CA Immo Group showed good results after the second quarter of this year, continuing the positive development of operations noted in the previous quarters. In a difficult market environment, CA Immo increased its fixed income (FFO I) in the first half of the year by 7.9% y / y to EUR 73.9 million. Rental income in the first six months was stable at EUR 121.1 million (+ 1.0% y / y), reflecting the recent expansion of the property portfolio and organic growth despite the sale of some assets.
The group’s consolidated net income rose by 28.5% to EUR 220.1 million. The strong leasing activity, the completion of the ONE high-rise project in Frankfurt and the successful continuation of the ongoing strategic capital rotation program contributed to the positive development. After a good first half of the year, CA Immo expects a fixed income (FFO I) of over EUR 125 million in the fiscal year 2022.
“CA Immo’s good results in the first half of the year are further proof of the strength of our business model. Even in the tougher macroeconomic environment, we see continued strong demand for premium offices in central locations. By investing in sustained portfolio quality and streamlining the project delivery process, we’ve further increased CA Immo’s resilience. We will continue our strategic capital rotation program and thus further increase our competitiveness,” said Silvia Schmitten-Walgenbach, CEO CA Immo.
Strong demand for premium offices in central locations in Europe and the first “green contracts” in Poland
In the first half of 2022, CA Immo concluded or extended lease agreements for a total of approx. 90.2 thousand. sqm existing space, which is an increase by approximately 30% compared to the same period last year. In addition, as part of development projects, the Group signed pre-lease agreements for a total of approx. 9 thousand. sqm usable area. The lease level of the entire portfolio as at August 24, 2022 was 90.7% (compared to 88.9% at the end of December 2021). The rate of return on real estate remained stable at 4.7%.
In Poland, in the first half of 2022, the company signed 24 lease agreements for approximately 13.9 thousand sq m. sqm with 36% share of new transactions (including expansions).
“From the beginning of the year to August, we closed 28 transactions for over 15,000. sqm of space in our Warsaw portfolio. Importantly, in the second quarter of this year. we started offering tenants green provisions in their contracts. As a result, we have already concluded “green” terms of cooperation in 9 contracts,” said Andrzej Mikołajczyk, Managing Director CA Immo in Poland.
On the Polish market, CA Immo currently has a portfolio of office properties offering over 155,000 sq m. sqm of space in the central parts of Warsaw. The occupancy rate in Poland at the end of June was 92.7%.
Moderate impact of inflation due to high share of indexed and graduated leases
CA Immo recorded a slight increase in rental income by + 1.0% to EUR 121.1 million in the first six months of 2022. This is mainly due to the portfolio growth (completion of projects and acquisitions), as well as higher rental income in the like-for-like portfolio, which more than compensated for the decline in rental income from the sale of the portfolio. About 96% of CA Immo’s leases are either inflation-linked (indexed rents) or contain fixed rent increases (graduated rents). In view of the currently high inflation rates, this should lead to a further increase in rental income.
Continuing to invest in somehow the group’s portfolio and handing over to the tenants of the ONE high altitude project
CA Immo Group acquired in the first half of the year a high-quality office building in a prime location in the center of Düsseldorf. At the end of June, the ONE high-rise project in Frankfurt was completed, with a total investment volume of approx. EUR 430 million and a lease area of approx. 68.5 thousand square meters. sqm Thanks to the use of innovative technologies and a fully integrated concept of digitization, ONE ensures maximum energy and resource efficiency in operation, as well as high comfort for tenants, thus supporting the company’s ambitious ESG commitment. By introducing this large project into CA Immo’s portfolio, the total investment volume of projects under construction has been reduced by almost 50% while increasing assets (+ 13% to EUR 5.6 billion). Over 90% of the remaining 70,000 sqm pre-lease agreements have already been signed for all projects under construction.
Strengthening competitiveness thanks to a strategic capital rotation program
The sale of properties that do not meet or no longer meet the criteria set at the strategy level is intended to further increase the quality and future profitability of the property portfolio. In line with these assumptions, in the first half of 2022, CA Immo sold four non-strategic investment properties (two for office and hotel purposes) above their book value from the fourth quarter of 2021. In addition, CA Immo decided at the beginning of August 2022 to start due diligence and negotiations regarding the sale of the company’s operations in Romania.
The group posted a solid financial result before interest, taxes, depreciation and amortization (EBITDA) of € 93.2 million. The decrease by 18.9% y / y is a consequence of the exceptionally high sales result in the same period of the previous year. In the first half of 2022, CA Immo again posted a strong revaluation result of € 153.1 million (previous year: € 195.3 million). This was also due to the revaluation of German development projects and land reserves. The largest contribution to the net revaluation result was the completion of the ONE project in Frankfurt, which is now part of the investment portfolio. The operating result (EBIT) of EUR 269.2 million was below the previous year’s comparable figure (06/30/2021: EUR 310.8 million), mainly due to lower revaluation and sales results. The consolidated net profit of EUR 220.1 million was significantly higher than the previous year’s figure of EUR 171.3 million, mainly due to the much better financial result (positive valuation of derivatives). Earnings per share were EUR 2.19 (06/30/2021: EUR 1.79 per share).
Total property assets increased by approximately 3.9% compared to the end of 2021 to EUR 6.5 billion as at the reporting date of 30/06/2022; approximately 87% of this is investment property (EUR 5.6 billion) and approximately 12% investment property under development (EUR 0.8 billion), the remaining 1% is intended for trading or sale. About 62% of total real estate assets are accounted for in Germany, the largest market in which the Group operates (30/06/2021: 56%).
Balance sheet strength, high liquidity and continued asset value growth
CA Immo Group continues to have an extremely strong balance sheet with a solid equity ratio of 48.3% (31/12/2021: 46.3%) and cash and cash equivalents of € 472.1 million (31/12/2021 year: EUR 633.1 million). LTV (loan-to-value ratio) based on carrying amounts was 34.2% (net of Group cash and cash equivalents) as at 30/06/2022 compared to 31.1% at the end of 2021. IFRS NAV was EUR 35.04 per share, 7.2% above the value as of December 31, 2021. Adjusted for the first quarter of 2022 dividends, it increased by 14.9% from the start of the year. The EPRA NTA was EUR 42.35 per share, 5.7% above December 31, 2021 (+ 12.0% dividend-adjusted). As of June 30, 2022, CA Immo delivered a 5-year total shareholder return of approximately 87%. The interest rate hedge ratio, of around 91% at the reporting date, is to be kept high in order to still allow to largely amortize the risk of interest rate increases.
Forecast: Significant organic rental growth expected in the medium term
Against the backdrop of positive business developments in the first half of the year, CA Immo is cautiously optimistic for the second half of the year, despite the current challenges in the macro environment. In the fiscal year 2022, CA Immo forecasts constant revenues (FFO I) of over EUR 125 million (FFO I 2021: EUR 128.3 million).
As part of our strategic capital rotation program, we got rid of many non-strategic properties. We consciously accept the associated lower rental income because we are familiar with the scheme.
“Together, it improves the quality of earnings and the resilience of rental cash flow. However, putting aside the effects of potential further sales of non-strategic real estate, we expect significant organic growth in rental income in the medium term – on the one hand from the indexation of the lease and on the other from the completion and full lease of development projects and their transfer to the investment portfolio,” said Dr. Andreas Schillhofer, CFO at CA Immo
Given the fundamentally changed market conditions and the uncertain economic outlook, CA Immo will continuously revise its strategy, pursue a disciplined pursuit of its strategic capital rotation program, and prioritize asset management and development focused on value and cash flow, efficiency and shareholder value. The overriding goal for the coming months will be to further increase the net asset value and return on equity while maintaining stable liquidity and a conservative financing structure.
