FOCUS IS KEY TO CASH FLOW GROWTH FOR CA IMMO
• Concentration follows large-scale acquisitions and expansion over recent years
• Investment of around € 300 m earmarked for German construction projects in 2013
• Sharp rise in international occupancy rate for 2012
Following years of rapid expansion in Germany and Eastern Europe, CA Immo is adjusting the focus of its real estate portfolio to existing core markets and the offices asset class. The re-dimensioning of the asset portfolio will be accompanied by measures aimed at raising efficiency across the value chain. The clear objective for 2013 is to increase creditworthiness and profitability while optimising risk with a view to stabilising the company over the long term.
According to Dr. Bruno Ettenauer, CEO of CA Immo, “Between 2006 and 2011, we acquired significant portfolios in Germany and Eastern Europe. Our priority now is to stabilise and focus that portfolio while exploiting positive market cycles to generate profit. By concentrating on what matters, we will enhance efficiency and raise our profitability while ensuring adequate equity capitalisation. Implementing these measures will enable us to cope with any changes to economic conditions and establish a sound basis for future growth.”
Raising efficiency and spreading risk through real estate sales
In the short to medium term, the company mainly plans to sell off real estate not classified as part of core business (in terms of markets such as the SEE and CIS and the hotel, logistics and residential asset classes, although size and tenant structure will also be key criteria in the sale of individual properties). As Ettenauer continues, “We specialise in the optimum management of large and modern office buildings in cities within defined core regions. That makes us the ideal owner for real estate of this type. If we find that we are unable to manage particular properties profitably enough because of the local staffing or portfolio structure, we set out to find investors for those properties.” Balancing the capital allocation within the portfolio is also targeted for the next periods. In 2013, for example, the proportionate sale of the Tower 185 office building in Frankfurt will be one item on the agenda. Funds generated through trading income will be used to repay certain loans and other financial liabilities and to ensure a dividend is paid.
High occupancy rates ensure stable revenue
Economic development continues to vary greatly from one country to another in Central Europe. However, general market analyses at national level are not always informative given that rental markets in particular operate at a local micro-level. A good example of this is Romania, where CA Immo has had a real estate portfolio operating at almost full capacity and producing stable revenue over many years – even though the office property market in Romania is generally regarded as tough, with an average occupancy rate of just 85 % or so.
As CA Immo CEO Dr. Bruno Ettenauer explains, “Provided you have good real estate and creditworthy tenants who are loyal to a location, it is possible to be successful even in a difficult market. The ability of professional staff on site to retain and acquire tenants is the key to success, and this will become an ever more important consideration in a tough environment.”
Focus on investment in 2013
Around € 300 m has been earmarked for construction projects in 2013. With all projects in Eastern Europe now completed, new projects will be launched this year, especially in Germany: the focus of investment activity will be on Munich, Frankfurt and Berlin. According to Bernhard H. Hansen, the CA Immo Management Board member responsible for development, “We are planning to commence construction in relation to new development schemes this year, with the main emphasis on big urban district development projects in Berlin and Munich. Pre-letting activity is highly positive, which confirms the exceptional quality of the projects and the high levels of acceptance on the market.”
Financing conditions in 2013
The availability of and conditions governing finance will remain critical issues for the real estate sector in 2013. The main source of financing with outside capital will still be via the banks, although some insurance companies are also likely to emerge as lenders. Long-term finance in particular is becoming more costly, a trend set to continue this year. For some considerable time, lower levels of lending and the rising cost of loan capital have combined to restrict and regulate the property investment market as well as project development business. According to Florian Nowotny, Chief Financial Officer at CA Immo, “Project financing has never been an obstacle for us provided key parameters are met, including a pre-letting rate and equity share of at least 40 %. We have very good access to bank financing, especially in Germany.”
The presentation of the press conference on January 17th you find here.
About CA Immo
CA Immo is one of the leading property companies of Central Europe and is listed in the leading ATX index of the Vienna Stock Exchange. The company’s core business is the lease and development of commercial proper-ties, principally in the office segment. CA Immo was founded in 1987 and its property assets today in Germany, Austria and Eastern Europe amount to about € 5.4 billion (as at 30.9.2012).