Branicks Group AG: Operationally successful in a challenging 2023 financial year
Press release
Branicks Group AG: Operationally successful in a challenging 2023 financial year
- Targets for 2023 largely achieved
- Financing secured
- Many new lettings continue at good conditions
- New renewables asset class
Branicks Group AG (Branicks), ISIN: DE000A1X3XX4, today published its annual and consolidated financial statements for 2023 with an unqualified audit opinion. In a challenging environment, the 2023 financial year was concluded operationally successful and largely in line with the forecast.
The operational letting business again developed very positively in both major asset classes. By contrast, the recovery in the transaction business, which was originally expected in the market, did not materialize and was flat throughout the year.
Assets under management as the sum of the existing portfolio and assets managed by Branicks as part of the Institutional Business amounted to EUR 13.2 billion at the end of the financial year (2022: EUR 14.7 billion). The decline is the result of sales and a valuation effect of -6.0%.
Branicks reorganized its financial structures in 2023 and in the first months of the 2024 financial year, putting its financing on a reliable footing for the coming years. The halving of the bridge financing for the acquisition of VIB Vermögen AG and the scheduled repayment of the 2018/2023 corporate bond contributed to this in the 2023 reporting year. At the end of the first quarter of 2024, Branicks reached agreements with its creditors on the repayment of a further partial amount of EUR 40 million of the VIB bridge financing and on a restructuring plan based on corporate planning audited by independent experts regarding the timing of the repayment of promissory note loans originally due in 2024 and the remaining VIB bridge financing. This has paved the way for a sustainable, financially stable future for the company.
CEO Sonja Wärntges comments: "Despite all the adversities of the real estate market, we have made it through 2023 successfully in operational terms. We are able to attract more and more tenants to our assets, and on good terms. We are continuing to invest in quality and sustainability. On this basis, we have set the course to be at the forefront when the sector recovers."
The Branicks Management Board had already announced in January 2024 that it would propose to the Supervisory Board and Management Board that no dividend be paid for the 2023 financial year due to the priority of stabilizing the company's financial position.
Key figures and results for the 2023 financial year
Given the challenging conditions on the real estate market, the ongoing phase of high interest rates on the financial markets and the tense global situation, Branicks Group AG closed the 2023 financial year with an FFO result (after minority interests, before taxes) of EUR 51.9 million, in line with the forecast, which had been revised in July 2023 to EUR 50-55 million (previous year: EUR 114.2 million). EUR 43.5 million was generated in the Commercial Portfolio and EUR 8.4 million in the Institutional Business. The decline in FFO was mainly due to reduced property management income and higher net interest expenses. FFO II (after minority interests, before taxes), adjusted for the effects of disposals, amounted to EUR 59.4 million.
Letting performance up 19% on the previous year - like-for-like rental growth of 5.4%
In 2023, the letting teams signed a total of 446,600 sqm, around 19% more space (previous year: 374,900 sqm) and annualized rental income of EUR 55.0 million, an increase of 12% (previous year: EUR 48.9 million). Of this, 67.1% (EUR 36.9 million) was attributable to the Institutional Business and 32.9% (EUR 18.1 million) to the Commercial Portfolio. Thanks to the outstanding work of the letting teams, annualized rental income from the Commercial Portfolio increased like-for-like by 2.7% to EUR 176.0 million as at the reporting date (previous year: EUR 171.4 million), while like-for-like rental income in the Institutional Business rose by 6.6% to EUR 435.5 million (previous year: EUR 408.5 million). Overall, like-for-like growth in rental income thus amounted to 5.4% (previous year: +5.8%). As announced, the Group's operating costs were noticeably reduced in the reporting year, which is reflected in the -16% decline in OPEX (operating expenses).
Low transaction volume due to market environment
The difficult market conditions in 2023, caused by high inflation, high interest rates and volatile energy prices as well as macroeconomic and geopolitical uncertainties, led to a persistently flat transaction volume throughout the year. Despite the difficult market environment, we achieved a total transaction volume of EUR 377 million (previous year with acquisition of VIB EUR 3.3 billion, without VIB EUR 1.1 billion), resulting from acquisitions with a volume of EUR 90 million exclusively in the Institutional Business and notarized sales of EUR 287 million, mainly from our own portfolio (EUR 223 million).
Significant increase in the green building quota and solid development of long-term calculable revenues in the Commercial Portfolio
The key operating figures for the Commercial Portfolio reflect the unchanged robust letting market in 2023 in a year-on-year comparison. In the financial year, gross rental income increased by around 7% to EUR 188.3 million (previous year: EUR 176.0 million) due to the first-time inclusion of VIB for a full 12 months and excellent letting work. Net rental income rose by around 8% to EUR 164.6 million in the 2023 financial year (previous year: EUR 152.5 million). The EPRA vacancy rate rose from 4.3% at the beginning of the year to 5.3% at the end of the year. The green building ratio in the Commercial Portfolio increased significantly to 43.6% (previous year: 31.0%). The external valuation of the properties in the Commercial Portfolio resulted in a valuation effect of around -6.8% or EUR -267.2 million at the end of the year. The market value of the Commercial Portfolio fell to around EUR 3.64 billion as at the reporting date at the end of the 2023 financial year (previous year: EUR 4.45 billion). The decline is mainly due to sales amounting to EUR 569 million and the revaluation carried out as at the reporting date.
Institutional business stable factor in a challenging environment
In the 2023 financial year, we generated a lower transaction volume than in previous years and therefore lower transaction-related real estate management income due to the difficult conditions on the real estate investment market and delays and rescheduling of transactions. Despite the very subdued real estate investment market, we were able to achieve our adjusted annual target for real estate management income of EUR 50.9 million (previous year: EUR 88.4 million). Assets under management in the Institutional Business fell from EUR 10.2 billion to EUR 9.6 billion in the financial year.
Balance sheet and real estate assets
As at December 31, 2023, Branicks Group AG's real estate assets in the Commercial Portfolio had a carrying amount of EUR 3,398.6 million (previous year: EUR 3,673.3 million). The net asset value (NAV) amounted to EUR 1,298.3 million or EUR 15.54 per share (previous year: EUR 1,593.5 million or EUR 19.16 per share). The adjusted net asset value (adjusted NAV), adjusted for the full value of the Institutional Business segment, amounted to EUR 1,473.5 million or EUR 17.63 per share at the end of 2023 (previous year: EUR 1,888.4 million or EUR 22.71 per share). The decline in adjusted NAV is primarily due to the lower valuation of the Institutional Business segment as a result of the increased discount factor.
Forecast 2024 - continued focus on operational strength and portfolio and cash flow optimization
With the gradual recovery of the transaction market expected in the second half of 2024, we see opportunities to further exploit the potential of the properties in our two segments Commercial Portfolio and Institutional Business and to successfully implement the "Performance 2024" action plan, in particular the sales plan. Branicks Group AG is planning transactions with a total volume of between EUR 0.8 billion and EUR 1.2 billion across all segments for 2024. Purchases totaling around EUR 0.15 billion to EUR 0.3 billion are planned exclusively for the Institutional Business segment, both for existing mandates and as part of new mandates and investment vehicles. Branicks anticipates sales across all segments with a volume of around EUR 650 to 900 million. Of this, around EUR 500 to 600 million will be attributable to the Commercial Portfolio and around EUR 150 to 300 million to the Institutional Business. Based on the current own portfolio, the planned letting performance and further on-balance sheet sales in the current financial year, Branicks expects gross rental income from the Commercial Portfolio to increase to between EUR 160 million and EUR 175 million. We also expect total income from property management of EUR 40 to 50 million in the 2024 financial year. In 2024, Branicks will focus in particular on further portfolio and cash flow optimization, so that total FFO (after minorities, before taxes) is expected to be in the range of EUR 40 to 55 million. The business forecast is based on the key assumptions explained on page 89 of the Branicks Group AG annual report.
Expansion of the business model to include the Renewables asset class
In view of the ongoing changes on the real estate markets, the Branicks Group is tapping into additional potential for returns and value appreciation by expanding its business model to include the Renewable Energy asset class, as announced on April 30. On the one hand, this includes the further expansion of the green building quota as the equivalent of ecological assets. In addition, a partnership with Encavis Asset Management AG has been launched in the Institutional Business segment to develop the additional Renewables asset class. The aim is to develop and offer investment vehicles in the field of solar and wind power plants in Germany and other European countries. A first fund with a target volume of EUR 300 million is being set up for this purpose and will be launched on the market shortly.
Focus on return to positive net cash flow and significant debt reduction
For the years after 2024, the Branicks Group will consistently drive forward its transformation into a profitable, ESG-focused and value-creating asset manager. In its corporate planning for the three-year period 2024-2026, which has been reviewed by independent experts, Branicks assumes that the transaction market will begin to recover in the second half of 2024 and plans to return to a net profit and positive net cash flow by the end of 2026, with income from ESG expertise exceeding the earnings contribution from traditional real estate management. The strategic focus is on a significant reduction in debt, which is to be financed primarily through sales from the real estate portfolio. The aim is to reduce the LTV ratio to below 50% in the course of 2025.
The 2023 annual report of Branicks Group AG was published today and is available on the company website at the following link: https://branicks.com/en/ir/financial-reports/
Invitation to the conference call on April 30, 2024
The Board of Directors of Branicks Group AG invites you to the presentation of the results for the 2023 financial year today, April 30, 2024 at 10:00 a.m. CET. To participate in the conference call, please register at: https://webcast.meetyoo.de/reg/hznAVzr7SXbD
The webcast (incl. replay) can be accessed via the following link: https://www.webcast-eqs.com/branicks-2023-fy
About Branicks Group AG:
Branicks Group AG (formerly DIC Asset AG) is a leading German listed specialist for office and logistics real estate as well as newly renewable assets with over 25 years of experience in the real estate market and access to a broad investor network. Our basis is the national and regional real estate platform with nine offices in the ground in all major German markets (including VIB Vermögen AG). As of December 31, 2023, we managed properties with a market value of EUR 13.2 billion in the Commercial Portfolio and Institutional Business segments.
The Commercial Portfolio segment comprises real estate held for our own account. Here, we generate cash flows from stable rent revenues on long-term leases while also optimizing the value of our portfolio assets through active management and realizing gains from sales.
In the Institutional Business segment, we earn recurrent fees from real estate services we provide to national and international institutional investors by structuring and managing investment products that return attractive dividend yields.
The shares of Branicks Group AG are listed in the Prime Standard of the German Stock Exchange (WKN: A1X3XX / ISIN: DE000A1X3XX4).
The company is fully committed to sustainability and occupies top positions in ESG-relevant ratings such as Morningstar Sustainalytics and S&P Global CSA. The Branicks Group is also a signatory to the UN Global Compact and the UN PRI network. Properties in the Branicks portfolio have been awarded renowned ESG certificates such as DGNB, LEED or BREEAM.
For more details, go to www.branicks.com
PR Contact Branicks Group AG:
Stephan Heimbach
Neue Mainzer Strasse 32-36
D-60311 Frankfurt am Main
Phone +49 69 9454858-1569
pr@branicks.com
IR Contact Branicks Group AG:
Jasmin Dentz
Neue Mainzer Strasse 32-36
D-60311 Frankfurt am Main
Phone +49 69 9454858-1492
ir@branicks.com
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