DIC Asset AG posts half-year results: Significantly higher FFO

DIC Asset AG posts half-year results: Significantly higher FFO

– Gross rental income increases sharply to EUR 62.5 million (H1 2011:
EUR 56.5 million)

– Vacancy rate improves to 12.0 per cent (H1 2011: 13.8 per cent)

– Operating profit FFO climbs by 6 per cent, to EUR 21.3 million (H1 2011: EUR 20.1 million)

– Significant marketing steps achieved with regard to the MainTor Quarter

– Target FFO for 2012 unchanged, at between EUR 43 million and EUR 45 million

Key results at a glance:

DIC Asset AG (German Securities ID 509840 / ISIN DE0005098404) today presents its interim report for the first half of the 2012 financial year. Gross rental income posted a marked increase of 11 per cent, to EUR 62.5 million. The vacancy rate has fallen further to only 12.0 per cent, reflecting successful rental activities. The operating profit (FFO) increased by 6 per cent, to EUR 21.3 million. All in all, DIC Asset AG generated consolidated profit of EUR 5.1 million (H1 2011: EUR 6.2 million), which is down on the previous year largely owing to expenditure targeting future projects. The trends of the first quarter were thus confirmed overall.

Details of the half-year report

Although sentiment improved initially, the first half of 2012 was once again defined by uncertainty stemming from the European sovereign debt crisis. In this market environment, DIC Asset achieved gross rental income of EUR 62.5 million (H1 2011: EUR 56.5 million). The 11 per cent increase was driven by portfolio growth as well as by constant and strong letting performance. Net rental income in the first six months amounted to EUR 56.1 million and was therefore 7 per cent higher year-on-year (H1 2011: EUR 52.2 million). Fees from real estate management were unchanged at EUR 2.3 million. Higher asset and property management revenues from the 'DIC Office Balance I' special investment fund therefore made up for the loss of fees after the sale of properties held in the Co-Investment segment and joint venture portfolios from the previous year that were fully taken over. Total revenues also increased to EUR 78.2 million (H1 2011: EUR 76.0 million), primarily reflecting higher rental income.

DIC Asset AG increased its letting volume by 16 per cent over the previous quarter to 60,000 sqm (Q1 2012: 52,000 sqm). Total letting volume in the first half year amounted to around 112,000 sqm (H1 2011: 138,000 sqm). This equates to annualised rental income of EUR 11.7 million and is therefore just short of last year's figure (H1 2011: EUR 12.4 million). The like-for-like increase in rental income was 0.1 per cent, as in the first half of the previous year. Overall, the vacancy rate was lowered significantly to 12.0 per cent (H1 2011: 13.8 per cent, Q1 2012: 12.3 per cent). Letting volume to date this year reduced the potential volume of contracts set to expire in 2012 by more than half, from 9.9 to 4.3 per cent of annual rental income. Lease expiries in 2013 have already fallen from 9.6 to 7.4 per cent.

The acquisition volume to date in 2012 amounts to EUR 86 million. This includes the purchase of an office property at the main station in Frankfurt/Main (EUR 17 million) for the asset portfolio (Commercial Portfolio), a new office building in Eschborn for the 'DIC Office Balance I' special investment fund (EUR 44 million), as well as two properties in Mannheim and Dresden (EUR 25 million) for the 'DIC HighStreet Balance' retail property fund that is being developed and marketed. The disposal volume to date for 2012 stands at EUR 12.4 million. This comprises primarily four properties, each of which are significantly lower than the average property size of around EUR 12 million, which has further optimised the portfolio structure.

Net financing expenses increased in the first half year – reflecting portfolio expansion – with an interest result of EUR -28.6 million (H1 2011: EUR
-26.1 million). This was attributable in particular to higher financing volumes as a result of the acquisitions and expenses incurred for servicing the bond issue. Interest income rose from EUR 3.6 million to EUR 4.9 million, whilst interest expense increased from EUR -29.7 million to EUR -33.5 million.

The average maturity of the financial debt of EUR 1.52 billion (31 December 2011: EUR 1.52 billion, 30 June 2011: EUR 1.43 billion) was 3 years as at 30 June 2012. In the first half of 2012, 11 loans with an aggregate volume of around EUR 500 million were arranged with around a dozen banks, with the loans covering the entire managed real estate portfolio. The average rate of interest on financial debt was 4.20 per cent as at 30 June 2012 – therefore 15 basis points lower than at year-end 2011 (Q4 2011: 4.35 per cent).

Personnel expenses increased to EUR 5.8 million (H1 2011: EUR 4.9 million) due to the expansion of DIC Asset AG's business activities, while administrative expenses of EUR 4.2 million were unchanged year-on-year. The operating cost ratio – the ratio of staff and administrative expenses to gross rental income (adjusted for fees from real estate management) – of 12.3 per cent was in line with plan.

FFO (funds from operations, defined as earnings before interest and taxes, and excluding profits from disposals and development projects) was EUR 21.3 million for the first six months and was therefore 6 per cent higher than in the previous year (H1 2011: EUR 20.1 million), primarily because of the larger portfolio and thanks to successful rental activity. The FFO per share remained stable, at EUR 0.47, despite the higher number of shares compared with the same period of the previous year. Profit for the period of EUR 5.1 million (H1 2011: EUR 6.2 million) was down EUR 1.1 million year-on-year, as expected. This was due, amongst other factors, to higher personnel and interest expenses.

Cash flow from operating activities (after interest and taxes paid) of EUR 21.3 million was clearly higher than the previous year (H1 2011: EUR 19.3 million). This reflects above all higher rental income generated from the expanded portfolio. Cash and cash equivalents totalled EUR 74.8 million at the end of the reporting period (31 December 2011: 100.3 million).

Real estate assets under management were unchanged at EUR 3.3 billion; DIC Asset AG's total assets increased to EUR 2.3 billion (31 December 2011: EUR 2.2 billion). The net debt equity ratio (net of cash and exclusive hedging reserve) stood at 31.4 per cent as at 30 June 2012 (31 December 2011: 31.7 per cent).

The MainTor Quarter project, in which DIC Asset AG holds a 40 per cent stake, is progressing quicker than planned. The breakdown of the development of the Quarter into several sub-projects, to be developed independently from each other in terms of time and place, resulted in the targeted risk mitigation that was rewarded by the market. With the sale of the 'MainTor Panorama' and 'MainTor Patio' construction phases in July 2012 for approx. EUR 150 million, more than half (EUR 340 million) of the project volume is already being realised. The two building complexes can be constructed without bank funding due to the purchase price instalments agreed upon. Therefore the current bank loan for the MainTor Quarter can be repaid pro rata; further borrowing or capital will thus not be necessary.

Let us recap:

– The development of the MainTor Quarter started in 2011 after the agreed withdrawal of the tenant Evonik.

– A comprehensive marketing campaign ensured it attracted nationwide attention. With a first forward deal (MainTor Primus) concluded last summer, the demolition at the entire site started in 2011.

– A large-scale rental of around 13,600 sqm was realised for 'MainTor Porta' at year-end, after which construction started on this building complex.

– The laying of the foundation stone for 'MainTor Porta' on 29 August 2012 will launch the start of the first structural engineering measures.

The DIC Asset AG share has significantly outperformed its benchmark indices so far this year. Following an annual low of EUR 5.14 at the start of the year, an interim annual high of EUR 7.40 was reached on 2 April. Equity markets deteriorated again in the spring, so that the share ended the first half-year at a price of EUR 6.80. However, it meanwhile reached a new annual high of EUR 7.90 on 13 August.

Forecast for 2012: DIC Asset AG affirms its FFO forecast of EUR 43 million to EUR 45 million for the 2012 financial year (2011: EUR 40.6 million). Rental income is expected to increase to EUR 124 million to EUR 126 million (2011: EUR 116.7 million), and the vacancy rate is planned to be reduced to around 11.5 per cent by year-end (2011: 12.4 per cent).

Ulrich Höller, Chairman of the Management Board of DIC Asset AG, stated: 'We are very satisfied with this result. The positive trend seen in the first quarter is stabilising in all business segments. In addition, the MainTor project has already achieved extensive market breakthrough, with a marketing result of more than 50 per cent.'

For more information on DIC Asset AG and the quarterly report, please visit http://www.dic-asset.de/engl/.

About DIC Asset AG:

Established in 2002, DIC Asset AG, with registered offices in Frankfurt/Main, is a real estate company with a dedicated investment focus on commercial real estate in Germany, pursuing a return-oriented investment policy. Real estate assets under management amount to approx. EUR 3.3 billion, comprising around 270 properties, of which EUR 2.2 billion is carried on DIC Asset AG's statement of the balance sheet. The Company's investment strategy is geared to the continued development of a high-quality, highly profitable and regionally diversified portfolio. The real estate portfolio is structured in two segments: the Commercial Portfolio (EUR 1.9 billion) comprises existing properties with long-term rental contracts generating attractive rental yields. The Co-Investments segment (EUR 0.3 billion) comprises fund investments, joint-venture investments, and interests in development projects. Own real estate management teams provide a direct service to tenants through six branch offices located at the regional hubs within the portfolio. This provides an edge in terms of market presence and expertise, and builds the foundation for maintaining and increasing the value of real estate assets. DIC Asset AG has been included in the SDAX^(R) segment of the Frankfurt Stock Exchange since June 2006. The Company's shares are also included in the EPRA index, which tracks the performance of the most important European real estate companies.

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