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ADLER Real Estate: recent portfolio acquisitions have substantial effect on earnings

ADLER Real Estate AG / Key word(s): Miscellaneous

10.07.2014 / 20:45


ADLER Real Estate: recent portfolio acquisitions have substantial effect on earnings

- Net rent and cash flow of the Group increased substantially

- EPRA NAV of ADLER Group at approx. EUR 11 per share

- LTV decreased considerably to around 65 percent

Hamburg 10 July 2014. The most recent and also largest portfolio acquisitions made by
ADLER Real Estate AG, Frankfurt/M., ("ADLER," ISIN DE0005008007) included seven property holding companies - concluded in June 2014 - and the takeover of 92.7 percent in ESTAVIS AG, Berlin, substantially improved the value and profitability of ADLER. The balance sheet of the expanded group is estimated to have been increased to roughly EUR 1.25 billion at the end of the first half of 2014. Investment properties have been included with an estimated book value of around EUR 1.07 billion. The balance sheet total amounted to EUR 540.9 million at the end of the first quarter 2014. The management board of
ADLER estimated that the ratio of liabilities to assets in the balance sheet (LTV = Loan to Value), which is a key ratio for real estate companies, substantially improved and decreased slightly to just over 65 percent as at 30 June 2014 (end of 2013: 71 percent).

The management board expects an increase in equity to more than EUR 290 million (31 March 2014: EUR 115.3 million). This increase results from the consolidation and first-time recognition of the acquired assets in accordance with IFRS, resulting in a three-digit million figure for ADLER in the first half of 2014. Due to effects from fair value measurements, the consolidated group results had increased to EUR 21.4 million in the first quarter of 2014. Consolidated revenues in the first half of 2014 will most likely increase to roughly EUR 25 million due to higher rental incomes (first half of 2013: EUR 2.8 million). The EPRA NAV (Net Asset Value according to the calculation standards of the European Real Estate Association) of the expanded ADLER group is now at approx. EUR 11 per share per 30 June 2014 - which is significantly above the current share price.

The portfolio acquisitions have set a foundation for significantly increasing revenues. Projected on a 12-month period, ADLER's existing real estate portfolio will generate net rent income of approx. EUR 77 million and a positive cash flow of roughly EUR 20 million. Income from the operating business (funds from operations = FFO) are also expected to increase to EUR 20 million. The FFO including disposals for the first quarter 2014 amounted to just EUR 1.5 million - which ADLER is reporting for the first time. Due to continuing work required on the financial statements, ADLER is expected to publish its half-year financial statement on 31 August 2014.

"We have accomplished two major steps in the first half of the year in our objective to evolve into a major residential real estate company and simultaneously improve our solid position and opportunity for further value growth and higher earnings", Axel Harloff, CEO of ADLER Real Estate, sums up. The eight property portfolios recently acquired together include approx. 8,500 residential and commercial units. The value alone of these portfolios amounts to roughly EUR 409 million. Together with the ESTAVIS portfolios, ADLER now manages roughly 21,000 residential units. This number will even increase to roughly 25,000 units after an acquisition close which was signed by ESTAVIS in March 2014.

"We are working to significantly improve on last year's occupancy rate of 91 percent", Harloff explains. ADLER has systematically invested in vacant apartments of the acquired portfolios and benefited afterwards with new renters. The rental markets in almost all German regions have improved. The German Property Index (GPI) of the research institute BulwienGesa, measured an increase in value and cash flow return of German real estate of +12.6 percent.

The research institute expects that rent prices will rise going forward. As a result of the combination of economic growth and the effects of fundamental factors, like increasing floor space consumption or people moving into congested urban areas, the institute projects the best future performance in the residential real estate market compared with all other sub-markets of the real estate sector. Additional potential exists in the so called B locations as a result of lacking affordable property for rent and increasing number of prospective tenants in the outskirts of urban regions. According to surveys done by the online platform ImmobilienScout24, tenants are showing a growing willingness to pay more. "Our portfolios should benefit from these developments", Harloff comments. In Duisburg for example, where ADLER manages approx. 4,000 apartments, the willingness to pay increased in 2013 by an average of 5.6 percent. In the Wolfsburg region, close to Helmstedt, where ADLER manages roughly 2,300 residential units, rents increased by 127 percent between 2009 and 2013 according to data compiled by the platform Immonet. And in Dresden (ADLER has approx. 1,500 units), rents increased already by 5.9 percent between 2011 and 2013. "We will benefit from these developments through our investments and enhanced distribution measures", says Harloff.

For inquiries please contact:

Press: german communications dbk ag
Jörg Bretschneider
Milchstr. 6 B, 20148 Hamburg, Germany
Phone: +49-(0)40/46 88 33 0
Fax: +49-(0)40/46 88 33 40
presse@german-communications.com

Investor Relations: Hillermann Consulting
Christian Hillermann
Poststraße 14, 20354 Hamburg, Germany
Phone: +49-(0)40/32 02 79 10
Fax: +49-(0)40/32 02 79 114
c.hillermann@hillermann-consulting.de

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