Peach Property Group marks best ever half-year result in the Group’s history
- Earnings before taxes of CHF 131.4 million marks best ever half-year result in the Group’s history
- Real estate portfolio expanded by approx. 4 300 residential units to approx. 27 500 residential units
- Rental income increased from CHF 27.4 million to CHF 50.2 million
- Market value of real estate portfolio increased to CHF 2.6 billion (FY 2020: CHF 2.1 billion)
- Loan-to-value ratio (LTV) further decreased to 54.5 percent
Peach Property Group AG, a real estate company focussing on investing and managing residential rental properties in Germany, achieved in the current 2021 financial year its best ever half-year result in its over 20-year history.
Peach Property Group generated earnings before taxes of CHF 131.4 million and after-tax profits of CHF 110.1 million. This represents basic earnings per share (EPS) of CHF 8.14. Diluted earnings per share amounts to CHF 7.96. Earnings before taxes in the comparative half-year of 2020 amounted to CHF 17.1 million. The operating margin improved from 74.9 percent for the year 2020, to 76.5 percent for the half-year 2021.
Peach Property Group’s funds from operations I (FFO I) amounted to CHF 5.1 million in the first half-year of 2021. For the full financial year 2021, the Group forecasts an FFO I of between CHF 14 million and CHF 18 million, compared to CHF 1.7 million (adjusted for extraordinary tax effects) in the previous financial year. Net rental income totaled CHF 50.2 million in the first half-year of 2021 compared to CHF 27.4 million in the comparative half-year of 2020. For the full financial year 2021, the Group’s management forecasts net rental income of between CHF 108 million and CHF 112 million, compared to CHF 54.7 million in the previous financial year.
Corporate strategy leads to positive revaluation result
Consistent with its continued growth strategy, Peach expanded its real estate portfolio in the first half-year of 2021 through the acquisition of approx. 4 300 residential units in Germany. This acquisition increased the total portfolio to approx. 27 500 residential units and a total market value of CHF 2.6 billion compared to CHF 2.1 billion at the end of 2020.
In addition to the benefits from the economies of scale driven by the acquisition of new units, the positive earnings development in 2020 are the result of positive revaluations across the Group´s portfolio. The like-for-like increase of the rental income and reductions in vacancy the portfolio supported a valuation increase of CHF 62.4 million. Furthermore, the Group achieved a valuation gain from acquisitions of CHF 63.8 million. Peach benefited from its investment strategy which focuses on Tier II cities located in the vicinity of German metropoles, where significant further valuation growth potential exists.
The value of the net tangible assets (NTA) of Peach Property Group AG, according to EPRA standards, totals CHF 63.60 per share in the first half-year of 2021, compared to CHF 57.29 per share at the end of 2020. The net reinstatement value (NRV) amounted to CHF 74.55 per share compared to CHF 67.92 per share at the end of 2020.
Loan-to-value ratio and average interest rate reduced
In June 2021, in parallel with the acquisition, Peach Property Group successfully issued a 2.5 percent mandatory convertible bond of CHF 180 million, which further strengthens its equity base.
Peach Property Group reduced its loan-to-value ratio (LTV) significantly, from 57.5 percent at the end of 2020, to 54.5 percent as of June 30, 2021. The interest coverage ratio (ICR) improved from 1.24 times at the end of 2020 to 1.4 times for the first half-year of 2021. The average interest rate was reduced to 2.7 percent by June 30, 2021, compared to 2.9 percent at the end of 2020. Fitch and Moody’s currently evaluate the company with a rating of BB- and Ba3 respectively, while S&P currently evaluates the company with a rating of B+, with positive outlook.
Thorsten Arsan, new CFO of Peach Property Group AG: “We continue to see significant upside potential in our portfolio, and we are aiming to achieve an LTV below 50 percent in the medium term, after having achieved our previous goal of less than 55 percent. Following on from our increasing operational earnings power, we should be able to continue the reduction of our financing cost. In this regard, we already see substantial potential to significantly reduce future interest expenses through the upcoming refinancing of our outstanding, unsecured corporate bonds.”
Rising rental income, lower vacancy and improved operations
In the first half of 2021, Peach Property Group achieved a like-for-like rental income increase from its residential portfolio of 4.4 percent. Average actual rental income amounted to CHF 5.68 per month and square meter in the first half-year of 2021, compared to CHF 5.44 (currency-adjusted) in the comparative half-year. As of the reporting date, the average target residential rental income for the total portfolio was CHF 6.11 per month and square meter. Compared to the average market rental income for comparable assets in Germany of CHF 7.09, the upside potential equates to 16 percent. Concurrently, the number of vacant residential units was reduced from 7.9 percent at the end of 2020 to 7.5 percent at the reporting date.
The Group currently operates twelve onsite Peach Points available to tenants across Germany. The overall time used for handling and processing tenant-related issues, including damage reports, was further improved from an average of approx. 7 days (183 hours) in 2020 to an average of approx. 5 days (138 hours) in the first half 2021. This is an improvement of 24.5 percent that further supports the notion of tenant satisfaction.
Dr. Thomas Wolfensberger, CEO of Peach Property Group AG: “Our company is on an excellent path and has, in an impressive manner, improved its economic stability whilst realizing its growth ambitions in parallel. Our strategic growth drivers are sound and dynamic. The further expansion of our portfolio located in Tier II cities through assets with significant upside potential, as well as decreasing financial expenses through effective capital management, are important levers. Furthermore, the upside potential of rental income and therefore our operational earnings power, as well as our highly efficient management coupled with a focus on being close to our tenants, demonstrates the functionality of our corporate strategy. We will continue on this path.”
Wolfensberger added: “We are proud of our company and all its employees. However, our tenants and their trust in Peach Property Group is our highest priority. We will continue to do everything we can for them, every day, and with our full commitment.”
Improved operating efficiency
During the period, personnel expenses and other operating expenses decreased relative to rental income due to the portfolio growth. For personnel expenses and other operating expenses, the ratio decreased from 21.1 percent and 11.1 percent in the first half of 2020, to 16.9 percent and 8.2 percent in the first half of 2021, respectively. Peach Property Group currently employs around 160 employees. Employees are distributed across Switzerland, with group headquarters in Zurich, and Germany, with the German head office in Cologne, a service center in Berlin, and now twelve Peach Points.
Peach Property Group considers itself well positioned to be highly efficient, enabled by its use of the latest administrative methods and technologies, such as the SAP S/4 HANA platform, which is suited for the highly specific requirements of a real estate company, such as lease contract management. Through the further automation of processes, as well as the planned use of artificial intelligence in standard processes, administrative expenses are to be reduced further.
No exposure to damages caused by weather conditions
The severe weather conditions and flooding in the German federal states of North Rhine-Westphalia and Rhineland-Palatine during July 2021 had little impact on Peach Property Group. Except for properties in Eschweiler, and two further individual properties in the Ruhr region, the group did not incur significant damage. Based on initial evaluations, existing insurance will fully cover any resulting damages.