DIC Asset AG – The “Performance 2024” action plan producing first results

Press Release

DIC Asset AG –  The “Performance 2024“ action plan producing first results

• “Performance 2024” action plan
  • Optimising the financial structure: EUR 200 million of bridge loan repaid and maturity of residual amount extended through 31 July 2024
  • Progress on transaction targets achieved with initial disposals worth c. EUR 132 million by mid-year 2023 – additional disposals in planning to reduce the loan-to-value ratio
  • Strengthening the portfolio business – large letting deals and sustained like-for-like rental income growth
  • New investment vehicle launched for the Institutional Business
  • Reduction in operating costs intended 
     
• Forecast update for the 2023 financial year

Dear Shareholders,

After a number of prosperous years of remarkable economic momentum and a historically low level of interest rates, the situation on the real estate market has clearly turned around over the past months. Geopolitical jitters coincide with persistent inflation and the continued increase in interest rates now.

DIC has been addressing these challenges with an extensive action plan, and has prepared itself for this real estate market cycle. We continue to pursue our unique “dynamic performance” approach. For instance, we moved ahead with four larger-scale transactions in recent days, launched and placed an attractive investment vehicle, and initiated important first steps toward the further optimisation of our financial structure.

Our strategic orientation, the flexibility of our portfolio, and the quality of our real estate stock are proving resilient even and especially now as we face persistent headwind on the markets. With EUR 14.1 billion in assets under management today and with a combination of proprietary real estate and assets managed for third parties, our real estate platform has achieved a robust scale. By acquiring VIB Vermögen last year, we made sure that our FFO will derive from sources that lend themselves to long-term planning to a much larger extent than used to be the case.

It is on this basis that we work to keep enhancing our resilience. Given the persistent challenges on the markets, we do not expect to see the situation normalise as swiftly as we had assumed, indeed probably not before 2024. As we intend to reposition ourselves for the purpose, we developed the “Performance 2024” action plan, which already produced first results, and we will structure our efforts during the coming 12 to 18 months along five priorities:
FIRST Reducing liabilities and boosting liquidity Most recently, we negotiated amendments to the bridge loan in the amount of c. EUR 500 million, which we had taken out from a banking consortium to acquire shares in VIB Vermögen in spring of 2022, and of which EUR 100 million have already been repaid. The agreement concluded today provides for a further repayment of EUR 200 million in July 2023, and grants an extension for the remaining amount over the same amount by another six months, extending the maturity from the end of January 2024, as previously agreed, back to 31 July 2024. We are using the Group’s available cash for the partial repayment. In addition, the 2018/2023 corporate bond will be fully repaid in a total volume of EUR 150 million in early October as planned.

SECOND Transactions. We realise disposals even within the difficult current market environment, and use the available cash from disposal proceeds for the steady reduction of our loan-to-value ratio. By the end of June, we had four disposals in a combined volume of EUR 132 million notarised. One asset was taken from the portfolio of the “RLI Logistics Fund – Germany II” managed fund. In addition, we disposed of another three logistics properties from the proprietary portfolio of the DIC Group in a combined volume of EUR 119 million. The three assets from the Commercial Portfolio currently generate a combined gross annual rental income of c. EUR 7 million. The transfer of ownership rights and obligations will take place during the second half-year. This puts us on course to achieve our targets, while our transaction pipeline is well stocked for the selling activities during the second half-year and beyond.

THIRD Focus on the operational portfolio business.
Our lettings business continues to maintain its high level. Interest in our properties remains strong, and this is equally true for office and logistics assets. Cases in point include our most recent lease signing for the entire 15,600 sqm of lettable area at “innvoation parc,” a “green” DGNB Gold certified logistics property in Langenhagen, and the fact that we achieved full occupancy at Global Tower in Frankfurt’s financial district. Our clients appreciate our speed, our creativity and our reliability in providing and structuring accommodation. Plus the fact that we are on hand nationwide! What is more: We are steadily working to expand our supply of green real estate in our portfolio. On the whole, this is currently reflected in strong like-for-like rental income growth, which amounted to 7.8% for the entire real estate stock under management by the end of March.

FOURTH Attractive investment ideas make us the perfect investment partner
We intend to steadily increase our offer of real estate services for national and international institutional investors in our Institutional Business segment. At this time, around 170 investors rely on our track record and our expertise. Just recently, we launched another investment vehicle. As a single investment, we contributed the “Offenbach Unite” property from the Commercial Portfolio to it, and already placed share certificates worth c. EUR 10 million. DIC Asset AG will remain committed with a 10% stake. The placement is generating disposal proceeds in 2023, generates one-time transaction fees, and will keep generating current revenues from the management of the investment vehicle in the future.

FIFTH Reduction of our operating costs planned 
Seeking to become more agile, more efficient and more focused, we are currently analysing our operational processes, and will, in addition to making the structures of our real estate platform more flexible, realise cost savings to ensure we have the agility we need to shape the future.

With a view to the second half-year of 2023, we expect the volatility phase to continue. As far as the wider transactions market goes, we now anticipate a longer period of uncertainty, further delays, and probably no increase in momentum before 2024. For us, this means that some of the things we had intended to get done in 2023 will have to wait until 2024.

Against the background of these developments, we have updated our forecast for the year 2023 as a whole. For one thing, we lowered the anticipated transaction volumes for the Institutional Business segment to EUR 100 to 200 million (previously: EUR 400 to 1,000 million from acquisitions and disposals). We expect interest expenses to keep rising during the remainder of this year, especially those from short-term liabilities. In sum, we have lowered our expectation for the funds from operations (FFO) before taxes and after non-controlling interests* during the ongoing year, down to a level of EUR 50 to 55 million (previously: EUR 90 to 97 million). Due to a decrease in transaction-based management fees, we have also downscaled our forecast for the income from management fees to EUR 50 to 55 million (previously: EUR 70 to 80 million). All other forecast targets remain unchanged.

Dear Shareholders,

2023 is proving to be a difficult year, but it won’t be a lost year for DIC. On the contrary: We are actively using these times to strengthen our portfolio business, to reduce our debt, to keep engaging in transactions, and to improve our cost structure. This will make us, your company, even stronger, and sustainably so.

Thank you for your faith and for your continued support!
Kind regards,

Sonja Wärntges
Chief Executive Officer/Chief Financial Officer (CEO/CFO)

About DIC Asset AG:

DIC Asset AG is Germany’s leading listed specialist for office and logistics real estate with 25 years of experience on the real estate market and access to a broad-based network of investors. Our business is based on a regional and inter-regional real estate platform with nine offices on the ground in all major German markets (with VIB Vermögen AG included). We currently manage a total of 357 assets with a combined market value of EUR 14.1 billion on site, always close to our properties and their occupiers.

The Commercial Portfolio segment comprises real estate held for our own account. Here, we generate steady cash flows from stable rent revenues on long-term leases while also optimising the value of our portfolio assets through active management, and realising gains from sales.

In the Institutional Business segment, we earn recurrent fees from real estate services we provide to national and international institutional investors by structuring and managing investment products that return attractive dividend yields.

IR/PR Contact DIC Asset AG:
Peer Schlinkmann
Head of Investor Relations & Corporate Communications
Neue Mainzer Str. 20 • MainTor Primus

D-60311 Frankfurt am Main
T +49 69 9454858-1492
ir@dic-asset.de