- Gross rental income increased by 16,5 percent to EUR 252.4 million
- FFO I improved by 69.6 percent to EUR 27.3 million
- Net Asset Value boosted by 21.6 percent to EUR 1,069.9 million
- Loan-to-Value lowered by 6.7 PP to 61.3 percent
- Further improvements expected for 2017
Berlin, 24 March 2017 – ADLER Real Estate AG, Berlin successfully reached or outperformed all of its financial targets guided for the financial year 2016. Both operating results and net asset value increased strongly, while significantly improving the Group’s financial structure and significantly lowering its LTV ratio during the same period. For 2017, the company expects to continue the positive development.
Gross rental income increased by 16,5 percent
Gross rental income, predominantly comprised of income from property lettings, reached EUR 252.4 million in the 2016 financial year, equivalent to an increase of 16.5 percent on the previous year (EUR 216.6 million). This marked growth was mainly due to the expansion in property holdings as a result of the acquisitions made in the previous year, namely the acquisition of Wohnungsbaugesellschaft JADE GmbH in February 2015, of WESTGRUND AG in June 2015 and of the Ajax portfolio at the end of the third quarter of 2015. All new acquisitions contributed to the income for the full twelve-month period in 2016, in contrast to a time-apportioned basis in 2015.
Gross rental income also increased as a result of further improvements achieved in operational performance indicators. At the end of 2016, the average contractually agreed rent per square metre per month in the core portfolio amounted to EUR 5.04. On a like-for-like basis, it was thus EUR 0.06 or 1.2 percent higher than the previous year’s figure (overall portfolio: EUR 5.00 at the end of 2016; EUR 4.93 at the end of 2015). The occupancy rate rose by 1.1 percentage points to 91.4 percent in the core portfolio and by 1.2 percentage points to 90.0 percent in the overall portfolio.
Net of expense items, earnings from property lettings amounted to EUR 113.6 million in 2016, 24.0 percent more than in the previous year (EUR 91.6 million).
Substantially higher income from the sale of properties
In 2016 ADLER Real Estate AG generated income of EUR 36.4 million from the sale of properties and thus significantly exceeded the previous year’s figure (EUR 23.5 million). This income was generated exclusively from the trading and privatisation activities at the Group subsidiary ACCENTRO Real Estate AG. In particular, ACCENTRO was able to sell a portfolio of 419 units located in the centre of Berlin in the third quarter. This portfolio, which had originally been earmarked for individual privatisation, was sold on attractive terms in its entirety.
The sale of 934 non-core units – one of ADLER’s strategic objectives since the beginning of 2015 and intended to increase the performance capacity of the overall portfolio – had no effect on earnings as they were predominantly executed at the respective carrying amounts. The non-core portfolio still comprised around 2,800 units at the end of the year.
Property valuation adapted in line with changing market circumstances
At EUR 199.7 million in 2016, income from fair value adjustments of investment properties was significantly higher than the previous year’s comparative figure (EUR 58.9 million). This valuation gain was partly driven by the rise in average rents and occupancy as well as through measures to maintain and modernise the properties, which accounted for a total of EUR 44.4 million (previous year: EUR 36.1 million). The larger share of the income from fair value adjustments was due to changes in market circumstances, which were characterised by persistent pressure on yields (yield compression).
Substantial EBIT growth
After the deduction of all non-financial expenses, earnings before income and taxes (EBIT) for the 2016 financial year amounted to EUR 301.8 million, 70.9 percent higher than in the previous year (EUR 176.6 million). A comparison between the earnings figures for the two periods adjusted for non-recurring and extraordinary items shows a similar development. Adjusted EBITDA for 2016 amounted to EUR 124.3 million, up 30.0 percent from the comparable figure of the previous year (EUR 95.6 million).
Funds from Operations I (FFO I) improved by two thirds
FFO I for 2016 amounted to EUR 27.3 million, 69.6 Percent more than in the previous year (EUR 16.1 million) and outperforming FFO I guidance by almost 10 percent. The FFO II figure for 2016 is reported at EUR 55.3 million, which also represents a substantial increase compared with the previous year (EUR 44.3 million). This key figure benefited from the fact that in the third quarter ACCENTRO was able to sell a property in Berlin-Kreuzberg. Originally earmarked for privatisation, this property was sold in its entirety in a single transaction.
Basic FFO I per share amounted to EUR 0.47 as of 31 December 2016 – a significant increase compared to the previous year (EUR 0.28)
Net Asset Value boosted by 21,6 percent
ADLER Real Estate AG refers to net asset value (NAV) as a key group management figure and calculates this in accordance with the guidelines issued by the European Public Real Estate Association (EPRA). At the end of 2016, this key figure amounted to EUR 1,069.9 million and was thus 21.6 percent higher than at the end of 2015. Basic EPRA NAV per share amounted to EUR 18.35 (Previous year EUR 15.51).
Loan-to-Value lowered to 61,3 percent
Assuming that the convertible bonds outstanding at the reporting date are converted into shares, the ratio of financial liabilities to total assets (loan to value), with both figures adjusted to exclude cash and cash equivalents, amounted to 61.3 percent, 6.7 percentage points lower than at the end of 2015. ADLER has thus moved closer to reaching its target of reducing LTV below 60 percent.
Further improvements expected for 2017
ADLER plans to increase its real estate portfolio during the course of the year. Although plans are to dispose of 2,800 non-core units, ALDER also expects to compensate this reduction by acquisitions of a similar amount. At the same time, the operational performance is expected to improve, average rent per sqm to increase and vacancy rate to decrease – to which the investment program to renovate 1,500 vacant apartments will certainly contribute towards. All in all, ADLER expects that net rental income 2017 will exceed the 2016 level by around 3 percent.
These operational improvements – together with the improved cost structure which has resulted from the structural changes in 2016 and the decrease in interest expenses initiated already through the redemption of higher yielding liabilities – should impact positively on FFO I. This key figure should therefore increase to around EUR 40 million, equivalent to year-on-year growth of nearly 50 percent.
In 2017, ADLER’s financial indicators will show improvements which are expected to be substantial in some cases. Having already begun to buy back some corporate bonds with higher interest rates in the first quarter of 2017, the Company expects to significantly reduce its LTV figure stabilizing it to around 55 percent as the year progresses. ADLER would then have reached what it sees as the right ongoing level. Furthermore, by redeeming bonds with higher interest rates and implementing refinancing measures ADLER expects to reduce its average interest on debt to around 3.45 percent.
It is particularly difficult to forecast the expected NAV figure, as this crucially depends on the development in the value of property holdings and also on the question whether the expected disposal of “non-core” portfolios can be achieved and new portfolios can be acquired in the course of the year. ADLER expects value growth to be achieved in a low double-digit percentage range in 2017.
The complete annual report of ADLER Real Estate AG for the financial year 2016 is available on the company’s website (www.adler-ag.com/new).
Key financial data for the financial year 2016
|In EUR m||2016||2015||Change 2016/15 %||Guidance 2017||Change 2017/16 %|
|Consolidated statement of income|
|Gross rental income||252.4||216.6||+ 16.5|
|Net rental income||167.5||131.6||+ 27.3||172.5||+ 3.0|
|Earnings from property lettings||113.6||91.6||+ 24.0|
|Earnings from the sale of properties||36.4||23.5||+ 54.9|
|Consolidated result||133.8||78.3||+ 70.9|
|FFO I||27.3||16.1||+ 69.6||40.0||+ 46.5|
|per share (EUR)*||0.47||0.28||+ 67.9|
|FFO II||55.3||44.3||+ 24.8||50.0||-9.6|
|per share (EUR)*||0.95||0.78||+ 21.8|
|Consolidated balance sheet (as of 31.12.)|
|Investment Properties||2,442.0||2,270.2||+ 7.6|
|EPRA NAV||1,069.9||879.5||+ 21.6||1,250||+ 16.8|
|per share (EUR)*||18.35||15.51||+ 18.3|
|Loan-to-value (%)||61.3||68.0||-6.7 PP||55||-6.3 PP|
|From operating activities||100.6||25.0||n.a.|
|From investing activities||-79.5||-438.7||n.a.|
|From financing activities||53.4||430.2||n.a.|
|Employees (as of 31.12.)|
|Number of employees||354||268||32.1|
* basic, 47,702,374 shares as at balance sheet date (previous year: 46,103,237) plus 10,606,060 shares from assumed conversion of mandatory convertible bonds (previous year: 10,606,060) which are considered as equity