Significant progress on G-REIT equity ratio driven by further disposals and strong operating business
First Half 2010
- Revenues at EUR 45.2 million and Funds From Operations at EUR 15.7 million in line with guidance
- Disposal of four properties for EUR 81.7 million at 5% premium to book value
- Improved balance sheet ratios: G-REIT equity ratio (post transactions) back at 45.2%, net LTV at 56.7%
alstria office REIT-AG (symbol: AOX, ISIN: DE000A0LD2U1), an internally managed Real Estate Investment Trust (REIT) focused solely on acquiring, owning and managing office real estate in Germany, today announces its financial result for the first six months of 2010.
Revenues of EUR 45.2 million in line with guidance, FFO of EUR 15.7 million benefits from lower financing costs
In the first six months of 2010 revenues decreased by 12.5% yearonyear to EUR 45.2 million, mainly as a result of the disposal of real estate assets. The Funds From Operations for the first half of 2010 were EUR 15.7 million (vs. EUR 16.2 million in H1 2009). alstria's operating margin improved to 34.7% (31.3% in H1 2009) due to seasonal lower real estate operating expenses and reduced financing costs. A negative noncash impact from interest derivatives amounting to EUR 9.2 million was partly compensated by a cash disposal gain in the first quarter. alstria's consolidated net profit for the first six months therefore amounted to EUR 11.6 million, which compares with a loss of EUR 2.3 million in the first half of 2009.
Strong balance sheet
As of June 30, 2010, alstria's investment property totalled EUR 1.36 billion. In July 2010 another four buildings located in Hamburg with a combined book value of EUR 77.9 million were sold and therefore transferred to assets held for sale. alstria's equity amounted to EUR 622.9 million as of June 30, 2010. The decline compared to Q1 2010 was mainly due to the dividend payment of EUR 28 million in the second quarter. The company's net LTV at reporting date was 56.7%.
alstria takes advantage of high demand for longterm leased assets
In July 2010 alstria sold four assets located in Hamburg, taking advantage of the continuing high demand for longterm leased assets. The properties located in residential areas or secondary office locations in Hamburg were sold at a total sum of EUR 81.7 million. Considering the contractual rental income of EUR 4.3 million per year these sales reflect an estimated average NOI yield on cost of 4.8%1. The disposals were executed at a premium of 5% to the latest appraised values as of December 31, 2009. The closings of the transactions, which are subject to customary conditions precedents, are expected to take place in the fourth quarter 2010.
Disposals lift G-REIT equity ratio
Everything else being equal and taking the property disposals into account, alstria's G-REIT equity ratio is back at 45.2%2. The gain on sale will further strengthen the company's equity. On this background alstria is well positioned to meet the G-REIT equity ratio of 45% at yearend, as required by the German REIT law.
Strong operating performance
In the first 6 months of the year the company has leased up 8,300 sqm of space, or around 10% of the vacancy of the portfolio at the beginning of the year. The total vacancy rate in the portfolio has increased from 6.5% to 7.7%, mainly reflecting the sale of fully let assets, as well as the acceleration of the refurbishment plan on the company's assets. The strategic vacancy is now at 32,400 sqm, while operational vacancy is stable at 31,000 sqm. The cash flow profile has been further strengthened, as asset management activities have allowed the reduction of the percentage of leases due to break in the next 24 months down from 10.6% to 7.3%.
"With the successful refinancing of our syndicated loan and by taking advantage of the strong demand for long term leased assets, alstria has mainly concluded its stepbystep approach to strengthen its balance sheet," said Olivier Elamine, CEO of alstria. "In the course of the past 24 months the company has managed the severe financial and economic crisis without any diluting capital measures, which we see as a real success. Today alstria is in an ideal position to benefit from possible investment opportunities that will come to the market, as a consequence of the expected difficult refinancing environment in the next two to three years."
alstria confirms its forecast for the 2010 financial year: annual revenues of EUR 89 million and EUR 27 million in FFO.
1 Assuming NOI margin of 92%.
2 As of August 11, 2010 unaudited
This release constitutes neither an offer to sell nor a solicitation of an offer to buy any shares. As far as this press release contains forwardlooking statements with respect to the business, financial condition and results of operations of alstria office REIT-AG (alstria), these statements are based on current expectations or beliefs of alstria's management. These forwardlooking statements are subject to a number of risks and uncertainties that could cause actual results or performance of the Company to differ materially from those reflected in such forwardlooking statements. Apart from other factors not mentioned here, differences could occur as a result of changes in the overall economic situation and the competitive environment - especially in the core business segments and markets of alstria. Also, the development of the financial markets and changes in national as well as international provisions particularly in the field of tax legislation and financial reporting standards could have an effect. Terrorist attacks and their consequences could increase the likelihood and the extent of differences. alstria undertakes no obligation to publicly release any revisions or updates to these forwardlooking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.