News from 11/12/2008
Hypo Real Estate: €3.1bn in pre-tax losses—bailout agreement
Hypo Real Estate Holding AG (HRE) is expecting €3.1bn in pre-tax losses for the third quarter—an even worse result than had been anticipated. According to the firm, the negative earnings are particularly due to €2.5bn in write-offs of intangible assets held by its subsidiary Depfa. Moreover, the institution has suffered from the collapse of the U.S. investment bank Lehman Brothers, the Icelandic bank crisis, and other factors. HRE’s management reported that it has reached an agreement with the German Federal Bank, the German Federal Government and the German bank consortium regarding the €50bn liquidity loan which was previously announced. In addition, the bank is applying for extensive further support from the SoFFin Special Financial Markets Stabilization Fund.
DIC Asset: Rise in EBITDA, FFO and rental income
DIC Asset AG has improved most of its figures for the first nine months of the year: earnings before interest, taxes, depreciation and amortization (EBITDA) grew, compared to the previous year, by 32%, to €92.0mn (2007: €69.8mn). Cash flow from current operating activities (after interest and taxes paid) was boosted by €6.8mn to €29.3mn (2007: €22.5mn). Funds from operations (FFO) rose by 32% to €38.9mn (2007: €29.4mn). Rental income soared by 57% to €101.0mn (2007: €64.4mn). On the other hand, consolidated net income fell from €24.0mn in 2007 to €18.5mn. Total revenues also sank by 16% from €167.4mn in 2007 to €140.6mn. These setbacks, the firm said, were due to “a change in sales strategy, which was adapted to the prevailing market environment and focused on sales of small-to-medium sized properties, with smaller transaction sizes.” The company maintained that the goal targeted for the entire year, renting out a total of 175,000 sqm, will “most probably” be exceeded and it upheld its mid-year prediction that consolidated net income for the entire year will amount to €25mn to €27mn.
HCI Capital: Record placements during Q1-3, forecast lowered for 2008
HCI Capital AG has attained a new placement record of €508mn during the first three quarters of the year. Compared to the same period in the previous year, this is a 17% increase. The equity placed in real estate funds rose even more, from €71mn during the same period last year to approximately €113mn this year. While EBIT, at €5.9mn, stayed at last year’s level during the third quarter, it plummeted from €28.5 to € -12.3mn for the first nine months together. The company attributes this to extraordinary one-off effects during the first half of the business year, particularly to the significant devaluation of its investment stake in commercial U.S. property loans originally conceived as a fund product. For the 2008 business year, HCI has now reduced its marketing plans from the former €880mn to between €650 and €750mn. Due to shaken investor confidence, sales have become noticeably fewer during recent weeks, HCI said. Its forecast for the year's after tax earnings, originally expected to break even, was lowered to € -9mn to € -13mn.
Berlin Hyp: Loan approvals expanded despite financial crisis
Despite the financial crisis, Berlin Hyp approved €2.8bn in new property loans during the first nine months of the year—approximately 25% more than during the same period of the previous year. At €119.6mn, the operating result before risk provisioning stayed at last year’s level. The interim result dropped from €41.4mn to €37.7mn; the balance sheet total rose from €41.2bn to €46.3bn. The bank attributes this climb to its successful refinancing activities that have a total volume of €6.6bn. The bank admits, however, that its activities have been severely limited since the beginning of October due to “sharpened” refinancing requirements. Lending is currently focused on domestic investor business. In other European countries, the LBB subsidiary approved some €500mn in loans and has announced that its core capital quota reached 6.1%. Due to valuation expenditure for liquidity reserve securities, the bank had to raise its risk provisioning balance to €71.6mn (same period in the previous year: €61.2mn). The operating result after risk provisioning shrank accordingly, by 17%, to €48mn.
GRR: Three acquisitions, credit line for more retail investments
GRR AG, based in Erlangen, acquired three grocery stores at the beginning of November, thus expanding its portfolio to 99 properties. The firm invested approximately €7mn in the acquisitions; their initial return runs to about 8%. The newly acquired buildings are situated in Bielefeld, in Fassberg in Lower Saxony (Celle County) and in Oberhausen. By their own report, GRR, a real estate AG specializing in German commercial objects, has invested more than €65mn in the expansion of its portfolio since the beginning of the year. A new credit line established with a German bank is supposed to make further purchases possible. GRR thus has three lines of credit from various financial bodies, amounting to more than €100mn, that is available for the expansion of its inventory. GRR Chairman André Langmann said that “we are especially interested in portfolios with total volumes between €20mn and €80mn.”
Postbank: Portfolio sale postponed
Postbank is shelving its plans to sell a package of office properties. A Postbank spokesperson told the daily newspaper Financial Times Deutschland that, “Due to the environment, we have put the project on hold.” As has already been reported, the package placed on sale in May comprises 25 office buildings in major German cities and secondary locations. Its value was estimated at €700mn to €800mn. A decision on the sale and lease back deal was originally supposed to have been made during the second half of 2008.