Significant profit increase and portfolio growth in first half of 2018
> Operating profit (EBITDA) up 72% to CHF 37.1 million and earnings after taxes up 66% to CHF 26.5 million
> Residential portfolio increased by 16% to 6,436 units
> Transfer of ownership of a good 1,900 additional apartments already acquired lifts property portfolio to 8,400 apartments by the end of 2018
> Actual rental income more than doubled to CHF 13.8 million (previous year: CHF 6.8 million)
> Increase in occupancy rate and efficiency gains in terms of cost structures
> Equity ratio of 46.8 percent and liquid funds of CHF 91.6 million provide excellent basis for further growth
Peach Property Group, an investor specialising in the management of residential property in Germany, announced today that it improved its earnings after taxes in the first six months of 2018 by around 66 percent year-on-year, from CHF 16.0 million to CHF 26.5 million. Operating profit (EBITDA) rose to CHF 37.1 million, up from CHF 21.5 million in the previous year, representing an increase of 72 percent. This significant increase in profits is attributable to the portfolio expansion, value-enhancing measures in the property portfolio, an improvement in the letting situation and an attractive contribution to profits made by development activities. Due to the depreciation of the Swiss franc against the Euro, however, the financial result in the reporting period includes negative currency effects of around CHF 2.2 million, while a positive currency effect of CHF 2.0 million was recorded in the same period last year.
Actual rental income more than doubled to CHF 13.8 million – market value of portfolio rises to CHF 530 million
Actual rental income in the first six months of the year more than doubled year-on-year, increasing by around CHF 7.0 million from CHF 6.8 million to CHF 13.8 million as a result of the expanded residential property portfolio, a further tenant-focused improvement of the properties and a reduction in vacancies. As of 30 June 2018, the portfolio of the Peach Property Group consisted of 6,436 residential units. This represents a year-on-year increase of around 2,200 units and an increase of just under 900 apartments compared to the end of 2017. The transfer of ownership of another 1,900 apartments already acquired will take place in the second half of 2018, lifting the Group’s portfolio to just under 8,400 units comprising a lettable floor area of around 540,000 square metres. As a result, annual target rental income will increase to CHF 44.3 million, from CHF 34.3 million at the end of the first half of 2018 and CHF 28.6 million at the end of 2017.
As of 30 June 2018, the market value of the investment portfolio was approx. CHF 530 million (+17 percent compared to 31 December 2017).
Occupancy rate further improved – efficiency gains in terms of cost structures achieved
Peach Property Group invested approximately CHF 4.2 million in specific maintenance and modernisation measures during the reporting period. The focus was on increasing tenant satisfaction and improving the letting situation. The occupancy rate in the residential portfolio rose to 85.5 percent as of 30 June 2018, an improvement of around 3 percent compared with the 2017 year-end figure of 83.2 percent. Excluding the refurbishment properties in Neukirchen-Vluyn and Fassberg, the occupancy rate is 91 percent.
Thanks to efficient property management, costs have only seen a disproportionately low increase despite the significant growth. The direct costs of the investment properties amounted to just under 31 percent of rental income in the first six months of 2018, compared with 37 percent in the same period last year. At 17 percent, overhead costs (personnel and other operating expenses) in the reporting period also rose at a significantly lower rate than the portfolio and earnings.
“Wollerau Park” completed – profit contribution of CHF 5.6 million
Peach Property Group pushed ahead with the remaining development projects in the first half of 2018. Construction work on the “Wollerau Park” project near Zurich with 46 apartments and 5 commercial units was completed. Except for one apartment, all units were either sold or reserved. This resulted in a profit contribution of CHF 5.6 million for the reporting period, which corresponds to 26.5 percent of the sales revenue generated.
Increase in FFO I before tax by 300 percent
The completion of “Wollerau Park” and the sale of the apartments resulted in income taxes of CHF 4.5 million Euros, whereas a tax refund of CHF 2.2 million was recognised in the previous year. As a result of these tax effects, funds from operations I (FFO I) of CHF 1.3 million were below the previous year’s figure of CHF 3.5 million. Excluding these tax effects, FFO I increased by around 300 percent. This reflects the major efficiency gains from portfolio growth.
Equity ratio rises to 45.9 percent (46.8 percent at market values)
Due to the substantial half-year profit and the funds from the 1.75 percent hybrid warrant bond of CHF 60 million issued in June 2018, Peach Property Group’s equity increased to CHF 316.6 million as of 30 June 2018 from CHF 258.5 million at year-end 2017. At market values, equity rose from CHF 272.2 million as of 31 December 2017 to CHF 328.4 million. This represents an equity ratio of 45.9 percent after 41.6 percent at the end of 2017. Based on market values, the equity ratio was 46.8 percent compared to 42.8 percent as of 31 December 2017. Due to the reduced proportion of development projects, total assets at the end of the first six months of 2018 rose by only 11 percent to CHF 689.6 million compared to year-end 2017. This also contributed to a higher equity ratio. As of the end of the first half of 2018, Peach Property Group had cash of CHF 91.6 million, up from CHF 49.2 million at the end of 2017.
Positive outlook for 2018
For the full year 2018, Peach Property Group expects a further significant increase in rental income driven by the integration of residential properties that have already been notarised and further progress with portfolio properties. The Group also wants to continue the steady expansion of its property portfolio, with the focus remaining on residential portfolios in German B-cities. In addition, the Group also expects further organic rental increases – among other things as a result of continued tenant-focused management and the opening of another flag ship store – “Peach Point” – in Heidenheim in the second half of 2018.
Dr. Thomas Wolfensberger, CEO of Peach Property Group, comments: “We are very pleased with the successful first half of 2018 that saw the further expansion of our portfolio and a considerable increase in profits. This growth makes us more attractive for institutional investors – a development that we feel very positive about. We are also optimistic for the future performance of our Company. With cash on hand of more than CHF 90 million and given our staffing levels, we are well equipped both in terms of funds and personnel to achieve further dynamic growth. We therefore reaffirm our medium-term target of having 11,000 apartments in our portfolio.”
The detailed 2018 half-yearly report is available (in German) on the Peach Property Group’s website: http://peachproperty.com
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Dr. Thomas Wolfensberger, Chief Executive Officer and Dr. Marcel Kucher, Chief Financial Officer
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About Peach Property Group AG
Peach Property Group is a property investor and developer focused on investments in Germany and Switzerland. The Group stands for long time experience, competence and quality. Innovative solutions for modern housing needs, strong partnerships and a wide value chain complete the profile of the Group. The portfolio consists of an increasing number of high yield investment properties, typically in B-cities in close reach to metropolitan areas. In addition, the Group develops properties for its own portfolio or for the sale as condominium. Developments for sale focus on A-locations and encompass attractive architecture and high level furnishing for an international clientele. The business activities of the Group cover the entire value chain, from property acquisition and site selection to active asset management and finally to the sale or lease of properties.
Peach Property Group AG is headquartered in Zurich and has its German Group headquarters in Cologne. Peach Property Group AG is listed on the SIX Swiss Exchange (PEAN, ISIN CH0118530366). Its Board of Directors consists of Reto Garzetti (President), Peter Bodmer, Dr. Christian De Prati and Kurt Hardt.
For more information, see http://peachproperty.com