EQS-News: CPI PROPERTY GROUP publishes financial results for the first quarter of 2024

CPI Property Group
(société anonyme)
40, rue de la Vallée
L-2661 Luxembourg
R.C.S. Luxembourg: B 102 254

Press Release - Corporate News

Luxembourg, 31 May 2024

CPI PROPERTY GROUP publishes financial results for the first quarter of 2024

CPI PROPERTY GROUP (“CPIPG” or the “Group”), a leading European landlord, hereby publishes unaudited financial results for the three-month period ending 31 March 2024.

“CPIPG’s like-for-like rents continued to grow at healthy rates through a combination of positive rent reversion and indexation,” said David Greenbaum, CEO. “Leverage, both value and earnings-based, declined during the first quarter and is on track to decline further as we progress on disposals.”

Highlights for the first quarter of 2024 include:

• Total assets were €21.5 billion, and EPRA NRV (NAV) was €7.0 billion.
• CPIPG’s property portfolio was €19.2 billion (versus €19.5 billion at year-end 2023), reflecting completed disposals and negative FX and valuation movements, partially offset by CapEx investments.
• The Group has closed more than €600 million of disposals year-to-date (€340 million in Q1 2024). In addition,  more than €600 million of signed disposals are expected to close in the coming months.
• Despite disposals, net rental income increased by almost 6% to €208 million, supported by a strong rental income growth of 5.5% on a like-for-like basis. Net business income rose to €221 million.
• Hotels had an excellent start to the new year with a net income of €5 million, an increase of 12% compared to Q1 2023.
• Consolidated adjusted EBITDA was €199 million; FFO1 increased to €111 million.
• Occupancy remained solid at 91.4% with a stable WAULT of 3.5 years.
• Net Loan-to-Value (LTV) decreased to 51.9%, down 0.4 p.p. from year-end 2023. Net LTV is 49.7% pro forma only for disposals closed post-reporting date or to be closed in the coming months. 
• Net debt was reduced by more than €250 million versus year-end.
• Net debt/EBITDA declined by 0.6x to 12.5x on an annualised basis.
• Total available liquidity was €1.3 billion at the end of Q1 2024. Net proceeds from disposals signed post-Q1 plus disposals signed and due to close soon will contribute €600 million to the Group’s liquidity, complemented by new financings and possible minority equity transactions.
• The average weighted debt maturity (4.6 years) and average cost of debt (3.12%) were unchanged from year-end.
• Unencumbered assets stood at 47%, and Net ICR was 2.5x.

Hot Topics for Our Investors

While CPIPG understands the keen investor interest in some of the topics below, we look forward to refocusing the discussion onto our diversified, well-positioned, well-managed property portfolio as soon as possible.

Credit Ratings and Capital Structure

Today, S&P Global Ratings unexpectedly downgraded CPIPG from BBB- to BB+ with a negative outlook (please see our press release published earlier today, “Comments on Recent Events”).

Based on our business plan, the Group expects to remain within S&P’s rating thresholds for both a BBB- and BB+ rating with S&P adjusted debt to debt plus equity below 60%, an EBITDA interest coverage of above 1.8x, and a debt to annualised EBITDA below 14x-15x in 2024 and 13x-14x in 2025. Hence, the Group will target stabilising our outlook and eventually regaining our investment grade rating with S&P.

The additional five years of equity credit assigned by S&P to our perpetual notes as part of the rating change is a development CPIPG did not anticipate, as the Group always believed CPIPG could remain investment grade. Prior to the downgrade, CPIPG had been vocal about the fact that we value our hybrid bondholders, that we know many of our hybrid bondholders also own our senior unsecured bonds, and that we place a high value on market access and our reputation.

The Group will reevaluate our liability management options in the coming weeks and months and looks forward to deploying our liquidity to optimise our maturity profile and interest expense.

Liquidity and disposals

CPIPG has €184 million of debt maturities for the remainder of 2024, and €401 million in 2025. Nearly all the debt relates to secured bank loans. Because of the quality of CPIPG’s assets, the Group is confident that secured lenders in our local markets will continue to be interested both in rolling over and new financing.

CPIPG has a €700 million revolving credit facility (RCF) with a large syndicate of banks maturing in January 2026. As the Group has prioritised repaying our bridge financing (now fully extinguished), and because of delayed regulatory approvals for certain disposals, the RCF was drawn. The current RCF balance is €460 million. CPIPG intends to repay and/or refinance the RCF before the end of 2024.

Since the end of Q1, the Group received about €150 million in net cash proceeds from disposals. €449 million in additional net proceeds are expected in Q2 / Q3 from disposals signed but not yet closed. The Group’s disposal pipeline under discussion still exceeds €2 billion.

In total, the Group is currently in discussions with secured lenders for €267 million of fresh financing. While CPIPG prefers senior unsecured financing, for the moment secured financing has a lesser impact on our ICR. CPIPG sees ample opportunity to increase the scope of the Group’s secured borrowing, if necessary, but also prefers to minimise structural subordination for our bondholders wherever possible.

As announced or commented previously, CPIPG is currently engaged in discussions with several highly respected international investors for up to €800 million of minority equity investments in Poland, Germany, and Italy. CPIPG sees benefits in the liquidity and flexible capital offered through these transactions but acknowledges drawbacks in terms of cost and complexity. Therefore, the Group seeks the right balance in terms of number and quantum. More details and decisions on these transactions should be expected in the coming months.

CPIPG Liquidity Analysis

The table below demonstrates CPIPG’s ample liquidity coverage of near-term maturities. Minority equity or new financing discussions would increase the level of available liquidity.
 

Distributions and Shareholder Loans

As part of our ongoing deleveraging efforts, CPIPG will sharply reduce distributions relative to our target of 65% of FFO, just as we did in 2022 and 2023. As stated previously, the Group intends to distribute to our shareholders only via share buybacks going forward, with final decisions on distributions made in Q4 each year.

The Group’s past practice of providing shareholder loans will be eliminated. More details on shareholder loans and related party transactions (policy, approach, and governance) can be expected from the Group over the summer, as announced on 24 May.

Selected actions occurring post-Q1

On 28 April, the Group signed a commitment agreement with Sona Asset Management regarding a proposed equity investment of €250 million in Poland.

On 2 May, the Group completed the sale of Crans-Montana Ski Resort for more than CHF 100 million.

On 6 May, IMMOFINANZ completed the sale of City Tower Vienna for more than €150 million.

On 7 May, CPIPG completed a successful €500 million green bond transaction, and fully repaid the remaining €460 million of bridge loans. With that, CPIPG successfully completed the repayment of around €2.7 billion in acquisition financings for IMMOFINANZ and S IMMO.

On 24 May, IMMOFINANZ commenced preparations for a squeeze-out of S IMMO, which would contribute significantly to simplification of the Group’s structure and improve costs/EBITDA going forward.

On 29 May, S IMMO announced the disposal of several commercial and residential assets across German cities for a total transaction volume of €255 million.

FINANCIAL HIGHLIGHTS

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT*

* The presented financial statements do not represent a full set of interim financial statements as if prepared in accordance with IAS 34

Gross rental income

Gross rental income increased by €8.0 million (3.5%) to €237.2 million in Q1 2024 compared to Q1 2023. The increase was primarily driven by rent indexation.

Property operating expenses

Property operating costs decreased by €6.0 million in Q1 2024 compared to Q1 2023, primarily due to lower repairs, maintenance, and personnel costs.   

Administrative expenses

Administrative expenses increased by €6.0 million in Q1 2024 compared to Q1 2023, primarily due to an increase in admin payroll costs and overall advisory costs.

Net valuation loss

Net valuation loss of €22.6 million in Q1 2024, represented primarily by revaluation loss generated by S IMMO.

Interest expense

Interest expense increased by €14.5 million in Q1 2024 compared to Q1 2023, mainly due to an overall increase in the cost of financing. IMMOFINANZ and S IMMO interest expense increased by €6.8 million and €9.4 million, respectively.
 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION*

* The presented financial statements do not represent a full set of interim financial statements as if prepared in accordance with IAS 34
 

Total assets

Total assets decreased by €465.0 million (2.1%) to €21,465.3 million as at 31 March 2024 compared to 31 December 2023. The decrease relates primarily to disposals of investment property (€133.4 million), negative foreign retranslation effect on investment property (€104.0 million) and decrease of property, plant and equipment (€235.0 million), related to the sale of hotels portfolio to the newly established joint venture.

Total liabilities

Total liabilities decreased by €438.8 million (3.2%) to €13,234.2 million as at 31 March 2024 compared to 31 December 2023, primarily due to a decrease in financial debts (€201.5 million) and bonds issued (€151.9 million).

Equity and EPRA NRV

Total equity decreased by €26.1 million from €8,257.2 million as at 31 December 2023 to €8,231.1 million as at 31 March 2024. The movements of equity components were as follows:                   

• Increase due to the profit for the period of €40.8 million (profit to the owners of €7.6 million);
• Increase in retained earnings due to sale of hotel portfolio to newly established joint venture (€23.8 million);
• Decrease in translation, revaluation and hedging reserve of €87.6 million;
• Net interests to perpetual notes holders of €15.7 million;
• Increase of NCI in the period of €14.4 million.       

EPRA NRV was €6,964 million as at 31 March 2024, representing a decrease of 1.0% compared to 31 December 2023. The decrease of EPRA NRV was driven by the above changes in the Group’s equity attributable to the owners (increase of retained earnings and decrease of translation, revaluation and hedging reserves).

GLOSSARY

APM RECONCILIATION[*]

* Includes pro-rata EBITDA/FFO for Q1 2024 and Q1 2023 of Equity accounted investees.

 *Annualised.

For further information please contact:

Investor Relations

Moritz Mayer
Manager, Capital Markets
m.mayer@cpipg.com

For more on CPI Property Group, visit our website: www.cpipg.com
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^[*]* Totals might not sum exactly due to rounding differences.