- Assets under Management (AUM) continue to show resilience at EUR 58.2bn (31.12.2022: EUR 59.1bn; -1.7% y-t-d and +0.4% q-o-q) supported by new assets acquired for clients
- Recurring management fees increased by 2.0% to EUR 187.7m (9M 2022: EUR 184.1m) while transaction and performance fees continue to be impacted by the subdued market environment, bringing total service fee income to EUR 228.3m (9M 2022: EUR 248.3m; -8.1%)
- EBITDA of EUR 50.2m came in below last year’s levels (9M 2022: EUR 78.8m; -36.4%) but already within PATRIZIA’s full-year guidance range for FY 2023 of EUR 50.0 - 70.0m driven by operating successes as well as supporting revenue items in other income
- Comprehensive adjustment of PATRIZIA’s cost base announced that will drive recurring costs below recurring income throughout market cycles. EBITDA FY 2023 likely at the lower end of the EUR 50.0 – 70.0m guidance range due to one-off reorganisation costs
- Dividend payments will be based on a profitability KPI going forward
Augsburg, 13 November 2023 PATRIZIA, a leading partner for global real assets, today published its 9M 2023 financial results. While PATRIZIA’s operating business continued to be impacted by an environment of continued market uncertainty, high inflation and rising financing costs, the third quarter showed a solid performance driven by operating successes while being supported by other operating income.
AUM decreased moderately by 1.7% to EUR 58.2bn (31.12.2022: EUR 59.1bn) mainly due to negative valuation effects of EUR 1.8bn (or -3.1%) during 9M 2023. The comparatively small devaluation effects and general robustness of AUM are attributable to PATRIZIA’s broad geographical and sectorial diversification across real estate and infrastructure. In addition, PATRIZIA successfully signed and closed transactions on behalf of clients, supporting the development of AUM with EUR 1.3bn – this partially offset market induced valuation pressure.
Recurring management fees continued to grow by 2.0% to EUR 187.7m (9M 2022: EUR 184.1m) with a solid third quarter supported by client project development service fees and client debt structuring fees. Management fees represented more than 80.0% of total service fee income in 9M 2023.
At the same time the subdued market environment led to a decline of more than 30.0% in both transaction fees amounting to EUR 8.8m (9M 2022: EUR 14.5m) and in performance fees amounting to EUR 31.7m (9M 2022: EUR 49.8m). Subsequently, the continued growth in management fees could not fully compensate for the market-driven weakness, leading to an 8.1% lower total service fee income at EUR 228.3m (9M 2022: EUR 248.3m).
Net sales revenues and co-investment income declined to EUR 4.4m (9M 2022: EUR 7.9m), mainly due to the profitable sale of one of the last remaining balance sheet properties in the UK (Trocoll House) in the reference period.
Net operating expenses increased by 2.9% to EUR 182.5m (9M 2022: EUR 177.4m), with material one-off income and cost items impacting both periods under review. When looking at the core elements of net operating expenses, staff costs increased by 3.9% to EUR 129.6m (9M 2022: EUR 124.7m) while other operating expenses decreased by 7.6% to EUR 55.5m (9M 2022: EUR 60.1m), showing a combined growth of only 0.2% y-o-y, demonstrating PATRIZIA’s focus on cost containment despite an environment characterised by inflationary pressure. Management will intensify the focus on cost efficiency to not only offset future revenue pressure but also to materially improve the ratio between recurring operating costs and recurring fees, which are largely independent from market and client activity.
EBITDA fell 36.4% to EUR 50.2m (9M 2022: EUR 78.8m) and the EBITDA margin decreased to 21.6% (9M 2022: 30.8%), primarily caused by a largely market-driven decrease in total service fee income.
With a solid net equity ratio of 71.3% and available liquidity of EUR 282.0m, PATRIZIA continues to be well positioned to take advantage of market opportunities as they arise, even in a subdued market environment. During the reporting period, management already saw and executed several opportunities in the market to invest. Management has also started to selectively use existing liquidity to seed invest or warehouse assets, especially in the infrastructure business.
Following a strong first quarter of 2023, a muted second quarter but a solid third quarter of 2023 helped by other operating income, PATRIZIA’s management expects a muted fourth quarter of 2023.
To offset potential further market-driven pressure on revenues going into 2024, management initiated a comprehensive review of the cost base which is expected to lead to reorganisation expenses of between EUR 10.0 – 20.0m in Q4 2023. Therefore, management expects FY 2023 EBITDA to come in at the lower end of the so far communicated guidance range of EUR 50.0 – 70.0m. The measures should bring PATRIZIA’s recurring cost base (personnel expenses, other operating expenses, cost of purchased services) closer to the level of FY 2021, which reflects a cost base before consolidation of two M&A transactions and before inflation started to accelerate. These measures should ensure the Company not only safeguards certain profitability levels in FY 2024 but would also reflect a significant improvement in earnings quality with the vast majority of EBITDA expected to be generated from recurring management fees.
Asoka Wöhrmann, CEO of PATRIZIA comments: “The market environment remains challenging, likely for a longer period than many had initially expected. PATRIZIA’s diversified platform delivered some encouraging successes during the third quarter of this year but we need to weatherproof PATRIZIA for continued pressure on client and business activity throughout 2024. Our clear goal is to create a simpler integrated platform to better meet our changing client needs and to ensure that our recurring management fees more than offset operating costs. This will make PATRIZIA more resilient and independent from market cycles. At the same time protecting and increasing the value of the assets entrusted to us by our clients through active asset management as well as taking investment opportunities which arise in the current environment remains our clear priority.”
Christoph Glaser, CFO of PATRIZIA adds: “Our team has shown a solid performance, especially in the third quarter of this year, which brought EBITDA after nine months already to the lower end of our communicated guidance for fiscal year 2023. Our third quarter performance was nevertheless also supported by other income items which we will not have in the fourth quarter or next year. We currently expect to deliver within our communicated guidance range for 2023 on an operating level. However, we have to prepare for continued pressure on valuations and on performance fees throughout 2024 and thus strengthen our platform efficiency to safeguard bottom line profitability next year and improve profitability going forward. At the same time our strong balance sheet and available liquidity allow us to support organic AUM growth via client investment strategies that deserve support via seed investments and temporary warehousing of assets and portfolios.”
The current dividend policy is based on growth of AUM and growth of management fees. Management intends to base dividend payments on a profitability KPI going forward and will provide an update and a dividend proposal for FY 2023 together with preliminary financial results in February 2024.
PATRIZIA: A leading partner for global real assets
With operations around the world, PATRIZIA has been offering investment opportunities in real estate and infrastructure assets for institutional, semi-professional and private investors for 39 years. PATRIZIA manages around EUR 58 billion in assets and employs around 1,000 professionals at 28 locations worldwide. PATRIZIA has been making an impact since 1984 by helping children in need, since 1992 in close collaboration with Bunter Kreis (“colourful circle”) in Germany for the care of children with severe diseases and since 1999 through its support for the PATRIZIA Foundation. The PATRIZIA Foundation has given more than 600.000 children and young people worldwide access to education, healthcare, and a safe home to get the chance to live a better self-determined life over the last 24 years. You can find further information at www.patrizia.ag and www.patrizia.foundation.
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