DGAP-News: Prime Office REIT-AG: Nine-month results dominated by one-time and special effects

DGAP-News: Prime Office REIT-AG:  Nine-month results dominated by one-time and 
special effects

DGAP-News: Prime Office REIT-AG / Key word(s): Quarter Results
Prime Office REIT-AG: Nine-month results dominated by one-time and
special effects

06.11.2013 / 07:30


Nine-month results of Prime Office REIT-AG dominated by one-time and
special effects

- Rental and lease revenues decline to 38.7 million Euro as a result of
vacancies and property sales in the nice-month period
- Special and one-time effects in connection with the planned merger and
the property valuation result in a loss of -86.0 million Euro for the
- FFO of -3.3 million Euro on the back of one-time effects and vacancies
are in line with expectations
- NAV declines to 380.2 million Euro or 7.32 Euro per share due to the
property fair values
- Significant decline of liabilities in connection with the continuing
early repayment of loans: total liabilities fall to 554.5 million Euro, LTV
down to 59.2%
- Successful lettings in Stuttgart and Heilbronn: long-term lease with
Daimler AG in Stuttgart/Moehringen for an overall 15,400 square metres.
Long-term lease signed with the land registry of the city of Heilbronn for
about 14% of the property's lettable space
- Executive board confirms revenue guidance of between 51 and 53 million
Euro for the full year and adjusts the FFO guidance to a range between -3
and -6 million Euro

Munich, 06 November 2013. Prime Office REIT-AG ('Prime Office'), a leading
listed property company with REIT status focused on investments and
management of prime office properties in Germany, presents the results for
the first nine months of fiscal year 2013.

In the reporting period, the development of the operating business was
influenced to a large degree by various special and one-time effects in
connection with the planned merger with OCM German Real Estate Holding AG
('OCM'), the current vacancies in the portfolio and particularly the
related adjustment of the property portfolio's fair value. Consequently,
the adjustment of the portfolio's fair value by about -78.3 million Euro to
805.6 (31 December 2013: 883.9) million Euro as at 30 September 2013
resulted from the overall shorter remaining terms of lease, delays in the
letting processes, the current vacancy ratio and a slightly more cautious
market outlook for individual properties. By mid-year, the adjustment of
the property fair values had amounted to an overall 57.3 million Euro; the
third quarter of 2013 accounted for about 21 million Euro.

In addition, the due diligence process carried out over the first nine
months of fiscal year 2013 in connection with the planned merger with OCM
led to a significant increase of legal and advisory costs. After the
positive votes of the shareholders of Prime Office and OCM on their
respective general meetings and the clearance of the planned merger by the
German cartel office, the two companies expect to implement the merger in
the first quarter of 2014. The discharge of the CEO on 28 June 2013 gave
rise to another one-time effect. Cost-related liabilities in the amount of
about 1 million Euro were created in the reporting period in connection
with the termination of the employment.

'Over the first nine months of this fiscal year, the business development
of our company was dominated largely by special and one-time effects from
the merger with OCM and the adjustment of the fair values in our property
portfolio. However, the impending merger with OCM in particular makes us
confident for the future, because - together with OCM - we will become a
leading, high earning and high dividend paying real estate company able to
generate sustainable value for our stakeholders,' says Alexander von Cramm,
CEO of Prime Office REIT-AG.

The rental and lease revenues declined by 29.2% year on year to 38.7
(Q1-Q3/2012: 54.7) million Euro during the first nine months of fiscal year
2013 on the back of the current vacancy of 18% and the completed property
sales. This resulted in rental and lease income of 29.2 (Q1-Q3/2012: 46.8)
million Euro, which was down compared with the first nine months of the
previous year. The operating earnings before valuation effects fell to 20.0
(Q1-Q3/2012: 42.1) million Euro over the first three quarters of this
fiscal year due to the described effects in connection with the adjustment
of the portfolio property fair values, the occupancy and the higher
advisory and due diligence costs in connection with the merger with OCM.
The adjustment of the portfolio property's fair value also affected
operating earnings before interest and taxes (EBIT), which amounted to
-62.8 (Q1-Q3/2012: 31.5) million Euro in the reporting period and were also
down year on year.

Special and one-time effects in connection with the planned merger with OCM
and the property valuation resulted in a loss of -86.0 (Q1-Q3/2012: 7.3)
million Euro in the first three quarters of fiscal year 2013. Consequently,
earnings per share declined year on year in the reporting period and
amounted to -1.66 (Q1-Q3/2012: 0.14) Euro. Similarly the 'EPRA earnings',
i.e. the result for the period adjusted by the effects from the fair
valuation of the property portfolio and the derivative financing
instruments, were significantly impacted by the implications of the
vacancies and the various one-time and special effects. The 'EPRA earnings'
for the first nine months of this fiscal year 2013 amounted to -2.8
(Q1-Q3/2012: 15.6) million Euro or -0.05 (Q1-Q3/2012: 0.30) Euro per share.

Funds from operations (FFO) of Prime Office fell year on year in the first
nine months of fiscal year 2013 to -3.3 (Q1-Q3/2012: 19.6) million Euro on
the back of higher vacancies and the above mentioned one-time effects and
non-recurring charges. The FFO per share amounted to -0.06 (Q1-Q3/2012:
0.38) Euro per share.

At the beginning of August 2013, Prime Office signed a long-term lease for
an overall 11,315 square metres of office and storage space and 220
passenger car parking spaces in the office compound 'emporia' in
Stuttgart/Moehringen with Daimler AG, Stuttgart. The lease contained an
option for Daimler to rent additional spaces. The company exercised this
option in October 2013 and will rent about 4,100 square metres of
additional space in the office compound 'emporia'. With this extension of
spaces to now about 15,400 square metres rented by Daimler AG, the building
reaches full occupancy. Furthermore, the real estate company signed a
contract on the sale of the office property in Hufelandstraße 13, 15 in
Munich with WealthCap in August 2013. The rights and obligations in
connection with the property, which has a total rental space of 8,224
square metres, transferred upon payment of the agreed purchase price of
20.5 million Euro on 4 September 2013.

As at the reporting date on the 30 September 2013, Prime Office could again
substantially reduce its total liabilities compared to 31 December 2012
(642.5 million Euro) thanks to the early repayment of loans and special
payments in connection with the optimisation of the financing structure.
The sum of current and non-current debts of the real estate company
amounted to 554.5 million Euro at the reporting date, 88.0 million Euro
below the level at year-end 2012. Similarly, the loan-to-value (LTV) of
Prime Office fell from 60.2% on 31 December 2012 to 59.2% on the reporting
date of 30 September 2013. The significantly lower LTV will continue to
take further pressure off the financial result going forward.

In the reporting period, the equity of Prime Office suffered both from
one-time effects that were dilutive to earnings and, as in the past, from
the financial and euro crisis and the continually low interest rate
environment. Particularly the relatively low interest rates depressed the
valuation of the long-term, derivative hedging instruments (interest rate
swaps) for the property financings. Owing to the above-mentioned factors,
the REIT equity ratio amounted to 39.8% on 30 September 2013, still below
the minimum equity ratio of 45% required under the REIT law. Prime Office
needs to meet this criterion by year-end 2013 in order to retain its status
as a REIT joint stock corporation. The executive board has made lifting the
REIT equity ratio to at least 45% a top priority. The executive board
expects to at least meet the REIT equity ratio through property sales by
year-end 2013.

The net asset value (NAV) of Prime Office amounted to 380.2 million Euro as
at 30 September 2013, down compared to 31 December 2012 (468.4 million
Euro) as a result of the fair value adjustments. The NAV per share declined
accordingly to 7.32 (31 December 2012:  9.02) Euro per share on the
reporting date for the period.

The executive board of Prime Office also continues to expect a largely
stable development of the economic environment and hence of the German
office property market. Still, the property company's operating business in
this fiscal year will be dominated by the fair value adjustments of the
portfolio properties, temporary vacancies in the properties in Frankfurt,
Dusseldorf and Stuttgart and the planned refurbishment measures in the
Stuttgart and Dusseldorf properties. Based on these assumptions, the
executive board anticipates revenues (including operating cost prepayments)
of 51 to 53 million Euro and FFO of between -3 and -6 million Euro for the
fiscal year 2013.

Key financial ratios of Prime Office REIT-AG
(in mm EUR) 01/01-30/09/2013 01/01-30/09/2012 Delta (in %)
Rental and lease revenues 38.7 54.7 (29.2)
Rental and lease income 29.2 46.8 (37.5)
Operating income (EBIT) (62.8) 31.5 (299.3)
Financial result (23.2) (24.2) 4.2
Income for the reporting period (86.0) 7.3 (1,283.8)
Income per share (in Euro) (1.66) 0.14 (1,283.8)
Funds from operations (FFO) (3.3) 19.6 (116.7)
FFO per share (in Euro) (0.06) 0.38 (116.7)

(in mm EUR) 30/09/2013 31/12/2012 Delta (in %)
Total assets 875.2 1,031.6 (15.2)
Equity 320.6 389.1 (17.6)
REIT equity ratio (in percent) 39.8 42.9 (7.1)
Leverage (in percent) 60.2 57.4 4.9
Net asset value (NAV) 380.2 468.4 (18.8)
NAV per share 7.32 9.02 (18.9)


Prime Office REIT-AG
Richard Berg
Director Investor Relations / Corporate Communications
Hopfenstraße 4
80335 Munich

Telephone +49. 89. 710 40 90 40
Facsimile +49. 89. 710 40 90 99
Email  richard.berg@prime-office.de

End of Corporate News


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Language:    English                                                    
Company:     Prime Office REIT-AG                                       
             Hopfenstraße 4                                             
             80335 München                                              
Phone:       +49 (0)89 7104090 40                                       
Fax:         +49 (0)89 7104090 99                                       
E-mail:      richard.berg@prime-office.ag                               
Internet:    www.prime-office.ag                                        
ISIN:        DE000PRME012                                               
WKN:         PRME01                                                     
Indices:     SDAX                                                       
Listed:      Regulierter Markt in Frankfurt (Prime Standard), München,  
             Stuttgart; Freiverkehr in Berlin, Düsseldorf               
End of News    DGAP News-Service  
238103 06.11.2013                                                      
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