Argo, which deals in the purchase, management and improvement of residential buildings in the “quality residences” sector (buildings for conservation in city centers) in Germany, reported that Menorah became an interested party and reached a holding of approximately 5.36% in the company.
Menorah’s vote of confidence follows on from the banking system’s vote of confidence, after about two months ago the company reported that it had signed an agreement for refinancing in the amount of about 77 million euros with two German banking corporations. The financing embodies an LTV of about 46% (on the value of the assets in the company’s books), and replaced existing loans in the amount of about 56 million euros, which the company took out in 2019 and 2020. The loans are secured by pledging buildings that include approximately 878 units in the cities of Leipzig, Dresden and Magdeburg in Germany. The rent on these properties was improved by 30% within 30 months.
In fact, the company received additional financing of approximately 21 million euros following the improvement of the company’s assets, when the increase in the rent on the assets and the improvement in values allowed the company to receive additional capital for those assets from the banking system, which will allow the company to invest in its continued growth through the purchase of additional assets. Against the background of the quality of the assets, the refinancing was carried out in margins of 1.2% compared to the financing margins of real estate companies in Germany which are 2%-5%, depending on the company and the quality of its assets.
Yesterday, the company updated regarding the scope of the transactions for the purchase of new properties that it carried out from November 1, 2022 until January 29, 2023. The company purchased 12 residential buildings in Germany that include 98 units for a financial amount of 14.1 million euros. D monthly per square meter of 7.11 euros, compared to 10.77 euros per square meter in new leases of the company in its existing properties. The company estimates that the ERV yield on the above purchases amounts to approximately 5.85%.
As of January 29, 2023, the company owns (including properties in the process of purchase) 353 residential buildings that include 3,663 housing units (97% residential) in a rental area of approximately 244 square meters and with the addition of 682 parking spaces, yielding an annual income of 22.2 million euros (assuming full occupancy). This is compared to 341 residential buildings, which include 3,565 housing units (97% residential) in a rental area of approximately 238 square meters and with the addition of 669 parking spaces yielding an annual income of 21.5 million euros (assuming full occupancy), as of 31 in October 2022 (status of the company’s assets as detailed in the report of the company’s board of directors for the third quarter of 2022).
Argo is engaged in the purchase, rental and improvement of high quality residential buildings in the city centers of Leipzig, Dresden and Magdeburg in Germany (federal capital cities) and the development and conversion of office space in Berlin. These cities benefit from long-term positive economic and demographic trends and, as a result, structural demand surpluses and a stable price increase trend. Throughout the years of its activity, Argo presents high returns on equity based on the purchase of quality assets and high organic growth alongside low levels of leverage. The company’s management, which includes Gal Tanenbaum and Ofir Rahamim, owns after the offering approximately 21.5% of the share capital (fully diluted), and has over 18 years of experience in the real estate field in Germany.