PRESS RELEASE

TAG Immobilien AG confirms based on continuous good operating results all forecasts for FY 2023; stable FFO I performance expected for the 2024 financial year; dividend suspension to be proposed to the AGM for FY 2023 as well 

• FFO I at EUR 132.6m in 9M 2023; down 8.7% from previous year due to higher costs of financing; by contrast, EBITDA (adjusted) rental business increases by 2.4%
• FFO II up 5.9% year-on-year to EUR 164.8m due to higher sales results in Poland
• Around 2,300 rental apartments have now been completed in Poland, with a further 1,050 rental apartments under construction; continued strong demand leads to high like-for-like rental growth of 12.4% and low vacancy rate of 3.7%
• Number of apartments sold in Poland in 9M 2023 at approx. 2,900 compared to approx. 1,700 apartments in the previous year (+70%); significant price increases in the Polish property market
• Continued disposals of residential units in Germany: c. 1,300 units sold in the nine-month period ending 30 September 2023, net cash proceeds of EUR 181.5m realised

• Dividend suspension proposed for FY 2023 to further strengthen capital base and to finance investments in Poland with high returns
• Initial guidance for FY 2024: FFO I of EUR 170-174m, unchanged compared to 2023; FFO II of EUR 217-223m (approx. -9% vs 2023); all forecasts for FY 2023 confirmed

Hamburg, 13 November 2023

Positive operating business performance in the first nine months of 2023; residential property sales in Germany successfully continued

As in the two previous quarters, TAG Immobilien AG (TAG) continued its positive operating performance in Q3 2023. FFO I, which includes the Group’s entire rental business in Germany and Poland, amounted to EUR 43.5m in Q3 2023 and EUR 132.6m in the nine-month period ended 30 September 2023. Based on a comparable portfolio (like-for-like), rental growth, including the effects of vacancy reduction, of 2.2% (financial year 2022: 2.7%) p.a. was achieved in Germany. Vacancy across the Group’s residential units in Germany fell to 4.6% in the third quarter of 2023, compared to 4.7% in the first two quarters of the year; in October 2023, the vacancy rate fell further to 4.4%.

In Poland, TAG delivered a successful performance in the reporting period. By the end of September 2023, the rental portfolio comprised around 2,300 apartments, with another c. 1,050 apartments to be completed by mid-2024. The medium-term aim is to own a portfolio of more than 10,000 rental apartments in the next five years. Vacancy across the whole portfolio was 3.7% at the reporting date, down from 35.8% at the start of the year, and only 1.5% for the residential units. Like-for-like rental growth for units that have been on the market for more than one year was 12.4% p.a. at 30 September 2023 (FY 2022: 22.0%).

In the first nine months of the year, 2,877 apartments were sold in Poland. This significantly exceeds the level of the same period of the previous year (1,674 apartments, with the pro forma inclusion of ROBYG S.A. since the beginning of 2022). Significantly improved financing conditions for buyers and the continuing high influx of people from Ukraine are also causing the prices of residential units in Poland to rise considerably. Adjusted net income from sales in Poland, which is a key component of FFO II alongside FFO I, came to EUR 28.0m for the first nine months of 2023, compared to EUR 11.4m in the same period of the previous year. A strong increase in earnings in Poland is expected in Q4 2023, as the majority of apartment handovers scheduled for 2023 will take place in the final weeks of the year.

From January to September 2023, disposals for a total of 1,313 units, including a larger commercial property, were signed in Germany, of which 262 apartments related to Q3 2023. The cumulative sales price amounts to EUR 205.4m, which corresponds to an average gross initial yield of 4.3%. The expected net cash proceeds, after repayment of bank loans, amounts to EUR 181.5m, of which EUR 38.4m relates to Q3 2023. Some of the disposals already closed in the first nine months of 2023, albeit after the reporting date in October 2023 with regard to net cash proceeds totalling EUR 91.2m.

Claudia Hoyer, COO and Co-CEO of TAG, commented on the results of the first nine months: “In a challenging market environment, we continued our residential property sales in Germany in the third quarter of 2023 and have now achieved the target we set in July 2022 of generating at least EUR 250m in net cash proceeds starting from this point in time. So we have successfully executed our disposal programme and can now act even more selectively. In conjunction with the high rental demand for our German portfolio and the strong growth of our letting and sales activities in Poland, TAG’s operations remain on an excellent course.”

Extensive repayment of unsecured financial debt; LTV unchanged compared to the beginning of the year; interest coverage ratio and ratio of net financial debt to EBITDA (adjusted) remain at a strong level

Since 1 July 2022, significant repayments of unsecured financial debt totalling EUR 965m have been made through the date of the interim statement published today. This includes corporate bonds, promissory notes and, in particular, the bridge financing for the purchase of the Polish company ROBYG S.A., of which EUR 650m was utilised at its peak last year and EUR 175m as at 30 June 2023, and which has been repaid in full in October 2023.

Despite the devaluations already recognised in Germany in the first half of the year, the loan-to-value (LTV) ratio remained almost unchanged at 46.9% at 30 September 2023 as compared to 31 December 2022 (46.7%). Besides the good operating results and the suspension of the dividend payment for the 2022 financial year, this was due in particular to the residential property sales realised in Germany. Although the results of the next portfolio valuation, which will take place on 31 December 2023, are not yet available, the continued disposals in Germany and the seasonally strong fourth-quarter sales results in Poland mean that the loan-to-value ratio is expected to remain largely stable or increases only slightly at year-end 2023.

Other financial metrics such as the interest coverage ratio (ICR) and the net financial debt/EBITDA (adjusted) ratio remain strong at 6.0x and 10.0x (4.7x and 13.5x excluding the Polish sales business).

Dividend suspension for FY 2023 to further strengthen capital base and to finance investments in Poland with high returns

As in the previous year, TAG’s Management Board and Supervisory Board plan not to propose a dividend payment for the 2023 financial year at the next Annual General Meeting. The liquidity retained in the company as a result of this will be used to further strengthen the capital base and to finance new projects in Poland with high returns.

Martin Thiel, CFO and Co-CEO of TAG, explains TAG’s financing strategy: “In the past few quarters, we have resolutely realised our goals on the financing side: scheduled repayment, prolongation, or refinancing of the maturities of all secured financing, and systematic repayment of unsecured financial debt. One milestone was the complete repayment of the ROBYG bridge financing. Even though no significant maturities are due in the 2024 financial year, particularly in the area of unsecured financing, we still believe it makes sense to continue to act conservatively. We can use the liquidity retained from the dividend waiver to reduce debt, as well as to further expand our Polish sales and rental portfolio with high returns. TAG’s further strengthened capital structure, with an LTV of 46.9% that is almost unchanged compared to FY 2022, bolsters our independence from the still volatile capital and transaction markets. This allows us to look ahead to the 2024 financial year with confidence despite an environment that is as challenging as ever.”

As soon as the capital and transaction markets have normalised again, TAG intends to resume dividend payments. A decision on a proposal for the dividend payment for FY 2024 will not be made until the end of next year at the earliest and will depend on the market conditions prevailing at that time.

New forecasts for FY 2024

All forecasts for the current 2023 financial year are confirmed. Forecasts for FY 2024 are issued for the first time as follows:

• FFO I: EUR 170-174m or EUR 0.98 per share (guidance 2023: EUR 170-174m or EUR 0.98 per share), approx. +/-0%
• FFO II: EUR 217-223m or EUR 1.25 per share (guidance 2023: EUR 240-246m or EUR 1.38 per share), approx. -9%

The following figures are forecasts for the Group’s operating results:

• EBITDA (adjusted) Rental business Germany: EUR 218-222m (guidance 2023: EUR 223-227m), c. -2%
• EBITDA (adjusted) Rental business Poland: EUR 11-13m (guidance 2023:
  EUR 6-8m), c. +57%
• EBITDA (adjusted) Rental business Total: EUR 230-234m (guidance 2023:
  EUR 230-234m), c. +/-0%
• EBITDA (adjusted) Sales business Poland: EUR 64-70m (guidance 2023:
  EUR 100-106m), c. -35%
• Adjusted sales result Poland: EUR 46-52m (guidance 2023: EUR 72-78m), c. -35%

FFO I is expected to remain constant in 2024 compared to 2023. A slightly lower operating result from the German rental business, mainly due to the disposal of residential portfolios sold in the financial year and the previous year, can be offset by rising operating results from the growing rental portfolio in Poland. While a reduction in interest expenses is expected as a result of the repayment of the ROBYG bridge financing, this will be offset by expected higher income taxes (mainly due to further utilisation of tax loss carry-forwards in Germany), which will reduce earnings. The FFO I forecast is based on the current real estate portfolio existing in Germany and therefore does not take any further acquisitions or disposals into account.

The expected decline in FFO II is due to the lower sales result forecast in Poland. Results from the sale of apartments are not recognised in the p&l until the units are handed over, even if the inflow of liquidity occurs earlier as construction progresses. As the majority of sales are made before construction begins or during the construction phase, which lasts c. 18 months on average, this result essentially reflects the weaker sales figures from 2022, which was impacted by sharply rising mortgage interest rates in Poland. The significantly higher sales figures for the current 2023 financial year will lead to increasing results in the p&l in the financial years from 2025 onwards. Book profits or book losses from the sale of residential units in Germany were not assumed for the purpose of the FFO II forecast.

Further details on the third quarter of 2023 can be found in the interim statement published today and in a 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

Fax +49 (0) 40 380 32 388

[email protected]