Fulga Dinu, Country Manager Operations IMMOFINANZ Romania tells Business Review about the company’s financial results and the properties included in its portfolio in Romania and in the region. She also explains how the local retail and office segments are perceived from the profitability perspective.
Your latest financial results show that net profit doubled compared to the first half of 2018. How did the company manage to double its profit?
This very good first half-year follows our strong performance in 2018. We delivered increases in rental incomes as well as in asset management results. The Group’s financial results also benefitted from a further decline in financing costs.
Since the beginning of the year, we have been an investment grade rated company. Additionally, the results of the revaluation were quite positive, reflecting the quality of our properties as well as their operative performance and the positive market environment. Therefore, net profit more than doubled to EUR 185.3 million.
Is the increase of rental income the result of higher rental prices or increased rental spaces?
As rentable space as well as occupancy rate more or less remained unchanged, it was the result of higher rents (including changes due to accounting rule IFRS 16). This can also be seen in the development of our like-for-like rental income (i.e. acquisitions, completions and sales are deducted to facilitate comparison) which showed a 3.3 percent hike in the second quarter of 2019.
The company invested EUR 59 million in the latest quarter. What was the destination of investments?
IMMOFINANZ invested a total of EUR 198.8 million in the property portfolio during the first half of 2019. This includes for example the purchase of the second half of the investment in Na Příkopě 14, a building in the inner city of Prague. Na Příkopě 14 is located on one of the best-known shopping streets and has roughly 17,000 sqm of exclusive retail and modern office space on ten floors. Additionally, we invested in the further growth of our portfolio via developments and opened another STOP SHOP in Serbia. In the third quarter of 2019 we finalized three large acquisitions worth more EUR 500 million – Warsaw Spire in Warsaw, Palmovka Open Park in Prague and six further retail parks.
What does the portfolio include in the retail sector?
The carrying amount of the 92 standing investments in the retail sector totalled EUR 1.51 billion as of 30 June 2019. These properties represented 36.9 percent of the standing investment portfolio and generated 46.7 percent of rental income in the second quarter of 2019. The largest regional markets are Romania with EUR 327.4 million, Poland with EUR 266.9 million and Slovakia with EUR 252.9 million. The STOP SHOP retail parks have a carrying amount of EUR 833.4 million and a gross return of 7.8 percent, respectively 8.0 percent based on invoiced rents. The VIVO! shopping centres have a carrying amount of EUR 674.1 million; they generate a gross return of 8.2 percent and an invoiced rental return of 8.3 percent.
How do you see retail versus office in Romania? Which one is more profitable?
We like the combination of both asset classes because we have built up a comprehensive experience and very well-known brands – myhive for offices as well as VIVO! for shopping centres and STOP SHOP for retail parks – which serve as guarantees for the best quality and service. With our office properties in Bucharest, we generate a gross return of around 7.2 percent, while retail properties located in middle-sized cities generate a return of 8.8 percent. We see quite a dynamic development in both asset classes and have just finished a larger upgrade of our VIVO! shopping centre in Cluj – bringing in several new international tenants. In the office segment we are working on a further roll-out of our myhive brand in Bucharest. Thereby, we translate this into offering sustainable buildings with modern designs and provide services to fulfil the tenants’ needs and contribute to their wellbeing.