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Secondary Listing of Deutsche Konsum REIT-AG on the JSE by way of an Introduction and Abridged Pre-listing Statement
DEUTSCHE KONSUM REIT-AG
(Incorporated in the Federal Republic of Germany)
(Registration number HRB 13072)
FSE Share Code: A14KRD
JSE Share Code: DKR
ISIN: DE000A14KRD3
LEI: 529900QXC6TDASMCSU89
(“DKR” or “the Company”)
SECONDARY LISTING OF DKR ON THE MAIN BOARD OF THE JSE LIMITED (“JSE”)
BY WAY OF AN INTRODUCTION AND ABRIDGED PRE-LISTING STATEMENT
1. INTRODUCTION
1.1. DKR is a German property company with REIT status in Germany,
that invests in convenience retail properties in well-
established micro locations in the central and regional areas
of Germany outside of major cities. DKR has a listing on the
Prime Standard on the Frankfurt Stock Exchange, as well as
listings on the Berlin Stock Exchange and the Xetra trading
system. The Frankfurt Stock Exchange is also an approved
exchange under the JSE Listings Requirements for secondary
listing purposes. DKR listed on the Prime Standard on the
Frankfurt Stock Exchange on 28 February 2017, on the Berlin
Stock Exchange on 15 December 2015 and the Xetra trading system
on 15 December 2015. The Company has a market capitalisation
of approximately EUR 546 million (ZAR 9.67 billion).
1.2. As of the date of this announcement, the DKR real estate
portfolio consisted of 165 convenience retail properties with
a gross lettable area of approximately 901,016 m² and a market
value of EUR 829 million. Following the transfer of seven new
property acquisitions that have been notarised but will only
transfer after the listing (as identified in paragraph 4.5.3
below), the DKR real estate portfolio will consist of 172
convenience retail properties with a gross lettable area of
approximately 958,747 m² and a market value of approximately
EUR 880 million.
1.3. The JSE has granted DKR a secondary listing of all its issued
ordinary no par value shares (“Shares”) on the Main Board of
the JSE by way of an introduction (“Listing”) under the
abbreviated name “DKR”, share code “DKR” and ISIN DE000A14KRD3
with effect from the commencement of trade on Monday,
8 March 2021(“Listing Date”). The Company will be listed in the
“Retail REITS” sector.
1.4. The abridged Pre-listing Statement appearing below is not an
invitation to the public to subscribe for securities but is
issued in compliance with the JSE Listings Requirements, for
the purpose of providing information to the public with regard
to the Company.
2. DISTRIBUTION OF PRE-LISTING STATEMENT
2.1. DKR has distributed a pre-listing statement regarding the
Listing containing detailed information regarding the Company
(“Pre-listing Statement”). The Pre-listing Statement is
available at the Stellenbosch and Johannesburg offices of PSG
Capital, at the addresses set out in the “Corporate Information”
section of the Pre-listing Statement and on the Company’s
website at https://www.deutsche-konsum.de/en/.
2.2. Terms appearing in title case in this announcement and that are
not otherwise defined herein, shall bear the meanings assigned
to them in the Pre-listing Statement.
3. SALIENT DATES AND TIMES RELATING TO THE LISTING
The salient dates and times relating to the Listing are set out
below:
2021
Pre-listing Statement distributed on Monday, 22 February
Abridged Pre-listing Statement Monday, 22 February
published on SENS on
Listing of Shares on the main board of
the JSE expected at commencement of Monday, 8 March
trade (09:00) on
Notes:
- The above dates are subject to change. Any such change will
be announced on SENS.
- All references to dates and times are to local dates and
times in South Africa.
4. ABRIDGED PRE-LISTING STATEMENT OF DKR
4.1. BRIEF OVERVIEW OF DKR
4.1.1. DKR is a property company that specialises in the ownership
of convenience retail real properties, with tenants that
supply goods and services to local residents for daily needs.
The business essentially comprises of the acquisition,
leasing and management of convenience retail properties in
well-established micro locations in the central and regional
areas of Germany outside of major cities.
4.1.2. DKR’s investment focus throughout Germany is on attractive
convenience retail properties with established track records
in their respective locations as suppliers of goods and
services to local residents for daily needs, with a strong
focus on non-cyclical tenants with strong credit ratings,
such as large German food retailers, retail warehouse stores,
drugstores and the like, which are considered to be largely
independent of the economic cycle and which significantly
reduces the risk of tenants failing to renew their lease
agreements in respect of such properties.
4.1.3. DKR acts as a professional investor in this niche area, as
the investment value per property, generally up to
EUR 25 million, is in many instances too high for private
investors or too low for institutional investors. Operating
in this niche area, creates an efficient property acquisition
process for the Company, with little competition from
competing bidders, who would ordinarily drive up the purchase
price of similar properties in major cities. DKR has a
particularly streamlined administrative structure which
allows for efficient decision making. The experience of DKR’s
management and their existing network, as well as the flat
structure of the business, facilitates quick decision making,
which further enhances the acquisition process.
4.1.4. Strategic asset and portfolio management, as well as targeted
and value-adding investments, has enabled DKR to reduce
vacancies and enter into strong lease renewals, which has
historically led to an increase in the value of its portfolio.
In this respect, properties with higher vacancies and short
rental contract maturities are deliberately bought, in order
to allow DKR to exploit value-adding opportunities.
4.1.5. Through the growth and refinement of its real estate
portfolio, DKR is able to achieve economies of scale with
regard to ongoing administrative and management costs, as
well as in relation to borrowing costs, which further enhances
returns to Shareholders. This results in a highly profitable,
low-risk and efficiently financed real estate portfolio of
institutional quality, which generates sustainable and
attractive dividends from non-institutional individual
properties and allows the Company to take full advantage of
the tax benefits of the Company’s REIT status.
4.1.6. DKR was registered as a REIT in Germany on 13 January 2016.
The primary benefits of the REIT status are that the Company
is exempt from the payment of income tax at company level and
capital gains tax on the disposal of properties.
4.1.7. Although the Company is a REIT registered in Germany, it is
not a South African tax resident and does therefore not
qualify as a REIT for South African tax purposes. As such,
the special taxation regime applicable to REIT’s in South
Africa does not apply in the current instance.
4.2. STRATEGY AND VALUE PROPOSITION
4.2.1. The Company’s investment strategy consists of the three-
pronged investment approach set out below:
- the acquisition of high-yield convenience retail
properties, with a tenant-mix that focuses on the supply
of goods and services to local residents for daily needs,
with a strong focus on non-cyclical tenants such as major
German food retailers;
- the creation of value in relation to properties acquired
by the Company, through a focused active asset management
regime;
- the transformation of individual properties into an
efficient real estate portfolio of institutional quality,
with high and sustainable yields, allowing the Company
to take full advantage of its REIT status.
4.2.2. Through the growth and refinement of the real estate portfolio
in accordance with the above strategy, DKR is able to achieve
economies of scale with regard to ongoing administrative and
management costs, as well as in relation to borrowing costs
which further enhances returns to Shareholders. This results
in a highly profitable, low-risk and efficiently financed
real estate portfolio of institutional quality, which
generates sustainable and attractive dividends from non-
institutional individual properties and allows the Company
to take full advantage of the tax benefits of the Company’s
REIT status.
4.2.3. In summary, DKR has been strategically positioned to provide
a significantly de-risked business model with a property
portfolio that provides high-yielding and non-cyclical
cashflows through the acquisition and letting of German
convenience retail properties, financed in part with
institutional debt at low debt costs. DKR has also adopted a
lean management structure in an institutional and transparent
REIT company. Collectively, this positions DKR as an
attractive investment opportunity with positive and
sustainable cashflow generation underpinned with real assets.
4.3. RATIONALE FOR LISTING
The Company’s rationale for the Listing is to:
4.3.1. establish a positive relationship and reliable track record
with the South African market;
4.3.2. raise capital in a new market to fund further acquisitions
in due course;
4.3.3. increase the liquidity and tradability in the Company’s
Shares;
4.3.4. provide investors on the JSE with an opportunity to
participate in the Company’s income and capital growth
potential;
4.3.5. provide investors on the JSE with an additional local platform
to invest and trade in the Company’s Shares; and
4.3.6. further diversify the Company’s shareholder base.
4.4. PROSPECTS
4.4.1. Despite the current COVID-19 pandemic, the Company has shown
resilience in a large part due to its investment strategy.
The Company’s investment focus on non-cyclical retail
tenants, such as large German food retailers, retail
warehouse stores, drugstores and the like which provide
‘essential’ services and goods to consumers have made it
resilient to the impact of the lockdowns in Germany. These
non-cyclical retailers which form a significant portion of
the tenant base of the Company were excluded from the
mandatory lockdowns in Germany applicable to ‘non-essential’
retail stores and accordingly have continued to generate
rental income for the Company during the COVID-19 pandemic.
In relation to the Company’s tenants which are in a more
precarious position with regards to the lockdowns in Germany,
the Company is holding individual discussions with such
tenants to find commercial solutions that both help the
tenants economically and protect the Company’s interests. By
way of example, the standard approach in respect of such
tenants is to reduce or waive rents during the lockdown period
and negotiate extended lease terms so that the Company can
still achieve a suitable return over the long term.
Furthermore, the Company does not currently see any declines
in the supply of its prospective acquisition pipeline that
will impact the further growth of the Company’s property
portfolio. To the contrary, the Company has seen an increase
in interest in their food-anchored properties.
4.4.2. Notwithstanding the short-term impact of the COVID-19
pandemic, given the efficient implementation of the
investment strategy and the strong pipeline of acquisitions,
the Management Board and Supervisory Board are of the view
that the long-term prospects of the Company are very
encouraging. This is further enhanced by the fact that each
new acquisition will contribute towards the economies of
scale of the Company and thereby positively impact
profitability. The Management Board and Supervisory Board are
also confident that the Company will deliver sustainable
income and capital growth for Shareholders going forward.
4.5. SUMMARY OF DKR PROPERTY PORTFOLIO
4.5.1. The property portfolio of the DKR Group on Listing (excluding
the New Property Acquisitions as defined in paragraph 4.5.3
below), is summarised as follows:
Number of Portfolio at Portfolio at Annualised Average
properties owned market value (as book value* rent rental per m²
by DKR per Independent / per month
Property Valuer)
165 EUR 829.1 million EUR 841.4m2 EUR 64.9 EUR 6.37
million
Average Property Initial Gross Gross lettable Vacancy Portfolio
Yield Yield** area (GLA) m² (% of value per m²
rentable
area)
7.97% 10.5% 901,016 10.1% EUR 920.2
Average portfolio Weighted average Sectors Geographic profile
escalations lease term
(like-for-like as (years)***
at 30-Sep-2020)
0.9% 5.6 Convenience Micro locations in the
Retail central and regional areas
of Germany outside of major
cities
Notes:
* The DKR property portfolio is appraised annually as at 30
June. The book value of the DKR properties consists of:
(i) all of the properties owned by DKR as at the last annual
property valuation date of 30 June 2020 which were accounted
for at the appraiser’s fair value as at 30 June 2020; and
(ii) all of the properties purchased by DKR after 30 June
2020 up until the Last Practical Date (excluding the New
Property Acquisitions), at the purchase price thereof plus
transaction costs. More-over the book values also include
leaseholds which were accounted for as finance leases which
capitalised the rights of use of the properties. The book
values also include capitalised expenditures (Capex) which
have been invested in the properties after the 30 June 2020
valuation. In the next regular property valuation (i.e. as
at 30 June 2021), the book values will be updated to reflect
the latest fair values provided by the appraiser as at 30
June 2021.
** Initial gross yield, being the annualised in-place-rental
divided by the purchase price of an acquired property
(without including additional costs such as real estate
transfer taxes, notary fees and the like).
*** Calculated as including all fixed term lease agreements but
excluding all lease agreements which do not have fixed
terms and which may be terminated by either party thereto
on notice.
4.5.2. The DKR real estate portfolio is comprised of convenience
retail properties located in well-established micro locations
in the central and regional areas of Germany outside of major
cities.
4.5.3. DKR has entered into agreements to acquire seven new
properties in respect of which ownership has not, as at the
Last Practicable Date, transferred to DKR (“New Property
Acquisitions”). The property portfolio of DKR immediately
following the transfer of ownership of the New Property
Acquisitions, can be summarised as follows:
Number of Portfolio at Portfolio at Annualised Average
properties owned market value (as book value* rent rental per m²
by DKR per Independent /per month
Property Valuer)
172 EUR 880.5 million EUR 889.9m2 EUR 69.2 EUR 6.73
million
Average Property Initial Gross Gross lettable Vacancy Portfolio
Yield Yield** area (GLA) m² (% of value per m²
rentable
area)
7.99% 10.4% 958,747 10.5% EUR 918.4
Average portfolio Weighted average Sectors Geographic profile
escalations lease term
(like-for-like as (years)***
at 30-Sep-2020)
0.9% 5.5 Convenience Micro locations in the
Retail central and regional areas
of Germany outside of major
cities
4.6. DIVIDEND POLICY
According to the German-REIT law, DKR is required to distribute
at least 90% of distributable profits for the applicable period,
calculated according to German GAAP (which is diminished by the
regular depreciation of the properties by the amount of 3% per
annum in accordance with German GAAP and German-REIT law). The
Company may however distribute dividends exceeding 90% of
distributable profits for the applicable period based on
German-GAAP (up to 100% thereof).
4.7. MANAGEMENT
4.7.1. DKR is managed by its Management Board as well as its
Supervisory Board. The Management Board and the Supervisory
Board perform separate functions but work together closely,
for the benefit of the Company to ensure responsible
management of the Company.
4.7.2. The leadership of the Company has more than 50 years of
combined experience in the German real estate industry.
4.7.3. The Management Board consists of three executive directors,
appointed by the Supervisory Board in terms of the Articles
of Association of the Company in accordance with three-year
fixed term contracts (other than in respect of the CEO). The
Management Board is the operative management of the Company
and represents the Company in transactions with third
parties. It develops the strategic direction of the Company,
coordinates such strategy with the Supervisory Board and
ensures the implementation thereof. The Management Board also
ensures proper risk management within the Company.
4.7.4. The Supervisory Board consists of six independent directors,
appointed by the shareholders of the Company at the annual
general meeting of the Company. The role of the Supervisory
Board is to advise and supervise the Management Board and to
oversee the implementation of corporate governance.
4.7.5. The asset management and property management functions of the
Company are outsourced to third parties, the details of which
are contained in the Pre-listing Statement.
4.8. SECONDARY LISTING ON THE JSE
The JSE has granted the Company a secondary listing of all its
issued ordinary Shares as a Retail REIT on the Main Board of
the JSE by way of an introduction, under the abbreviated name
“DKR”, share code “DKR” and ISIN DE000A14KRD3 with effect from
the commencement of trade on Monday, 8 March 2021. The Company
will be listed in the “Retail REITS” sector.
4.9. SHARE CAPITAL
The issued share capital of the Company, on the Last Practicable
Date, is as set out below:
Number of Shares EUR
Issued share capital 35 155 938 35 155 938
Treasury Shares - -
Total 35 155 938 35 155 938
4.10. COMPOSITION OF THE BOARD
The names, ages, business addresses and capacities of the
Directors of the Company are provided below:
Names Capacity Age Business address Date of
appointment
Management Board
Rolf Elgeti Chief 44 August-Bebel- 23 December
executive Street 68, 14482 2014
officer of Potsdam, Germany
the Company
Alexander Chief 38 August-Bebel- 1 July 2017
Kroth investment Street 68, 14482
officer of Potsdam, Germany
the Company
Christian Chief 41 August-Bebel- 1 July 2017
Hellmuth financial Street 68, 14482
officer of Potsdam, Germany
the Company
Supervisory Board
Hans-Ulrich Chairman of 72 August-Bebel- November
Sutter the Street 68, 14482 2014
supervisory Potsdam, Germany
board of the
Company
Achim Betz Deputy 46 August-Bebel- November
chairman of Street 68, 14482 2014
the Potsdam, Germany
supervisory
board of the
Company
Johannes C. Non- 52 August-Bebel- April 2016
G. Boot executive Street 68, 14482
Director of Potsdam, Germany
the Company
Nicholas Non- 62 August-Bebel- April 2016
Cournoyer executive Street 68, 14482
Director of Potsdam, Germany
the Company
Kristian Non- 49 August-Bebel- March 2018
Schmidt- executive Street 68, 14482
Garve Director of Potsdam, Germany
the Company
Cathy Bell- Non- 50 August-Bebel- 5 March 2020
Walker executive Street 68, 14482
Director of Potsdam, Germany
the Company
4.11. Public shareholders
The free-float (public spread) of DKR on the Frankfurt Stock
Exchange at the Last Practicable Date amounts to 40.64%. The DKR
free-float meets the Frankfurt Stock Exchange requirements and
exceeds the minimum free-float requirement of the JSE of 20%. In
terms of German securities law, all holdings below a threshold
of 3% constitutes free-float (public spread).
5. COPIES OF THE PRE-LISTING STATEMENT
Copies of the Pre-listing Statement are available in English only
and may, from Monday, 22 February 2021 until the Listing Date,
be obtained from the registered office of the Company and from
the Sponsor, at the addresses set out in the “Corporate
Information” section of the Pre-listing Statement. A copy of the
Pre-listing Statement will also be available on the Company’s
website (https://www.deutsche-konsum.de/en/).
22 February 2021
PSG Capital Proprietary Limited: JSE Sponsor and Transaction Adviser
Cliffe Dekker Hofmeyr Incorporated: Legal Adviser
Date: 22-02-2021 04:30:00
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