CA Immo has reported strong second-quarter results, continuing the positive business development of the previous quarters. In a challenging market environment, CA Immo increased its recurring earnings (FFO I) in the 1st half-year by 7.9% compared to the previous year, to €73.9 million. Rental income in the first six months was stable at €121.1 million (+1.0% y-o-y), reflecting recent portfolio additions and organic growth despite property sales. Consolidated net income improved by 28.5% to €220.1 million. Following the strong first half-year, CA Immo expects recurring earnings (FFO I) of more than €125 million in the 2022 business year.
Silvia Schmitten-Walgenbach, CEO of CA Immo said: “CA Immo’s good 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. By investing in sustainable portfolio quality and streamlining our project pipeline, we have further increased CA Immo’s resilience. We will continue our strategic capital rotation programme and, thus, further increase our competitiveness.”
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% on the same period last year. In addition, a total of around 9,000 sqm of usable space was pre-let in project developments. The economic occupancy rate increased to 90.7% as of the reporting date (H2 2021: 88.9%). The property yield remained stable at 4.7%.
Modest impact from inflation due to high degree of indexed and graduated rental agreements
CA Immo recorded a slight increase in rental income by +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 (indexed rents) or contain fixed rent increases (graduated rents). In light of the currently high inflation rates, this should lead to a further increase in rental income from the portfolio.
Strategic capital rotation programme to strengthen competitiveness
The sale of properties that do not or no longer meet the strategic requirement profile is intended to further increase the average quality and future viability of the property portfolio. In this context, CA Immo has sold four non-strategic investment properties (two each for office and hotel use) above their respective Q4 2021 book value in the first half of 2022. In addition, CA Immo decided at the beginning of August 2022 to initiate exclusive due diligence and negotiations with regard to the sale of the company’s Romanian activities.
Results in detail
Earnings before interest, taxes, depreciation and amortisation (EBITDA) were robust at €93.2 million. The 18.9% decline compared to the previous year is due to an exceptionally high sales result in the same period of the previous year. In the first half of 2022, CA Immo again recorded a strong revaluation result of €153.1 million (previous year: €195.3 million). This was also due to revaluations of German development projects and land reserves. The largest single contribution to the net revaluation result was made by the completion of the ONE project development in Frankfurt, which is now part of the investment portfolio. At €269.2 million, the operating result (EBIT) was below the comparable value of the previous year (30.6.2021: €310.8 million), mainly due to the lower revaluation and sales results. The consolidated net income of €220.1 million was significantly above the previous year's value of €171.3 million, mainly driven by a significantly improved financial result (positive derivative valuation). Earnings per share amounted to €2.19 (30.6.2021: €1.79 per share).
The value of total property assets increased by around 3.9% compared to the end of 2021 to €6.5 billion as at the reporting date 30.6.2022; around 87% of this is accounted for by investment properties (€5.6 billion) and around 12% by investment properties under development (€0.8 billion), the remaining 1% is intended for trading or sale. Around 62% of the total property assets are attributable to Germany, the largest single market (30.6.2021: 56%).
Balance sheet strength, high liquidity and further increase in asset value
CA Immo continues to have a robust balance sheet with a solid equity ratio of 48.3% (H2 2021: 46.3%) and cash and cash equivalents of €472.1 million (H2 2021: €633.1 million). 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 at H1 2022 compared to 31.1% at the end of 2021. IFRS NAV was at €35.04 per share, 7.2% above the value as at 31 December 2021. Adjusted for the dividend payment in the first quarter of 2022, this has risen by 14.9% since the beginning of the year. EPRA NTA was at €42.35 per share, 5.7% above the value as at 31 December 2021 (+12.0% adjusted for dividends). As at H1 2022, CA Immo has delivered a 5-year total shareholder return of around 87%. The interest rate hedge ratio, at around 91% as at the reporting date, is to be maintained at a high level in order to continue to be able 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 for the second half of the year, despite the ongoing challenges in the macro environment. For the 2022 business year, CA Immo forecasts recurring earnings (FFO I) of more than €125 million (FFO I 2021: €128.3 million).
Dr. Andreas Schillhofer, CFO of CA Immo added: “In the course of the strategic capital rotation programme, we have disposed of a number of non-strategic properties. We consciously accept the lower rental income associated with this, as the programme significantly improves the quality of earnings and the resilience of the rental cash flow. However, putting aside the effects of potential further sales 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 investment portfolio.”
Given the fundamentally changed market conditions and uncertain economic outlook, CA Immo will constantly review its strategy, continue the strategic capital rotation programme in a disciplined manner, and put value and cash flow focused asset management and development, platform efficiency and shareholder value at the top of the company’s 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.
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