was an increase of 4% in relation to the FFO I per share to1.11 Euros and this was attributed to the cumulative effects of the share buyback program along with the tender offer which came to 270m Euros in 2021. Revaluation and capital gains enabled the company to record an additional 695m Euros, which helped to create an 8% rise in the portfolio on a like-for-like basis although this did not include capex. This was achieved through the portfolio performing exceptionally well and market conditions that provided additional support, all of which helps to underpin and prove the quality of GCPs portfolio and the strategy used in relation to the value-adding acquisition.

During 2021, GCP implemented a variety of measures with the aim of streamlining the financial profile. The biggest bond-to-date of 1bn Euros was issued in Jan, and it was offered at a coupon of 0.125% which is exceptionally low while it was given a 7-year maturity. The primary use for the funds was to refinance more than 1.1bn Euros of debt that came with high interest. The result was that the average cost of debt was reduced to 1% from 1.3% in Dec 2021 while also having the scope to manage a maturity schedule that was well-balanced and came with a lengthy average maturity of 6 years as well as no material near term maturities.

It was also possible to achieve an ICR of 6.4x in 2021 as a result of optimising debts and that came with a higher interest coverage, especially when compared with 5.7x seen in 2020. The financial platform of the company continues to remain conservative as it consists of leverage of 36% while a portfolio that is strong, consists of assets that total 8.4bn Euros and this mirrors an unencumbered ratio of 88%. Additionally, with the perpetual notes being refinanced in Dec 2020 and final redemption in Feb 2021, it helped to decrease the coupon attributable to perpetual notes investors, all of which helped to provide support in the growth of the Company’s FFO.

The focus throughout 2021 was to ensure that progress was delivered across all activities while also providing stakeholder value that was sustainable which benefited tenants, local communities and the environment while also delivering rewards for shareholders. It is also possible for the company to take advantage of opportunities that might arise through optimising the portfolio and financial profile, creating a strong platform. With value-added management led by Rafael Zamir, the CEO, along with Yakir Gabay as the chairman of the GCPs advisory board, it’s fair to say that GCP is now moving into a strong position to achieve success during 2022.