conwert Immobilien Invest SE
Ansprechpartner: Clemens Billek
Tel.: +43 1 52145-700


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Public disclosure of inside information according to article 17 MAR

conwert Immobilien Invest SE: conwert achieves strong operating results in 2014, new FFO guidance

Vienna (pta020/24.03.2015/18:55) - -
+ Rental income up by 4.4% to EUR237.3 mn (2.3% rise in like-for-like NRI)
+ Further reduction in operating costs of 12.5% to EUR67.4 mn
+ Rise in average rents, further fall in vacancy rates
+ FFO I of EUR34.8 mn significantly exceeds guidance for 2014
+ Group forecasts increase in FFO I to over EUR50 mn by 2016
+ Comprehensive review of financing structure to cut finance costs currently being prepared - further significant FFO potential possible
+ Offer price from Deutsche Wohnen fails to adequately reflect conwert's value potential

conwert Immobilien Invest SE managed to achieve a significant improvement in its operating business in 2014. The core business areas of residential property in Germany and Austria underwent particularly pleasing growth.

Rental income rose by 4.4% to EUR237.3 mn, despite a reduction in the property portfolio to 30,385 rental units. This increase was primarily due to the rise in average rents per square metre as well as the sharp cut in vacancy rates. At year end 2014 the vacancy rate stood at just 9.0%, following on from 10.1% at 31 December 2013. Average rents in the entire portfolio climbed by 2.5% to EUR6.27/sqm/m (31/12/2013: EUR6.12/sqm/m). Against this backdrop, net rental income (NRI) increased by 6.6% from EUR141.4 mn to EUR150.7 mn. Even on a like-for-like basis, NRI was also up by 2.3%. The adjusted NRI margin*) rose from 81.4% to 85%, thereby matching the average level of the German residential peer group.
*) After adjusting rental income for recoverable operating costs (running costs charged to tenants), in order to facilitate comparisons with German property companies. Before adjustment, the NRI margin stood at 63.5% (2013: 62.2%).

At the same time as improving rental income, conwert also managed to cut costs significantly. Personnel and other operating expenses fell by 12.5% against the previous year to EUR67.4 mn.

Proceeds from the sale of individual units and properties amounted to EUR133.4 mn in 2014. If the transactions which had been fixed but not yet concluded as at the reporting date are included, proceeds from the sale of properties amount to EUR229.1 mn (2013: EUR273.4 mn) and are therefore above the guidance for 2014 (EUR150 to EUR200 mn). The IFRS gain on sales amounted to EUR11.1 mn, whereby the IFRS margin was 9.0%.

Revenues from property services fell back by 31.1% year-on-year to EUR10.5 mn. On the one hand, this was due to reducing internal invoicing for managing the conwert portfolio, on the other hand because of the planned reduction in third-party services to a few, carefully selected core areas.

Major progress was also achieved in refocusing the portfolio and the subsequent concentration on the core markets of Germany and Austria. In 2014 the majority of the Slovakian and Czech portfolio (closing still anticipated) was sold and the percentage accounted for by the other countries segment (Czech Republic, Slovakia, Hungary, Ukraine, Luxembourg) in terms of usable space of the entire conwert portfolio has therefore fallen to below 2%.

The revaluation of the property portfolio resulted in net gains of EUR13.0 mn, although this also includes net losses on revaluation of the commercial property portfolio totalling EUR(27.1) mn. The revaluation of residential property resulted in net gains for conwert of EUR40.1 mn in 2014.

As expected, the high financing costs continued to put considerable pressure on conwert's earnings again in the fourth quarter 2014; these primarily result from interest rate derivatives concluded in the years 2007 to 2010. The mark-to-market valuation pursuant to IFRS led to a significant burden on net finance costs in light of interest rates falling even lower than the previous year. Against this backdrop, net finance costs increased from EUR(74.7) mn in 2013 to EUR(131.5) mn, of which EUR(50.6) mn was from the non-cash expenses from ineffective swaps, which stood at EUR5.8 mn in 2013.

This led to a post-tax loss of EUR(8.9) mn, following on from a profit of EUR13.3 mn last year. In the third quarter 2014 the loss stood at EUR(19.9) mn and it was therefore possible to halve it in the fourth quarter.

In 2014 funds from operations before sales and one-off effects (FFO I) was 3.9% below the level of the previous year at EUR34.8 mn, although it was significantly higher than the guidance (over EUR30 mn) due to the sharp reduction in one-off costs.

NAV rose from EUR15.40 to EUR15.70 per share. The loan-to-value (LTV) fell to 53.6% for the first time and was therefore within the 2014 target range of 50-55%. If the cash tied up in convertible bonds is included as equity (share price is currently above conversion price), the LTV is even just 47.5%.

Guidance for 2015 is around EUR40 mn; for 2016 management assumes FFO I of over EUR50 mn. The main factor in this FFO improvement will be reducing borrowing costs. In addition, more efficient property management will unlock NRI potential: the integration of the KWG and GE portfolio will be completed by the end of 2015 and the subsequent synergic effects will first have an impact over the full year in 2016. Furthermore, the "Greenfield" project has been initiated in 2015 and will lead to further optimisation of asset and property management, as well as having a positive effect on earnings from 2016.

Furthermore, the management has announced a comprehensive review of the financing structure in order to cut interest rate costs to far below the level expected in the guidance. Based on first indications, conwert predicts - depending on further developments in interest rates - that it will cut financing costs by over 100 basis points and therefore make a significant additional contribution to earnings. This is not included at present in the guidance for 2015 and 2016.

CEO Clemens Schneider sees the annual results for 2014 as extremely positive: "The measures to improve the operating business have started to take effect. The increase in average rents, the fall in the vacancy rate and the successful cost-cutting programme have sustainably increased the company's profitability. The restructuring of the portfolio towards a company focused on residential property in Germany and Austria is also well underway."

A solid foundation is therefore in place for the upcoming additional measures to improve profitability. CEO Clemens Schneider: "We have developed a tough work programme for 2015 and 2016, which is reflected in the guidance for the most important KPIs." CFO Thomas Doll added: "In light of the current opportunities on the international finance markets, we see significant additional potential, particularly as regards refinancing our existing financial liabilities."

The Administrative Board and both Executive Directors agree: "The business outlook for 2015 and 2016 and conwert's refinancing potential are not adequately reflected in the offer made by Deutsche Wohnen AG."

Deutsche Wohnen AG published a voluntary takeover offer for EUR11.50 per share on 18 March 2015. Details on the offer can be found on conwert's website ( ). The Administrative Board will issue a detailed statement on the offer by 1 April 2015 at the latest.

Key performance indicators

2014 2013 Change
Rental income EUR mn 237.3 227.3 4.4%
Proceeds on sale EUR mn 133.5 273.9 -51.3%
Service revenues EUR mn 10.5 15.2 -31.1%
Revenues EUR mn 381.2 516.4 -26.2 %
Earnings before interest, taxes and depreciation (EBITDA) EUR mn 109.9 116.8 -5.9%
Depreciation, amortisation and other impairment charges EUR mn (1.3) (1.0) 33.1%
Earnings before interest and taxes (EBIT) EUR mn 121.6 123.4 -1.5 %
Funds from Operations I *) (excl. sales and one-off effects) EUR mn 34.8 36.2 -3.9%
Funds from Operations II **) EUR mn 39.0 52.1 -25.1%
Net Rental Income (NRI) EUR mn 150.7 141.4 6.6%
NRI margin % 63.5 62.2 2.1%
Adjusted NRI margin ***) % 85.0 81.4 4.5%
Non-diluted earnings/share EUR (0.14) 0.09 -
Diluted earnings/share EUR (0.14) 0.09 -
FFO I (excl. sales and one-off effects) *)/share EUR 0.42 0.44 -4.5%

*) FFO I: Earnings before tax (EBT) - difference between sales and carrying amount of sold properties + operating expenses of sales income -/+ revaluation gains/losses + depreciation and value adjustments + non-cash components of financial income and other non-cash costs not including non-controlling interests + restructuring costs/one-off costs
**) FFO II: FFO I + difference between sales and carrying amount of properties sold - operating expenses of sales income
***) Margin on net rental income (rental income less running costs charged to tenants)

Balance sheet indicators

31/12/2014 31/12/2013 Change
Total assets EUR mn 2,974.0 3,165.7 -6.1%
Non-current loans and borrowings EUR mn 1,120.4 1,081.6 3.6%
Current loans and borrowings EUR mn 221.3 378.0 -41.4%
Equity EUR mn 1,104.6 1,128.6 -2.1%
Equity ratio % 37.1 35.7 4.2%
Gearing % 143.8 154.2 6.7%
EPRA NAV (basic)/share EUR 15.7 15.40 1.9%

Property indicators

31/12/2014 31/12/2013 Change
Rental units No. 30,385 32,120 -5.4%
Parking spaces No. 13,573 14,187 -4.3%
Total usable space 1'000 sqm 2,473.2 2,603.5 -5.0%
Property assets EUR mn 2,810.5 2,868.1 -2.0%
Vacancy rate % 9.0 10.1 -10.9%
ø Rent EUR/sqm 6.27 6.12 2.4%

This report contains forward-looking estimates and statements that were made on the basis of the information available at this time. Forward-looking statements reflect the point of view at the time they are made. We would like to point out that the actual circumstances and. consequently, the actual results realised at a later date may differ from the forecasts presented in this report for a variety of reasons.

Emitter: conwert Immobilien Invest SE
Alserbachstraße 32
1090 Vienna
Contact Person: Clemens Billek
Phone: +43 1 52145-700
Stock Exchanges: official trade in Vienna
ISIN(s): AT0000697750 (share)
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