FCR Immobilien — Sustained high transaction activity

FCR Immobilien (DB: FC9)

Currency in

Last close As at 30/11/2023


0.00 (0.00%)

Market capitalisation


More on this equity

Research: Financials

FCR Immobilien — Sustained high transaction activity

FCR continues to grow its property portfolio which, at 29 May 2019, represents lettable floor space of c 261,500 sqm compared to 175,000 at end-2017. To facilitate this growth, the company recently launched a new €30m bond issue and a share capital increase. FCR deploys its targeted higher leverage at property level, with the bank liabilities to book value of properties ratio at c 67% at end-2018. Meanwhile, it also managed to achieve a solid aggregate return of 32.3% on nine property disposals completed in FY18 (with additional profitable transactions in 2019 ytd), taking advantage of continuing strong underlying investment demand in the commercial real estate (CRE) market.

Milosz Papst

Written by

Milosz Papst

Director, Financials


FCR Immobilien

Sustained high transaction activity

Real estate

Scale research report - Update

31 May 2019



Market cap


Share price graph

Share details




Deutsche Börse Scale

Shares in issue


Last reported net debt at end-2018


Business description

FCR Immobilien is a German real estate investor primarily focussed on small and mid-sized properties in tier two domestic locations. It looks for special situations translating into bargain purchases. Subsequent measures are aimed at improving rental income generation. FCR’s portfolio currently consists of 63 properties with a lettable area of c 262k sqm, of which more than 80% represent retail properties.


Expertise in sourcing attractively priced properties.

Considerable portfolio expansion leads to rental income growth.

Exposure to mostly non-cyclical tenants with limited threat from online shopping.


High leverage level vs peers.

Relatively high tenant concentration.

Key personnel risk.


Milosz Papst

+44 (0) 20 3077 5700

FCR continues to grow its property portfolio which, at 29 May 2019, represents lettable floor space of c 261,500 sqm compared to 175,000 at end-2017. To facilitate this growth, the company recently launched a new €30m bond issue and a share capital increase. FCR deploys its targeted higher leverage at property level, with the bank liabilities to book value of properties ratio at c 67% at end-2018. Meanwhile, it also managed to achieve a solid aggregate return of 32.3% on nine property disposals completed in FY18 (with additional profitable transactions in 2019 ytd), taking advantage of continuing strong underlying investment demand in the commercial real estate (CRE) market.

Results reflect expanding property portfolio

FCR reported net income of €1.4m in FY18, 46% ahead of FY17. This was assisted by both growing rental income (€15.9m vs €8.5m in FY17) and a net gain from property disposals of €5.2m (vs €4.6m in FY17). This allowed FCR to book EBITDA of €10.1m, ahead of management guidance released in November 2018 of €9.9m. Momentum continued into Q119, with group revenues and EBITDA at €16.6m and €6.6m, respectively. FCR’s net debt to total assets reached 84% (vs 81% in FY17), including property-level bank loans (€112.1m) and holding-level bonds (€45.7m).

Rental income up, but average rental yield down

FCR’s portfolio now consists of 63 properties with a current net rental income of c €17.2m pa at 29 May 2019. This compares with 41 properties with a net rental income of €9.5m (and potential €10.9m assuming full occupancy) at end-2017. However, the net rental yield declined to 9.2% pa as at May 2019 (excluding the two most recent acquisitions) vs 14.1% pa at end-2017 (and FCR’s original target of at least 12% pa), which we believe is mostly due to lower yields on newly acquired properties. Retail projects outside tier one cities remain FCR’s core focus and now represent more than 80% of the portfolio by net rental income.

Valuation: Trading at a moderate discount to NAV

FCR’s NAV per share as at end-March 2019 was €21.30, with its shares now trading at an 8% discount. This compares with an average premium to NAV for FCR’s peer group of 14% (which is, however, somewhat distorted by outliers). FCR is trading at 41% and 22% discounts to the peer group on FY19e P/E and EV/EBITDA ratios, respectively. The shares currently offer an FY18 dividend yield of c 1.9%.

Consensus estimates




































Source: Company accounts, market consensus as at 28 May 2019. Note: *Paid in 2019. Market consensus is based on available estimates of one broker (First Berlin).

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

FY18 results highlights

Income statement: Growing scale of operations

FCR’s FY18 results reflect its dynamic property portfolio expansion and high transaction activity. The company reported FY18 revenues at €37.2m (up 127% y-o-y), of which €15.9m was rental income (FY17: €8.5m) and €21.3m represented the sale of investment properties (FY17: €7.9m). See below for a detailed discussion of these transactions. Group EBITDA increased to €10.1m from €4.9m in FY17, with EBITDA margin of 27.1% (vs 30.0% in FY17). This is ahead of management guidance for FY18 total revenues of €33.5m and EBITDA of €9.9m. As interest expense increased to €4.8m from €3.1m in FY17, the company achieved a pre-tax profit of €3.0m (up 133% from €1.3m in FY17). This is below company guidance at €4.2m. FCR booked €0.9m in other taxes, of which €0.7m represents property taxes that were previously booked under other operating expenses (€0.3m in FY17). Together with income taxes of €0.7m (compared to €0.3m in FY17), this translated into 46% y-o-y growth in net profit to €1.4m. This momentum continued into Q119, with FCR reporting revenues, EBITDA and pre-tax profit of €16.6m, €6.6m and €4.5m, respectively. This was largely a function of the €9.5m gain on the sale of three properties.

Exhibit 1: Financial highlights

€ '000s, unless otherwise stated



Change y-o-y

Revenues, of which:




Rental income




Sale of investment properties




Increase/decrease in unfinished goods and services




Total revenue




Material expenses




Personnel expenses




Other operating income




Other operating expense








EBITDA margin












EBIT margin




Other interest and similar income




Interest and similar expense




Write-downs of financial assets and current securities




Pre-tax profit




Income taxes




Other taxes




Net profit




Source: FCR Immobilien, Edison Investment Research

Balance sheet: Taking advantage of high leverage

FCR’s financing strategy involves 70–80% leverage (preferably at the upper end of the range) at individual property level, which usually takes the form of non-recourse, first-lien bank loans. The weighted average interest rate on these loans at end-2018 stood at 2.0% pa and their redemption portion stood at 9.6% pa. At end-December 2018, the ratio of bank liabilities to book value of properties stood at c 67% compared with 79% a year ago. FCR’s book value of properties is not adjusted for the impact of improvement measures introduced after the purchase and thus may potentially represent an understated value.

In addition, FCR uses bonds to further gear up investments. The outstanding value of issued bonds increased to €45.7m at end-2018 in comparison to €20.7m at end-2017 following the €25m issue of bonds conducted in February 2018 at a coupon rate of 6.0% and five-year maturity. Consequently, net debt to total assets remained at a relatively high level of 84% at end-December 2018 (in line with management’s intension to keep a high gearing level), up from 81% reported at end-December 2017.

Post balance sheet date, FCR launched another bond issue of up to €30m by means of a public offer which is still in progress. The bond’s maturity is five years and its coupon rate stands at 5.25% pa (paid semi-annually). Until 29th May, investors subscribed to bonds worth €14m. The proceeds from the new bond issue will be used to fund further property acquisitions. FCR’s earliest outstanding bond issue with a face value of €1.7m matured in April 2019 and another €4.0m issue will mature in June 2019. We note that the terms of the new bonds illustrate FCR’s continued reduction in weighted average coupon rate on its bond issues, with the 2014, 2016 and 2018 issues having a rate of 8.0%, 7.1% and 6.0%, respectively. In terms of debt covenants on the new issue, it is worth noting that FCR’s dividend payout ratio will be capped at 50% and the company will be also obliged to maintain a coverage ratio (expressed as EBITDA to interest expense) of at least 1.1, which compares with 2.1 at end-2018 (Edison estimate).

On the equity side, FCR completed the first stage of its capital increase through a subscription rights offering at an issue price of €17.50 per share, with gross proceeds at €3.26m. Falk Raudies (FCR’s majority shareholder) subscribed to €0.5m worth of shares as part of the offering. Additional proceeds of up to €5.9m may be collected in the second stage, ending on 5 August 2019.

Portfolio expansion continues

At end-2018, FCR’s portfolio consisted of 58 properties with a total usable floor space of c 248,000 sqm, which compares with 41 properties representing c 175,000 at end-2017. During 2018, FCR acquired 26 properties with a usable space of 97,000 sqm and net rental income of €7.5m pa for a total consideration of €93.3m (excluding incidental acquisition costs). At the same time, it sold nine properties covering 24,000 sqm and net rental income of €1.9m, and was able to realize a profit of €5.2m (or 32.3% in total) on these disposals. The average holding period of these investments was 22 months (according to FCR) and for individual properties ranged from six to 28 months.

Post balance sheet date, the company finalised the transfer of ownership of three properties for which acquisition was agreed in FY18, including a 1,000 sqm retail property in Aken (January 2019), a hotel in Westerburg (February 2019) and a residential property with eight units in Köpenick/Berlin. Moreover, the company carried out the acquisition of five more properties: a retail property in Söhlde with a floor space of 1,700 sqm, a retail property in Würselen, a 13,000 sqm specialist retailer store in Brandenburg, a 1,700 sqm retail property in Weidenberg and a 1,800 sqm neighbourhood store in Niederlausitz. The transaction volume of the above-mentioned five acquisitions is in excess of €20m. FCR has also benefited from the current favourable investment market for real estate in Germany with the disposal of three properties: Stadtpassage in Salzgitter (8,600 sqm), a shopping centre in Hennef (3,950 sqm) and a specialist retail store in Würzburg (1,900 sqm). FCR generated a strong profit of €9.5m (or 85.3%) on these transactions, based on an average holding period of 35 months. This activity is already in line with FCR’s near-term targets of two to four property disposals per year.

As a result, FCR’s portfolio at 29 May 2019 consists of 63 properties with total lettable floorspace of c 261,500 sqm generating a net rental income of €17.2m pa. The current net rental yield on the portfolio stands at 9.2% as at May 2019 (excluding the two acquisitions announced on 29 May), while the yield based on potential rental income estimated by FCR equals 11.0%. This compares with the company’s earlier target of at least 12% and end-2017 levels of 14.1% and 16.1%, respectively. We believe this is because yields on newly acquired properties in 2018 and so far this year have been less attractive than for transactions before 2018 and in many cases represented an initial net rental yield closer to 7–9% pa. The weighted average unexpired lease term currently stands at c 5.3 years (broadly unchanged vs the end-September 2018 figure). Retail properties made up 83.7% of FCR’s portfolio at end-March 2019, followed by hotels (8.8%), residential (4.7%) and offices (1.5%). FCR retained a high exposure to the food sector (39.3% of current net rental income at end-March 2019), textiles (22.2%) and DIY (12.3%).

CRE market remains robust

CRE transactions in Germany reached €60.3bn in 2018 (up 6% y-o-y), according to Jones Lang LaSalle (JLL). If we include the broader living segment (ie multi-family housing, student accommodation, retirement/nursing homes etc.), the transaction value stood at c €79bn in 2018. Retail property transactions represented €10.5bn (or 13% of the total CRE volumes), which is a 9% decline from €11.5bn in FY17. Of this, more than 40% was attributable to retail warehouses and retail parks. Last year was characterised by a high level of investor caution towards shopping centres due to the threat from online shopping. As a consequence, transaction volumes in this segment declined by 30% y-o-y to €1.38bn. However, from FCR’s perspective it is worth noting that JLL saw greater demand for properties with a high local convenience retail profile and high proportion of food, personal care products or cleaning agents (which are largely immune to the growing trend towards online shopping). Moreover, the outlook seems positive for specialist retail stores, in particular those with anchor tenants from the food sector, which may experience a further capitalisation yield compression in 2019 (according to JLL). Q119 data seem to reinforce this view, with specialist retail store yields in Germany down 10bp to 5.10%. On the back of the above, FCR management expects clearly positive net income and a significant increase in both rental and disposal income in FY19. The company’s acquisition pipeline remains robust at around €69m. Moreover, FCR has outstanding offers to acquire three of its portfolio properties.


FCR’s NAV at end-2018 reached €89.3m and increased further to €93.9m at end-March 2019, translating into a NAV per share of €21.30. This implies that FCR’s shares are currently trading at an 8% discount to NAV. We acknowledge that FCR’s NAV estimate is not based on regular valuations performed by external real estate experts (which is often the case with real estate investment companies). Instead, FCR relies predominantly on received purchase offers, as well as bank valuations on debt refinancing and internal fair market value assessments. FCR estimates the gross market value of its property portfolio at €257m compared to the current book value of €172m (implying a potential value uplift on disposal of c €85m).

It is instructive to review the market multiples at which FCR and comparable companies are currently trading. FCR is trading at an FY18 P/NAV ratio at 0.92x, which represents a 19% discount to the peer group. Based on FY19e P/E and EV/EBITDA ratios, FCR is trading at 41% and 22% discounts to the peer average, respectively. Management recently recommended a dividend per share of €0.35 based on FY18 net income, which represents a yield of c 1.9%.

Exhibit 2: Peer comparison



P/E (x)



(last reported)












Deutsche Konsum REIT







Defama AG







Hamborner REIT







VIB Vermogen







Deutsche EuroShop







Peer group average







FCR Immobilien














Source: Company accounts, Edison Investment Research, market consensus as at 28 May 2019. Note: Consensus is based on the available estimates of a single broker (First Berlin).

General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.


Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt


London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt


London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

This paragraph mark is needed to maintain formatting, please leave this text for the editors.

More on FCR Immobilien

View All

Latest from the Financials sector

View All Financials content

Research: Financials

DeA Capital — Continuing to focus on asset management growth

DeA Capital produced a solid performance in Q119, with the alternative asset management division benefiting from performance-related fees, continuing its platform development, and launching new funds. NAV and the net cash position remained robust, and an unchanged €0.12 per share dividend was paid on 22 May 2019. We forecast a similar distribution in FY19, representing a prospective yield of more than 9%. Following the dividend payment, our adjusted net asset value per share is €1.75.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free