Corestate Capital Holding SA
Overview
Corestate Capital Holding SA (IBIS:CCAP) is a real estate investment manager and co-investor that acquires, develops and manages predominantly residential, micro-living, retail and office real estate in Germany and other parts of Europe. The Company offers real estate equity as well as debt products and had roughly € 26.4bn in assets under management at the end of September 2019.
The Company has undergone a deliberate transformation over the last few years, from a largely residential-focused investment management company to a diversified real estate group with a wide and committed client base of institutional, semi-institutional, Family Offices/UHNWI and retail investors. Corestate Capital Holding SA is a one-stop shop offering property management services and related investment products for its clients, covering all major real estate asset classes and investment vehicles incl. real estate debt financing.
The company respond to market trends where the company see smart investment opportunities within the real estate sector and this has expanded both the type of investment properties the company manage and the cities and countries where the company operate. Alongside its portfolio diversification CORESTATE has made several corporate acquisitions that have brought additional depth and breadth also to its business model.
The company operate from its principal offices in Germany, Switzerland, the UK and Spain employing 753 people (701 fulltime equivalents) across 42 offices in 7 countries. CORESTATE is listed in the Prime Standard on the Frankfurt Stock Exchange (SDAX).
Market Development
The market environment of CORESTATE’s business remained positive in the first nine months of 2019 despite signs of economic slowdown. The German real estate investment market showed a strong third quarter with transaction volume increasing quarter-on-quarter as well as year-over-year. Given the persistently low interest rates, the limited investment alternatives versus the strong demand from large institutional investors, such as pension schemes and insurers, for stable and yielding investments as well as the reputation of the German real estate market as a “safe haven”, 2019 is set to be another promising year for real estate investments. For the last quarter of 2019, there are no signs of a slowdown in activity. In view of these current dynamics, experts consider a real estate transaction volume of € 75 bn in Germany for the year as a whole to be realistic.
Also, on a European level, the market conditions remain in very good shape. According to the European real estate market outlook by Aberdeen Standard Investments (Q1/2019), the real estate sector is a little bit more challenging but the overall outlook for 2019 remains positive because the demand is still on a high level.
In Q3 as well as in October 2019, CORESTATE continued to work successfully on its business and product offering and broadened its footprint in the market. At the end of September 2019, CORESTATE had total assets under management of roughly € 26.4bn; the core business, real estate assets under management, comprised € 22.1bn. At the end of June 2019, these figures were lower, standing at € 26bn and € 21.6bn. At the end of 2018, assets under management amounted to € 25.3bn and real estate assets under management to € 20.7bn.
At the beginning of July, CORESTATE announced that it has signed the contract to acquire the French real estate investment management firm STAM Europe. STAM was founded in 1997 and manages around € 2bn from international institutional investors focusing on the French real estate market and the asset classes office, logistics, residential and retail.
CORESTATE´s real estate debt finance branch HFS showed once again stable contributions to its results as their underlying business is running very well with stable interest rates, fully-committed funds of around € 1.25bn and tangible pipeline of financing projects for the upcoming quarters.
The CORESTATE subsidiary Hannover Leasing has opened an office in Amsterdam to meet the strong local customer demand. The office focuses on the management of properties and tenants in the Netherlands in cooperation with an asset management team in Pullach. The respective property portfolio volume currently amounts to € 1.5bn and is expected to grow in the future. Hannover Leasing has long-standing expertise in office properties in the BeNeLux countries. The establishment of a further office in Belgium is planned for 2020.
Financial highlights
In general, the nine months 2019 figures were mainly driven by the continuously excellent market environment with the usual seasonality of its business. The once again growing client demand for its products and offerings led to the typical financial exposure in the first half of a year, and the company will – also once again – harvest the fruits of this in the last three months of 2019, also from a range of new products that will be brought to the market. In 2018, the figures for Q3 were characterized by higher than usual gains from the sale of three trophy assets.1
Consolidated Total Revenues of the Group (including total revenues from real estate investment management, net rental income, revenue from service charges from real estate operations and warehousing and income from other warehousing activities) was at € 156.8m. The Group EBITDA came out at € 100.1m compared to € 128.4m in 9M/2018. The financial result came out at € -15.2m for 9M 2019 (9M/2018: € -17.5m). The Group’s Net Profit stands at € 51.3m, which translates into Earnings per Share of € 2.42 (9M 2018: € 3.78).
Business segments
Real Estate Investment Management
The Real Estate Investment Management segment generated the biggest revenues, which was € 127.6m and € 131.0m in 9M/2018.
The change in Acquisition Related Fees (€ 31.7m in 9M/2018, € 24.0m in 9M/2019) was mainly a result of a large acquisition fee received from a new asset management contract beginning of 2018. The Company expects the Earnings from Real Estate Investment Management to pick up significantly in the fourth quarter of 2019 from typical seasonal impacts on acquisition related fees and promote fees.
Revenues from Asset and Property Management increased to € 103.6m from € 99.1m in 9M/2018. With its recurring fee pattern, this revenue portion underlines the sustainable growth of the business driven by the ongoing demandsupply gap in the German residential market.
Real Estate Operation and Warehousing
The total income contribution from Real Estate Operations and Warehousing was € 38.1m (9M/2018: € 72.3m). In the first nine months of 2018, net rental income was significantly higher than usual, driven by three trophy assets in its warehousing (“Stadttor”, “Danone Research Center” and “Kronberg”) which were sold in 2018. In 2019 the company is back to stable business activities on a continuously high level. Around € 15.1m as ‘income from other warehousing activities’ stem primarily from client driven bridge financing for the private debt funds of HFS (9m 2018: € 6.3m).
Real Estate Operation and Warehousing delivered earnings of € 21.3m (9M/2018: € 54.0m).
Alignment Capital Management
Mainly as a result of the strong market performance, the share of profit from associates and joint ventures was € 7.5m compared to € 11.2m in 9M/2018, the dividends from other alignment capital amounted to € 6.7m compared to € 9.8m in 9M/2018. Gains/losses from fair value measurement of financial instruments related to real estate were € 5.7m.
Total revenues from Alignment Capital stood at € 19.9m compared to € 21.1m in 9M/2018.
Outlook
Against the background of its strong transaction pipeline for Q4 and the decent business development in the first nine months, the company confirm its financial outlook for the full year 2019 with aggregate revenues and gains of € 285 to 295m, EBITDA of € 165 to 175m and adjusted Net Profit of € 130 to 140m.
