Announcement

TAG Immobilien AG is driving forward its operational growth with vacancy reduction and rent increases. At the same time, the successful share buyback has created further value for shareholders. Net Asset Value (NAV) rises to EUR 10.16 per share.

TAG Immobilien AG is driving forward its operational growth with vacancy reduction and rent increases. At the same time, the successful share buyback has created further value for shareholders. Net Asset Value (NAV) rises to EUR 10.16 per share.


TAG Immobilien AG / Key word(s): Quarter Results

06.11.2014 / 07:30


PRESS RELEASE

TAG Immobilien AG is driving forward its operational growth with vacancy reduction and rent increases. At the same time, the successful share buyback has created further value for shareholders. Net Asset Value (NAV) rises to EUR 10.16 per share.

Confirmation of FFO forecast based on EUR 0.69 per share for 2014, further increase expected to between EUR 0.71 and 0.73 per share for the full year 2015.

- Operational business is going according to plan: vacancy reduction and rent increases across the entire residential portfolio; rental profit rises disproportionately to rental income

- Strategic focus going forward will be based on total return per share

- Share buyback creates additional shareholder value

- Successful above book-value sale in Berlin-Marzahn in early November increases future NAV

Hamburg (6 November 2014) - TAG Immobilien AG ('TAG') has ended the third quarter of 2014 with further operational growth in the portfolio, which currently includes nearly 75,000 units, thanks to increases in rent and vacancy reduction. The sale of TAG Gewerbeimmobilien GmbH in late May 2014 completes the company's focus on the residential segment. In the residential inventory, targeted sales take advantage of attractive opportunities in the market, and the freed-up funds are being reinvested in inventories in TAG's core regions that have development potential. At the same time, the successful share buyback in September and October 2014 has led to an improvement across all performance indicators. This confirms the annual forecast for 2014 of FFO I in the amount of EUR 0.69 per share. FFO I for 2015 is expected to be between EUR 0.71 and 0.73 EUR per share.

Operational indicators:
Total rental income increased to EUR 192.9 m at 30 September 2014 after EUR 188 m in the first nine months of last year. Rental income from the residential property business increased from EUR 172.4 m last year to EUR 184.4 m. This results in rental profit across the Group of EUR 158.1 m at 30 September 2014, after EUR 149.5 m in the first nine months of last year, and in the residential property segment EUR 151.2 m after last year's EUR 135.9 m. As in previous quarters, rental profit rose disproportionately to rental income, demonstrating the efficiency of the inventory management. It should be noted that a large proportion of the 9,000 units newly acquired since year-end 2013 were not transferred into the inventory and therefore did not have an effect on net income until the second half of the year.

Across the Group, vacancy in the residential portfolio improved slightly (excluding new acquisitions during the year) to 8.6% at the end of September 2014, after 8.9% at the end of 2013. The highest level of reduction was once again recorded in Salzgitter, where vacancy has declined by 2 percentage points since the beginning of the year, to 16.6%. This development confirms the effectiveness of the rental policies and measures pursued at this location. Average monthly net actual rent per square metre in the Group increased to EUR 5.07 across the entire residential real estate portfolio at the end of Q3 (EUR 5.04 at the end of 2013). This was especially due to higher new leases, which averaged EUR 5.31 per sqm.

Earnings before taxes (EBT) from continuing operations in the residential real estate portfolio amounted to EUR 85.4 m at the end of Q3 2014, after EUR 52.4 m in the same period last year. Interest income from this business segment was EUR -74.2 m in the first nine months of 2014, slightly below the previous year's level (EUR -70.8 m). Total net income for the Group was EUR 63.5 m as of the end of Q3 2014 (previous year EUR 38.2 m).

Funds From Operations (FFO) as an indicator of operating profitability was EUR 0.51 per share at the end of Q3 2014, excluding sales (FFO I). The FFO I forecast of EUR 0.69 per share (after EUR 0.52 per share in the previous year) will be achieved by the end of the year, although the absolute amount of EUR 90 m is less than we had predicted. The main reasons for this are the sales concluded in the first half of the financial year, especially in the commercial segment, as well as the fact that new acquisitions weren't transferred into the inventory until the second half of 2014. For the 2015 financial year, a further increase in FFO I is forecast, to between EUR 0.71 and 0.73 per share.

The balance sheet total decreased slightly compared to year-end 2013, from EUR 3,763 m to EUR 3,724 m at 30 September 2014. Meanwhile, the book value of the entire real estate inventory was 3,530.5 m at the end of Q3 2014. The loan-to-value (LTV) ratio not including convertible bonds was reduced to 61.6%, after 62.1% at year-end.

Following a redefinition of the calculation of deferred taxes and taking into account the dividend of EUR 0.35 per share paid out in 2014, NAV (Net Asset Value) per share was EUR 10.16 per share at the end of Q3 2014, after EUR 9.96 at year-end. Under the previous definition, NAV is EUR 9.66 per share after EUR 9.45 at 31 December 2013.

In the interim report for the quarter ended 30 September 2014, TAG changed its financial reporting and made it more comprehensive. Key indicators such as FFO and NAV were redefined or will be shown additionally under alternative assumptions, in order to increase the transparency of the quarterly report and facilitate comparability with competitors.

Strategic focus, share buyback, and selective use of sales opportunities:
The strategy for shareholders focuses on the total return on individual shares. A growth in absolute numbers is no longer a priority for TAG, in contrast to previous years. The company has now reached a size at around 75,000 units that allows to effectively manage the portfolio. Further growth no longer leads to economies of scale to the extent it did in the past. TAG can therefore focus much more on optimising the portfolio and effectively increasing the cash flows.

As early as the 2013 financial year, we had bought back EUR 72 m in convertible bonds, thereby significantly reducing the potential dilutive effect for our shareholders. In September and October 2014 a share buyback of 10% of the outstanding share capital in the amount of approximately EUR 122 m of TAG shares below NAV, at a price of EUR 9.30 per share, created additional value for our shareholders. A strong liquidity position, among other things from the sale of our commercial portfolio in May this year, made this share buyback possible.

At the same time, the strategy is governed by explicit capital discipline when purchasing new portfolios. Since last December, nearly 9,000 units have been acquired, especially in locations with development potential in East Germany where TAG already has holdings.

Meanwhile, sales opportunities in the residential portfolio are also being seized provided the sales improve the profitability of the overall portfolio. One successful example of this strategy is the sale of a 2,600-unit property in the Marzahn district of Berlin that was registered a few days ago. At the beginning of November, the portfolio, which had been managed by TAG since 2011, sold for EUR 170.4 m. The contract is scheduled to close at the end of Q4 2014, and the sale is expected to result in net cash inflow (after deducting the liabilities to banks on the properties), of around EUR 72 m and an increase in NAV per share (before prepayment penalties for financing) of about EUR 0.30. The released capital is to be reinvested in further acquisitions with higher initial returns in TAG's core regions.

Outlook:
Martin Thiel, CFO of TAG, comments: "In order to be able to continue buying back shares quickly and flexibly in future, wherever this makes sense for the total return on our shares and provided our debt remains in a sustainably stable framework, we will ask the shareholders, at the Extraordinary Shareholders' Meeting on 28 November 2014, to renew the authorisation to purchase own shares."

At the same time the Extraordinary Shareholders' Meeting will vote on our former CEO Rolf Elgeti moving to the TAG Supervisory Board. Mr Elgeti resigned from the Management Board for personal reasons on 31 October 2014. Mr Thiel adds: "Shareholders who collectively hold more than 25% of the voting rights in our company have proposed his move to the Supervisory Board and support the prompt implementation of this proposal in order to preserve continuity in the composition of the TAG boards and also to be able to continue using Mr Elgeti's strategic expertise and experience for the Company's benefit in future."

Further details can be found in the quarterly report as of 30 September 2014, published today: www.tag-ag.com/en/investor-relations/financial-reports/interim-reports.

Press enquiries:
TAG Immobilien AG
Head of Investor & Public Relations
Dominique Mann
Phone +49 (0) 40 380 32 300
Fax +49 (0) 40 380 32 390
pr@tag-ag.com





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Language: English
Company: TAG Immobilien AG
Steckelhörn 5
20457 Hamburg
Germany
Phone: 040 380 32 0
Fax: 040 380 32 390
E-mail: ir@tag-ag.com
Internet: www.tag-ag.com
ISIN: DE0008303504, XS0954227210, DE000A12T101
WKN: 830350, A1TNFU, A12T10
Indices: MDAX
Listed: Regulierter Markt in Frankfurt (Prime Standard), München; Freiverkehr in Berlin, Düsseldorf, Hamburg, Hannover, Stuttgart
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