TAG Immobilien AG has started into FY 2023 with strong rental performance of the German business; operations in Poland delivering significant earnings contribution from elevated unit sales

PRESS RELEASE

TAG Immobilien AG has started into FY 2023 with strong rental performance of the German business; operations in Poland delivering significant earnings contribution from elevated unit sales

• FFO I of EUR 42.6m (-11% vs. Q1 2022) and FFO II of EUR 51.1m (+12% vs. Q1 2022); strong rental results in Q1 2023 with total l-f-l rental growth of 2.8%
• Significant earnings contribution from the Polish operations with 972 units sold in Q1 2023 (715 units in Q4 2022) and a growing build-to-rent portfolio of c. 2,100 units completed at 31 March 2023; new joint venture signed for sales business in April 2023
• Net sales volume in Germany of c. 1,000 residential units signed in Q1 2023
• All debt refinancings due in 2023 secured; LTV ratio at 46.4%; ICR at 6.7x and net financial debt/EBITDA adjusted at 10.9x
• Rolf Elgeti to withdraw from the Supervisory Board after the end of the Annual General Meeting on 16 May 2023 for personal reasons

Hamburg, 11 May 2023

Strong operating performance in Q1 2023

Q1 2023 has proven to be a strong quarter for TAG Immobilien AG (TAG) in operating terms. The Q1 2023 FFO I of EUR 42.6m is composed of EUR 42.9m from the German rental business and EUR -0.3m from the Polish rental business, which is still under development. A strong like for like rental growth within the German portfolio of 2.8% p.a. (1.6% p.a. without effects from vacancy reduction) have made a particular contribution to this result. Vacancies in the Group’s residential units in Germany moved slightly from 4.5% at the beginning of the year to 4.7% in March 2023 (vs 5.7% in March 2022) similar to prior years as a seasonal effect within the first quarter. As a result of currently higher financing costs of EUR 15.3m in Q1 2023 (net financial result in cash, after one-offs) compared to EUR 10.0m in Q1 2022 and EUR 12.3m in the previous quarter, FFO I was reduced to EUR 42.6m or 11% y-o-y despite a stable adjusted EBITDA from the rental business of EUR 59.0m (Q1 2022: EUR 58.9m; Q4 2022: EUR 55.8m).

The sales business in Poland has performed very well. The adjusted net income from sales in Poland, which is a key component of FFO II, was EUR 8.8m in Q1 2023 after EUR -1.3m in Q1 2022. This was mainly driven by an increased number of units handed over after the first-time consolidation of ROBYG S.A. at 31 March 2022 (583 units in Q1 2023 vs 61 units handed over in Q1 2022). Unit sales increased to 972 units in Q1 2023, the strongest quarter since the beginning of 2022, showing the strong demand for new constructed apartments in Poland. In total, FFO II amounted to EUR 51.1m a 12% growth y-o-y.

The consolidated net profit increased to EUR 33.1m in Q1 2023, after EUR 31.2m in Q1 2022. No portfolio valuation was carried out in Q1 2023. The next valuation is scheduled, as in the previous years, for 30 June 2023. The guidance for FY 2023, including the FFO I and FFO II guidance, remains unchanged.

Disposals of residential units in Germany

From January to March 2023, several contracts were signed for the sale of a total of 1,638 apartments. The cumulative sales price amounts to EUR 163.2m and the expected net cash proceeds, after repayment of related financial debt for the disposals, to EUR 129.3m. The disposals were made with a total book loss of EUR 4.3m and are expected to close in the second and third quarter of 2023.

Included in these 1,638 apartments is a sale of c. 1,350 apartments with net cash proceeds of c. EUR 90.0m, for which the buyer’s financing has not yet been secured. Part of this transaction is also a purchase of c. 650 apartments by TAG from this buyer at a purchase price of around EUR 45.0m, which, however, will only take place if the sale of the c. 1,350 apartments is completed. Thus on a netted basis, total net cash proceeds from the signed disposals of 1,638 apartments and the acquisition of c. 650 apartments (leading to a c. 1,000 net sales volume) amount to c. EUR 84.3m.

After the reporting date, a commercial property and another c. 200 apartments were sold in April and early May 2023 for a total purchase price of EUR 49.4m. This is expected to result in additional net cash proceeds of around EUR 46.1m and a book profit, as a part of the commercial property was valued at amortized costs, of c. EUR 9.3m.

Commenting on the results of the first quarter in 2023, TAG COO Claudia Hoyer noted: “Our strong operational performance at the start of 2023 further encourages us to pursue our focused approach to vacancy reductions and sustainable rent increases in our German portfolio. In our Polish business, the uptick in disposal volumes on the one hand, as well as the strong growth in rent levels, crystallize significant liquidity levels. Despite the challenging macroeconomic backdrop that we are still facing at the start of 2023, we continue to be well positioned to serve our tenants and offer attractive apartments at reasonable prices. The combination of our German and Polish businesses allows us to generate stable cash flows from our German portfolio while developing high-yielding new apartments in Poland, both for sale and for rent. This combination is an essential factor for our ability to successfully navigate the elevated interest rate environment and volatility in the real estate sector.”

Strong performance in Poland amid challenging macroeconomic environment; successful Capital Markets day in Warsaw and Wroclaw; USD 100m joint venture signed for the sales business

In the first quarter of 2023, sales prices and margins in Poland remained at a high level, while the number of units sold significantly surpassed the previous four quarters by c. 200-500 units per quarter. In the rental business in Poland, in the meanwhile around 2,100 apartments are completed and either tenanted or in the process of being rented out, while another c. 1,250 apartments for rent are currently under construction. Until 2024, the total number of completed rental apartments is expected to reach c. 3,350, while the mid-term goal is set at a portfolio size of more than c. 10,000 units for rent in the next five years.

The demand for rental apartments in Poland continues at a very elevated level. This is primarily driven by substantial demographic change, i.e. strong migration flows into Poland including a large share of Ukrainian refugees who are expected to stay permanently in Poland. The total like-for-like growth in rents for those apartments completed more than a year ago was 16% p.a. in March 2023. The total Gross Asset Value (GAV) of the Polish portfolio amounted to EUR 1,191m as of 31 March 2023 compared to EUR 1,153m as of 31 D.

At the end of April 2023, TAG invited investors, analysts and banks to Warsaw and Wroclaw for its fourth Capital Markets Day. At the event, a total of over 50 participants were given an insight into the operating business, the very positively developing Polish residential real estate market and TAG’s strategy in Poland. Presentations and other material from the Capital Markets Day is available at TAG’s website at https://www.tag-ag.com/en/investor-relations/capital-markets-day.

Furthermore, on 28 April 2023 TAG signed an agreement with an international institutional investor as a joint venture partner in order to develop a sales portfolio in Poland, which will help to further accelerate the pace of TAG’s growth and will produce significant cash inflows. The joint ventures targets investments for land acquisition of USD 100m. TAG assumes a transfer of projects to the joint venture currently held by its Polish operations with a capacity of more than 100,000 sqm of usable area as well as acquisitions of additional projects from third parties. The resulting shareholding of TAG and the joint venture partner is 50% each. This transaction demonstrates the ability of TAG’s Polish business to capture selected growth opportunities on a self-funding basis.

All debt refinancings due in 2023 secured; stabilized LTV level and strong financing metrics

For the FY 2023, all upcoming maturities can be repaid from existing cash and existing credit lines. As of 31 March 2023, the loan to value (LTV) ratio of TAG is at 46.4%, thus slightly below the December 2022 level of 46.7%. At the same time, the key financial covenants still provide extensive headroom. Other financing metrics like interest cover ratio (ICR) or net financial debt/EBITDA adjusted stand at a strong 6.7x and 10.9x (4.9x and 13.7x excluding the Polish sales business).

Martin Thiel, CFO of TAG: “We have been able to start into FY 2023 with a clearly stabilized and de-risked capital structure. Further pay downs of the EUR 250m ROBYG acquisition bridge facility will be made from the expected cash proceeds from property disposals in Germany and new mortgage secured bank loans we are currently working on. It is our target to repay the full bridge amount in Q3 2023. After that we have positioned TAG to be independent of capital market financing for the next years, which is clearly an advantage in this difficult financing environment.

Withdrawal of Mr Rolf Elgeti from the Supervisory Board

The Chairman of the Supervisory Board of TAG, Mr Rolf Elgeti, has informed the Management Board and the Supervisory Board that he will not continue his office as a member of the Supervisory Board of the Company after the end of the Annual General Meeting on 16 May 2023 for personal reasons and will not stand for re-election. Mr Elgeti will therefore withdraw from the Supervisory Board of the Company as scheduled at the end of the Annual General Meeting. The remaining candidates remain unchanged for election. In its current composition, the Supervisory Board assumes that Mr Olaf Borkers, if elected, will stand as a candidate for the chair of the Supervisory Board until it is completed in accordance with the Articles of Association. The Supervisory Board will immediately begin the search for a suitable successor for Mr Elgeti and intends to complete it in a timely manner.

Lothar Lanz, Deputy Chairman of TAG’s Supervisory Board: „The Supervisory Board and the Management Board of TAG would like to express their gratitude to Mr Elgeti for his extraordinary achievements and his many years of great commitment to the Company. We very much regret his departure from the Supervisory Board, but of course respect his wish to withdraw for personal reasons.”

Further details on the first quarter of 2023 can be found in the interim statement published today and in a related presentation at https://www.tag-ag.com/en/investor-relations.

Overview of key financials

Contact

TAG Immobilien AG

Dominique Mann

Head of Investor & Public Relations

Phone +49 (0) 40 380 32 305

Fax +49 (0) 40 380 32 390

ir@tag-ag.com