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The mood on the German real estate market continues to be gloomy. But there are also providers who are benefiting from the crisis. CR Energy specializes in the cost-effective construction of energy self-sufficient residential properties. The company is therefore benefiting from the factors that are currently making buying a home unaffordable for many.
The dream of owning a home is over for many!
The desire for home ownership remains high: according to a study conducted by Sparda Bank in 2023, around 74% of Germans would like to own their own property. However, the actual ownership rate is well below 50%, one of the lowest levels in Europe, and is unlikely to rise any time soon. This is because a number of dreams of owning a home have been dashed in recent years. Rising interest rates and rising material costs have put paid to many plans to build or buy. Nothing will change here all too quickly: This is because higher interest rates and construction costs have been compounded by a mix of persistently high purchase prices, which have made it impossible for many to finance their own home. Many real estate stocks have crashed in the wake of these market changes. Those operating in the commercial real estate sector have been hit particularly hard. But the situation is also difficult for residential shares. Many investors have turned their backs. This offers opportunities.
CR Energy: Profiting from high interest rates and energy prices
However, there are also successful companies in this market environment. These include CR Energy (€ 24.70 | ISIN: DE000A2GS625), which has positioned itself as an investment company and invests in the residential market via subsidiaries. The crisis in residential construction appears to be a great opportunity for the Brandenburg-based company. This is because the company has specialized in the segment of cost-effective and energy-efficient/energy self-sufficient off-the-peg construction.
With this offer, the company also benefits from the high energy prices that make CR Energy’s low-energy properties so attractive to buyers. Nowadays, home buyers also look at how the long-term management costs of a property develop. After all, the costs of energy-efficient renovations have also risen considerably. Such properties also show the highest depreciation. Last but not least, another driver for CR Energy is the high demand for real estate in metropolitan areas. The rate of urbanization in Germany is steadily increasing and almost all metropolitan areas are gaining population. Hamburg is expected to break the 2 million population barrier as early as 2030, while Frankfurt is marching steadily towards the 800,000 mark.
Affordable, energy-efficient houses in central locations – not a utopia
CR Energy’s business model can be explained quickly. The company buys large building plots, primarily in the Berlin suburbs, which offer space for 50 to 70 residential units. The focus is on high synergies and standardization. Implementation is carried out entirely from a single source, meaning that the entire value chain is covered: From the acquisition of the land, construction under the company’s own management and the installation of a photovoltaic system by the wholly owned subsidiary Solartec. Another cost-cutting factor is the uncompromising standardization: the houses are all handed over with the same construction method and fittings. There are no deviations or special requests. And this obviously goes down well with the new owners, as the demand for CR Energy properties is enormous. After all, creating affordable living space in central locations remains one of the key challenges in Germany.
Low valuation and high dividend
CR Energy’s operating success is also reflected in its key figures: EBITDA amounted to € 76.3 million in the 2022 financial year (FY 2021: € 66.5 million) and net profit for the year was € 75.3 million (€ 65.4 million). The equity ratio reached a whopping 98% as of the half-year report 2023. More recent data is not yet available. Cash flow increased from € 7.8 million to € 14.7 million. And cash and cash equivalents rose from € 8.9 million to € 13.4 million within a year (as at June 30th, 2023). CR Energy announced that it is once again aiming for a dividend of € 2.50 per share. At the current share price, this results in a dividend yield of just over 10%.
Always looking ahead
However, CR Energy does not want to stand still with this business model. For example, CEO Stefan Demske wants to focus more on infrared heating systems, which are even cheaper than heat pumps. The electricity for this is to come from the company’s own PV system on the roof. Parts of the properties are also to be transferred to a separate ELTIF fund. This vehicle is then to be opened up to institutional investors in the future, as stated in the half-year report. Private investors will also be able to participate via a bond construct. The participation bond issued two years ago, which has already paid out twice, shows that this can certainly work.
Our conclusion: CR Energy’s business figures show that the company is riding a wave of success that may well continue in the coming years. Challenges certainly lie in the acquisition of suitable land. More transparency in reporting would certainly help the share price. Opportunities arise from the enormous pressure on the residential real estate market. Too little is being built, especially in big metropolitan areas like Berlin or Frankfurt. On the stock market, the share is still likely to suffer from clannishness, as many investors are keeping their hands off real estate companies – a very superficial approach where differentiation would be necessary. We always recommend taking a close look and weighing things up. A P/E ratio of less than 3 and a dividend yield of 10% certainly give CR Energy shares potential. The highs from 2022 are around € 40.
Please note: Investments in the capital markets are associated with a high level of risk. Investors can lose all of their capital – and more. Remember to do your own due diligence! The content of this website is intended exclusively for readers who are permanent residents of Germany. The German disclaimer applies (see below).
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