Grand City Properties - comment

Grand City Properties continues to benefit from robust fundamentals in the German residential market, where supply shortages and broader macroeconomic factors are driving rental growth across urban areas. In Q1, the company achieved a like-for-like net rental growth of 3.8%, partially mitigating the impact of net disposals. Net rental income rose by 1%, while EBITDA improved by 3%. GCP will not pay a dividend for 2024, which is a little surprising, but reflects the recent downgrade and the aim of maintaining financial flexibility and cash headroom.  

Key credit metrics showed modest improvement during the period. Given the company’s solid liquidity position, we question the rationale behind S&P’s recent downgrade of Grand City Properties to BBB. The downgrade, which also affected Aroundtown, was attributed to heightened macroeconomic uncertainty and a weakening German economy—factors expected to slow Aroundtown’s deleveraging efforts.