Adler Group S.A.: Resilient business underpinning continued growth

- Transactions to gain control over ADLER and Consus have been successfully completed bringing total assets to €14.6bn

- Significant improvement in operating and financial performance due to the consolidation of ADLER

- Strong performance of rental portfolio with like-for-like rental growth outside Berlin of +2.0% and a sustained low vacancy rate in top 13 locations of 2.5%

- EPRA NAV stood at €4.7bn equating to EPRA NAV per share of €45.27

- Synergies realized ahead of the plan and expecting to reach top end of the guidance of €63-72m for FY 2020

- Management confirming 2020 guidance, generating €280-300m of NRI and €105-125m of FFO1

Berlin, 30 November 2020 - At the end of June, Adler Group S.A. ("Adler Group") acquired control of Consus Real Estate AG ("Consus") by exercising its call option. We are pleased to present fully consolidated accounts of our third business pillar for the first time in the third quarter. Consus brings organic growth to the Group's portfolio benefitting from the embedded value of a first-class in-house developer. The new Group boasts a well-diversified pan-German residential portfolio with 70,741 units in operation, a fair value of its investment properties of €11.4bn and development pipeline of 10,000 apartments that will be constructed over the next 10 years.

Adler Group has achieved a number of major milestones. In July 2020, it strengthened its capital structure and significantly extended its debt maturity profile following the successful completion of a €457m rights issue with 98% take-up and the placement of a €400m five-year bond with a fixed coupon of 3.25%. An additional €400m bond with a 6-year maturity and 2.75% fixed coupon was placed on 9 November 2020 further extending our debt maturity. Secured financing of €677m was successfully refinanced at 2.1% cost of debt and 4.7 years maturity bringing the average cost of debt of the Group down to 2.98% as of today.

During the third quarter we also successfully divested c. 5,000 units above book value that further streamlined our portfolio: discontinued our presence in 36 cities and dispose of 12% embedded vacancy. The transaction is expected to close by the end of 2020.

The Annual General Meeting was held on 29th September 2020 as a virtual General Meeting. In addition to reconfirming the existing directors of the Company, the General Meeting approved the three new directors Thomas Zinnöcker, Claus Jorgensen and Thilo Schmidt.

Solid performance

Income from rental activities more than doubled for 9M 2020 to €266.1m from €107.5m for 9M 2019. This was primarily attributable to the first-time consolidation of ADLER at the beginning of April 2020 which was partially offset by the disposal of 5,900 units to Gewobag at the end of 2019. Net rental income increased to €203.2m for the 9M 2020 from €101.7m for 9M 2019. The first full year effects of the consolidation of ADLER show in our 2021 accounts.

EBITDA from rental activities increased significantly to €133.8m for 9M 2020 compared to €72.4m in the same period of the previous year. FFO 1 (from rental activities) increased to €74.7m for 9M 2020 compared to €50.4m for 9M 2019, corresponding to a FFO 1 per share of €1.06 (9M 2019: €1.14 per share).

Despite the Berlin rental freeze legislation ("Mietendeckel") coming into force on 23 February 2020, partially restricting like-for-like rental growth on c.50% of our rental portfolio, the portfolio performed strongly. Outside Berlin, we have been able to generate rental growth of 2.0% and are able to post a 1.4% like-for-like rental increase of our total rental portfolio in the first 9 months of 2020. The average in-place rent of the rental portfolio increased to €6.25 per sqm per month as of Q3 2020 (Q3 2019: €6.14). The vacancy rate for the top 13 cities for rental portfolio decreased to 2.5% as of Q3 2020, a significant decrease compared to 2.9% as of H1 2019.

Resilient asset class

As at 30 September 2020, the fair value of Adler Group's portfolio amounted to €11.4bn (FY 2019: €8.6bn). Despite the Berlin rent freeze legislation coming into force, valuations remained resilient with the like-for-like value uplift of +6.6% in the first nine months of 2020. The portfolio comprised 70,741 units (FY 2019: 75,721 units), with 67% of fair value located in the top 13 cities in Germany.

The EPRA Net Asset Value (EPRA NAV) of the portfolio amounted to €4,744m which represents €45.27 per share as of Q3 2020.

Already refinanced €1.9bn in 2020

On 29 July, the Adler Group successfully placed fixed rate senior unsecured bond for EUR 400 million with a 5-year maturity and a 3.25% fixed coupon to partly repay an outstanding bridge facility. The bond was placed with institutional investors across Europe, and the order book was heavily oversubscribed.

On 9 November 2020, the Adler Group places additional bond for EUR 400 million with a 6-year maturity and a 2.75% fixed coupon. The new issue was more than four times oversubscribed, with more than 150 investors participating. The proceeds will be used to repay short-term debt, thus further extending the Adler Group's average debt maturity to 3.2 years.

Streamlining of portfolio at premium to book value

During the third quarter we successfully divested c. 5,000 units, or 18% of our non-Top 13 cities units, at a premium to book value to a listed international real estate company. As we discontinue our presence in 36 cities and dispose of 12% embedded vacancy, we further streamline our portfolio and can increase cost efficiency. The transaction is expected to close by the end of 2020 leading to reduction in net rental income by €18.6m per year.

Planned synergies realised ahead of the plan

At the beginning of April 2020, Adler Group successfully closed its business combination with ADLER (current ownership of c. 95%), creating one of the largest listed real estate companies in Europe. At the end of June, Adler Group acquired control of Consus. Significant progress has been made in the integration of the three companies with the combined group ahead of schedule in realizing its synergies and expecting to reach top end of the €63-72m guidance for FY 2020. Financing synergies are currently already at €41m and a further increase to €50m is expected by the end of the year. Operating synergies currently add up to €17.5m and a further increase to €20.8m is expected at the year-end.

Guidance reiterated

Adler Group reconfirms its guidance for net rental income, FFO 1 and dividend for the financial year 2020 as per table below.

Earnings call
An Analyst & Investor webcast and conference call will be held today, 30 November 2020, at 3pm CET / 2pm GMT / 9am EDT.

PLEASE USE THIS LINK FOR THE WEBCAST: https://www.webcast-eqs.com/adler20201130

OR ONE OF THE FOLLOWING NUMBERS (LISTEN ONLY):

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Confirmation code: 2363659

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Contact
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