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IPO
The IPO in July took place after an initial cancellation due to market volatility in the shadow of the Greek crisis, and along with a capital increase, raised just under €200m for fresh investment. Previous owner Ado Group in Israel retains a nearly 40% stake.
The listed Berlin-based Ado Properties, which in July managed to get its much-heralded IPO away after an initial stumble, has posted very buoyant figures for the first half and increased its earnings forecast for the full year after seeing "substantial growth" in its business.
Ado said it expects funds from operations (FFO) to reach around €30m in 2015. FFO (excluding profit from dlisposals) increased 119% in Q2 compared with the same period last year.
Ado Properties’ portfolio was valued at €1.2 bn at end-June and comprises 13,700 residential units in Berlin. However, the group said it plans to double this voulme over the next three years, despite the steep rise in property values in the capital over the past five years.
The IPO in July took place after an initial cancellation due to market volatility in the shadow of the Greek crisis, and along with a capital increase, raised just under €200m for fresh investment. Previous owner Ado Group in Israel retains a nearly 40% stake.
The strong results for the first half are due to the increased rents Ado is receiving from its more recent acquisitions, particularly the Carlos Portfolio of 5,750 units, mainly in Spandau and Reinickendorf. This has produced a strong rise in annual rental income (6.2%) on a like-for-like basis, along with lowered vacancy rates. CEO Rabin Savion commented on the hike in the company's figures:
“The reason for the successful letting of our apartments is our unit modernization strategy. For each building we acquire, we develop a detailed modernization and refurbishment strategy to improve the quality and the sustainable value. Due to our integrated management platform with dedicated employees for Asset-, Property- and Facility Management, we are close to our buildings and tenants and know which measures are necessary for successful letting, rent development, and tenant satisfaction."
"In the first half of 2015 we invested €19.2 per sqm p.a. after €27.2 per sqm for the complete year in 2014. This is distinctly more than other residential companies invest. But we are a long-term investor and we are convinced that timely, fundamental investment in maintenance and modernization will lead to a sustainable value enhancement of each building as well as the complete portfolio. From our point of view, this is a more successful asset strategy than postponing modernization measures."
On its financing structure, Savion said the firm remains conservative, operating with an LTV of 57.6% (pre-IPO, and targeting sub-50%) and an average interest rate on borrowings of 2.6%. More than 95% of the loans have fixed interest rates or are hedged, while the loan maturity period is about six years.
Savion remains very bullish on Berlin. “Berlin is now one of the most exciting cities in Europe, and Berlin’s property market is one of the most dynamic in Germany,” he said. "Over the last four years, Berlin’s population has grown by an average of 40,000 people per year. This greater population is faced with a low supply of new residential construction. Thanks to our insider knowledge of this market and our highly efficient in-house management platform, we are in a position to react to market developments very quickly. This is how we identify opportunities and invest in Berlin’s most promising neighborhoods."
"Although the market is facing more challenges with governmental regulations such as housing rent caps, the Berlin property market still harbors a lot of potential. That’s why we are 100% focused on the Berlin market and why ADO Properties is set to continue to grow in Berlin."
