Adler Group S.A. raises Guidance for FY 2021 underpinned by strong operational and financial performance
DGAP-News: Adler Group S.A. / Key word(s): Half Year Results Adler Group S.A. raises Guidance for FY 2021 underpinned by strong operational and financial performance - Management increases FY 2021 Guidance with NRI target of €340-345m and FFO 1 target of €135-140m. Dividend to increase from €0.46/share paid over 2020 to €0.57-€0.60/share thanks to the anticipated increase in FFO - implying dividend growth of c.27% - Strong performance across yielding portfolio through sector leading like-for-like ("LFL") rental growth of +4.3% YoY, fuelling LFL fair value uplift of +6.4% YoY - Significant progress on non-strategic assets disposals with a volume of €503m YTD - Following successful completion of €2.5bn refinancing in H1 2020, debt KPIs further improved bringing average cost of debt to 2.1% - Strong ESG rating ranking Adler Group within the top 5% of real estate companies globally
Management is increasing Guidance for the FY 2021, with a new Net Rental Income target of €340-345m and FFO 1 target of €135-140m whilst adding additional KPIs to the Guidance on the back of better than expected operational performance of the overall portfolio as well as stronger demand for its non-strategic development assets. Maximilian Rienecker and Thierry Beaudemoulin, Co-CEOs of the Adler Group, explain: "We are very pleased that our strategic repositioning and M&A integration efforts are beginning to bear fruits and, supported by a strong market environment, we expect a correspondingly positive further development for the second half of 2021." New sustainability rating from Sustainalytics ranks Adler Group in the top 5% of real estate companies globally following its strong Environmental commitment, clear Social consciousness and robust Governance practices. Outstanding portfolio performance Net rental income increased to €174.0m in H1 2021 from €114.8m in H1 2020, primarily due to strong portfolio performance with +4.3% like-for-like ("LFL") rental growth and the first-time consolidation of ADLER Real Estate AG ("Adler RE") at the beginning of April 2020. EBITDA from rental activities increased by 45.5% to €112.5m in the first half of 2021 compared to €77.3m in the same period of the previous year. FFO 1 (from rental activities) increased to €67.8m in H1 2021 compared to €44.3m in H1 2020, corresponding to a FFO 1 per share of €0.58 (H1 2020: €0.88 per share). Market leading LFL rental growth of +4.3%, driven by capex & re-letting (2.6%) and indexation (1.8%), was fuelled by a +4.0% growth in Berlin and stronger +4.6% growth across all remaining cities. Such performance still provides ample growth potential, which following cancellation of Berlin rent freeze in April 2021, provides a blended reversionary potential of approximately 20% to current market rents across the entire residential portfolio. The average in-place rent of the rental portfolio increased to €6.55/sqm/month as of Q2 2021 (Q2 2020: €6.20/sqm/month) as a result of successful active portfolio management and selective capital recycling measures, notably the disposal of 6,729 units located in smaller cities with lower growth potential and higher average vacancy rate. The vacancy rate decreased by 1.8ppts YoY from 5.6% to 3.8% mainly driven by success in letting of our Berlin development project Riverside. Vacancy is slightly higher compared to 3.4% in Q4 2020 due to seasonal effects and is expected to continue its downward trajectory for the remaining of the year. Valuations remained resilient in H1 2021. The income from revaluation amounting to €479m representing a LFL fair value increase for the residential yielding portfolio of +6.4%. As at Q2 2021, the fair value of the portfolio amounted to €12.6bn (Q4 2020: €11.4bn). The yielding residential portfolio comprised of 69,701 units accounting for 82% of the fair value. The number of units has come down by 4,981 (Q2 2020: 74,682 units) following active capital recycling exercise in the last year. The EPRA NRV of Adler Group amounted to €6,543m (€55.68 per share) representing an increase of 8.4% compared to FY 2020 EPRA NRV of €6,037m (€51.38 per share). The EPRA NTA for H1 2021 amounted to €4,950m (€42.12 per share) representing an increase of 11.4% versus FY 2020 EPRA NTA of €4,443m (€37.81 per share).
Following the lease of the 213 co-living apartments, all residential units of the development project Riverside in Berlin have been fully leased and are generating annual net rental income of €10.4m. This project alone accounts for circa 3% of total rental income and a significantly higher EBITDA margin given the 100% occupancy, lower maintenance and lower management costs given the concentration. Sale of non-strategic assets YTD gathers pace In the first half of the year, Adler Group continued to progress with its active capital recycling strategy and in total sold non-strategic yielding residential assets with a value of €95m. Following reporting date, speed of disposals gathered pace with an incremental €408m of non-strategic development projects sold around book value, totalling a €503m of disposals year-to-date.
Build-to-hold The municipality of Hamburg has approved the urban development plan for the Holsten Quartier, one of Adler Group's major Build-to-hold development projects (GAV of €364m). Construction is expected to start in 2022 and, once completed, it is expected to have c.1,600 units. In addition, a significant milestone was achieved for Grand Central development project in Duesseldorf, (GAV of €208m) as the building permit was obtained and start of construction is now scheduled for 2022, with expected delivery of c.900 new residential units. Lastly, five Build-to-hold projects with a total GDV of €705m are already under construction. Build-to-sell Three forward sales projects with a total GAV of €172m are on track to be completed by the end of the year. Additionally, Adler Group will be handing-over to retail buyers three condominium projects (Palatium, Dreizeit and Westend) with a GAV of €139m in the next couple of months.
Following publication of its first sustainability report, published in May 2021, Adler Group has received external recognition for all the efforts put into increasing transparency around ESG and its improvements already implemented, particularly when it comes to corporate governance. Sustainalytics assigned new rating to Adler Group of 10.7, ranking the company as the 46th best real estate company in Sustainalytics' global coverage of 1,001 real estate companies which represents a very strong rating, positioning the company in the top 5% of the real estate coverage. Most recent accomplishments include improvement of ESG oversight, by establishing an ESG Board which is led by Sven-Christian Frank, Chief Legal Officer and reports directly to the senior management of the company and is in charge of all ESG related activities in the company. Furthermore, Adler Group has become a member of the UN Global Compact and subscribes to the targets of the organisation. The company has also become a member of the German Association of Sustainable Building (DGNB). It has committed itself that all new buildings will comply with the DGNB Gold standard or the comparable LEED standard, building carbon-neutral houses for the better future. A similar certification shall be obtained for all major modernisation projects, including energetic improvements of existing buildings, aiming to modernise around 1% of its residential portfolio each year. Adler Group continued its substantial refinancing program to streamline the overall capital structure of the Group. In January 2021, the company placed a €1.5bn dual tranche unsecured bond across 5- and 8-year maturities with a 1.875% and 2.250% coupon to repay the remaining bridge facility and refinance existing mezzanine debt. In April 2021, Adler Group placed a €500m fixed rate senior unsecured bond with a 6-year maturity and a 2.25% coupon under its newly established EMTN programme. The proceeds were used to call and repay the EUR 450m 9.625% high yield bond issued by Consus, thereby realising further EUR 33m of annualised financial synergies. Secured markets remained attractive with €500m volume secured with an average cost of debt of 1.53% in Q1 2021. Furthermore, in Q1 2021 Adler Group signed a €300m syndicated Revolving Credit Facility (RCF) to provide additional liquidity, replacing the previous RCF of €150m. Since integration of Consus in July 2020, Adler Group successfully refinanced more than €1.9bn of mezzanine debt with a weighted average cost of debt (WACD) of around 10% leading to improvement of all of the debt KPIs. As of Q2 2021, WACD improved significantly to 2.1% compared to 3.7% at the first-time consolidation of Consus in July 2020. Weighted average debt maturity increased to 4.3 years (3.2 years as of July 2020). Management sees no refinancing risk as most of the early maturing debt has either already been refinanced or is fully covered by €370m of cash on hand. Adler Group continues to strive to further de-lever through portfolio revaluation and selective asset disposals with the mid-term guidance of <50%. As of Q2 2021, net LTV stands at 54.7% (52.3% excluding convertibles).
Management is increasing Guidance for the FY 2021, with a new Net Rental Income target of €340-345m and FFO 1 target of €135-140m whilst adding additional KPIs to the Guidance on the back of better than expected operational performance of the overall portfolio as well as stronger demand for its non-strategic development assets. Dividend to increase from €0.46/share paid over 2020 to €0.57-€0.60/share thanks to the anticipated increase in FFO - implying dividend growth of c.27%.
Implied dividend range on basis of the FFO 1 guidance range of EUR 135-140m, and company dividend policy of 50% payout ratio, subject to final board approval and shareholder approval in the annual General Meeting in 2022.
(Please provide your name when logging into the conference) For more details and definitions of our alternative performance measures like FFO1 or EPRA NAV see our latest financial report under "Financial Results" section of our website: https://ir.adler-group.com/websites/adler-group/English/2000/publications.html#reports Contact 31.08.2021 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
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