10. August 2012 
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Prime Office confirms the guidance for the full year
Prime Office REIT-AG reports overall stable business development in the first half of 2012 and confirms the outlook for the full year.
The rental and lease revenues amounted as expected to 36.6 million Euro over the first six months of fiscal year 2012, which was mainly due to temporary vacancies. They were consequently slightly down year on year (H1/2011: 37.9 million Euro). Overall rental and lease expenses increased by about 0.8 million Euro to 6.0 (H1/2011: 5.2) million Euro as a result of extensive marketing activities for the properties that require re-letting, the related planning costs and the asset management fee. Consequently, the rental and lease income over the first half of 2012 amounted to 30.8 (H1/2011: 33.3) million Euro.
Other operating expenses fell by 3.1 million Euro year on year in H1/2012 to about 2.4 (H1/2011: 5.5) million Euro, mainly as a result of the costs incurred in connection with last year's IPO in the amount of 3.7 million Euro that had still been included in H1/2011. Overall, the operating income before valuation effects increased to 27.7 million Euro over the reporting period, slightly up year on year (H1/2011: 27.2 million Euro).
The on-going financial crisis in the euro zone and the consequently still low interest rate environment in Germany negatively affected the valuation of the long-term derivative interest and currency hedging instruments (interest and currency swaps) and thus the equity of Prime Office over the reporting period. In this context, the equity was further reduced by the scheduled dividend payment (11.9 million Euro) in May 2012. The equity of the Company fell accordingly from an overall 418.0 million Euro as at 31 December 2011 to 398.1 million Euro as at the balance sheet date on 30 June 2012. As a result, the Company had an equity ratio of 41.4 percent on 30 June 2012, compared to 43.1 percent on 31 December 2011. It is still below the minimum equity ratio of 45 percent required for REIT joint-stock companies. Under the German REIT law, the Company has two years from 31 December 2011, when it first failed to meet the REIT requirement, during which to return to the statutory minimum with impunity, i.e. until 31 December 2013.
The net debt of Prime Office increased slightly from 561.5 million Euro on 31 December 2011 to 576.6 million Euro on 30 June 2012 in spite of loan repayments in the overall amount of 6.9 million Euro. This was again due to the valuation of the Company's interest rate hedges. The derivative financial instruments used, which lock in interest over the term of the loan and whose market value is invariably zero at maturity, offer substantial value recovery potential over the time to maturity. This should benefit the leverage and the equity capital base. The leverage amounted to 59.9 (31 December 2011: 57.8) percent in H1/2012. The loan-to-value ratio (LTV) remained almost unchanged year on year; it amounted to 65.4 percent compared to 65.2 percent on 31 December 2011.
Looking ahead, Prime Office is confirming its targets for the fiscal year 2012. The board anticipates revenues including operating cost prepayments of 72 to 74 million Euro and funds from operations (FFO) of 17 to 19 million Euro. In spite of charges from reconstruction and temporary vacancies, it expects to achieve a dividend of 9 to 12 million Euro for fiscal year 2012.
The rental and lease revenues amounted as expected to 36.6 million Euro over the first six months of fiscal year 2012, which was mainly due to temporary vacancies. They were consequently slightly down year on year (H1/2011: 37.9 million Euro). Overall rental and lease expenses increased by about 0.8 million Euro to 6.0 (H1/2011: 5.2) million Euro as a result of extensive marketing activities for the properties that require re-letting, the related planning costs and the asset management fee. Consequently, the rental and lease income over the first half of 2012 amounted to 30.8 (H1/2011: 33.3) million Euro.
Other operating expenses fell by 3.1 million Euro year on year in H1/2012 to about 2.4 (H1/2011: 5.5) million Euro, mainly as a result of the costs incurred in connection with last year's IPO in the amount of 3.7 million Euro that had still been included in H1/2011. Overall, the operating income before valuation effects increased to 27.7 million Euro over the reporting period, slightly up year on year (H1/2011: 27.2 million Euro).
The on-going financial crisis in the euro zone and the consequently still low interest rate environment in Germany negatively affected the valuation of the long-term derivative interest and currency hedging instruments (interest and currency swaps) and thus the equity of Prime Office over the reporting period. In this context, the equity was further reduced by the scheduled dividend payment (11.9 million Euro) in May 2012. The equity of the Company fell accordingly from an overall 418.0 million Euro as at 31 December 2011 to 398.1 million Euro as at the balance sheet date on 30 June 2012. As a result, the Company had an equity ratio of 41.4 percent on 30 June 2012, compared to 43.1 percent on 31 December 2011. It is still below the minimum equity ratio of 45 percent required for REIT joint-stock companies. Under the German REIT law, the Company has two years from 31 December 2011, when it first failed to meet the REIT requirement, during which to return to the statutory minimum with impunity, i.e. until 31 December 2013.
The net debt of Prime Office increased slightly from 561.5 million Euro on 31 December 2011 to 576.6 million Euro on 30 June 2012 in spite of loan repayments in the overall amount of 6.9 million Euro. This was again due to the valuation of the Company's interest rate hedges. The derivative financial instruments used, which lock in interest over the term of the loan and whose market value is invariably zero at maturity, offer substantial value recovery potential over the time to maturity. This should benefit the leverage and the equity capital base. The leverage amounted to 59.9 (31 December 2011: 57.8) percent in H1/2012. The loan-to-value ratio (LTV) remained almost unchanged year on year; it amounted to 65.4 percent compared to 65.2 percent on 31 December 2011.
Looking ahead, Prime Office is confirming its targets for the fiscal year 2012. The board anticipates revenues including operating cost prepayments of 72 to 74 million Euro and funds from operations (FFO) of 17 to 19 million Euro. In spite of charges from reconstruction and temporary vacancies, it expects to achieve a dividend of 9 to 12 million Euro for fiscal year 2012.
