Grand City raises LEG stake to 20.04% in financial investment
Key Facts
Grand City Properties announced that its total stake in German residential property company LEG Immobilien had reached 20.04%, in a financial investment it expects to boost its funds from operations. The company said in its official disclosure that it had entered into share purchase agreements with financial intermediaries, adding the shares covered by those agreements to its existing holding in the German company. The total disclosed stake thus includes shares Grand City owned before the agreements, alongside shares covered by the new purchase agreements with intermediaries. According to the investment statement, the position offers a yield exceeding 13% based on funds from operations I, the return the company attributed to the investment. Grand City expects funds from operations under the same measure to rise by about 30% on a proportionate basis as a result of the investment in the German company.
Regarding the stake's valuation, Aroundtown said the book value of LEG's equity attributable to the acquired shares was about 1.8 billion euros. The figure is based on the value LEG reported in its financial statements as of June 2026, according to Aroundtown's official disclosure on the investment. Aroundtown described the investment's valuation as representing a "significant discount" to the book value of equity attributable to the shares covered by the investment. It added that the group could record a one-off, non-cash gain under International Financial Reporting Standards if certain conditions required to recognise the gain were met. That potential accounting impact remains subject to those conditions being met, while Grand City attributed its expectations for higher funds from operations to the investment's anticipated return.
The investment's impact extends to Aroundtown, which is increasing its indirect exposure to German residential property through its subsidiary Grand City, the direct buyer of the shares. Aroundtown said in the investment statement that it expects its funds from operations I to increase by about 15% on a proportionate basis. Including the investment, residential property rises to 42% of the group's total portfolio, becoming its largest asset class, according to the weightings the company disclosed. The accommodation sector, which includes hotels alongside residential property, rises to nearly 60% of the portfolio, compared with 53% before the new investment. Aroundtown Deputy Chief Executive Kamaldeep Manaktala described the investment in LEG as "transformational" in the company's comments on its portfolio impact.
Grand City classified the stake in its disclosure as a "financial investment", retaining the flexibility to adjust the size of the position according to the market conditions it faces. Its disclosed options include increasing its stake in LEG to 29.9%, with any such move dependent on market conditions. Conversely, the company also retains the option to reduce its exposure by selling part of its announced investment in the German property company. The disclosed options also include selling the investment in full, alongside a partial sale, both subject to market conditions as stated in the disclosure. Grand City has thus left its ownership trajectory open, ranging from increasing its stake to the disclosed potential level to partially or fully exiting the financial investment.
The investment comes after Grand City reported a decline in funds from operations I in the first half of 2026, according to its financial results. The measure stood at about 91 million euros during the period, compared with about 95 million euros in the first half of 2025, a year-on-year decline of 4%. On leverage, the company said in the investment statement that it expects its loan-to-value ratio to remain well below its guidance level of 45%. Its loan-to-value estimate relates to its position after the investment, alongside its expectation of higher funds from operations on a proportionate basis from LEG. Grand City presented the expected increase of about 30% as an effect of the investment, compared with the first-half figure disclosed in its earlier financial results.
On the regulatory front, Grand City said voting rights attached to the shares would not be exercised until the relevant regulatory approval was issued by Germany's Federal Cartel Office. Exercising the voting rights is therefore subject to obtaining the required approval, under the restriction the company disclosed in its investment statement regarding its LEG stake. In the upcoming financial reporting schedule, Grand City is due to publish its third-quarter financial report on 11 November 2026, according to its financial calendar. Aroundtown is scheduled to publish its third-quarter financial report on 25 November 2026, according to the date listed in the group's financial calendar. The scheduled disclosures begin with the report from Grand City, the direct buyer of the stake, followed by Aroundtown's report, which accounts for the investment's impact through its subsidiary.