– Net rental income net of the ACCENTRO sale increased by 5.8 percent to EUR 170.3 million
– FFO I grew by 48.5 percent to EUR 40.5 million
– EPRA NAV net of one off items grew by 14.1 percent to EUR 1,207.2 million
– Loan-to-Value was lowered to 59.4 percent
– Further growth of c. 20% through acquisition of Brack Capital Properties
Berlin, 26 March 2018 – ADLER Real Estate AG, Berlin successfully reached its main financial targets in 2017. “Strategically”, said Tomas de Vargas Machuca, Co-CEO of ADLER Real Estate AG, “we wanted to significantly improve our operational performance by insourcing property and facility management, significantly reduce our higher-interest liabilities and continue to grow our portfolio through selective acquisitions – targets which we have fully achieved during the year. Moreover, we also streamlined our business model by divesting our trading unit ACCENTRO at the end of the year. These achievements contributed to us reaching our financial targets, especially in regards to our efforts to improve our rating from the original BB- to a BB/positive outlook.”
Net rental income net of disposals increased by 5.8 percent
Through several acquisitions, ADLER Real Estate AG increased the number of rental units in its portfolio by 5.6 percent to 50,305 units in 2017. Not included here are the 700 new built apartments of the project Wasserstadt Mitte – Riverside in Berlin which are expected to be completed by the end of 2019 and let out thereafter. At the same time, the average rent per square meter per month in the core portfolio increased by 3.4 percent to EUR 5.21 with the corresponding occupancy rate increasing by 0.5 percentage points to 92.1 percent. Portfolio growth and improved operational performance helped to increase net rental income to EUR 170.3 million in 2017, up by 5.8 percent against the previous year (EUR 160.9 million) which has been adjusted in order to facilitate comparison on a like-for-like basis after the sale of ACCENTRO at the end of 2017. Adjustments assume ACCENTRO had already been sold in the beginning of 2016.
Net of expense items, earnings from property lettings amounted to EUR 125.8 million in 2017, 15.4 percent more than in the previous year (EUR 109.0 million).
Funds from Operations I (FFO I) grew by 48.5 percent
FFO I for 2017 amounted to EUR 40.5 million equal to a 48.5 percent increase compared to the previous year (EUR 27.3 million) and marginally outperforming FFO I guidance. Basic FFO I per share amounted to EUR 0.60 as of 31 December 2017 – an increase of nearly 40 percent compared to the previous year (EUR 0.43). On a fully diluted basis FFO I per share increased by almost 31.0 percent to EUR 0.51 compared to 0.39 for the previous year.
EPRA NAV net of disposals up by 14.1 percent
At the end of 2017, EPRA NAV net of the sale of ACCENTRO amounted to EUR 1,207.2 million and was thus 14.1 percent higher on the adjusted figure of the previous year. Basic EPRA NAV per share came to EUR 17.80, an increase of 7.9 percent over the previous year (EUR 16.50). The fact that EPRA NAV per share has increased less than the absolute value is mainly due to the significant increase in the number of shares following the extensive conversions of convertibles and the issue of bonus shares. On a fully diluted basis, EPRA NAV per share increased by 9.2 percent to EUR 16.64 (previous year adjusted EUR 15.23).
Income from fair value adjustments increased
Income from fair value adjustments of investment properties reflect operational improvements as well as market conditions and increased to EUR 235.4 million in 2017 (previous year EUR 199.7 million). This was driven by the rise in average rents, modernization capex on selected properties, ongoing repair and maintenance which accounted for a total of EUR 55.1 million (previous year: EUR 43.9 million) in 2017 and yield compression. First time consolidation of the newly acquired portfolios also contributed towards fair value adjustments.
Loan-to-Value at 59.4 percent
Since the sale of ACCENTRO, ADLER has adopted an LTV computation which is more widely used in the real estate sector. LTV II shows the ratio of net debt to total property assets (Gross Asset Value) in line with the definition of the rating agency S&P. The LTV II according to this calculation was reduced to 59.4 percent excluding convertible bonds outstanding at the reporting date which are in the money. Excluding one off items incurred in conjunction with refinancing and other measures taken during 2017 LTV II stood at 57.3 percent. The LTV guidance for 2017 of 55% was met if adopting the historic LTV I calculation methodology, now discontinued.
Substantial EBIT growth
After the deduction of all non-financial expenses, earnings before interest and taxes (EBIT) for the 2017 financial year amounted to EUR 311.8 million. Compared to the previous year’s EBIT adjusted for the contribution of ACCENTRO, this equals to an increase of EUR 43.3 million or 16.1 percent. In the context of the Group, ADLER thus more than compensated for the loss of ACCENTRO’s earnings contribution from the sale of properties thanks to a better result from property management and a higher valuation result.
Further growth through acquisition of Brack Capital Properties
ADLER plans to grow and improve its financial metrics further in 2018. Both targets are, to a large part, linked to the acquisition of Brack Capital Properties N.V. As of March 22, a sufficient number of shares has already been tendered into the Special Tender Offer so that the acquisition can be closed in early April. ADLER is expected to succeed in reaching a 70 percent stake in the target. Brack Capital owns more than 11, 000 apartments thus increasing the ADLER core residential portfolio by c. 25 percent. Brack will also add FFO I of c. EUR 20 million annually which, on the basis of the 2017 results, represents an increase of c. 50 percent.
Tomas de Vargas Machuca and Maximilian Rienecker Co-CEO’s concluded: “Brack Capital will be a great supplement to our business and we are happy that the Special Tender Offer has been successful. This transformational acquisition is consistent with all the other measures we have taken recently to improve our business both operationally and financially with the clear target of receiving an investment grade rating in the near future.”
Key financials 2017
|In EUR millions|
|Consolidated Statement of Income||2017||2016|
|Net rental income||170.3||160.9 3)|
|Earnings from property lettings||125.8||109.0 3)|
|Earnings from the sale of properties||0.8||-0.5 3)|
|Consolidated net profit from continuing operations||106.4||133.8 3)|
|Consolidated net profit||142.6|
|FFO I per share in EUR 1)||0.60||0.47|
|FFO II per share in EUR 1)||0.78||0.86|
|Consolidated Balance Sheet||31.12.2017||31.12.2016|
|Investment Properties||3,018.5||2,442.0 3)|
|EPRA NAV||1,207.2||1,058.4 3)|
|EPRA NAV per share in EUR 1)||17.80||16.50 3)|
|LTV in % 2)||58.1||60.7 3)|
|LTV II in % 2)||59.4||55.3 3)|
|Net cash flow from operating activities||36.3||100.6|
|of which from continuing operations||66.2||80.2|
|Net cash flow from investing activities||212.7||-79.5|
|of which from continuing operations||212.8||-80.7|
|Net cash flow from financing activities||-4.7||53.4|
|of which from continuing operations||-17.3||56.2|
|Number of employees||555||354|
|1) based on the number of shares outstanding as at balance sheet date plus shares from assumed conversion of mandatory bond which is considered as equity, previous year’s figures adjusted accordingly
2) excluding convertible bonds
3)Adjusted due to sale of trading activities