DGAP-News: Prime Office REIT-AG starts the year with positive net income in Q1/2013 and has begun merger talks with OCM German Real Estate Holding (German Acorn)
(firmenpresse) - DGAP-News: Prime Office REIT-AG / Key word(s): Quarter Results/Mergers&Acquisitions
Prime Office REIT-AG starts the year with positive net income in
Q1/2013 and has begun merger talks with OCM German Real Estate Holding
(German Acorn)
08.05.2013 / 07:31
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Prime Office starts the year with positive net income in Q1/2013 and has
begun merger talks with OCM German Real Estate Holding (German Acorn)
- Net income for the reporting period amounts to 1.1 million Euro on the
back of 14.5 million Euro in revenues, which is in line with our
expectations
- 1.3 million Euro funds from operations (FFO) as expected
- Seamless re-letting of about 6,000 square metres in the 'Xcite' from
April 2013 - currently 17 percent occupancy instead of expected vacancy in
the property
- Significant decline of total liabilities: LTV with 55.6 percent for the
first time ever below the 60 percent threshold
- Increase of REIT equity ratio to 43.7 percent-reaching the REIT minimum
equity ratio of 45 percent by year-end has high priority
- The boards of Prime Office REIT-AG and OCM German Real Estate Holding AG
have started talks on a potential merger of both companies to create a
listed combined company. Should the talks progress positively, the
companies plan to take the necessary steps that are required for a merger
including the determination of the merger exchange ratio and the
appointment of the merger auditor.
Munich, 8 May 2013. Prime Office REIT-AG ('Prime Office'),a leading listed
property company with REIT status focused on investments and management of
prime office properties in Germany, reports income of 1.1 million Euro and
funds from operations (FFO) in the amount of 1.3 million Euro based on 14.5
million Euro in revenues in Q1/2013, which is in line with our
expectations.
'Our business developed as anticipated even though the first quarter of
2013 was dominated by temporarily lower rental and lease revenues that
resulted from the sale of the property in Hamburg at the end of 2012 and
temporary vacancies, which were mainly due to the lease in Frankfurt that
expired at year-end 2012. Not least our recent letting successes in the
'Xcite' in Dusseldorf makes us confident, however, that we will reach our
full-year targets and be able to pay a dividend for the current fiscal
year', says Claus Hermuth, CEO of Prime Office.
The boards of Prime Office and OCM German Real Estate Holding AG, Cologne,
(German Acorn), a company owned by Oaktree Capital Management LLP, Prime
Office's largest shareholder, have started talks on a potential merger of
both companies to create a listed combined company. Should the talks
progress positively, the companies plan to take the necessary steps that
are required for a merger including the determination of the merger
exchange ratio and the appointment of the merger auditor.
The talks are the result of a strategic review conducted in 2012 by the
board of Prime Office in light of the still challenging commercial property
market in Germany. In this analysis, German Acorn was identified as an
attractive partner for a potential merger due to the strategic fit of
investing into prime office properties in German metropolitan areas and a
multi-tenant strategy complementary to the single-tenant strategyof Prime
Office.
'We examined attractive options to advance Prime Office in the best
interest of our stakeholders. We believe that a merger of both companies
offers the potential to create a leading German property company with a
focus on high-quality office properties with an attractive and highly
diversified tenant base across major German cities and metropolitan areas,
with over 800 lease contracts and 64 buildings in 29 locations. As of
December 31, 2012, we estimate that the combined company would have a gross
asset value of about 2.3 billion Euro and the potential to generate net
cold rents of about 147 million Euro based', says Claus Hermuth, CEO of
Prime Office.
The board of Prime Office stresses that the discussions related to a
potential merger of both companies are an open process. The board is
therefore unable to provide specifics on a potential merger at this point.
However, if the talks progress as anticipated and if all necessary steps
and measures are implemented effectively, such merger could be completed by
the end of 2013.
A merger requires the approval of the general shareholders' meetings of
both companies. In the interest of advancing the merger effectively and
without delay and still being able to hold only one general shareholders'
meeting of Prime Office in 2013, the board of Prime Office REIT-AG decided
to schedule its ordinary general shareholders' meeting for 21 August 2013.
Berenberg acts as financial advisor regarding the potential merger.
Meanwhile, the Company reports as follows on the business in Q1/2013: Prime
Office generated 14.5 million Euro in rental and lease revenues in the
first quarter of 2013, down year on year (Q1/2012: 18.2 million Euro) due
to a temporary decline in occupancy after the expiry of the lease in
Frankfurt at year-end 2012 and the sale of the property in Hamburg at the
end of the year. Accordingly, the rental and lease income over the
reporting period declined to 11.8 (Q1/2012: 15.3) million Euro. Operating
income before valuation effects also declined over the first three months
of this fiscal year because rental revenues fell to 10.4 million Euro
compared to the first quarter of 2012 (Q1/2012: 13.9 million Euro). The
operating income before interest and taxes (EBIT) developed accordingly and
also amounted to 10.4 (Q1/2012: 13.9) million Euro over the reporting
period.
Even though vacancies across the portfolio increased to about 23 percent on
31 March 2013 (31 December 2012: 14.0 percent) after the tenant of the
'Xcite' in Dusseldorf vacated the premises, partial spaces of about 6,000
square metres overall could be let seamlessly to Vodafone partner companies
in that same property from April 2013. Instead of falling entirely vacant
from April 2013 as originally anticipated, about 17 percent of the former
Vodafone headquarters are currently occupied as a result.
Due to the temporarily lower occupancy in the portfolio, lower rental
revenues caused by the sale of the property in Hamburg at the end of 2012
and one-time effects from early full and partial repayments as part of the
on-going optimisation of the financing structure, the income generated by
Prime Office in the first quarter of 2013 fell in line with our
expectations to 1.1 (Q1/2012: 5.6) million Euro. Income per share declined
accordingly to 0.02 (Q1 2012: 0.11) Euro. The 'EPRA earnings', where the
income for the reporting period is adjusted by one-time or special effects
from the fair valuation of the property portfolio and the derivative
financing instruments, amounted to 2.5 (Q1/2012: 4.7) million Euro or 0.05
(Q1/2012: 0.09) Euro per share in the first three months of this fiscal
year.
Over the first quarter of 2013, Prime Office generated funds from
operations (FFO) in the amount of 1.3 (Q1/2012: 6.5) million Euro, which
were in line with our expectations and the guidance for this fiscal year.
Accordingly, FFO per share amounted to 0.02 (Q1/2012: 0.13) Euro at the
reporting date.
As a result of the early loan repayments and special repayments made in the
context of the optimisation of the financing total liabilities of the
property company as at the reporting date on 31 March 2013 had declined
substantially, i.e. by about 49.8 million Euro or 7.8 percent to 592.7 (31
December 2012: 642.5) million Euro. Consequently, Prime Office was able to
reduce its loan-to-value (LTV) by an overall 460 basis points compared to
31 December 2012 to 55.6 percent, bringing the LTV of Prime Office for the
first time ever below the 60 percent threshold. On 31 December 2012,
leverage had still been 60.2 percent. The significantly lower LTV will take
further pressure off the financial result going forward.
The on-going financial and euro crisis and the consistently low interest
rate level continue to weigh on the equity of Prime Office as they affect
the valuation of the long-term derivative interest rate hedging instruments
(interest rate swaps) of the property financings. Still, Prime Office could
increase its REIT equity ratio each quarter from mid-year 2012. It reached
43.7 percent on 31 March 2013 (31 December 2012: 42.9 percent). This
notwithstanding, the REIT equity ratio still falls short of the 45 percent
minimum required under the German REIT law that must be reached by year-end
2013 in order for Prime Office to remain a REIT. The board of Prime Office
is making every effort to comply with this requirement. The company is
exploring the option of additional property sales until year-end and has
therefore initiated a sales process for the SZ-tower in Munich.
Looking ahead to the further operating business development, Prime Office
confirms its guidance for fiscal year 2013. The board continues to
anticipate revenues including operating costs prepayment of between 51 and
53 million Euro and FFO of between 0 and 2 million Euro on the back of
temporary and refurbishment-driven vacancies. While the property company
plans to again pay a dividend for fiscal year 2013, the latter will be
contingent on successful letting and potential property sales due to the
charges from property reconstruction and refurbishment measures.
Contact details
Prime Office REIT-AG
Richard Berg
Director Investor Relations / Corporate Communications
Hopfenstraße 4
80335 Munich
Telephone +49. 89. 710 40 90 40
Facsimile +49. 89. 710 40 90 99
Email richard.berg(at)prime-office.de
End of Corporate News
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08.05.2013 Dissemination of a Corporate News, transmitted by DGAP - a
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Language: English
Company: Prime Office REIT-AG
Hopfenstraße 4
80335 München
Germany
Phone: +49 (0)89 7104090 40
Fax: +49 (0)89 7104090 99
E-mail: richard.berg(at)prime-office.ag
Internet: www.prime-office.ag
ISIN: DE000PRME012
WKN: PRME01
Indices: SDAX
Listed: Regulierter Markt in Frankfurt (Prime Standard), München,
Stuttgart; Freiverkehr in Berlin, Düsseldorf
End of News DGAP News-Service
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Datum: 08.05.2013 - 07:31 Uhr
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