DIC Asset AG posts half-year results: significantly higher FFO (DE)
Wednesday 15 August 2012
|DIC Asset AG has today presented its interim report for the first half of the 2012 financial year. Gross rental income posted a marked increase of 11%, to €62.5 million.|
|The vacancy rate has fallen further to only 12.0%, reflecting successful rental activities. The operating profit (FFO) increased by 6%, to €21.3 million. All in all, DIC Asset AG generated consolidated profit of €5.1 million (H1 2011: €6.2 million), which is down on the previous year largely owing to expenditure targeting future projects. The trends of the first quarter were thus confirmed overall.|
Details of the half-year report
Although sentiment improved initially, the first half of 2012 was once again defined by uncertainty stemming from the European sovereign debt crisis. In this market environment, DIC Asset achieved gross rental income of €62.5 million (H1 2011: €56.5 million). The 11% increase was driven by portfolio growth as well as by constant and strong letting performance. Net rental income in the first six months amounted to €56.1 million and was therefore 7% higher year-on-year (H1 2011: €52.2 million).
Fees from real estate management were unchanged at €2.3 million. Higher asset and property management revenues from the ‘DIC Office Balance I’ special investment fund therefore made up for the loss of fees after the sale of properties held in the Co-Investment segment and joint venture portfolios from the previous year that were fully taken over. Total revenues also increased to €78.2 million (H1 2011: €76.0 million), primarily reflecting higher rental income.
DIC Asset AG increased its letting volume by 16% over the previous quarter to 60,000 m² (Q1 2012: 52,000 m²). Total letting volume in the first half year amounted to around 112,000 m² (H1 2011: 138,000 m²). This equates to annualised rental income of €11.7 million and is therefore just short of last year's figure (H1 2011: €12.4 million). The like-for-like increase in rental income was 0.1%, as in the first half of the previous year. Overall, the vacancy rate was lowered significantly to 12.0% (H1 2011: 13.8%, Q1 2012: 12.3%). Letting volume to date this year reduced the potential volume of contracts set to expire in 2012 by more than half, from 9.9 to 4.3% of annual rental income. Lease expiries in 2013 have already fallen from 9.6 to 7.4%.
The acquisition volume to date in 2012 amounts to €86 million. This includes the purchase of an office property at the main station in Frankfurt/Main (€17 million) for the asset portfolio (Commercial Portfolio), a new office building in Eschborn for the ‘DIC Office Balance I’ special investment fund (€44 million), as well as two properties in Mannheim and Dresden (€25 million) for the ‘DIC HighStreet Balance’ retail property fund that is being developed and marketed. The disposal volume to date for 2012 stands at €12.4 million. This comprises primarily four properties, each of which are significantly lower than the average property size of around €12 million, which has further optimised the portfolio structure.
Net financing expenses increased in the first half year – reflecting portfolio expansion – with an interest result of €-28.6 million (H1 2011: €-26.1 million). This was attributable in particular to higher financing volumes as a result of the acquisitions and expenses incurred for servicing the bond issue. Interest income rose from €3.6 million to €4.9 million, whilst interest expense increased from €-29.7 million to €-33.5 million.
The average maturity of the financial debt of €1.52 billion (December 31, 2011: €1.52 billion, June 30, 2011: €1.43 billion) was three years as at June 30, 2012. In the first half of 2012, 11 loans with an aggregate volume of around €500 million were arranged with around a dozen banks, with the loans covering the entire managed real estate portfolio. The average rate of interest on financial debt was 4.20% as at June 30 2012 – therefore 15 basis points lower than at year-end 2011 (Q4 2011: 4.35%).
Personnel expenses increased to €5.8 million (H1 2011: €4.9 million) due to the expansion of DIC Asset AG's business activities, while administrative expenses of €4.2 million were unchanged year-on-year. The operating cost ratio – the ratio of staff and administrative expenses to gross rental income (adjusted for fees from real estate management) – of 12.3% was in line with plan.
FFO (funds from operations, defined as earnings before interest and taxes, and excluding profits from disposals and development projects) was €21.3 million for the first six months and was therefore 6% higher than in the previous year (H1 2011: €20.1 million), primarily because of the larger portfolio and thanks to successful rental activity. The FFO per share remained stable, at €0.47, despite the higher number of shares compared with the same period of the previous year. Profit for the period of €5.1 million (H1 2011: €6.2 million) was down €1.1 million year-on-year, as expected. This was due, amongst other factors, to higher personnel and interest expenses.
Cash flow from operating activities (after interest and taxes paid) of €21.3 million was clearly higher than the previous year (H1 2011: €19.3 million). This reflects above all higher rental income generated from the expanded portfolio. Cash and cash equivalents totalled €74.8 million at the end of the reporting period (December 31, 2011: 100.3 million).
Real estate assets under management were unchanged at €3.3 billion; DIC Asset AG's total assets increased to €2.3 billion (December 31, 2011: €2.2 billion). The net debt equity ratio (net of cash and exclusive hedging reserve) stood at 31.4% as at June 30, 2012 (December 31, 2011: 31.7%).
The MainTor Quarter project, in which DIC Asset AG holds a 40% stake, is progressing quicker than planned. The breakdown of the development of the Quarter into several sub-projects, to be developed independently from each other in terms of time and place, resulted in the targeted risk mitigation that was rewarded by the market.
With the sale of the ‘MainTor Panorama’ and ‘MainTor Patio’ construction phases in July 2012 for approx. €150 million, more than half (€340 million) of the project volume is already being realised. The two building complexes can be constructed without bank funding due to the purchase price instalments agreed upon. Therefore the current bank loan for the MainTor Quarter can be repaid pro rata; further borrowing or capital will thus not be necessary.
• The development of the MainTor Quarter started in 2011 after the agreed withdrawal of the tenant Evonik.
• A comprehensive marketing campaign ensured it attracted nationwide attention. With a first forward deal (MainTor Primus) concluded last summer, the demolition at the entire site started in 2011.
• A large-scale rental of around 13,600 m² was realised for ‘MainTor Porta’ at year-end, after which construction started on this building complex.
• The laying of the foundation stone for ‘MainTor Porta’ on August 29, 2012 will launch the start of the first structural engineering measures.
The DIC Asset AG share has significantly outperformed its benchmark indices so far this year. Following an annual low of €5.14 at the start of the year, an interim annual high of €7.40 was reached on April 2. Equity markets deteriorated again in the spring, so that the share ended the first half-year at a price of €6.80. However, it meanwhile reached a new annual high of €7.90 on August 13.
Forecast for 2012: DIC Asset AG affirms its FFO forecast of €43 million to €45 million for the 2012 financial year (2011: €40.6 million). Rental income is expected to increase to €124 million to €126 million (2011: €116.7 million), and the vacancy rate is planned to be reduced to around 11.5% by year-end (2011: 12.4%).
Ulrich Höller, Chairman of the Management Board of DIC Asset AG, stated: "We are very satisfied with this result. The positive trend seen in the first quarter is stabilising in all business segments. In addition, the MainTor project has already achieved extensive market breakthrough, with a marketing result of more than 50%."
For more information on DIC Asset AG and the quarterly report, please visit http://www.dic-asset.de/engl/
Source: Thomas Pfaff Kommunikation
Top-100, Real Estate Investment, Corporate