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Summit Germany aims to increase yield

Summit Germany’s results for 2015 show it increasing its EPRA NAV from 87 cents to 97 cent per share. The company’s second fund raising and the profit generated during the reporting period contributed greatly to the increase in the Group’s EPRA NAV of the whole fund to EUR427.5 million as of the end of the reporting period.

Profit from ongoing operations more than doubled during the reporting period and amounted to EUR31 million (2014: EUR14.9 million). The outstanding improvement was partly offset by a non-recurring financial expense of EUR11.6 million, related to the repayment of the shareholders loan, which resulted in annual cost saving of EUR4.75 million.

In January 2015, prior to the Group’s second fund raising, the Group distributed a dividend of 1.2 cents per share, reflecting an annual yield of 7.6% on the IPO price of 63 cent. Whilst not having the placing proceeds fully deployed in 2015 following the second fund raising, but still acknowledging the importance of dividend to its shareholders, the Group has distributed two quarterly dividends of 0.77 cents per share each in April and August 2015. While the same amount of cash has been paid to the shareholders at each payment date, the dilutive effect of the new shares resulted in an annual yield of 4.4% on the increased number of shares and on the higher placing price of 70 cents. In November 2015, following the deployment of part of the placing proceeds, the Group paid a higher dividend of 0.90 cents per share, reflecting an annualised yield of 5.1%. A further increase in the dividend rate has been made after the reporting period, when the Group distributed a dividend at a level of 0.95 cents per share, reflecting an annualised yield of 5.4%. The board of directors believes that the recent expansion of the property portfolio and the improvement in the Group’s FFO should permit the Group to consider increasing future dividends, generating even higher dividend yield for its shareholders.

Summit Germany invested EUR95 million in new properties within just a few months after the completion of the fund raising. A portfolio of six commercial properties was purchased via a loan acquisition at an implied rental yield of 13.8% and a complex of office buildings in Stuttgart was purchased through a corporate share transaction at a rental yield of 8.1% per annum. They also acquired an additional EUR40.5 million of further properties post period end. The properties, located in Munich, Duisburg and Frankfurt were purchased at an implied average rental yield of approximately 7.4%. Together with long term bank financing at an average interest rate of 2% per annum, these acquisitions will contribute approximately a 14% return on the invested cash and blended FFO yield of 20.5%.

They believe that there are opportunities to further enhance the value of the acquired properties through the letting of vacancies, part conversion to residential uses and development of surplus land. As such, in addition to their material contribution to the Group’s future cash flow, they think the properties make an excellent addition to the existing portfolio.

SMTG : Summit Germany aims to increase yield

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