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by Thomas Strohm, Euro on Sunday
FLarge companies with a good rating currently have no problem placing new bonds. The enormous demand fueled by the ECB’s purchase programs sometimes leads to investors foregoing the usual new issue premium and accepting a reduction in yield compared to older bonds. Smaller companies with poorer or no ratings hardly come onto the market.
The Frankfurt-based real estate company Publity, which specializes in office buildings, is now taking this step and is issuing a bond whose placement in March had actually been postponed to autumn due to the corona turmoil. The Publity shares are listed on the Scale, the segment for small and medium-sized companies of the Deutsche Börse. There is no independent rating. With a five-year term, Publity offers a correspondingly high interest rate of 5.50 percent per annum for the bond.
The subscription of the papers with a denomination of 1,000 euros runs until June 17. Investors who are in possession of the company’s convertible bond issued in 2015 and due in November 2020 (ISIN: DE 000 A16 9GM 5) can exchange them for the new bond at a ratio of one to one until June 15. In addition to the accrued interest, there is 20 euros per exchanged convertible bond, which corresponds to a premium of two percent.
A volume of EUR 100 million is targeted for the new bond. Publity CEO and major shareholder Thomas Olek guarantees a minimum volume of 50 million. This ensures the refinancing of the convertible bond, which has an outstanding volume of 46 million. The rest of the proceeds will flow into further company growth.
Publity has grown significantly in the past few years and is now managing property worth a total of 5.5 billion euros. On the one hand, the group acts as an asset manager and manages real estate for investors. On the other hand, an own portfolio with a volume of 1.1 billion euros has recently been built up.
The company focuses on office properties in the top 7 locations in Germany, cities like Frankfurt and Munich. However, Olek still sees itself primarily as a real estate dealer who buys, revitalizes and resells older buildings. The objects are held for an average of only one and a half years. In 2019 the surplus was a good 64 million, in 2018 it was just under 25 million euros. Publity explains this jump in profits primarily by expanding its own portfolio.
Don’t worry about the Corona crisis
The two-pillar business model is considered stable. The company benefits from recurring income as an asset manager and regular income from long-term rentals of its own properties. The Management Board sees the group as well positioned in the Corona crisis. The quality of an asset manager and investor, as well as excellent market access with a strong network and extensive database, prove themselves, particularly in the difficult environment, says Olek. With the focus on top real estate in top cities, Publity is also active in an above-average stable segment.
Olek has massively increased its equity stake in recent years, but recently announced plans to sell packages to investors, which would lower its stake below 50 percent. At the same time, however, Olek emphasized that depending on the course, he would also buy back and continue to bind himself to Publity as a shareholder and board member.
New issue: Private investors can subscribe to the new bond through their house bank and the Frankfurt stock exchange.
Image sources: Brian A Jackson / Shutterstock.com, Istockphoto