Immofinanz started the 2020 financial year with strong operational performance, but the development of business in the second quarter was negatively influenced by the COVID-19 pandemic. Rental income rose by 10.4% to €145.5 million due to the expansion of the portfolio through acquisitions and completions, but a crisis-related increase in receivables write-offs led to substantially higher property expenses.
The pandemic also influenced the valuation of investment property: revaluations totalled €-159.2 million, compared with clearly positive results in the first half of the previous year (Q1-2 2019: €123.5 million). This reduction represents 3.1% of the total property portfolio. Net profit for the first half of 2020 amounted to €-120.4 million (Q1-2 2019: €185.3 million)
“The effects of the COVID-19 pandemic have also confronted our company with challenges and had a negative effect on results for the first half-year. However, exactly the strengths that made Immofinanz one of the leading providers of office and retail properties in our region are now helping us to master the crisis. These strengths include our high-quality, innovative office solutions and cost-efficient, comparatively crisis-resistant retail concepts, our focus on customers, the commitment of our employees and our conservative financing policy“, commented Ronny Pecik, CEO of Immofinanz, on the development. “On the capital side, we also acted quickly and proactively and, in July, took steps to strengthen our equity base and the indicators important for our investment-grade rating.”
The real estate portfolio included 212 properties with a combined carrying amount of approximately €5.0 billion as of 30 June 2020. Of this total, approximately 65.0% is attributable to the office business and 33.0% to the retail business. The occupancy rate is nearly unchanged at a high 95.9% (31 December 2019: 96.8%) and equalled 94.2% in the office properties and 97.8% in the retail properties. The gross return equalled 6.0% based on IFRS rental income and 6.2% based on invoiced rents.
COVID-19 update
Immediately at the start of the crisis, numerous measures were introduced to minimise the negative effects on Immofinanz and strengthen the liquidity. These activities include, among others, the postponement of non-essential investments and the reduction of costs.
Individual solutions were quickly developed with the retail tenants to help them overcome the crisis. In exchange for the temporary reduction or deferral of rental payments, agreements were reached, among others, for contract extensions. Nearly 95% of these negotiations had been finalised by mid-August. Rent collection in the retail segment for the first half-year equalled roughly 67.8% of the invoiced rents as of mid-August.
Extensive security measures and marketing activities were also implemented to support the rapid recovery of visitor frequencies. The latest developments are as follows: All our retail areas have reopened with only a few exceptions, which primarily involve restaurants and cinemas in Romania and Serbia. Visitor frequency has recovered well, above all in the Stop Shops where the number of visitors on individual days is even higher than the comparable period in 2019. This also underscores the competitive advantage of our retail parks with their focus on everyday products and one-stop shopping with direct access to the stores from the parking areas and lower number of contact points to other people. Visitor frequency in the Vivo! shopping centres is still roughly 20% below the level at the beginning of the year. The development of our retailers’ revenues also indicates that consumers are shopping less often but spending more per shopping trip. An analysis of the first six months of 2020 shows that the number of visitors in the Stop Shop retail parks is roughly 24% lower year-on-year, but retailers’ revenues have only declined by roughly 13% – and this is due, above all, to the phase of government-ordered shutdowns.
Immofinanz office tenants receive support with back-to-office plans for their safe and smooth return to work. “In addition, we will be offering flexible ‘all-inclusive’ office solutions beginning in September. They will give our tenants the option to rent space or individual workstations, also on a short-time basis. This ‘all-inclusive’ offering, just like a vacation hotel, also includes a wide variety of services for our customers – from occupancy planning to cleaning and the organisation of coffee machines and plant care. Our customers can then concentrate on their core business in a modern office environment”, indicated Dietmar Reindl, COO of Immofinanz.
Ronny Pecik, CEO of Immofinanz, explained: “We are living in extraordinary times which are characterised by significant uncertainty over further recovery. With a view towards the long-term development of our company, we are therefore convinced that we must act cautiously and protect Immofinanz’s ability to act from a position of strength during the crisis as well as the ability to utilise attractive opportunities and quickly return to a profitable growth course with acquisitions and development projects.”
