ADO Properties S.A. reports strong full year 2019 financial results with growth in rental income

- Sustained increase in income from rental activities to EUR 141.6m (+5.2%)

- Strong annual like-for-like rental growth of 5.0% and further reduced vacancy rate (2.7%)

- Fair value of portfolio at EUR 3.7 billion; average fair value per sqm increased to EUR 2,966

- EPRA Net Asset Value per share at EUR 65.80 as of 31 December 2019 (31 December 2018: EUR 55.05) - an increase of 19.5%

- Dividend of EUR 0.75 per share anticipated for the 2019 business year

- Business combination with ADLER Real Estate AG ("ADLER") and strategic cooperation agreement with Consus Real Estate AG ("Consus") will enhance scale and diversify portfolio across key German cities

- Mietendeckel expected to reduce FY20 FFO by EUR 1 million

- ADO Properties is proactively supporting tenants and employees throughout the Covid-19 pandemic and expects no material impact on FFO

Berlin, 31 March 2020 - ADO Properties S.A. ("ADO Properties") reports strong full year financial results for 2019 with significant growth in rental income and EPRA Net Asset Value per share of 5.2% and 19.5%, respectively.

Thierry Beaudemoulin, CEO of ADO Properties said: "The outbreak of Covid-19 has challenged governments and societies around the world. At ADO Properties, our foremost concern is for the safety and well-being of our employees and tenants. To this end, in line with government guidelines we have encouraged all employees to work remotely and are interacting with tenants digitally as appropriate. We are in constant dialogue with local authorities to discuss how we can best use our central role in society to ensure tenants are kept aware of relevant policy changes, and we will continue to prioritise their safety throughout the pandemic.

For ADO Properties, 2019 was a transformative year. We delivered another strong set of financial results with annual income from rental activities increasing by 5.2% to EUR 141.6 million off the back of 5.0% like-for-like rental growth for the year. We have also taken action to further optimize our portfolio, through the disposal of 5,900 units to Gewobag.

Through the business combination with ADLER and the strategic cooperation with Consus, we will progress from a Berlin-focused property company into one of the largest residential real estate groups in Europe, benefitting from greater scale and enhanced growth prospects. By diversifying our portfolio through the combination, we are de-risking from a regulatory and operational perspective while also generating easily attainable synergies that will create significant value for shareholders. Going forward, we will remain committed to delivering consistent value to all stakeholders as we complete the business combination and realize the substantial potential of the combined group."

Key operational figures show sustained growth

The income from rental activities of ADO Properties increased by 5.2% in 2019 to EUR 141.6 million (2018: EUR 134.6 million) due to strong like-for-like rental growth of 5.0% as well as further reduced vacancy. The net rental income increased to EUR 134.1 million (2018: EUR 128.0 million). The company predicts, following the combination with ADLER, to generate net rental income in the range of EUR 280-300 million in FY2020.

ADO Properties' EBITDA from rental activities fell by 2.5% to EUR 92 million (2018: EUR 93.8 million) in 2019. FFO 1 (from rental activities) decreased by 5.4% to EUR 63.2 million (2018: EUR 66.8 million) equivalent to an FFO 1 of EUR 1.43 per share (2018: EUR 1.51 per share). Combined FFO 1 with ADLER is forecasted to register within the range of EUR 105 million and EUR 125 million in FY2020.

The average in-place rent of the residential portfolio increased to EUR 7.39 per sqm per month at the end of the year 2019 (31 December 2018: EUR 6.73). The vacancy rate for the residential portfolio decreased to 2.7% as of 31 December 2019 due to active lettings, sales and modernization activities (31 December 2018: 3.2%).

Ongoing portfolio optimization

As at 31 December 2019, the fair value of ADO Properties' portfolio stood at EUR 3,664 million (31 December 2018: EUR 4,092 million). It comprised 17,637 units at the end of the reporting period, of which are 16,255 residential units (31 December 2018: 22,238 residential units). The average fair value per sqm of the residential portfolio increased to EUR 2,966 (31 December 2018: EUR 2,488). The EPRA Net Asset Value of the portfolio amounted to EUR 2.9 billion or EUR 65.80 per share as of 31 December 2019 (31 December 2018: EUR 55.05).

Disciplined financial structure

ADO Properties has an LTV of 27% by the end of the reporting period and an average interest rate of 1.6%. The average maturity of the outstanding debts is approximately 4.2 years. Almost all loans have fixed interest rates or are hedged. ADO Properties will continue with this sustainable financing strategy and targets an LTV of maximum 50%.


Transformational business combination with ADLER and Consus

On 15 December 2019, ADO Properties announced its business combination with ADLER and a strategic cooperation agreement with Consus to create one of the largest listed real estate companies in Europe. As announced on 30 March, ADO Properties' offer received strong support from ADLER shareholders with 91.93% of investors in the company tendering their shares. Together with the treasury shares held by ADLER the offer has been accepted by 94.15% of ADLER's share capital. The business combination with ADLER brings together two high-quality and complimentary portfolios diversified across key German cities with attractive growth potential. The combined company will have a larger free float market capitalization and will be a potential MDAX candidate in near term, while investors will benefit from enhanced liquidity. Through its strategic partnership with Consus, the company will gain access to a market leading development platform with a pipeline of over 15,000 residential rental units that will support the combined group's efforts to reduce the current housing imbalance in Germany. In anticipation of the new group structure, Maximilian Rienecker, Co-CEO of ADLER, was appointed Co-CEO of ADO Properties by ADO Properties' Board of Directors on 30 March 2020. Mr. Rienecker's appointment becomes effective on 9 April 2020.

Mietendeckel

The Mietendeckel law came into force in Berlin on 23 February 2020, effectively freezing rents as they stood on 18 June 2019 for a period of five years. ADO Properties continues to believe that the law is both unconstitutional and unlikely to address the current housing shortage in Germany. As a combined entity with ADLER, EUR 119 million, or 35%, of the company's total rental income is exposed to the regulation and it is expected Mietendeckel will reduce FY2020 FFO by EUR 1 million and FY2021 FFO by EUR 9 million.

Negligible impact from Covid-19

ADO Properties is closely monitoring the spread of Covid-19 and is committed to ensuring the safety and health of all employees and tenants. ADO Properties benefits from a reliable and high-quality stream of rental income and is confident that the pandemic will not materially impact FFO for 2020. ADO Properties has robust financing structures in place and a strong liquidity position with EUR 500 million of directly accessible cash on hand. As such, ADO Properties does not envisage that the pandemic will have a significant financial impact on the company and expects rental growth to continue outside of Berlin in the year ahead.

Earnings call

We will be hosting a conference call today, 31 March 2020, at 3pm CET / 2pm GMT / 9am EDT. For dial in details and link to the webcast please follow the below link:

https://www.ado.properties/websites/ado/English/7999/analyst-conference-call.html

The complete annual report of ADO Properties for the financial year 2019 is available on the company's website (https://www.ado.properties/websites/ado/English/4000/publications.html).