CA Immo has reported a solid operating performance record for the first half of 2023. The results for the first six months show, among other things, a significant increase in rental income (+12%) and strong income from the sale of non-strategic properties (sales result of €112 million, FFO II +122%), resulting in a 121% increase in EBITDA. In total, CA Immo generated a consolidated net profit of €13.5 million.
Keegan Viscius, Chief Executive Officer of CA Immo said: "We are consistently pursuing our strategic course, which aims to reduce the complexity of our business model and increase our portfolio focus, quality and efficiency. Our strong operating performance, achieved in a challenging market environment, demonstrates the good positioning and resilience of our business and supports the positive outlook and financial guidance for the full year 2023."
Capital rotation programme as a key pillar of corporate strategy
To emerge stronger from the current market downturn, CA Immo initiated a consolidation and transformation process at an early stage to further improve the group´s portfolio quality and organizational structures. A key pillar of this process is the strategic capital rotation program, which was successfully continued in the first half-year despite headwinds in the markets.
In total, the group completed six disposals totalling €381 million in value in the first six months of 2023, including the sale of three non-strategic investment properties and three German plots that are not primarily suitable for office use. The gross selling prices achieved were on average around 50% higher than the most recently reported book values of the properties. Thanks to the ongoing implementation of the capital rotation program, the quality of the portfolio has increased significantly in recent years, mainly due to the increasing focus on modern, large Class A office buildings (from 88% to 93% of total investment portfolio in the period 2018 to H1 2023) and the reinvestment and development of new, prime-quality office buildings in Germany for the Group´s own portfolio (German share of the investment portfolio up from 35% to 62% in the period 2018 to H1 2023).
In addition, the profitable sales transactions have significantly strengthened the group´s liquidity position and demonstrated the solidity of the book values.
Stable income-producing portfolio
Despite the generally subdued landscape for global office demand, CA Immo successfully concluded various important long-term leases and maintained a stable occupancy rate at around 90% in the first half of the year. In total, around 51,000 sqm of new and extended existing leases have been signed; the contractually fixed rents were around 9% above the expected rental value (ERV).
Lean, 100% pre-leased development pipeline
The ongoing development pipeline has been significantly reduced compared to previous years, currently totalling two office buildings under construction directly located at Berlin’s main train station, and a residential project in Mainz (CA Immo project share 50%). The office project Hochhaus am Europaplatz with almost 23,000 sqm of rental space will be completed and handed over to the single tenant occupying the full building in the third quarter of 2023 – six months ahead of schedule. The last Berlin office project Upbeat still under construction thereafter is 100% pre-leased and is scheduled for completion by early 2026. Approximately 50% of the outstanding construction costs have already been tendered, further reducing the cost volatility of the development pipeline with a total investment volume of around €520 million.
The results for H1 2023
CA Immo recorded a 12% increase in rental income to €118.2 million in the first half of 2023 despite non-strategic property sales. This development is mainly related to higher rental income in investment properties (incl. indexations) and the completion of project developments in the previous year.
The property sales result amounted to €112.3 million as at 30 June 2023 (H1 2022: €12.1 million) due to successful sales activity at a premium to book value. The sale of the Langes Land plot in Munich and the Hotel Savoyen /Mechelgasse 1 property in Vienna made the largest contribution to the sales result.
Indirect expenses amounted to €–24.5 million after the first six months and were thus 7.3% above the previous year's level (H1 2022: €–22.9 million).
Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 121.5% to €184.6 million (H1 2022: €83.3 million), primarily driven by the property sales result and higher rental income.
After the first half of 2023, the market-driven revaluation result amounted to €–146.6 million (€160.5 million in H1 2022). This result reflects the significant downturn in the market environment for office properties compared with previous years.
Earnings before interest and taxes (EBIT) of €37.9 million was 85.8% below the H1 2022 result of €266.8 million due to the negative revaluation result in H1 2023.
The financial result stood at €–28.5 million after the first six months (H1 2022: €32.8 million). The previous year's result was mainly driven by the positive result from derivatives. The Group’s financing costs amounted to €–26.2 million, 2.7% above the value for H1 2022 (€–25.6 million).
Consolidated net income was €13.5 million, down on the H1 2022 value of €220.1 million. Earnings per share amounted to €0.14 on the balance sheet date (€2.19 per share in H1 2022).
FFO I stood at €53.0 million as of the key date, 28.4% down compared to the H1 2022 value of €73.9 million due to successful sales activity over the last quarters (including the sale of the Romanian Platform in Q4 2022). As a result of these sales, FFO II increased by 121.7% to €132.5 million.
Total property assets of €5.6 billion
The company’s core business is commercial real estate, with a clear focus on office properties across the gateway cities in Germany, Austria and the CEE region; it deals with both investment properties (€4.8bn, 86% of the total portfolio) and investment properties under development (€589.6 million, 11% of the total portfolio). Properties intended for trading or sale (reported under short-term property assets) account for the remaining 3% (€182.4 million) of property assets. As of key date 30 June 2023, CA Immo’s total property assets stood at €5.6 billion (31 December 2022: €5.9 billion). The largest regional segment is Germany with a share of 67% of the total portfolio, followed by CEE (26%) and Austria (7%). The economic occupancy rate of the investment portfolio was 90.5% (2022: 89.9%).
Strong balance sheet, stable financial profile
In view of its many years of positive business development and defensive balance sheet and financing policy, CA Immo has an extremely robust balance sheet with a solid equity ratio of 46.3%, (2022: 46.8%), a net LTV of 29.6% (2022: 32.5%) and high cash reserves (cash and cash equivalents incl. cash deposits: €952.8 million).
The net asset value (IFRS NAV) per share was €32.95 at 30 June 2023 compared to €33.71 at year-end 2022 – a decrease of 2.2%. EPRA net tangible assets (NTA) per share stood at €38.65 as at the reporting date (2022: €40.31).
Outlook and financial guidance for 2023
The strategic focus remains on implementing the capital rotation program. On the sales side, this means in particular further sales of non-strategic land and existing buildings and the implementation of all relevant activities in connection with a possible exit from the Hungarian market. On the investment side, the top priority is to complete the three projects under development in Berlin and Mainz on time and within budget. In addition, the Group will continue to systematically implement the simplification of its business model and efficiency enhancement through optimized cost structures.
Recurring income (FFO I) for the full year 2023 is expected to be above €100 million (€1.02 per share). The decline compared to the previous year (€125.3 million) reflects in particular the sale of the Romanian platform and other non-strategic assets, which substantially improve the portfolio and earnings quality of CA Immo going forward.
On the basis of a solid operating business and in particular profitable sales of non-strategic properties, the current EBITDA expectation for the financial year 2023 is increased from > €200 million to > €250 million. This would represent a significant increase over the figure for 2022 (€149.5 million).
