Grand City Properties is traded on the Prime Standard segment of the Frankfurt Stock Exchange since 2012 (symbol: GYC), as a specialty company concentrating on value-add real estate opportunities in Germany’s most densely populated metropolitan areas where they manage around 60,000 residential units.
The real estate giant specializes in management of tenants by raising the levels of occupancy. The activity of was originally founded by real estate magnate investor Yakir Gabay (יקיר גבאי) in 2004. Today, 40% of GCP’s share ownership is held by Aroundtown SA, Germany’s largest commercial real estate company, accredited with a high BBB+ rating from the S&P. In addition to the properties managed in Germany, Grand City Properties also owns an additional 4,000 residential units in London.
In 2015, Grand City Properties issued €500 million euros in perpetual notes with a 3.75% coupon. These notes were tendered in December 2020 through a successful Dutch auction process. Grand City was able to tender €415 million of the perpetual notes (about 83% of the full issued volume).
Because of the success to redeemed over 80% of the original principal amount, they were able to issue a “clean-up call” option that permitted them to redeem the rest of the outstanding amount at a nominal value (along with accrued interest).
A refinance of €700 million of perpetual notes issued with a 1.5% coupon is a significant reduction from the original 3.75% coupon. This is indicative of Grand City Properties’ strong improvement over the recent years. Since 2015, the company has continued to grow, improving its capital market standing. The successful growth has been confirmed by the company’s strong credit rating of BBB+ on the S&P, as well as a Baa1 rating on Moody’s.
Grand City Properties always monitors the markets in order to improve its financial profile using a diverse variety of capital sources which include straight bonds, debt financing, perpetual notes and equity capital. GCP uses perpetual notes as equity instruments to strengthen its balance sheet and firm up its equity base.
Much like common shares, perpetual notes do not have a maturity date, so, at the company’s discretion, the coupons can be deferred. The company has the option (but not the obligation) also to redeem the perpetual notes on certain dates, typically 5 years apart at its discretion. This is a strategy that is key in their conservative financial approach and a diversified financing mix.
