* Stable rental income (+1.0% to € 121.1 million) reflects recent portfolio additions and organic growth despite portfolio disposals
* Consolidated net income of € 220.1 million € 220.1 million, up 28.5% on previous year
* Increase in net asset value IFRS NAV by 7.2% since beginning of year (14.9% adjusted for dividends) to € 35.04 per share and EPRA NTA by 5.7% since beginning of year (12.0% adjusted for dividends) to € 42.35 per share
* Sustainable earnings (FFO I) up 7.9% on previous year to € 73.9 million. € increased
* Annual target 2022: sustainable earnings (FFO I) of more
than €125 million
* CEO Silvia Schmitten-Walgenbach: “Even in a more difficult macroeconomic environment, we see continued robust demand for premium offices in central locations.”
CA Immo, the real estate group specializing in high-quality office space, can look back on a good 2nd quarter and was thus able to seamlessly continue the positive business development of the previous quarters. Despite the challenging market environment, CA Immo was able to increase its sustainable result (FFO I) by 7.9% year-on-year to € 73.9 m in H1. Rental income in the first six months was stable at € 121.1 mn (+1.0% yoy), reflecting recent portfolio expansions and organic growth despite property sales. Net income improved by 28.5% to €220.1 million. The main contributors to the positive development were a strong rental business, the completion of the ONE high-rise project in Frankfurt and the successful continuation of the ongoing strategic capital rotation program. Following the strong first half, CA Immo expects to generate sustainable earnings (FFO I) of more than €125 million for the year as a whole.
Silvia Schmitten-Walgenbach, CEO of CA Immo, said, “CA Immo’s strong performance in the first half of the year is further evidence of the strength of our business model. Even in a more difficult macroeconomic environment, we see continued robust demand for premium offices in central locations. We have further increased CA Immo’s resilience by investing in sustainable portfolio quality and streamlining our project pipeline. We will continue our strategic capital rotation program and further increase our competitiveness as a result.”
Robust demand for premium offices in central locations with positive trend
In the first half of 2022, CA Immo concluded or extended leases for a total of around 90,200 sqm of existing space, an increase of around 30% compared with the same period last year. In addition, a total of around 9,000 m² of usable space was pre-let in project developments. The economic occupancy rate was 90.7% as of the reporting date (December 31, 2021: 88.9%). The property yield remained stable at 4.7%.
First impact of inflation due to high proportion of indexed and staggered leases
CA Immo recorded a slight increase in rental income of 1.0% to € 121.1 million in the first six months of 2022. This is predominantly related to portfolio growth (project completions and acquisitions) as well as higher like-for-like rental income in the portfolio, which more than compensated for the decline in rental income from portfolio sales. Around 96% of CA Immo’s rental agreements are linked to inflation rates or contain fixed rent increases (graduated rents). In light of the current significantly higher inflation rates, this should lead to a further increase in rental income from the portfolio.
Continued investment in portfolio quality and handover of the ONE high-rise project to tenants
On the investment side, CA Immo acquired a high-quality office building in a prime Düsseldorf city center location in the first half of the year. At the end of June, the Frankfurt high-rise project ONE was completed with a total investment volume of around € 430 m and a rentable floor space of around 68,500 m². Through the use of innovative technologies and a fully integrated digitalization concept, ONE ensures maximum energy and resource efficiency in operation as well as high tenant comfort, thus underpinning the company’s ambitious ESG commitment. The transfer of this major project to the company’s own portfolio reduces the total investment volume of all projects under implementation by almost 50%, while at the same time increasing the portfolio (+13% to €5.6 billion). The remaining total project volume of around 70,000 m² under construction is over 90% prelet.
Strategic capital rotation program to strengthen competitiveness
The aim is to further increase the average quality and future viability of the real estate portfolio by selling properties that do not meet or no longer meet the strategic requirement profile. In this context, CA Immo sold four non-strategic portfolio buildings (two each with office and hotel use) in H1 2022 above their carrying amount as of December 31, 2021. Furthermore, at the beginning of August 2022, CA Immo decided to start an exclusive due diligence and negotiations related to the sale of the company’s Romanian activities.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were robust at €93.2 million, down 18.9% year-on-year due to an exceptionally high sale result in the same period last year. In the first half of 2022, CA Immo again recorded a strong revaluation result of € 153.1 million (previous year: € 195.3 million). Among other things, revaluations of German development projects and land reserves were responsible for this. The largest single contribution to the revaluation gain was made by the completion of the ONE project development in Frankfurt, which is now part of the portfolio. At €269.2 million, profit from operating activities (EBIT) was down on the comparable figure for the previous year (June 30, 2021: €310.8 million), mainly due to lower revaluation gains as well as gains on sales. At € 220.1 million, consolidated net income was significantly higher than the previous year’s figure of € 171.3 million, mainly driven by a significantly higher financial result (positive derivative valuation). Earnings per share amounted to €2.19 (June 30, 2021: €1.79 per share).
The value of total real estate assets increased by around 3.9% compared with year-end 2021 to €6.5 billion as of the reporting date of June 30, 2022; of this, around 87% relates to existing real estate (€5.6 billion) and around 12% to real estate assets under development (€0.8 billion), with the remaining 1% held for trading or sale (current assets). Around 62% of total real estate assets are attributable to Germany, the largest single market (June 30, 2021: 56%).
Balance sheet strength, high liquidity and further increase in net asset value
CA Immo continues to have an extremely robust balance sheet with a solid equity ratio of 48.3% (31.12.2021: 46.3%) and cash and cash equivalents of € 472.1 m (31.12.2021: € 633.1 m). The loan-to-value ratio (LTV) based on balance sheet values was 34.2% (net, taking into account the Group’s cash and cash equivalents) as of June 30, 2022, compared with 31.1% at the end of 2021. The net asset value IFRS NAV was €35.04 per share as of the reporting date, up 7.2% on the figure as of December 31, 2021. Adjusted for the dividend payment in the first quarter of 2022, this was up 14.9% since the beginning of the year. At €42.35 per share, EPRA NTA was 5.7% above the value at Dec. 31, 2021 (+12.0% adjusted for dividends). As of 30.06.2022, CA Immo has achieved a 5-year total shareholder return of around 87%. The interest rate hedge ratio, at around 91% as of the reporting date, is to be maintained at a high level in order to continue to largely cushion the risk of interest rate increases.
Outlook: significant organic increase in rents expected in the medium term
Against the backdrop of the positive business development in the first half of the year, CA Immo is cautiously optimistic about the future despite the ongoing challenges in the environment. The Group forecasts sustainable earnings (FFO I) of more than €125 million for the 2022 financial year (FFO I 2021: €128.3 million).
Dr. Andreas Schillhofer, CFO: “As part of the strategic capital rotation program, we have disposed of a number of non-strategic properties. We are consciously accepting the associated lower rental income, as the program significantly improves the quality of earnings and the resilience of the rental cash flow. However, excluding the effects of potential further disposals of non-strategic properties, we expect a significant organic increase in rental income in the medium term – on the one hand from lease indexation and on the other from the completion and full letting of development projects and their transfer to the existing portfolio.”
Given the fundamental change in market conditions and the uncertain economic outlook, CA Immo will constantly review its strategy, continue its capital rotation in a disciplined manner, and place value- and cash flow-focused asset management and development, platform efficiency and shareholder value at the top of its agenda. The overriding objective for the coming months will be to further increase net asset value and return on equity while maintaining stable liquidity and a conservative financing structure.
CA Immobilien Anlagen AG
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