TAG Immobilien AG: Stable rental results, increased sales results in H1 2024; annual guidance fully confirmed

PRESS RELEASE

Stable rental results, increased sales results in H1 2024; annual guidance fully confirmed

• Rental income (FFO I) of EUR 88.1m in H1 2024 at previous year’s level (EUR 89.1m) despite property sales in Germany
• Rental growth in Germany rises to 2.7% (financial year 2023: 2.3%)
• Sales result in Poland increases to EUR 34.1m in H1 2024 (H1 2023: EUR 23.2m)
• Value adjustment in German real estate portfolio significantly slower at -2.7% in H1 2024 after -4.1% in H2 2023 and -7.4% in H1 2023 – no significant further value adjustments expected
• Around 880 residential units in Germany sold in H1 2024; net cash proceeds of EUR 66.2m expected
• LTV at 46.6% as at 30 June 2024 and at c. 46.3% pro forma taking into account disposals closing after the reporting date
• Interest coverage ratio and net financial debt to adjusted EBITDA at strong levels of 6.7 and 9.0 times, respectively; TAG again has two stable investment grade ratings (‘Baa3’ from Moody’s and ‘BBB-’ from S&P Global)

Hamburg, 13 August 2024

Good operating performance of Q1 continues in first half of 2024

In the first half of 2024, FFO I, which includes the Group’s entire rental business in Germany and Poland, totalled EUR 88.1m. Compared to the same period of the previous year, this represents only a slight decrease of EUR 1.0m or 1%, despite the disposals of residential units in Germany in the financial year 2023 and the first half of 2024. Total like-for-like rental growth in the German portfolio increased to 2.7% after 2.3% p.a. in the last full financial year 2023. Vacancy in the Group’s residential units in Germany improved year-on-year from 4.7% in June 2023 to 4.2% at June 30, 2024.

In the rental business, c. 2,630 residential apartments have now been completed in Poland and further rental units are under construction. The number of completed rental apartments will total around 3,350 by year-end 2024; the medium-term goal is to have a portfolio of c. 10,000 rental units by the end of 2028.

Although some of the Polish rental units were only completed in the last few months, the occupancy rate in the overall portfolio was already 92.6% at the reporting date, due to the strong demand for residential units; the vacancy rate for residential units that have been on the rental market for more than one year is 2.8%. Like-for-like rental growth for residential units that have been on the market for more than one year was 4.5% p.a. at 30 June 2024. After two exceptionally strong financial years 2022 (22.0%) and 2023 (10.8%), rental growth has therefore normalised somewhat, as expected.

FFO II, which includes the sales business in addition to FFO I, increased by EUR 9.8m or 9% to EUR 121.4m compared to the same period of the previous year. This is primarily due to TAG’s increased sales result in Poland (EUR 34.1m in H1 2024 after EUR 23.2m in H1 2023). In the reporting period, 1,330 (prior-year period: 863) residential units were handed over to buyers and thus recognised in profit or loss.

In the first six months of 2024, sales of 1,056 (previous year: 1,817) residential units were signed in Poland. Despite the reduced number of apartments, the total sales volume (cumulative sales prices) remained at a high level in H1 2024 of EUR 198m after EUR 222m in H1 2023, thanks to the average increase in sales prices of c. 20% in the last twelve months.

Claudia Hoyer, COO and Co-CEO of TAG, comments on the results of the first half of 2024 as follows: “We can be very satisfied with our operating performance so far in 2024. The increase in rental growth in Germany shows that the affordable residential units we offer are also meeting with strong demand in B-locations. At the same time, our Polish rental portfolio is growing and sales in Poland continue to deliver good results. On this basis, we can fully confirm the guidance for the full year 2024, including the FFO I and FFO II forecasts.”

Only moderate adjustment to market value of the real estate portfolio in Germany

As in previous years, a full external valuation of the real estate portfolio was carried out as at 30 June 2024. A valuation decrease of 2.7% or EUR 144.3m was recorded for the German portfolio. This means that the devaluation trend has slowed significantly compared to the two previous half-yearly valuations. Based on the new valuation levels of c. EUR 1,040 per sqm and a gross yield of 6.5%, no further significant value adjustments are expected.

The valuation of the rental portfolio in Poland resulted in a profit of EUR 9.5m after EUR 15.6m in the same period of the previous year. The gross yield of the c. 2,630 Polish rental apartments already completed as at 30 June 2024 is 5.7%, which corresponds to a value of c. EUR 2,800 per sqm.

Disposals of around 880 residential units in Germany in H1 2024

Following the disposal of c. 1,400 residential units in the 2023 financial year, sales contracts for c. 880 residential units were signed between January and June 2024. The cumulative sales price was EUR 78.4m, which corresponds to an average gross yield of 5.2%. The expected net cash proceeds, after repayment of bank loans, amount to EUR 66.2m.

Closing will take place after the reporting date for c. 720 residential units, although around 500 residential units already closed in July 2024. Net cash proceeds of EUR 58.8m is attributable to these c. 720 residential units that had not yet been transferred as at the reporting date.

Financial ratios remain strong, LTV down over the course of the year, further LTV reduction after the reporting date

Despite the valuation losses in Germany, the loan-to-value (LTV) ratio was reduced to 46.6% as at 30 June 2024 compared to 31 December 2023 (47.0%). In addition to the good operating results and the suspension of the dividend payment for the 2023 financial year, this was due in particular to the strong inflow of liquidity from sales in Poland.

Taking into account the pro-forma sales of around 720 residential units in Germany that had already been signed but not yet transferred as of the reporting date, the LTV as of 30 June 2024 is c. 46.3%. This means that TAG is still very close to its LTV target of c. 45.0%, even after the recognised valuation loss.

Other KPIs such as the interest coverage ratio (ICR) and the ratio of net financial debt to adjusted EBITDA remain strong at 6.7 and 9.0 times respectively (4.2 and 13.1 times excluding the Polish sales business).

TAG again has two stable investment grade ratings from Moody’s and S&P

In May 2024, the rating agency Moody’s upgraded TAG’s long-term credit rating from ‘Non Investment Grade, Ba1, outlook stable’ to ‘Investment Grade, Baa3, outlook stable’. According to Moody’s, the rating upgrade reflects TAG’s continued strong operating performance and the company’s disciplined financial policy in a challenging market environment due to rising interest rates. With its upgrade, Moody’s is matching the rating agency S&P Global, which had already upgraded the ‘negative outlook’ of the existing BBB- investment grade rating to ‘stable’ in March 2024.

Martin Thiel, CFO and Co-CEO of TAG, adds: “We are pleased to have two stable investment grade ratings again. This increases the range of attractive financing options for strengthening our capital structure and for further growth. At the same time, we have almost reached our LTV target despite the overall challenging environment of the past quarters. This demonstrates TAG’s financial stability and capacity for obtaining financing.”

Further details on the first half of 2024 can be found in the interim report published today and in a summary presentation at https://www.tag-ag.com/en/investor-relations.

Key financials at a glance

Contact

TAG Immobilien AG

Dominique Mann

Head of Investor & Public Relations

Phone +49 (0) 40 380 32 305

ir@tag-ag.com