PRESS RELEASE
 

TAG Immobilien AG records significant increase in FFO and NAV at 30 June 2019

• FFO up to EUR 40.8m (EUR 0.28 per share) in Q2 2019 after EUR 39.5m (EUR 0.27 per share) in previous quarter
• FFO for H1 2019 reflects nearly 13% increase over H1 2018 (EUR 80.3m or EUR 0.55 per share compared to EUR 71.2m or EUR 0.49 per share)
• Portfolio valuation as at 30 June 2019 increases NAV per share to EUR 18.59 after EUR 17.32 at 31 December 2018
• Strong valuation result reduces LTV to 46.2% after 47.3% at 31 December 2018
• EUR 211.4m in gains from property valuation (after EUR 230.0m in H1 2018 and EUR 200.0m in H2 2018) corresponds to a 4.4% uplift of the portfolio in H1 2019
• Total like-for-like rental growth of 3.0% p.a. as of 30 June 2019 after 2.6% p.a. in the 2018 financial year
• Vacancy in TAG's residential units at 5.2% in June 2019, after 5.0% on a like-for-like basis at the beginning of the year

(Hamburg, 8 August 2019) Commenting on the results for the second quarter of 2019, which were published today, TAG CFO Martin Thiel says: "In the first half of 2019, we once again achieved very good results. Our strategy, which we have been pursuing for exactly 10 years now, of making acquisitions not in the metropolitan cities but especially and also in eastern Germany, is showing continuous success. As a company that takes a long-term view, we continue to focus on modernisation measures to reduce vacancy, as well as many regional projects to develop neighbourhoods so that we can offer homes that are both attractive and affordable."

Positive development in operational key performance indicators

At EUR 78.7m, the Group's net rent for the second quarter of 2019 remained at a high level (Q1 2019: EUR 78.6m). Compared to the same period of the previous year, the first half of 2019 increased by EUR 6.6m (EUR 157.3m compared with EUR 150.7m) or 4.4%. Besides the acquisitions that took effect in the second half of 2018, a very positive overall like-for-like growth in rents contributed to this increase, which amounted to 3.0% p.a. as of 30 June 2019 (2018 financial year: 2.6%). Excluding the effects of vacancy reduction, like-for-like rental growth amounted to 2.5% p.a. at 30 June 2019 (2018 financial year: 2.3%).

Due to lower operating costs, net rental income increased to EUR 64.4m in Q2 2019 after EUR 63.5m in Q1 2019. For the first half of 2019 as a whole, net rental income amounted to EUR 128.0m after EUR 122.7m as at 30 June 2018.

In June 2019, vacancy across TAG's residential units was 5.2%, after 5.0% at the beginning of the year. This slight increase in vacancy was mainly due to the previous year's acquisitions, which had higher vacancy rates and had to be integrated into portfolio management, as well as modernisation projects which will contribute to the reduction of vacancy in the course of the year. In July 2019, vacancy had already been brought back down to 5.1%.

Total investment (H1 2019 annualised) of EUR 18.92 per sqm - maintenance and modernisation cost (capex) - in the residential units, was roughly at the level of the 2018 financial year of EUR 19.24 per sqm. As in previous years, the lion's share of capex went to reducing vacancy. Rental increases for existing tenants due to modernisation surcharges contributed only 0.1% p.a. to like-for-like rental growth, unchanged from the 2018 financial year.

TAG's total portfolio was completely revalued as at 30 June by the independent expert CBRE GmbH, which carries out such revaluations on a regular basis. The total valuation gain was EUR 211.4m, attributable both to the strong operating performance (23% of total valuation gain) and yield compression (77%). The resulting valuation for the portfolio of c. EUR 990 per sqm (31 December 2018: c. EUR 940 per sqm) and in place yield of 6.3% p.a. (31 December 2018: 6.5%) offers further upside potential.

Net income for the first half of 2019 amounted to EUR 233.7m after EUR 218.3m at 30 June 2018. In addition to the rise in net rental income, this increase is primarily attributable to the EUR 29.8m improvement in the financial result. Of this improvement, EUR 6.7m was attributable to direct cash interest cost savings and EUR 23.1m to valuation results and one off-effects which only occurred to a lesser extent in the first half of 2019.

Adjusted funds from operations (AFFO), which results from FFO after deduction of all capex, also increased to EUR 26.0m in Q2 2019, after EUR 24.3m in the previous quarter. In the first half of 2019 as a whole, AFFO increased to EUR 50.2m after EUR 43.6m in H1 2018.

As a result of the positive operating performance and the good valuation result, the net asset value (NAV) per share increased to EUR 18.59 as of 30 June 2019, after EUR 17.32 at the end of 2018. Excluding the dividend of EUR 0.75 per share paid to shareholders in Q2 2019, this translates to NAV growth of nearly 12% for the first half of 2019.

The valuation result also had a positive effect on the loan to value (LTV) ratio. With 46.2% as of 30 June 2019, the LTV was at a lower level than at the end of the previous year (47.3%) despite the dividend payment.

Acquisitions and disposals during the 2019 financial year to date

Mostly in the months of June to August 2019, around 1,000 residential units were acquired at a total purchase price of EUR 36.2m in a total of four transactions in Thuringia, Saxony-Anhalt and Mecklenburg-Western Pomerania. These acquisitions have an average vacancy rate of c. 11%. The purchase multiplier was 11.8 times the current annual net rent, which corresponds to an initial annual gross yield of 8.5%. The acquisitions are expected to close during the second half of 2019.

No major sales have been signed in the financial year to date. As of 30 June 2019 the number of units in TAG's overall portfolio was approximately 84,300, roughly the same as at 31 December 2018 (84,400 units).

Further reduction in financing costs

In June 2019, a promissory note of EUR 102.0m was placed by way of a private placement with two maturity tranches of 5 and 7 years. The interest coupons are 1.125% and 1.250% p.a. respectively, the effective interest rates amount to 1.15% and 1.35% p.a. Overall, the average cost of debt on TAG's total financial liabilities as of 30 June 2019 was just 1.80% compared with 1.92% at the end of 2018. The average maturity of 7.5 years as of 30 June 2019 (31 December 2018: 8.1 years) remains at a high level.

Further details on the second quarter of 2019 can be found in the interim report published today at https://www.tag-ag.com/en/investor-relations/financial-statements/quarterly-reports/.

 

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TAG Immobilien AG
Dominique Mann
Head of Investor & Public Relations
Tel. +49 (0) 40 380 32 305
Fax +49 (0) 40 380 32 390
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