News from 08/29/2008
Deutsche Wohnen: Turnover and earnings more than double in second quarter
In the second quarter, Deutsche Wohnen AG, based in Frankfurt, more than doubled its sales volume and earnings, attaining a net profit of €23.2mn (Q2 2007: €11.6mn). The property company listed on the S-DAX announced that the second quarter was characterized by two one-time effects—restructuring expenses and positive development of interest rate swaps. Due to the personnel restructuring expenses, EBIT (earnings before interest and taxes), at €16.8mn, was way below that of the same period in the previous year. At the end of the quarter, Deutsche Wohnen was managing a total of 51,836 residential units. The largest location by far is still Berlin, with a portfolio share of nearly 50%; in the core stock, the share even reaches 67%. The firm quoted the average rent for the core stock as of June 30, 2008 at €5.19/sqm, meaning that rents were up by €0.05/sqm, or 1% over those of the previous quarter. It was also reported that the vacancy rate, compared to the end of 2007, was down from 4.8% to 4.5%. Deutsche Wohnen quotes its net asset value as of June 30, 2008 at €986mn, or €37.35 per share.
CA Immo: Vivico takeover reduces earnings
CA Immobilien Anlagen AG (CA Immo), Austria, has presented its figures for the first half of the year. Due to the high cost of financing the takeover of Vivico Real Estate, the financial result fell to €-41.9mn (first half of 2007: -12.8mn). A radically reduced revaluation result (€-0.1mn, after €32.1mn during the first half of 2007) also showed negative effects. For these reasons, the earnings of the concern plunged by 82% to €9.4mn (first half of 2007: €53.0mn). Earnings before interest and taxes (EBIT) fell back from €79.5mn to €59.1mn. Thanks to the first-time inclusion of the portfolio of Vivico, the value of the property assets soared by 61%, to €4.07bn. EBITDA rose by 28% to €62.1mn (first half of 2007: €48.5mn). For the whole of 2008, CA Immo has not ventured to make any forecasts: “Regarding the total result, we have to wait for further developments on the real estate markets.”
Shopping centers: 1mn sqm of new urban sales area by 2010
The current EHI shopping center report concludes that the shopping center boom is continuing with shopping center operators concentrating on inner city locations. In Germany, 15 new centers are planned this year. The average area for the inner city developments, at 27,000 sqm, is much smaller than that of greenfield projects, which average 40,000 sqm. Of the 51 centers to be built during the next three to four years, according to EHI’s list, only two are planned for greenfields. Wolfgang R. Bays, Chairman of the German Council of Shopping Centers (GCSC), commented, “At the moment, we can be certain that some 1mn sqm of sales area will be developed in 40 inner city locations in Germany by 2010.” The GCSC has supported publication of the study since 2000.
Degi: Degi International acquires business park in Warsaw
Degi, a part of the Aberdeen Property Investors Group, has signed purchase contracts for the “Marynarska Business Park” in Warsaw. The investment volume for the project having 43,000 sqm of lettable area and some 1,400 parking spaces is quoted at €167mn. The property, which is to be integrated into the portfolio of the open-ended property fund Degi International, was bought indirectly via a property firm. The seller is the internationally active developer Ghelamco. The project was completed this past April and is situated in Mokotów, Warsaw’s biggest business district, centrally located between the airport and the inner city. The new acquisition is already 99% rented long-term to Polish and international firms, particularly from the service sector.
Open funds: €1.2bn raised in July
At the moment, open property funds are quite popular among investors. As they are considered to be a relatively crisis-resistant investment vehicle, they recorded a net cash influx of €1.2bn in July (June: €376mn)according to current statistics compiled by the Federal Association Investment and Asset Management (BVI).
Whitehall: Less funding for maintenance of LEG apartments
Just shortly after the takeover, Whitehall, the new owner of LEG Nordrhein-Westfalen, seems to be introducing its first cost-cutting measures. Quoting a memorandum sent by LEG’s management to the directors of its companies and holdting firms, the daily newspapers Financial Times Deutschland and Echo-Münster reported that expenditures for the maintenance of 93,000 apartments are to be reduced immediately by about €1/sqm. No further contracts are to be made for measures which were approved, but not yet implemented. For the time being, no further allocations are to be made, except for measures required by public authorities, obligatory measures for the promotion of traffic safety, or measures necessary to avoid serious damage to building substance. The new owner reportedly wants to initially gain an overview of the measures that had been planned and the costs they would incur, and then make its own decisions regarding the amount of future investment. Tenant associations criticized the decision as a bitter blow to the firm’s modernization program.
Orco Germany: Positive development partly due to valuation profits
Orco Germany raised its surplus during the first half of 2008, compared to the same period of the prior year, from €21.8mn to €26.8mn. Operating earnings climbed from €44.6mn to €48.7mn. This result, however, contains surpluses from revaluations of investment properties and development plots amounting to €60.9mn, after €46.3mn last year. Rental income skyrocketed from €1.9mn to €28.6mn. The net financial result dropped by €2mn, from €-6mn to €-8.1mn. Adjusted EBITDA grew from €-2.41mn to €7.01mn. The net asset value per share increased by 4%, from €6.70 to €7.81. During the second half of the year, the firm hopes to heighten its occupancy rate and optimize the portfolio.