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ADO Properties S.A.: ADO Properties S.A. reports resilient Q1 2020 financial results and confirms guidance for 2020

DGAP-News: ADO Properties S.A. / Key word(s): Quarter Results
18.05.2020 / 07:00
The issuer is solely responsible for the content of this announcement.

ADO Properties S.A. reports resilient Q1 2020 financial results and confirms guidance for 2020

- Strong 2.7% like-for-like net rental growth despite impact of Berlin "Mietendeckel"

- Limited financial impact from COVID-19 expected

- Berlin "Mietendeckel" will reduce 2020 FFO 1 by EUR 1 million

- Pro-forma combined diluted EPRA NAV of €4.8bn

- Rental guidance confirmed: EUR 280 - 300 million (EUR 340 - 360 million FY consolidation)

- FFO guidance confirmed: EUR 105 -125 million (EUR 120 - 140 million FY consolidation)

- Business combination with ADLER Real Estate and strategic cooperation agreement with Consus Real Estate AG has enhanced scale and diversified portfolio across key German cities; integration proceeding as planned

Berlin, 18 May 2020 - Following a transformative financial year 2019 in which ADO Properties further optimized its portfolio through the disposal of 5,900 units to Gewobag, which was completed on 29 November 2019, ADO Properties has made a promising start to the new financial year and confirms its guidance on the combined group with ADLER Real Estate AG ("ADLER Real Estate") for the financial year 2020. This is despite the Berlin rental cap law ("Mietendeckel"), having come into force on 23 February 2020, which partially restricted like-for-like rental growth in Q1 2020. Following the successful business combination with ADLER Real Estate, which was completed on 9 April 2020, ADO Properties has substantially reduced its Berlin residential real estate exposure to approximately 29% of total rental income and thus expects the rent cap to have a considerably less significant financial impact.


Resilient business underpins solid performance

Combined net rental income came to EUR 88.1 million which was driven by like-for-like net rental growth of 2.7% derived from increased indexation outside Berlin and increased occupancy. The combination has had a positive impact on operational KPIs, although in absolute terms net rental income declined year-on-year as a result of the disposal of - amongst others - circa 20% of the ADO Properties portfolio at the end of 2019. The company confirms its guidance that FY20 combined net rental income will be between EUR 280 - 300 million, based on the inclusion of ADLER Real Estate as per 9 April. On the pro-forma basis of a full year consolidation, net rental income is expected to come out between EUR 340 - 360 million.


The average rental income of the Top 13 cities of the combined group increased to EUR 6.54 per sqm per month, while the average rental income of the entire portfolio increased to EUR 6.18 per sqm per month. The highest like-for-like rental growth was reported in Wolfsburg (6.2%), Göttingen (6.0%), Leipzig (5.5%), Halle (4.4%) compared to 3.1% for Berlin.


The FFO 1 for ADO Properties came to EUR 11.5 million for Q1 2020 and to EUR 19.1 million for ADLER Real Estate. Since financial consolidation takes place from 9 April onwards, ADLER Real Estate's results are not yet reflected in the Q1 2020 financial accounts.


High quality portfolio

As at 31 March 2020, the fair value of the combined portfolio stood at EUR 8.6 billion (31 December 2019: EUR 8.6 billion). It comprised almost 76,000 units at the end of the reporting period, the vast majority of which are residential units. The average value of EUR 1,633 per sqm is still well below replacement costs and as such is resilient despite the disruption caused by COVID-19.

The pro-forma diluted EPRA Net Asset Value of the combined companies amounted to EUR 4.8 billion.

Disciplined financial structure

The combined group has a 52.4% loan-to-value (LTV) ratio as at the end of Q1 2020 (or 54.6% when including convertible bonds). The company has a clear target to lower the loan to value to below 50% by amongst other an equity issue of up to EUR 500 million. There are limited debt maturities in 2020, and the majority of the bank loans expiring up to end of 2021 are currently in the process of being extended. The next bond (EUR 500 million) expires in December 2021 which almost equals the near EUR 500 million cash position in Q1 2020. The average interest rate has been reduced to 1.8%, and the average maturity of 3.5 years is anticipated to be further extended.

Adapting to COVID-19

Amid the disruption caused by the outbreak of COVID-19, ADO Properties remains committed to ensuring the safety and wellbeing of all tenants, employees and business partners throughout the pandemic. ADO Properties has ensured that it is aligned with all appropriate government guidelines and has encouraged employees to work from home where possible and maintain social distancing when interacting with tenants. As ADO Properties benefits from a reliable and high-quality stream of rental income and strong financing structures, it is expected that the pandemic will not materially impact FFO for 2020. At the end of April, rent deferrals amounted to approximately EUR 220,000 which corresponds to 2% of total monthly rents and was derived almost exclusively from the commercial portfolio (residential being at 0.1%).

Integration of ADLER Real Estate progressing as planned
On 9 April 2020, ADO Properties successfully closed its business combination with ADLER Real Estate, creating one of the largest listed real estate companies in Europe. Significant progress has been made in the integration of both companies, and on 28 April 2020, ADO Properties announced that its Board of Directors has resolved to initiate a domination agreement with ADLER Real Estate in order to further pursue the integration. A dedicated Steering Committee comprised of board members from all involved parties was established to oversee the ongoing integration. Considerable effort is being put into formulating in detail the mission, vision and high-level strategy of the combined group. The combined group is ahead of schedule in realizing its operational synergies of EUR 6.5m run rate expected for 2020. Noticeable financial benefits have already been realized, particularly around operating expenses. Additionally, ADO Properties has taken action to streamline the structure of the combined group through a voluntary public takeover offer, which also constitutes a public delisting tender offer, for all registered shares of WESTGRUND AG, against payment of cash consideration, announced on 25 March 2020.

Compelling benefits of business combination strengthen ADO Properties' position
Through the business combination with ADLER Real Estate, ADO Properties has attained significantly enhanced scale, diversified its portfolio into key German cities and reduced its overall level of exposure to commercial tenants. The benefits of the combination are already beginning to materialize, and the group is well positioned to deliver attractive returns to shareholders in the future. The strategic partnership with Consus Real Estate AG ("Consus Real Estate") meanwhile provides the combined group with access to a market-leading development platform that will support ADO Properties' efforts to address the current housing imbalance in Germany. ADO Properties has already begun to leverage the partnership with Consus Real Estate, by signing a non-binding letter of intent for the acquisition of the Hamburg Holsten Quartier in January 2020, with the decision to buy subject to the outcome of a due diligence process.

ADO Properties is well placed to manage headwinds of COVID-19 and "Mietendeckel"
As a result of the greater scale and portfolio diversification facilitated by ADO Properties' combination with ADLER Real Estate, the combined group is well positioned to weather the disruption caused by COVID-19 and "Mietendeckel". The defensive nature of ADO Properties' portfolio, and indeed the broader German real estate market, should provide resilience during the crisis and ADO Properties also benefits from a reliable rental income stream and a strong liquidity position with EUR 489 million in cash at hand in the combined company as at the end of Q1 2020.

Following the combination with ADLER Real Estate, only 29% of ADO Properties' residential rental income is affected by "Mietendeckel". The group estimates that the rent cap will reduce FFO for 2020 by EUR 1 million and negatively impact FFO in 2021 by EUR 9 million. ADO Properties continues to believe that the rent cap is unconstitutional and inept to address the housing shortage in Germany. ADO Properties sees it as a positive development that the Berlin rent cap has been referred to the German Federal Constitutional Court for a definitive ruling following an application by certain members of the German federal parliament. ADO Properties supports the efforts of these lawmakers and will monitor the outcome of the constitutional proceedings closely.

Maximilian Rienecker, Co-CEO of ADO Properties said: "It is a testament to the strength and resilience of ADO Properties' business model that we are able to deliver a strong set of results for the first quarter of 2020 and confirm our guidance for the full year despite the turbulence caused by COVID-19. Particularly given current market conditions, the decision to proceed with the business combination with ADLER Real Estate has clearly strengthened the group's position and allows us to confirm our full year 2020 guidance of combined rental income of between EUR 280 million and EUR 300 million or EUR 340 million to EUR 360 million if ADLER Real Estate would have been fully consolidated for the entire year."

Thierry Beaudemoulin, Co-CEO of ADO Properties added: "The transformational business combination we completed with ADLER Real Estate and the strategic partnership agreed with Consus Real Estate has significantly enhanced the quality and diversity of our portfolio, meaning we are well placed to deliver consistent value to shareholders going forward. The transaction has facilitated our growth into one of the largest real estate companies in Germany and provides us with the capability to take meaningful action to address the German housing shortage. Our efforts towards the integration of both companies have proceeded with pace and as planned, with only limited interruption caused by COVID-19. We look forward to reporting as a single entity for the first time in Q2 and to sharing our combined mission and values with the market in the near-future."


Definitions of our alternative performance measures like FFO1 or EPRA NAV are available in our latest financial report under in the Financial Performance Indicators section.

Earnings call

An Analyst & Investor webcast and conference call will be held on Monday, 18 May 2020, at 3pm CET / 2pm BST / 9am EDT.

Thierry Beaudemoulin, and Maximilian Rienecker, Co-CEOs of ADO Properties will provide an overview of the business highlights and financial results for Q1 2020, followed by a Q&A session. Please note participants will only be able to ask questions if joining through webcast.




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18.05.2020 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
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