(New: Statements from the meeting with the Chairman of the Board of Directors, share price)

LUXEMBOURG (dpa-AFX) - Aroundtown subsidiary Grand City Properties increased its rental income in the first nine months of the year thanks to strong demand for residential space. However, higher financing costs weighed on the operating profit (FFO1) in the reporting period. The real estate group confirmed its targets for the year as a whole. The share price rose significantly in early trading, but then turned negative. Most recently, the share lost just under 0.8 percent to EUR 9.19.

According to an initial assessment by analyst Stephanie Dossmann from analyst firm Jefferies, the company has slightly improved its key operating figures. However, borrowing costs have risen. She also assumes that Grand City Properties will not pay a dividend for 2023, as it did last year. The real estate group had previously planned to pay a dividend of 76 to 80 cents per share. Analyst Jonathan Kownator from US bank Goldman Sachs, on the other hand, expects a dividend of 77 cents for the current year.

"Whether we pay a dividend depends on market conditions," said Supervisory Board Chairman Christian Windfuhr in an interview with the financial news agency dpa-AFX. If market conditions do not improve by the beginning of next year, the payment of a dividend is rather unlikely. TAG Immobilien recently canceled its dividend for the second time in a row.

In the first nine months of the year, Grand City Properties increased its net rental income by four percent year-on-year to 307.5 million euros, as the SDax group announced in Luxembourg on Wednesday. The majority of the increase came from rent increases, but also from a lower vacancy rate.

The company also intends to increase rents in the future. "We are planning to increase rents as much as possible," said Windfuhr. According to the manager, the average rent in Germany at the end of September was EUR 7 per square meter, around three percent more than in the previous year.

Although rental income increased, higher financing costs in particular weighed on the operating result (FFO 1) in the first three quarters, which fell by two percent to 141 million euros.

At the bottom line, the real estate group made a loss of almost EUR 398 million due to a lower revaluation of the real estate portfolio. The Luxembourg-based company had already revalued its properties at the end of the first half of the year. In the same period last year, Grand City Properties reported a profit of just under 273 million euros.

"We also expect book value losses in the second half of the year," said Supervisory Board Chairman Windfuhr. There could be a further devaluation of the properties of an additional five percent at the end of the year.

Like other companies in the sector, the Group is focusing primarily on its debt and is therefore selling properties. In the first three quarters, Grand City Properties sold apartments worth 270 million euros, the company also announced. According to earlier information, the majority of these were older properties in London and North Rhine-Westphalia. According to the company, contracts for the sale of apartments worth 130 million euros have also been signed since the beginning of the year.

In total, Grand City Properties has properties worth 175 million euros up for sale, said Windfuhr. The management hopes to sell these in the next 12 months. However, the Chairman of the Board of Directors was open to further sales of apartments if the price is good. In return, the real estate group is also looking to acquire apartments. "At the moment, however, we are not receiving any attractive offers to buy apartments," said the manager.

The Group's total debt nevertheless rose to 5.6 billion euros by the end of September, up from 5.2 billion euros at the end of 2022.

The cost of debt remained low for the company at 1.9 percent as of September 2023, with an average term of 5.5 years, it said. The Group has cash and cash equivalents that cover debt maturities until the second quarter of 2026.

With around 63,400 apartments, Grand City Properties is particularly active in densely populated areas of Germany, such as Berlin, North Rhine-Westphalia, the Halle-Leipzig-Dresden region and the Rhine-Main area. Grand City Properties is also represented in major cities such as London and Munich. The largest shareholder is the commercial real estate group Aroundtown, which holds 60 percent of the company./mne/mis