Peach Property Group AG: Highest operating result in Group’s history

Peach Property Group AG, a real estate investor with an investment focus on residential rental properties in Germany, successfully strengthened its operating profitability and financial profile in the 2022 financial year, based on preliminary, unaudited figures. The result is achieved despite a fundamentally changed market environment following a turnaround in interest rates. Funds from Operations (FFO I) of between approx. EUR 18 million and EUR 19 million marks the highest operating result in the Group’s history. The year-on-year increase of approx. 70 percent results mainly from the integration of acquired portfolios in recent years, as well as increased efficiency in management.

Rental income increased significantly to approx. EUR 116 million due to a strong performance in new letting and an accelerated increase in market rents across key Peach locations. Rental income achieved is at the upper end of our guidance and underlines the value growth potential of the portfolio. Like-for-like rental growth is at approx. 5 percent.

Result before taxes excluding foreign exchange losses is slightly positive. Considering impacts from foreign exchange losses, the result before taxes is expected to be at EUR -20 million.

Market value of real estate portfolio

The total market value of our real estate portfolio of EUR 2.6 billion as of December 31, 2022, remained virtually unchanged from the market value at the end of 2021. Following a valuation gain in the first half-year of 2022, a valuation loss during the second half-year of 2022 results in a full-year accumulated valuation loss of approx. EUR 13 million.

The net tangible asset value (NTA) according to EPRA BPRs is expected to be approx. EUR 63 per share, compared to EUR 66 per share at the end of 2021. When 3.8 million new shares will be issued with the conversion of the mandatory convertible bond announced in December 2022, the EPRA NTA per share will be approx. EUR 55, pro forma. Peach Property Group AG (PEAN; ISIN CH0118530366) shares are thus currently trading at approx. 65 percent below the pro forma EPRA NTA per share.

Improvement of financial profile

Peach Property Group used the proceeds from the issue of the mandatory convertible bond announced in December in full to repay debt. Together with the proceeds of a secured financing completed in August 2022, as well as existing liquidity, the Company repaid a EUR bond maturing in February 2023 ahead of maturity on January 26, 2023. The significantly strengthened equity base, taking into account the mandatory convertible bond, results in a loan-to-value ratio (LTV) of approx. 52 percent, pro forma. As the mandatory convertible bond was only issued in January 2023, the LTV as of December 31, 2022, is still expected to be at approx. 54 percent.

Through these and further measures, Peach Property Group is aligning its financial profile with the changing interest rate environment and believes it is well positioned for the coming years. This is demonstrated not least by the fact that no further substantial refinancing is due before the end of 2025.

First ESG risk rating by Sustainalytics

In reporting period, Peach Property Group intensified its sustainability efforts and achieved important milestones in its sustainability strategy. For the first time, the Company was subjected to an ESG rating. The ESG rating firm Sustainalytics rated Peach Property Group in the risk category "low", placing the Company in the top four percent of all the 15,000 companies assessed. In line with its own decarbonization goals, the energy modernization of the Peach portfolio was further advanced. Peach Property Group is also stepping up its sustainability efforts in the current financial year and will for the first time publish a separate sustainability report according to Global Reporting Standards (GRI) in spring 2023.

Start of construction works at development project Peninsula

In addition to the operative progress in the German portfolio of Peach Property Group, the Company achieved important milestones with its last remaining development project “Peninsula Wädenswil” in Wädenswil, Switzerland. Following the start of the demolition works in the second quarter of 2022, the official breaking ground ceremony for the project on Lake Zurich took place in December 2022. Since notarizations began in July 2022, around 60 percent of the total of 56 planned residential units worth approx. CHF 77 million have already been sold or reserved.

Positive operative development expected for 2023

Peach Property Group expects a positive operational development for the current, 2023 financial year. As a result of the noticeable decline in new construction activity in Germany following the steep rise in construction and financing costs, the Company anticipates a medium- to long-term surplus in demand for affordable housing and an accelerated increase in market rents. Peach Property Group already noticed stronger growth in market rents in key Peach locations than the German national average for the completed 2022 financial year.

Thomas Wolfensberger, CEO of Peach Property Group AG: “The real estate industry has entered a new cycle in 2022 with a fundamentally changed interest rate and capital market environment. But even under these market conditions, the Peach Property Group’s operating performance remains strong. The past fiscal year will be one of the most successful in the Company's history in terms of operating performance. We achieved a new record level in new letting, and vacancy rates were significantly reduced. The noticeable decline in new construction activity in Germany will have a positive medium to long-term impact on demand in the market for existing properties and consequently on our rental income performance. Given our very affordable rents compared to the market, our real estate portfolio offers significant value growth potential. At the same time, we have significantly strengthened our capital structure and adapted it to the new environment and are now focusing on the full earning power of our portfolio and on optimizing our cost structure. The subscription of the mandatory convertible bond at year-end 2022 was a strong commitment by our anchor shareholders to Peach Property Group and the potential of our business model. Together with the operational progress, this forms a solid foundation for 2023. We are therefore optimistic about the new fiscal year.”

Wolfensberger continued: “Despite the increase in rental income, our focus remains on providing affordable housing. We want to continue to stand by our tenants in these challenging times. Because of hedging transactions concluded at an early stage, we were able to reduce the risks arising from increased energy and electricity costs resulting from Russia's war of aggression and could avoid an increase in incidental costs for many of our tenants. We will continue to invest in the modernization of our real estate portfolio and pursue our decarbonization course over the next few years despite a declining investment budget. This not only reduces the environmental impact, but it also helps our tenants in the context of current developments on the energy markets and it creates sustainable value."

Thorsten Arsan, CFO of Peach Property Group AG, said: "Owing to the successful an efficient integration of the completed acquisitions, we were able to increase the FFO I significantly. We also succeeded in successfully strengthening the financial profile in the past financial year and further reducing the Company's leverage ratio in 2022. We will continue to focus on optimizing costs and the balance sheet.”