First Berlin – GRAND CITY Properties S.A. Research Update (20/11/2019)

First Berlin Equity Research has published a research update on GRAND CITY Properties S.A. (ISIN: LU0775917882). Analyst Ellis Acklin reiterated his BUY rating and maintained his EUR 28.00 price target.

Third quarter reporting continued the good operational trajectory of the past quarters. Net rent climbed 6.6% Y/Y, thanks to the reversionary potential of the portfolio, which resulted in 3.6% like-for-like (LFL) total net rent growth. But the conference call centred around the German capital's rent freeze set for the start of 2020, which Berlin lawmakers agreed to in October. Management provided guidance on the LFL impact. Thanks to strong portfolio diversification, only ~15% of portfolio rent is exposed to the Berlin rent freeze and LFL net rent growth should remain above 2% in 2020 and climb to 2.5% the following year. The estimated €3m decline in net rent equals <1% of the portfolio total and does not materially impact our forecasts. We stick to our Buy rating and €28 price target.