Grand City Properties (AO) | Buy | No surprises in Q1

Research evidence excerpt

Grand City Properties (AO) | Buy | No surprises in Q1

Grand City Properties Buy | Target Price: EUR16.50

Company description Management

Grand City Properties is a specialist real estate company focused on investing in Refael Zamir, CEO

and managing value-add opportunities in the densely populated areas of Idan Hadad, CFO

Germany and London. In Germany, its regional presence is mainly focused on Christian Windfuhr, Chairman

North Rhine-Westphalia, Berlin and large Eastern German cities, such as Dresden Key shareholders

or Leipzig. The company is majority owned by Edolaxia Group, a holding Free float 37.00%

company of Aroundtown. Edolaxia 63.00%

Investment case Valuation methodology

GCP has built up an impressive record of acquiring and turning We value GCP using the blended outcome of a DCF model, a

around residential portfolios in structurally growing German discounted dividend model (DDM), and an average discounted

regions. A significant difference between in-place rents and NTA model.

market rents could lead to highly visible, decent rental growth in The key assumptions for our DCF model are: a long-term EBITDA

the next few years. margin of 83%, growth of 3.5% in 2026E fading to 2% long-term,

The company has recently started to stronger focus on capital WACC: 6.66%) and for the DDM are: a long-term growth of 2%,

recycling in order to augment organic growth. COE of 9.00% and a long-term payout ratio of 90%.

The German residential market remains structurally Risks to our rating

undersupplied, which creates an attractive long-term Negative regulatory changes.

operational environment. An unlikely big increase in interest rates, which could lead to

Catalysts falling property prices and put FFO under pressure.

An ongoing acceleration of rental growth.