by Property Forum | Report

Immofinanz recorded an increase in rental income and in the results of asset management and property sales during the first three quarters of 2020 despite the COVID-19 crisis. FFO 1 (before tax) was only slightly lower than the previous year at €89.2 million. After an adjustment for the straight-lining of a bond coupon payment in Q1 2020 over 12 months, FFO 1 improved by 10.1% to €92.4 million. The capital measures carried out in Q3 2020 strengthened the equity ratio and reduced the net LTV to 38.4%. The strong cash position of €601.9 million at the end of September was increased to approximately €1.2 billion by the benchmark bond issued in October and an undrawn credit line.


Rental income rose by 5.7% to €215.1 million due to the expansion of the portfolio through acquisitions and completions, but a crisis-related increase in the write-off of receivables in the asset management area, primarily in the second quarter, led to substantially higher property expenses. The results of asset management still improved by 3.3% to €158.9 million, despite these write-offs. The pandemic had a negative influence on the valuation of investment property: revaluations totalled €-153.7 million, compared with clearly positive results in the first three quarters of the previous year (Q1–3 2019: €116.8 million). This reduction represents roughly 3.0% of the total property portfolio. Net loss for the first three quarters of 2020 amounted to €-98.3 million (Q1–3 2019: €202.6 million).

“Immofinanz has also been faced with challenges due to the COVID-19 pandemic. We implemented a wide range of measures in recent months – on both the operating and capital sides – to minimise the negative effects and make the company even more robust. We are a strong and reliable partner for our tenants and can also conclude successful transactions in uncertain times, as we proved with the very profitable sale of a property in Germany. With a solid balance sheet and more than €1 billion of liquid funds, we are optimally positioned for further growth and the opportunities that arise from the crisis,” commented Ronny Pecik, CEO of Immofinanz, on the company’s development.

Occupancy rate stable at a high level

The real estate portfolio included 208 properties with a combined carrying amount of approximately €4.9 billion at the end of September 2020. Of this total, approximately 65% are attributable to the office business and 34% to the retail business. The occupancy rate is nearly unchanged at a high 95.5% (31 December 2019: 96.8%) and equalled 93.4% in the office properties and 97.6% in the retail properties.

COVID-19 update

Immediately at the start of the crisis, numerous measures were introduced to minimise the negative effects on Immofinanz and strengthen liquidity.

Individual solutions were developed with retail tenants to help them overcome the crisis. Immofinanz has since signed agreements with all major retailers for the first lockdown and reopening period. In exchange for temporary rent reductions and deferrals, contract extensions, among others, totalling roughly 300,000 sqm were agreed during Q1-3 2020. Temporary support was also provided to individual office tenants in branches particularly hard hit by the crisis. Roughly 96% of the rents invoiced in the retail and office businesses (after rent reductions) during the first nine months of 2020 had been paid by mid-November (retail: 96%, office: 96%). The temporary rent reductions granted during this period represent 11% of contract rents (retail: 18%, office: 5%), and a further 4% (retail: 4%, office: 5%) are not yet due or still outstanding.

All countries in which Immofinanz holds commercial properties have recorded an increase in new infections since the beginning of October. This development has led to the renewed implementation of restrictions by governments that again include temporary shutdowns in the retail sector. As of mid-November 2020, roughly 35% of the rented retail space was temporarily closed, but a reopening is expected in the coming weeks.

Outlook

Despite the first positive reports of possible approvals for COVID-19 vaccines, uncertainty remains high over the further development and duration of the pandemic and over potential future containment measures and their impact on the economy and financing environment. Immofinanz has therefore decided not to issue any guidance at the present time on the development of FFO 1 in the current year or the amount of a dividend for the 2020 financial year.

In the office sector, plans include further growth with the myhive brand in the capital cities of Immofinanz's core countries. The goals for the STOP SHOP retail parks include an increase from the current level of 90 to roughly 140 locations over the coming years.