IVG Immobilien AG ended the second quarter of 2012 with a consolidated net result of -11.2 million (previous quarter: -4.8 million) and expects to almost break even by the end of the year in line with planning.
The reason for the drop in earnings as against the previous quarter were realized changes in market value of investment property, which developed from -1.7 million in the first quarter of 2012 to -15.4 million in the second quarter of 2012. In particular, there were non-recurring effects on earnings especially from the disposal of properties in connection with the successful placement of the IVG EuroSelect 21 Munich funds.
A total of five caverns still under construction will be measured under Fair Value accounting when sufficiently completed in the second half of the year, therefore contributing to an almost break-even consolidated net result for the year in addition to the further decline in interest expenses.
Dr Wolfgang Schδfers, CEO of IVG Immobilien AG, said: By repaying a total of 520 million in financial liabilities this year alone, IVG is successfully continuing its consolidation. In addition to the Groups ongoing and scheduled debt reduction by a further 800 to 900 million in the next two years, we will gradually expand our business activities to include new and lucrative asset classes in the fields of real estate and infrastructure, therefore again growing from a stable basis in the medium term.
The recently implemented listing of IVG Immobilien Management REIT-AG is just one example of the expansion of the integrated real estate and infrastructure platform.
Performance in the second quarter of 2012
Revenues climbed by 9.0 million to 110.9 million, predominantly as a result of an increase in net rents in the Investment area and greater structuring income for the placement of IVG EuroSelect 21 Munich fund in the segment Funds (Private Funds). Other revenues also increased as a result of the successful start-up of hotel operations at THE SQUAIRE at Frankfurt Airport in the segment Investment (Development).
While unrealized changes in market value of investment property made a 5.1 million higher positive contribution (2Q 2012: 20.4 million) than in the previous quarter (Q1 2012: 15.3 million), the disposal of properties especially in connection with the successful placement of the IVG EuroSelect 21 Munich fund resulted in a total non-recurring expense of 15.4 million. Operating EBIT (Earnings before interest and taxes) therefore declined slightly from 50.3 million in the first quarter of 2012 to 45.0 million in the second quarter of 2012.
The financial result remained at the same level as in the previous quarter at -56.8 million (Q1 2012: -54.8 million). The 2.9 million improvement in net interest result to -49.3 million (Q1 2012: -52.2 million) was unable to fully offset a negative non-recurring effect from interest rate hedges in the second quarter of 2012. However, the repayment of liabilities to banks of around 520 million to date in the current financial year is expected to further improve the net interest result and net finance costs significantly for 2012 as a whole and the years to come.
Funds from operations (FFO I), which describe the companys operating cash flow without non-recurring income from Development or the effects of sales, increased significantly to 14.6 million (previous quarter: 2.9 million). This was due in particular to a substantially better result in the segment Funds (Private Funds) as compared to the first quarter of 2012. With vacancies at 11.3% as against 11.4% in the first quarter of 2012, a slight increase in like-for-like rents of 0.7% as against the previous quarter and a NOI yield of 5.2%, the other main portfolio indicators remained stable.
Reported net asset value changed slightly from 4.83 per share on March 31, 2012 to 4.76 per share on 30 June 2012. The net asset value including future caverns business (adjusted NAV) amounted to 6.35 per share as at the end of the second quarter as against 6.29 per share on March 31, 2012. The loan-to-value ratio (balance sheet LTV) improved slightly and is now below the 70% line at 69.8%. The Groups liquidity amounted to 105 million as at the end of the second quarter of 2012 and was therefore virtually unchanged as against the previous quarter.