Adler sees mixed results after year of consolidation, but boosts FFO

The listed Frankfurt-based Adler Real Estate, much in the news and in these pages recently for its unwelcome flirtation with Austria's conwert Immobilien, reported mixed results for the full-year 2015. It saw net profit fall 30% to €78m but improved its FFO 1 figure to €16m from a loss of €1m last year.

The company owns and manages nearly 50,000 residential units across Germany, making it one of the five largest listed housing companies in the market. Most of its units are in so-called B-locations of Germany's largest cities. It also holds a 23.5% stake in Austrian-listed conwert Immobilien, which holds 82% of its residential housing units in Germany, mostly also in Germany's largest cities. It also owns Berline privatisation specialist Accentro Real Estate AG.

New CEO Arndt Krienen, who recently replaced 13-year veteran Axel Harloff at the helm of Adler, commented: “Adler’s development in recent years has been driven by substantial acquisition-based growth. In 2016, we will reap the first full benefits of income growth from our operating business and exploit initial synergy benefits by integrating our various organisations. The underlying framework in property markets is still very strong. There is growing demand for living space, and that not only in conurbations but also in the peripheral locations where most of Adler’s housing portfolios are located.”

His comments refer largely to the acquisitions of Westgrund last year, which saw Adler doubling its number of owned and managed residential units, as well as the 24.8% stake in conwert Immobilien from British-Israeli businessman Teddy Sagi. The acquisitions led to consolidated net profit falling from €111.6m in 2014, but FFO 1, which excludes sales revenues, rose to over €16m, turning round a €1m loss in the prior year. EPRA net asset value jumped to €880m from €351m in 2014.

Adler said, "As a result of ongoing operational improvements, in-place rent, vacancy reduction and synergies, FFO I is expected to significantly increase by 55% to about €25m next year.”

Further operation improvements expected by the company by December 2016 include: growing gross rental income by 20% to €260m; Boosting occupancy from 88.8% to 90.8%; lowering LTV to 65%: lowering WACD by 0-25% to 3.75%; and growing EPRA NAV by more than 10% to €1bn.