CONSUS Real Estate: Right time, right place

Delivering what’s missing: Consus builds apartments in nine cities, from Hamburg to Stuttgart to Dresden.

The real estate developer is still flying under the radar of large investors. This should change as business grows and the company’s stocks get an upgrade.

By Bernd Johann

Focus Money, 31.7.2019

Consus is creating something that is currently in extreme demand: living space in urban centres. At present, no less than 65 projects with a volume of almost ten billion euros are in the pipeline. This makes the company “the number one real estate developer in Germany”, according to its Executive Board. Its properties are going fast, a fact which should increasingly be reflected in the figures. By 2020, analysts expect the company’s turnover to triple in comparison to 2018, and profits to explode. “Against this backdrop, the share price is far too low,” says Stefan Scharff, analyst at SRC Research. He sees the medium-term target price at around double the current level.

Business is picking up speed. There are solid reasons for both the obvious undervaluation of the share and its considerable potential. Consus only went public in 2017, and then primarily as a commercial real estate specialist. Because of this, the share is still relatively unknown, especially since it is only listed OTC in Munich and Frankfurt. With the acquisition of the Berlin-based CG Gruppe and the Swiss SSN Group, and the sale of the commercial portfolio, Consus switched to developers with a focus on residential properties. This move was made possible by an experienced team headed by CEO Andreas Steyer (previously of Demire and Deka Immobilien).

Moreover, the company has not yet attracted attention with higher earnings. In 2017, the year of the IPO, there was a loss, and in 2018, despite a leap in turnover to 615 million euros, only a minimal profit.

The future looks different. The Berlin-based company has built a property pipeline of 9.6 billion euros across nine major German cities. The latest addition? The Benrath Gardens in Düsseldorf. The current focus is on the development of urban living quarters and multi-storey rented buildings.

Thanks to strong demand, many properties are already being sold well ahead of completion, most recently “Leipzig 416”, located on a former railway site in the Saxon metropolis. At the present moment, this applies to a volume of 2.7 billion euros. “Almost 30 percent of the development portfolio is already secured by advance purchases,” says Scharff, the expert, enthusiastically. He sees this fact as a clear sign of the attractiveness of the Consus portfolio.

This also allows future revenues and profits to be anticipated quite accurately. For 2019, SRC Research expects Consus to post a turnover of 1.83 billion euros and for 2020 a turnover of 2.39 billion euros. At the same time, earnings are expected to rise from 1.2 million euros in 2018 to 19.3 and 96.9 million euros respectively in 2019 and 2020. Further growth is likely to follow. Scharff speaks of “impressive key figures” regarding the company’s developments to date.

Before the upgrade. Consus can rely on a strong partner: 57 percent of the shares belong to the Luxembourg Aggregate Group, an international real estate investor, with whom the Berlin-based company works closely. A drawback so far remains the high debt of 2.4 billion euros at a steep eight percent interest rate. If the Executive Board succeeds in reducing both, as intended, this would prove a further lever for revenue.

The stock is also about to appreciate in value on the stock exchange. The market expects the trading segment to change from over-the-counter to Prime Standard – “maybe even in 2019”, hopes Stefan Scharff. In that case, the security would also be available for purchase by institutional investors.

There’s a lot to be said for the stock. “We fully affirm our recommendation to buy,” says Scharff. A significant rise in interest rates in the strongly capital and market-sensitive developer business alone could throw the timetable overboard, but the central banks have officially rejected this possibility. A possible rent cap is not considered a hindrance by the Executive Board. Consus sees itself rather as part of the solution towards the development of additional affordable living space. CEO Steyer firmly believes in a shining future.

FOCUS MONEY article, published July 31, 2019 in German only