The DIC Group is one of the leading investors in the German market for commercial real estate

Press Release

DIC Asset AG posts further marked increase in FFO

Frankfurt, 13.11.2012

• Vacancy rate improved significantly, to 11.7 per cent
  (9M 2011: 13.5 per cent)
• Operating profit FFO up 8 per cent, to EUR 32.2 million
  (9M 2011:  EUR 29.8 million)
• Volume of acquisitions rises to EUR 113 million
• Realised sales in excess of EUR 100 million
• Forecast for 2012 FFO affirmed, at EUR 43 million to EUR 45 million

DIC Asset AG (German Securities ID 509840 / ISIN DE0005098404) today presented its interim report for the first nine months of the 2012 financial year. In an economic environment that remains unstable, DIC Asset AG generated significant increases in its operating business. The Company is well on track to achieve the announced targets for the current year.

Key results at a glance:
DIC Asset AG's gross rental income for the first nine months of 2012 amounted to EUR 94.3 million - a notable 10 per cent increase. It also succeeded in bringing the vacancy rate down to 11.7 per cent, which is notably below the long-term average of 13 per cent for the first time in several years (30 Sep 2011: 13.5 per cent). FFO (funds from operations) rose to EUR 32.2 million, up 8 per cent year-on-year. DIC Asset AG thus generated consolidated profit of EUR 7.6 million, which is slightly below the previous year's figure (9M 2011: EUR 8.1 million). This is mainly due to higher staff and interest expenses. All told, the Company followed up on the positive performance achieved during the first half of the year, generating FFO per share of EUR 0.70.

Detailed review of nine-month performance:
DIC Asset AG's gross rental income amounted to EUR 94.3 million (9M 2011: EUR 85.8 million). The 10 per cent increase was attributable to portfolio growth, and to the Company's sustained strong rental performance. Reflecting higher costs that cannot be allocated to tenants, net rental income grew at a rate of 7 per cent, to EUR 84.4 million for the first nine months (9M 2011: EUR 78.8 million). At EUR 3.6 million, fees from real estate management matched the previous year's level. Higher fees from real estate management services rendered to the "DIC Office Balance I" special fund thus offset the loss of fee income - as planned - following disposals of other co-investments as well as the full acquisition of three joint-venture portfolios in the autumn of 2011. Total revenues increased by 8 per cent, to EUR 120.4 million for the first three quarters, in particular due to the higher level of rental income.

DIC Asset AG increased its letting volume during the third quarter of 2012, to 61,000 sqm (Q2 2012: 60,000 sqm). During the first nine months, new rental contracts or renewals were concluded for properties with an aggregate floor space of some 173,000 sqm (9M 2011: 202,000 sqm); the 14 per cent year-on-year decrease reflected the portfolio conditions, and was in line with planning. New rentals accounted for 82,000 sqm, with the remainder of 91,000 sqm in renewals. Total new rentals were equivalent to annualised rental income of EUR 18.4 million; thanks to the higher rental levels negotiated, the figure was down only slightly on the previous year's level (9M 2011: EUR 19.5 million). On a like-for-like comparison, the growth in rental income was similar to the previous year at 0.6 per cent (9M 2011: 0.7 per cent). Thanks to the strong rental performance, the occupancy rate rose by 1.8 percentage points year-on-year, to 88.3 per cent (30 Sep 2011: 86.5 per cent - 30 June 2012: 88 per cent). The end-of-year target is approximately 88.5 per cent. Year-to-date rental performance has reduced the volume of potential expiries in 2012 by more than a half, from 9.9 per cent of annual rental income to 3.4 per cent. At the same time, potential lease expiries for 2013 have also been reduced, from 9.6 to 5.9 per cent.

With a further acquisition due in November, the year-to-date volume of acquisitions in 2012 adds up to some EUR 113 million. DIC Asset AG has acquired the "Looper" office property - located in Duisburg's Inner Harbour - for the DIC Office Balance I fund, in which DIC Asset AG holds a 20 per cent stake. The investment amounted to approximately EUR 27 million. The 10,000 sqm multi-tenant property is let on long-term contracts (with an average term of around six years) to numerous business tenants from diverse sectors (industry, transport, financial services).

The sales volume reached EUR 101 million as at the end of September. After the end of the reporting period, DIC Asset AG sold two co-investment properties in Mörfelden-Walldorf (close to Frankfurt airport), for EUR 8 million, plus an office property in Dusseldorf for EUR 6 million. Following disposal of the "Bienenkorbhaus" property in Frankfurt, which was sold from the Commercial Portfolio in October for approximately EUR 73 million, business during the fourth quarter continues to develop briskly. With these sales, we have significantly exceeded the market and book values of our properties.

The net interest result for the first nine months of 2012 amounted to EUR -42.5 million (9M 2011: EUR -41.0 million). The fact that the net figure only exceeds the previous year's figure by EUR 1.5 million (4 per cent), in spite of the significantly higher financing volume, is due in particular to lower interest rate levels. Interest income rose by EUR 1.9 million, to EUR 7.5 million, also due to the extension of a short-term bridge loan to a MainTor project development company. Interest expense rose by EUR 3.4 million, to EUR 50.0 million, mainly due to the higher financing volume and to interest expenses for the bond issue that did not accrue fully during the same period of the previous year.

The average maturity of financial liabilities of EUR 1.53 billion (31 Dec 2011: EUR 1.52 billion - 30 Sep 2011: EUR 1.41 billion), stood at around three years as at 30 September 2012. During the first three quarters of 2012, 16 loans financing the entire real estate portfolio under management were arranged with around one dozen banks, in an aggregate volume of approximately EUR 550 million. The average interest rate on financial debt stood at 4.10 per cent as at 30 September 2012 - down 25 basis points compared to the 2011 year-end (Q4 2011: 4.35 per cent).

Reflecting the boost in business activities and the portfolio growth, personnel expenses increased to EUR 9.0 million (9M 2011: EUR 7.1 million), in line with planning, whilst administrative expenses of EUR 6.4 million were up only slightly on the previous year's level (9M 2011: EUR 6.2 million). The operating cost ratio (defined as the ratio of staff and administrative expenses, adjusted for fees from real estate management, to gross rental income) was 12.5 per cent. The end-of-year target for the cost ratio is unchanged, at 11-12 per cent.

At EUR 32.2 million, the FFO (funds from operations, defined as earnings before depreciation and taxes, excluding profits from disposals and development projects) for the first nine months of 2012 was up by 8 per cent year-on-year (9M 2011: EUR 29.8 million), mainly on account of the larger portfolio and successful rental activity. FFO per share increased to EUR 0.70 (9M 2011: EUR 0.68). Consolidated profit for the period of EUR 7.6 million (9M 2011: EUR 8.1 million) was down 6 per cent year-on-year - as expected, and due, amongst other factors, to higher staff and interest expenses. DIC Asset AG has succeeded in reducing the difference to the previous year's results since the first quarter of 2012 (difference 6m 2012 vs. 6m 2011: EUR -1.1 million). The result is equivalent to earnings per share of EUR 0.16 (9M 2011: EUR 0.18).

Cash flow generated from operating activities rose strongly, to EUR 35.6 million, up 11 per cent (9M 2011: EUR 32.1 million). Specifically, the increase reflects higher rental income (on account of the larger portfolio). Cash and cash equivalents totalled EUR 56.2 million at the end of the reporting period (31 Dec 2011: EUR 100.2 million); the decline was predominantly a reflection of the use of funds for acquisitions, as well as the dividends distributed in July.

Real estate assets under management currently stand at around EUR 3.3 billion, whilst DIC Asset AG's total assets of EUR 2.2 billion were in line with the level at year-end 2011 (31 Dec 2011: EUR 2.2 billion). The net debt equity ratio (based on net liabilities, and adjusted for effects of derivatives) was 30.5 per cent as at 30 September 2012 (31 Dec 2011: 31.7 per cent).

Development of the MainTor quarter in Frankfurt, in which DIC Asset AG holds a 40 per cent stake, is progressing ahead of schedule. Spreading this development across several independent sub-projects (which differ both in terms of schedule and properties) brought about the risk-minimising effects desired (and honoured by the market). We have been able to market and bring under construction about half of this city quarter project clearly ahead of schedule, which has significantly reduced the overall project risk. Marketing for around 100 condominiums within the MainTor Palazzi (with aggregate floorspace of approximately 10,000 sqm) will commence in December, in a very dynamic market for residential real estate. With a project volume of around EUR 75 million, construction of this subproject is scheduled to start in late summer 2013.

DIC Asset AG has already reached the full-year target for fund acquisition volume; EUR 95 million was invested in the expansion of the fund business. Having invested about EUR 365 million in our special investment fund business to date, we already have realised more than half of the planned investments (up to EUR 700 million) in both funds. Two properties are being acquired for the "DIC Office Balance I" office real estate fund: the new "Loftwerk" office development in Eschborn near Frankfurt (for around EUR 44 million), plus the attractive "Looper" property in Duisburg. First purchases were also made for the developing "DIC HighStreet Balance" retail real estate fund: ownership of a property based in Dresden (worth approximately EUR 17 million) passed to the fund at the end of September, and a property in Mannheim (approx. EUR 8 million) was acquired in October. Equity raising for the fund is also progressing well, with negotiations that offer good potential.

Outlook for 2012 and beyond: despite the prevailing sovereign debt crisis, the real estate business is very stable indeed - particularly in Germany. DIC Asset AG is very confident that it will achieve its forecast FFO of between EUR 43 million and EUR 45 million for the 2012 financial year (FY 2011: EUR 40.6 million), with an FFO per share of approximately 1 euro. The basis for this will be provided through the target end-of-year letting rate of around 88.5 per cent (2011: 87.6 per cent), and rental income within a range of EUR 124 million to EUR 126 million. From today's perspective, DIC Asset AG expects total acquisitions to reach a volume of some EUR 150 million by the end of the year. The Company is well-positioned to face any potential weakness in economic development in 2013. DIC Asset AG has the necessary funds to take advantage of selective growth opportunities and to retain its financial flexibility.

Ulrich Höller, Chairman of the Management Board of DIC Asset AG, commented: "DIC Asset AG's earning power and quality of its portfolio keep rising continuously, and provide for steadily increasing operating profit."

About DIC Asset AG
Established in 2002, DIC Asset AG, with registered offices in Frankfurt/Main, is a real estate company with a dedicated investment focus on commercial real estate in Germany, pursuing a return-oriented investment policy. Real estate assets under management amount to approx. EUR 3.3 billion, comprising around 270 properties, of which EUR 2.2 billion is carried on DIC Asset AG's balance sheet. The Company's investment strategy is geared to the continued development of a high-quality, highly profitable and regionally diversified portfolio. The real estate portfolio is structured in two segments: the Commercial Portfolio (EUR 1.9 billion) comprises existing properties with long-term rental contracts generating attractive rental yields. The Co-Investments segment (EUR 0.3 billion) comprises fund investments, joint-venture investments, and interests in development projects. Own real estate management teams provide a direct service to tenants through six branch offices located at the regional hubs within the portfolio. This provides an edge in terms of market presence and expertise, and builds the foundation for maintaining and increasing the value of real estate assets. DIC Asset AG has been included in the SDAX® segment of the Frankfurt Stock Exchange since June 2006. The Company's shares are also included in the EPRA index, which tracks the performance of the most important European real estate companies.

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