InCity's on target in the first half of 2022 and improves group result

by   CIJ News iDesk III
2022-09-15   09:21
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According to its semi-annual report published today, InCity Immobilien AG (“InCity AG”) generated a net income of EUR -430 k at Group level (same period of the prior year: EUR -802 k) and a net income of EUR 21 k at single-entity annual financial statement level (same period of the prior year: EUR 424 k) in the first six months of fiscal year 2022. The improved Group result is mainly attributable to the increased EBITDA and lower interest expenses. The decrease at single-entity annual financial statement level is primarily due to the fact that the current reporting period does not contain any positive earnings contributions from the sale of a property, as such contributions had an effect on the result of the same period of the prior year, in the form of a sale of 15% of the shares in a property company holding a portfolio property. "In the first six months of fiscal year 2022, revenue and results developed according to plan, both in the InCity Group and at InCity Immobilien AG. At the same time, our portfolio properties continue to have a very high occupancy rate. Our own project development activities, which we resumed in the past year, are also on target," says CFO Helge H. Hehl.

As of 30 June 2022, the InCity Group’s property portfolio comprised seven properties in total, five residential and commercial buildings and two office properties in Berlin and Frankfurt am Main. This means that the number of properties in the property portfolio has remained unchanged since the balance sheet date on 31 December 2021. The properties’ HGB carrying amount totalled EUR 151 m as of the reporting date on 30 June 2022. The decrease compared to 31 December 2021 (EUR 152 m) is due to the regular depreciation and amortisation in the course of accounting according to the German Commercial Code (HGB), which does not reflect the current development of market values.

Successful start of expansion of own project development activities and move of registered office to Berlin-Schönefeld

In addition to ongoing property and facility management for the property portfolio, the resumption of own project management and development activities in the prior year represented another focus of InCity AG’s business activities in the first half of 2022. The current priority is the construction of a new office building in Berlin-Schönefeld, in the immediate vicinity of the Berlin-Brandenburg (BER) airport, which InCity was commissioned with as a general contractor in the past year. However, the earnings contribution according to HGB accounting, i.e. the margin as a general contractor, will not be recorded until the new office building is completed – in 2023 – in the form of an initial partial statement of account. The further settlement of accounts will take place successively in parallel to ongoing rentals and the according expansion of the rented areas.

As the property portfolio already showed a trend towards concentrating in Berlin in recent years and six of seven properties held by InCity are currently located in the German federal capital, the resumption of own project development activities was coupled with another move of InCity’s business activities to Berlin-Brandenburg. In view of the above, the ordinary Annual General Meeting of InCity Immobilien AG resolved on 31 August 2022, based on a proposal by the Management Board, to move the registered office of the company and the registered offices of many of its subsidiaries from Frankfurt am Main to Berlin-Schönefeld.

"The majority of InCity staff is already working at the Schönefeld location. In addition, the office property we are currently constructing as a general contractor is part of a neighbourhood development for a business park, which opens up the prospect of further contracts for us during the realisation of the next construction phases. This would not only lead to further earnings potential, but would also stabilise our activities at this location," says Michael Freund, CEO of InCity AG. "With this in mind, moving the company’s registered office to Schönefeld seemed a logical step to us, and we are convinced that this will allow us to continue optimising in-house processes and leverage synergy effects in the coming years."

InCity property portfolio continues to prove its revenue and value stability

Despite the continuing COVID-19 pandemic and the increasing challenges due to a market environment characterised by rising inflation, higher interest and economic upheaval as a consequence of the war in Ukraine, the property portfolio of the InCity Group continued to prove its resilience in the first half of 2022 and generated stable revenue. The very good letting situation in nearly all the portfolio properties was therefore maintained, and the rate of payment was unchanged at approximately 99%. A slight, temporary increase in vacancies compared to the same period of the prior year primarily resulted from the expected expiry of a lease agreement with an existing tenant in the property located at “Stiftstrasse 18-20” in Frankfurt at the end of July 2022, while various scenarios for further use or exploitation of the property are currently being elaborated. Regarding the penthouse and residential units still to be expanded in the Berlin properties Jägerstrasse 34/35 and Jägerstrasse 54/55 as well as the three flats at Leipziger Platz, also in Berlin, InCity AG aims to complete some of these residential units in the second half of 2022 and the remainder by the end of 2023.

"The continual value and revenue stability of our property portfolio, even in the face of an increasingly challenging market environment, strengthens us in our conviction to consistently follow the same criteria as before in the further expansion of our portfolio. We currently see no alternatives other than maintaining our high-quality core properties with tenants with strong credit ratings in locations that are attractive in the long term," emphasises CEO Michael Freund.

Continuously high equity ratio and slight NAV increase

In the first half of 2022, EBITDA at the level of the InCity Group amounted to approximately EUR 1.4 m (same period of the prior year: approximately EUR 1.2 m). The slight increase compared to the first half of 2021 was mainly due to lower operating costs.

InCity Immobilien AG’s equity ratio was around 91.3% as of the reporting date on 30 June 2022, at the same high level as on 31 December 2021. At Group level, the equity ratio was around 49.2% as of 30 June 2022, also nearly unchanged from end of the prior fiscal year (31 December 2021: 50.1%). The net asset value (NAV) of InCity AG’s shares increased slightly to EUR 1.89 per share as of 30 June 2022 (31 December 2021: EUR 1.88 per share).

In view of the business development in the first half of 2022, the Management Board confirms the forecast which it issued in April 2022 along with the publication of the annual report for the fiscal year 2021.

Photo: CFO Helge H. Hehl - InCity Immobilien