EQS-News: INCITY CLOSES FISCAL YEAR 2023 WITH A CONSOLIDATED LOSS OF EUR 6.0 M ACC. TO HGB – CONTINUED STABLE FINANCIAL SITUATION AND SIGNIFICANT HIDDEN RESERVES

INCITY CLOSES FISCAL YEAR 2023 WITH A CONSOLIDATED LOSS OF EUR 6.0 M ACC. TO HGB – CONTINUED STABLE FINANCIAL SITUATION AND SIGNIFICANT HIDDEN RESERVES

Schönefeld, 25 April 2024 – The annual report of InCity Immobilien AG (“InCity AG”) published today reports a net loss (acc. to HGB) of EUR 6.0 m at Group level and a net loss of EUR 9.7 m at single-entity annual financial statement level for fiscal year 2023. This means that the final results are below the forecast revised in December 2023. In this respect, the Management Board’s expectations and plans for the InCity Group and at the level of InCity Immobilien AG were not met in the course of 2023. The significantly lower result compared to the prior fiscal year (2022: EUR -2.9 m at Group level and EUR -1.9 m at single-entity annual financial statement level) is primarily due to a decrease in EBITDA as well as two extraordinary depreciations on portfolio properties.

As of the balance sheet date on 31 December 2023, the InCity Group’s property portfolio comprised seven properties in total, five residential and commercial buildings and two office properties in Berlin and Frankfurt am Main. The number of portfolio properties held by InCity thus continued to remain constant in fiscal year 2023. As at the balance sheet date of the prior year, we again subjected our portfolio properties to a market valuation by a third party as of 31 December 2023. Based on this market valuation amounting to EUR 177.5 m (31 December 2022: EUR 207.0 m)for the seven portfolio properties held by the Group as of the balance sheet date, and taking into account the other Group balance sheet items, a net asset value of EUR 1.30 per share results (31 December 2022: EUR 1.66 per share).

The year-on-year decrease in the seven portfolio properties’ market values assessed by a third party is mainly attributable to an increase in the capitalisation rates used. For “Stiftstrasse 18/20” in Frankfurt am Main and for “Oranienburger Strasse 39” in Berlin, extraordinary and non-liquidity-related depreciations – as described above – became necessary for HGB accounting, as the currently determined market value is below the HGB carrying amount in this case (at amortised cost: acquisition costs reduced by the standard amortisation according to the expected useful life). The difference between the market value and the carrying amount of all seven portfolio properties – known as hidden reserves – amounts to approximately EUR 33.9 m as at 31 December 2023 (31 December 2022: approx. EUR 58.3 m). Despite the decrease in market values as of the balance sheet date, the market values are therefore about 24% higher than the HGB carrying amounts overall.

The InCity’s Group EBITDA was approximately EUR 0.7 m in the reporting year (prior year: EUR 2.6 m). The decrease in EBITDA by approximately EUR 1.9 m is primarily due to non-capitalised investments into portfolio properties incurred in the reporting year that amounted to about EUR 1.2 m and mainly related to the property located at Jägerstrasse 34/35 in Berlin. In addition, revenue fell by approximately EUR 0.4 m while personnel and material costs rose by about EUR 0.3 m.

At single-entity annual financial statement level, the decreased result is primarily due to non-liquidity-related extraordinary depreciation amounting to about EUR 7.1 m on InCity AG’s equity-replacing loans to three of the total seven portfolio-managing property companies, which in turn are exclusively due to the decrease in the externally assessed market values of the respective three portfolio properties. The fact that the internal corporate operating asset management fees were restructured also had a negative impact on the result. These will no longer be collected by InCity AG from fiscal year 2023 onwards, but instead by IC Immobilien Betriebsgesellschaft mbH, and will therefore flow indirectly to InCity via profit distributions in future.

High equity ratio documents stable financial situation

The Group’s equity ratio was approximately 50% as of the balance sheet date (31 December 2022: 46%) and documents its stable financial situation. In spite of the consolidated net loss for the year, the equity ratio increased on the previous year. This was mainly due to the balance sheet being contracted as a result of the partial handover of the office property in Schönefeld, which was built as a general contractor for a third party, and the HGB depreciations on the portfolio properties.

Cautiously optimistic outlook for fiscal year 2024

Fiscal year 2024 will be characterised by a clearly negative net income for the year, particularly in InCity’s consolidated financial statements. However, it must be taken into account that ordinary HGB depreciation of around EUR 2.0 m on property, plant and equipment (of which around EUR 1.8 m is attributable to the portfolio properties) will particularly reduce the planned Group results. Furthermore, the forecast for the consolidated financial statements in fiscal year 2024 includes portfolio investments between EUR 3.1 m and EUR 3.6 m that are not capitalised on the balance sheet but instead reduce the Group results. The vast majority of all the planned investments are value-enhancing measures. The realisation of profits from the general contractor agreement for the construction of a new building in Schönefeld is an integral part of the Group forecast for 2024 and will have a positive effect on results. The Company currently projects a total net loss for the year of between EUR -3.5 m and EUR -4.0 m for the InCity Group, without considering positive earnings contributions from potential future acquisitions or sales of portfolio properties in 2023.

Even though the upturn in prices has slowed noticeably since the fourth quarter of 2023 and the European Central Bank (ECB) has refrained from further interest rate hikes since September 2023, interest rates and prices are likely to continue to have a significant impact on economic development in Germany in 2024. Although several experts expect economic growth to recover in the course of 2024, it is likely to gain momentum later than initially assumed. Despite the fact that the growth forecasts for 2024 were most recently downgraded multiple times, stronger growth is considered likely for 2025. “InCity is countering the scenario of subdued short-term economic development that is expected to improve more significantly only towards the end of 2024 with a low LTV ratio compared to the sector as a whole and a solid equity ratio”, says Michael Freund, CEO of InCity Immobilien AG. “We continue to regard the general conditions for InCity’s business model as largely stable, and, in our opinion, the most significant potential impact of Inflation and globally disrupted supply chains on InCity’s business development continues to be possible increases in energy, building material and construction service prices in connection with InCity’s own project developments. However, at this juncture, we do not expect the relevant costs to rise significantly above the level assumed in the current plans, especially as the construction project in Schönefeld, which is currently being realised, has already been largely handed over to the client.”

As a multi-disciplinary real estate company, InCity Immobilien AG (referred to in the following as InCity AG) is dedicated to creating and increasing the value of property portfolios and operates in the fields of asset management and project development. For its property portfolio, InCity AG focuses on the real estate markets of the two major cities Berlin and Frankfurt am Main and pursues a sustainable investment strategy. The decisive factors here are location, property quality and long-term value stability. Accordingly, the portfolio consists of high quality core properties with value stability in Berlin as well as properties in locations in Frankfurt that are attractive in the long term with investment volumes between EUR 5 m and EUR 50 m. In addition, InCity AG assumes comprehensive and individually developed asset management contracts for third parties. InCity AG significantly strengthened its project development business unit in July 2021 by undertaking a contract, as a general contractor, for the construction of a new office property in the immediate vicinity of the Berlin-Brandenburg (BER) airport, as well as adding its own project development activities.
Visit the website for further information about the company: www.incity.ag