The JSE-listed German real estate investment trust (Reit) Deutsche Konsum Reit-AG (DKR) said funds from operations (FFO) declined as a result of higher maintenance costs and net interest expenses.
FFO, which measures a Reit’s performance, fell 5.2% year on year to €10.2m (about R195.6m) in the quarter to end-December despite DKR benefiting from an uptick in rental income at the start of its new financial year that came from from acquisitions and inflation-linked rent increases.
“Significantly higher interest rates are being charged on new loans and refinancing, which is leading to a gradual increase in the average cost of debt,” the company said, referring to a spate of rate hikes by central banks around the world.
Adjusted FFO (AFFO) dropped almost three quarters (71.8%) to €2.15m as DRK increased capital expenditure on the revitalisation of the properties in Stralsund and Ueckermünde from current cash flows.
“The revitalisation measures are nearing completion, so that rising AFFO can be expected again in the following quarters,” the company said.
DRK, founded by Rolf Elgeti, invests in convenience retail properties in micro locations in the central and regional areas outside several German cities.
The company completed a secondary listing on the JSE in 2021, bucking the bourse’s delisting trend. Since then its value has more than quintupled to R4.22bn.
Rental income at DRK, with has a primary listing on the Frankfurt exchange, rose 2.2% year to €18.68m and monthly rent per square metre grew 1.1% in the three months, the first quarter of the company’s 2023 financial year, as it expanded its portfolio to 185 properties valued at €1.1bn.
“The absolute increase in rental income was counteracted in the first quarter by the loss of rents from the properties sold at the end of the last financial year, which were only compensated for from the middle of the first financial quarter by the addition of the properties acquired,” the company said.
DKR forecasts that the FFO will be €40m-€44m in the 2023 financial year, in line with last year’s performance.
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