DGAP-News: Prime Office AG / Key word(s): Final Results/Forecast
Prime Office AG presents pro forma results for financial year 2013
09.04.2014 / 07:58
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Prime Office AG presents pro forma results for financial year 2013
- Pro forma rental income from investment properties of EUR 135.1 (pro
forma FY 2012: 159.9) million due to temporary vacancies and the sale of
properties in 2013
- Pro forma net income of EUR -124.0 (pro forma FY 2012: -1.5) million due
to special and non-recurring items
- Pro forma EPRA earnings: pro forma earnings of EUR 14.1 (pro forma FY
2012: 43.5) million
- Pro forma funds from operations (FFO) of EUR 41.9 (pro forma FY 2012:
54.6) million due to temporary vacancies and property sales
- Long-term financing at attractive conditions that meets the requirements
of the capital market: 3.7 percent interest on loans with an average
weighted maturity of about 5.1 years
- Outlook for financial year 2014: FFO is expected to increase from EUR
41.9 million in 2013 to between EUR 44 and 46 million with rental income
from investment properties in the amount of EUR 112 to 114 million
Cologne, 09 April 2014. Prime Office AG, a leading office property company
with a focus on German metropolitan regions and conurbations, presents its
results for financial year 2013 after the successful merger of Prime Office
REIT-AG into OCM German Real Estate Holding AG. In order to meaningfully
portray the economics of the business over the year 2013, the development
of results as outlined below is shown on a pro forma basis. Since the
merger was completed in January 2014 and the two companies had no
pre-merger business relationships, the presentation of the pro forma
numbers from the sum of the separate IFRS-compliant (consolidated)
statements for 2012 and 2013 does not account for the effects of the
initial consolidation, which was not implemented till 21 January 2014. It
should be noted in this context that the refinancing of Prime Office's
Homer and Herkules portfolios and the cash capital increase, which was
successfully completed in February 2014 and led to a sustainable
improvement of leverage and equity ratio is not reflected in the pro forma
financial statement as of 31 December 2013.
In the financial year 2013, the economic development of Prime Office was
largely dominated by one-off items. They can be broken down into the
valuation effects from the measurement at fair value of the Prime Office
REIT-AG property portfolio in 2013, and non-recurring items such as
advisory, due diligence, value and transaction costs incurred in connection
with the preparation and execution of the merger and financing costs in
connection with the repayment of loans. Both affected the development of
the business in 2013.
In the financial year 2013, Prime Office generated pro forma rental income
from investment properties in the amount of EUR 135.1 million, which
declined year on year on a pro forma basis (FY 2012: EUR 159.9 million) due
to temporary vacancies in various buildings and the sale of properties. Due
to the above-mentioned developments, the pro forma net rental income
declined accordingly to EUR 120.5 (pro forma FY 2012: 146.1) million in
financial year 2013.
The pro forma proceeds from the disposal of real estate in the financial
year 2013 increased to EUR 215.6 (pro forma FY 2012: 146.3) million as a
result of numerous property sales. At the same time, however, the pro forma
expenses related to the disposal of real estate also increased to EUR
-219.9 (pro forma FY 2012: -147.7) million, which resulted in a slightly
lower total pro forma income from the sale of real estate of EUR -4.3 (pro
forma FY 2012: -1.4) million in the reporting period.
The fair value of the property portfolio of Prime Office REIT-AG was
already adjusted over the course of the financial year 2013. Overall, the
pro forma result from the measurement at fair value over the reporting
period declined substantially year on year on a pro forma basis to EUR
-115.5 (FY 2012: -52.1) million.
The pro forma financial result of Prime Office also suffered from
non-recurring items in 2013. Lower interest expenses, which resulted
particularly from the repayment of loans at the beginning of 2013, were
overcompensated by one-time payments made after the unscheduled repayment
of the bank loans to redeem swap contracts. With EUR -106.8 million, the
pro forma financial result was significantly higher year on year (pro forma
FY 2012: EUR -88.6 million).
Based on the pro forma financial result and pro forma income from income
and earnings taxes in the amount of EUR 2.6 (pro forma FY 2012: 1.7)
million, the pro forma net income amounted to EUR -124.0 (pro forma FY
2012: -1.5) million in the financial year 2013, which was due particularly
to various non-recurring and special items.
Conversely, Prime Office generated positive pro forma EPRA earnings over
the reporting period. In the financial year 2013, these pro forma EPRA
earnings, which are adjusted by the effects of the measurement of the
property portfolio at fair value, the income from sales, the transaction
costs in connection with the merger and the derivative financial
instruments, amounted to EUR 14.1 (pro forma FY 2012: 43.5) million.
The pro forma funds from operations (FFO) of Prime Office amounted to EUR
41.9 (pro forma FY 2012: 54.6) million in the past financial year. This
development was mainly due to temporary vacancies in the portfolio and
various property sales.
As of today, the property portfolio of Prime Office consists of 57
properties with a market value of about EUR 1.9 billion and total lettable
area of about 950,000 sqm. The company generates contractual net annual
rents of EUR 112 million from over 550 leases under management that,
together, have a weighted average time of lease of 5.0 years. This results
in a gross initial yield of about 5.9 percent. At the reporting date on 31
December 2013, the net yield amounted to 5.1 percent. The EPRA net yield of
Prime Office on 31 December 2013 was 4.8 percent. The EPRA "topped up" net
yield, which is adjusted by rent-free periods, amounted to 5.0 percent.
Vacancies as a percentage of square metres in the portfolio amounted to
19.9 percent at the reporting date on 31 December 2013, which was largely
due to vacancies in big properties in Frankfurt (Westend-Ensemble and
Kastor) and Dusseldorf (XCite and Heerdter Lohweg). The EPRA vacancy ratio,
a benchmark calculated according to EPRA standards, is based on the market
rental value of vacant space. By this measure, the portfolio's EPRA vacancy
ratio as of 31 December 2013 amounted to 23.2 percent, mainly due to the
vacancies in Frankfurt.
Between January 2013 and February 2014, eight properties accounting for an
overall transaction volume of about EUR 320 million were sold in the cities
Dusseldorf (2), Hamburg, Munich (2), Stuttgart, Darmstadt and Wolfsburg
respectively for accounting and strategic portfolio-related reasons. Of the
eight property sales accomplished since January 2013, five were completed
by 31 December 2013.
The pro forma balance sheet of Prime Office shrank significantly to EUR
2,119.7 (pro forma FY 2012: 2,574.4) million in financial year 2013 due to
the sale of five investment properties and loan repayments from the
purchase prices, some of which had already been paid by 31 December 2012.
Since the property company often used the proceeds from the property sales
entirely for repaying interest loans, the pro forma equity ratio could be
increased by about four percentage points to 33.2 (pro forma FY 2012: 29.6)
percent in spite of the negative pro forma net income over the period.
The refinancing of the Homer and Herkules portfolios of Prime Office had
not been completed prior to the reporting date on 31 December 2013 and is
therefore not reflected in the pro forma balance sheet numbers. By now, the
Homer and the Herkules portfolio with an overall loan volume of about EUR
927 million have been refinanced long-term and at attractive rates. With an
average weighted term of its loans of about 5.1 years on which it pays
about 3.7 percent in interest, Prime Office has an attractive long-term
financing structure that meets the requirements of the capital markets.
Furthermore, Prime Office completed a cash capital increase in February
2014 that has major implications on important balance sheet ratios and
again sustainably improves particularly the leverage and the equity ratio.
In this context, a total of 46.6 million new shares, from which Prime
Office raised gross proceeds of EUR 130.4 million, were placed. The
proceeds were predominantly used to repay debt, which resulted in a
reduction of the company's leverage (LTV ratio) to 58 percent. The
transaction brought the equity ratio up to about 40 percent.
The pro forma net asset value (NAV) of Prime Office at the reporting date
on 31 December 2013, i.e. even prior to the described cash capital
increase, amounted to EUR 688.5 (pro forma FY 2012: 761.7) million. This
also corresponds to the pro forma EPRA NNNAV. Adjusted by the fair value of
the derivative financial instruments in the pro forma balance sheet, the
pro forma EPRA NAV at the reporting date amounted to EUR 732.5 (pro forma
FY 2012: 869.6) million.
At the general meeting, which will be held on 20 May 2014 in Cologne, the
Executive Board will propose to the shareholders to change the name of the
property company in "DO Deutsche Office AG". The new name is intended to
characterise the new, post-merger high-earnings and high-dividend office
property company with its focus on return-oriented growth in German
metropolitan regions and conurbations.
In addition, Prof. Dr h.c. Roland Berger informed the Executive Board that
he will step down as a member of the Supervisory Board of Prime Office AG
at the end of 5 May 2014. For this reason, a new member will be appointed
during the general meeting. The Supervisory Board will propose at the
general meeting to elect Mr Caleb Kramer, fund manager at Oaktree Capital,
as a new member of the company's Supervisory Board.
Beyond the development of the operating property business and the result of
the valuation of investment properties, the financial year 2014 will be
characterised to a large extent by non-recurring items from the initial
post-merger consolidation. Transaction costs such as the real estate
transfer tax payable in connection with the merger and advisory costs will
lower the company's net income by about EUR 24 million. Based on the
aggregated portfolio and the current business plan, the Executive Board
expects to generate like-for-like rental income from investment properties
of between EUR 112 and 114 million in the financial year 2014. Furthermore,
the Executive Board anticipates an increase of the pro forma FFO from EUR
41.9 million in 2013 to between EUR 44 and 46 million in the financial year
2014 due to the reduction of debts and the resulting improvement of the
financial result, the portfolio refinancing and the resulting attractive
financing structure, as well as the exploitation of post-merger synergies.
The separate consolidated financial statement of Prime Office AG that still
reflects the company as a pre-merger company for the financial year 2013 is
available online on the website of Prime Office AG on
http://prime-office.de/.
Pro forma figures of Prime Office AG
(in million EUR) 01/01-31/12/2013 01/01-31/12/2012 Delta (in %)
Rental income from investment
properties 135.1 159.9 (15.5)
Net rental income 120.5 146.1 (17.5)
Proceeds from the
disposal of real estate 215.6 146.3 47.4
Expenses related to the
disposal of real estate (219.9) (147.7) (48.9)
Result from the sale
of real estate (4.3) (1.4) (207.1)
Gain/loss on measurement
at fair value (115.7) (52.1) (122.1)
Financing result (106.8) (88.5) (20.7)
Net income (124.0) (1.5) n.a.
EPRA earnings 14.1 43.5 (67.6)
Funds from operations
(FFO) 41.9 54.6 (23.3)
(in million EUR) 31/12/2013 31/12/2012 Delta (in %)
Balance sheet total 2,119.7 2,574.4 (17.7)
Equity 711.5 761.7 (6.6)
Equity ratio (in percent) 33.2 29.6 12.2
Loan-to-value (in percent) 60.2 65.2 (7.7)
Net asset value (NAV) 688.5 761.7 (9.6)
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Contacts
Prime Office AG
Richard Berg
Head of Investor Relations & Corporate Communications
Email richard.berg@prime-office.de
Telephone +49 (0)221 - 888 29 160
About Prime Office AG
Prime Office AG is a leading office property company with a focus on German
metropolitan regions and conurbations. At present, the geographically
diversified commercial real estate portfolio contains 57 properties with a
total rentable space of about 950,000 square metres and an attractive and
broad tenant base. According to a valuation performed by CB Richard Ellis
as of 31 December 2013, the properties had a total market value of about
EUR 1.9 billion. The business model of Prime Office AG relies on the
return-oriented management of assets and particularly of office properties
in German metropolitan regions and conurbations. This strategy is
complemented by the selective pursuit of value-add investments and
attractive buying opportunities in locations with a proven track record of
significant value increases.
Additional information on Prime Office AG is available in the Internet on:
www.prime-office.de
End of Corporate News
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Language: English
Company: Prime Office AG
Maarweg 165
50825 Köln
Germany
Phone: +49 (0)221 88829 100
Fax: +49 (0)221 88829 299
E-mail: info@prime-office.de
Internet: www.prime-office.de
ISIN: DE000PRME020
WKN: PRME02
Listed: Regulierter Markt in Frankfurt (Prime Standard);
Freiverkehr in Berlin, Düsseldorf, München, Stuttgart
End of News DGAP News-Service
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262287 09.04.2014
DGAP-News: Prime Office AG presents pro forma results for financial year 2013
| Source: EQS Group AG