Aroundtown Sa Ord

Ladies and gentlemen, welcome to the conference call of Around Town FA. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. If any participant has difficulty hearing the conference, please press Starkey, Holiday Zero on your telephone for operator assistance. May I now hand you over to Mr. Viladis, Head of Sustainability, who will lead you through this conference. Please go ahead.

Thank you. Good morning, everybody. Thank you for joining us for Around Town's third quarter 2021 results call. You should have received our press release and can view this presentation on Around Town's website, either on the home section or under financial reports of the investor relations section. I'm Sylvie Lagis, Around Town's head of sustainability. With me today will be CEO Barak Bahen, CFO Ilario Ben-David, Chief Capital Markets Officer Oshri Masachi, executive board member Frank Rosen, and representative from Grand City Properties. For the duration of the call, all participants will be on a listen-only mode. Following our presentation, you will have the opportunity to ask questions. Please feel free to send us your questions via email, also during the presentation. The email address is info at aroundtown.de. With that, I'd like to pass you over to Audrey Masacci. who will start presenting our results.

Thank you very much, Sylvie, and good morning, everyone, and welcome to our third quarter 2021 earnings call for Ransom. We all experienced a mixed first nine months this year. The first half of the year was dominated by lengthy lockdown periods and travel restrictions across our markets. Since mid-June, however, most markets lifted their lockdowns and the pent-up demand from prospective tenants Travelers and investors gained momentum during the course of the third quarter. While some asset classes and markets benefited from the ending of lockdowns more than others, we saw in general a positive trend across our asset classes and regions. Once again, the diversification in attractive asset classes in top locations has served us well as a protection during the entire COVID-19 pandemic so far. This leads me to slide 4, where we want to highlight some key strengths Aroundthon has gained over the years. In the last two years, we achieved significant growth through acquisitions, the merger with GRG, strategic disposals to improve our portfolio quality, the consolidation of GCP, and the joint venture control stake in Global World. Aroundthon is the third largest real estate company in Europe with an asset base of 39 billion euros. Our top tier locations, together with a diversified investment in the most attractive asset classes with 45% offices and 28% residential, have allowed us to benefit from market improvements. The increased economies of scale and well-timed capital recycling of non-core assets led to a further strengthening of our fundamentals, even in times of the pandemic. Successful tender of a for global worth has given us a joint controlling stake of 61% together with our JV partner CPI. Together we explore synergy and variation potential, which we expect to start crystallizing towards the end of the year. In the meantime, we are finalizing the delisting of TLG, which further reduces ongoing costs in the long run, whilst we are continuing with the integration of its high-quality portfolio. At the same time, we introduced several projects to improve sustainability in our portfolio. We put a strong focus on increasing our share in green building certification, and we have introduced an energy investment program. This is not a sprint, but a milestone, and we are implementing our strategy to capture future value creation from a higher quality portfolio, which will attract more ESG-sensitive tenants. On slide 5, we provide a glance of our business and financial performance highlights of the first nine months. Grand City Properties has been consolidated in around one financial since July this year, which is reflected in those figures. The net rental income increased slightly to 773 million euros. Our FFO1 before COVID adjustment amounts to 367 million euros. After the impact of the extraordinary provision, we put in place for this year our FFO1 amounted to 267 million euros. The ongoing share buyback offset the decrease which resulted in an FFO1 per share of 23 cents per share, up 5% year over year and in line with our 2021 guidance. We will provide a breakdown of the different FFO metrics later in the presentation. The like-for-like net rental income excluding hotels resulted in a 1.2% growth for the first nine months, and including the like-for-like effect of our hotels amounted to a 0.6% growth. Note, please, that the like-for-like numbers exclude Grand City properties, which will be included in the next periods. The LCB slightly grew last quarter through 39%, mainly due to the accounting impact of the consolidation of Grand City properties, but remains well below our internal Board of Directors long-term limit of 45%. Again, at the end of Q3, we maintained a strong cash and liquid asset position of 3.3 billion euros, whilst repaying 1.6 billion euros of shorter and more expensive debt over the course of the year. Thus, our cost of debt decreased to our historic lowest of 1.3%, while maintaining our long average debt maturity of close to 6 years. Moving to slide 7, we see that the contribution of residential assets located in top locations has a positive impact on the overall portfolio of the group. leading to a reduced vacancy of 7.7% and the annualized rent increased to 1.2 billion euros on a full consolidation or 8.2% vacancy and 993 million euros annualized rent on a relative consolidation. As a result of the consolidation with GCP and our disposal activity, our portfolio diversification has become more balanced as the residential asset type stands now at 28% whilst offices remain nearly half of the portfolio value, and the hotel portfolio reduced to 18% from 24% last June. In the past, we presented the portfolio with our relative position in the residential portfolio, but with the consolidation taking place, the residential portfolio becomes visible with the around-the-world portfolio and reports. The consolidation with GCP has further enhanced our competitive strengths, of a diversified investment strategy into the top European asset classes and locations that we break down on this slide. These elements of diversification protect us to some degree in volatile times linked to microeconomic or domestic uncertainties, but also during times of political change. Such events will therefore not have a negative impact on our entire portfolio equally. On slide 8, we highlight the growth of our investment platform from December 2019 to September this year. Over the last two years, the scale of investment properties grew over that period by 60%, from €18.1 billion to €29 billion, which includes the merger with TLG and subsequent disposals, which improved the portfolio quality as did the consolidation of GCP. Excluding the consolidation impact of Grand City, the investment properties increased by 11% and the higher portfolio quality becomes evident in the increase in value per square meter over time, which increased by 15% since December 2019, notwithstanding the pandemic period. Yes, we maintained our defensive leverage level and conservatively funded our growth through disposals and low-cost debts. Our portfolio is continuously revaluated by external valuers at least once per year, and our disposals above book value, which I will elaborate in more detail shortly, validate these conservative valuations. Both around town and Grand City are in continuous negotiations for further asset acquisitions, but we remain disciplined and patient to close deals on accretive investments once they arise. As can be seen on slide 9, since December 2019 we report a larger portfolio allocation in our core asset classes as well as in our preferred markets. Our focus increased in top tier cities in Germany, the Netherlands and London from 62% to 66%. The increased share in office, residential and hotel grew to 91% and in parallel we reduced the share in non-core asset types to 9% from 12% in December 2019. This stronger portfolio gives us a larger base of high-quality assets with an increased focus on top locations where we see further growth potential in rent as well as capital values. Moving to slide 10, you see the split of our size disposals year-to-date of 2.5 billion euros, of which 1.1 billion euros have been closed as of September as of September at 51% margin over total costs with 3% margin over book value. 34% of disposals were located in non-core locations. The split of disposals was made up of 39% offices, 30% hotels, 22% retail and logistics and 9% development rights. These disposals of non-core and mature assets above book value once again validate the conservative external valuations of our portfolio throughout the pandemic. As demonstrated last year already, by means of the successful disposal activity, we capitalized on significant value creation and recycled the funds to repay shorter and more expensive debts, as well as execute a critical share buyback at a significant discount to our IPRA NTA, which creates long-term shareholder value. We continue to execute our share buyback program of up to 500 million euros by year end, announced back in March of this year, of which 80% has been already executed as of last week. The overall buyback program started back in 2020, where we bought back 1 billion euros at an average share price of 4.9 euros. These share buyback programs allow us to reinvest capital from successful disposals into our own portfolio at higher quality with a significant discount to the MTA per share. So far, we repaid 1.6 billion euros of debt this year, of which 1.1 billion euros were bond repayments with an average coupon rate of 2.2% and the remaining repayments of bank debts. As illustrated on slide 11, We present our tenant diversity with around 3,500 commercial tenants from various industries across our properties with limited exposure to any single tenant and additional 65,000 units from Grand City. Over time, our tenant dependency remains low as the rental income of our largest 10 tenants accounts for less than 20% of the group's updated total rental income. A round-round group portfolio platform after consolidation of GCP came in at nearly 29 billion euros and demonstrates the significant economies of scale potential that can be achieved, placing us amongst the three largest listed European real estate companies. The analyzed net rent came in at 1.2 billion euros and on a relative consolidation level of GCP, 993 million euros. with a portfolio size of 24.2 billion euros. End of Q3, the rental yields stood at 4.5%, whilst the vacancy rate of the group reduced to 7.7% consolidated, or 8.2% at relative consolidation. We will, of course, continue to work relentlessly on our letting activities in order to reduce vacancies in the coming periods. On slide 12, We highlight our revisionary upside potential in our total portfolio, including consolidating Grand City. The September 2021 rental income run rate, excluding assets held for sale, of course, amounted to 1.194 billion euros on an annualized basis. Assuming no further acquisitions and disposals and no changes to today's market rent in the locations of our assets, The gap to market rent results in a 22% rental growth potential, including filling our vacancies. Our development rights are excluded from this calculation and would be added to the total upside potential. We are able to achieve the repositioning of the assets with our experience management and operational platforms, which is supported by the sustainable, strong fundamentals of our main markets. As we highlighted previously, This upside potential has served us well as a downside protection from the existing debt-to-market rent levels and ensures our in-page rents have a strong buffer in case of weakening rents. Yet prime rents remain stable in our office market locations during 2020 and 2021. The healthy wall stood at 7.8 years at the end of Q3 and was achieved through our ongoing letting efforts. Our asset valuations and our locations are significantly lower than the replacement costs and this further ensures stable valuations in the long term with upside potential. As shown on slide 13, our office assets represent the largest portion of our group portfolio with 45%. And we continue to be the largest office landlord amongst listed real estate companies in Berlin, Frankfurt and Munich. Yet other central locations and top tier cities of Germany and the Netherlands remain our focus as shown on the price chart. With a balance wall of 4.6 years and no significant dependency on a single tenant or location, we continue to maintain a well diversified and robust tenant structure. Over 45% of the office rent comes from tenants in the strongest industries such as insurance, banking, governmental, infrastructure, health or energy. We maintain good relations with the public sector, which represents by far our largest tenant segment with 29% of the rent. Moreover, the private sector values us as a top service provider and we foster long-term relationships with some of the largest tenants in Germany, such as the German and Dutch government, Bundesbank, Allianz, Siemens, Deutsche Bahn and many more. The office market in our locations remains with positive trends. We have seen a rebound from pent-up demand this year. As lockdowns were lifted and travel restrictions eased, potential new tenants were more decisive in 2021 to commit to signing new leases. Due to our disposal and letting activities, we were able to reduce our office vacancy further to 10.5% from 11.6% since December last year. Prime rents remain stable and only in secondary locations we saw stagnation or small decline in rent levels. However, as new leases are signed for a bit shorter periods on average, we believe to have the possibility to catch up to market rents in the near future, assuming no long-term negative impact will crystallize from the pandemic. Although 2021 showed a positive increase in letting demand when comparing to 2020, We remain cautiously optimistic as the number of infections increases across European markets as we speak, and we cannot rule out further lockdowns or other restrictions, all of which might have a negative impact on the office sentiment in the market. Moving to slide 14, we illustrate the continuous resilience in the top eight German plus Amsterdam office markets since Q4 2019, just shortly before the outbreak of the pandemic. These main metropolitan cities entered the pandemic in a very strong shape, which has mitigated the impact of the pandemic. Year-over-year Q3 2021 has shown a good uprise in office take-up by 37%. Prime rents as well as use also further strengthened, especially in the last quarter. Pre-lab ratios of new developments have shown a similar trend. Meanwhile, vacancy levels continue to increase only marginally, but remain at record low levels of about 5% on average, compared to 11% just before entering the global financial crisis in 2008. Our long-term holding in the residential sector through Grand City is reflected on slide 15. The diversification to residential assets in the top German cities plus London continues to be a strong element of our long-term investment strategy. The German residential asset class has proven to be the most resilient type of European real estate during the pandemic, whilst like-for-like rental growth reached 2% and like-for-like capital values further grew by 4% in September. At full consolidation, the residential asset class represents the group's second-largest type with 28% of the portfolio value after offices. With Berlin, North Rhine-Westphalia, London and other German key cities as growth drivers, Grand City is very complementary to Rantan's top tier investment locations. In face of a housing shortage, increased rent levels and low interest environment, we continue to see strong demand for condominiums, in turn growing capital values for German residential assets, across almost all main and secondary cities during the pandemic and lockdown. I'll now hand you over to Barak, who will continue with the portfolio.

Thanks, Osli. On slide 17, we summarize our hotel portfolio. The portfolio is located across top European cities, such as Berlin, London, Brussels, Paris, Frankfurt, and many other key cities. We focus on a strong geographic diversification that spans across operators and hotel types. The core of our hotel portfolio is 85% of four-star hotels, which capture both segments, leisure and business travelers. Due to the increased share in residential assets and hotel disposals, the share of this asset class reduced from 24% in June to 18% in September this year. During the summertime this year, similarly to last year, the hotel industry, and particularly the leisure hotel, experienced a revival as the lockdowns were lifted. We felt this redirection of the hotel business also across our portfolio, which was reflected in nearly double the collection rate for Q3 in comparison to Q2 of this year. Yet, it was not a balanced reopening as laser tourism took the lead while its business travelers were only slowly starting to meet in person again. Demanding on the hotel market is highly dependent on the degree of restriction. The easing of the restrictions that took place in the second quarter and continued in the third quarter has resulted in a clear increase in hotel demand in our markets. The positive development in the hotel market shows that there is a substantial pent-up desire for travel, which is quickly converted into demand once restrictions are reduced and it becomes easier to travel again. However, the effect of the pandemic remains. Infection rates are currently surging again, and travel as well as other lockdown restrictions are changing constantly, despite being in a different situation than last year, as the majority of the population has been vaccinated. Thus, as the related uncertainty of potential further lockdowns or other restrictions remains, it is difficult to make a qualified assessment of how this winter will be developed compared to last winter. it is difficult to assess how seasonal variations in the spread of the virus and new virus mutations may be expected to impact travel restrictions and hotel demand. We remain confident that our hotel investment will recover in the mid to long term when we have a higher certainty that lockdowns and travel restrictions will be a companion of the past. Until then, we remain cautious as we watch European countries considering again stricter travel restrictions in light of rising infection cases. Slide 18 highlights the collection rate of 60% for Q3. This compares to 34% collection during H1 this year, of which most time was shadowed by lengthy lockdown periods, with most hotels being closed for business. The steep increase in collection rate of Q3 shows that people want to travel, and validate the investment case for quality hotels in top destinations. During the summer vacation period, the laser segment drove most of the demand. Independent market reports do not expect business and international travel to fully recover to 19 levels before 2023 or 2024. This also depends if hotels remain open for business and no further travel restrictions will be implemented again next year. Our historically high ratio of domestic travel demand in Germany and the Netherlands and the UK from nature and business travelers acted as a support for the summer demand we saw. Nonetheless, we remain cautious for the coming period. In October, we saw 60% collection rate that was slightly supported by business travelers and we hope the trend will continue to remain stable and not decline because of the recent increase in numbers of infections and restrictions. Corporate travel would take longer to rebound in significant volume. Moreover, the spike in later traveling will most likely level again to some degree as countries discuss new travel restrictions for the upcoming Christmas vacation period.

Thank you, Barak. And please move now to slide 18, where we summarize our remaining logistics and research portfolios. Throughout this year, we experienced a dynamic transaction market for these two asset types due to stronger e-commerce and essential goods, which benefited from impact by the pandemic. As we see these assets mainly as non-core, we identified further disposer opportunities and achieved additional successful asset disposers during Q3 in order to recycle the capital. Our updated remaining position of these asset types At the end of Q3 were 7% in retail, down from 9% of the group portfolio value in March 2020, and 2% in logistics, down from 7% during the same period. Their walls are 4.7 years and 5 years respectively. The top investment location for both asset classes remains again Berlin, with around 40% of the asset value in each segment. Over 40% of the remaining retail assets are attached to good stores, such as supermarkets, pharmacies or drugstores. They appear resilient and experience high demand even during times of lockdown. We present on slide 19 the composition of our development and building rights portfolio. The development segment makes up only 6% of our total assets and is therefore not material on a group level, but it is a growth driver that gains more importance with each year as we lift more value through identification and obtaining building rights, as well as selective construction. This portfolio implies significant upside potential, given the shortage in new supply across many prime locations. The composition is illustrated on the two pie charts on the right-hand side, which now also account for Grand City. with Berlin as the most attractive single location with 47% of the value embedded. Grand City, on a standalone basis, also identified most development rights in its Berlin portfolio. We regard the German capital as the most attractive location in Germany for development due to its attractiveness and severe shortage of housing. In terms of asset-type breakdowns, 45% of this segment are offices, which matches the undersupply of office space in several prime locations. The locations of our development rights include Berlin, Paris, Dresden, Munich and Frankfurt. These five hubs together make up 85% of this segment. In most cases, we aim to sell these building permits. However, if we see significant yield potential and strong tenants with long-term pre-let agreements, We will also undertake projects ourselves for which we employ third-party developers. We have added additional development projects in the appendix of this presentation for which we recently obtained building permits or free permits. Also, we just hold a development right in Berlin Mediaspray above book value. On slide 20, we show our overall strong commitment to ESG. ESG is a complex topic. Therefore, choosing the right priorities has been very important to us in order to build the foundation of a successful ESG transformation. On the environmental side, we have set a clear and ambitious target to reduce CO2 emissions, water consumption and at the same time to increase awareness. We aim to use energy and water as wisely and efficiently as possible. To achieve these goals, We have, amongst others, implemented an energy investment program covering the entire portfolio and at the same time started a pilot program in the Netherlands to green certify one-third of the assets. The goal of this pilot project is to gain relevant experience and subsequently roll out across all portfolio locations and significantly increase the share of our green certified portfolio. For more information on this, please refer to the appendix. On the social responsibility side, Arantron aims to develop societies with a long-term perspective where people's needs and well-being are at the center. It means that we are actively committed in cities where we operate, as well as cooperating with tenants, municipalities and other partners. And naturally, we look out for and care for our employees. Under social responsibility, our foundation plays a very important and active role to keep the company involved with the communities in our markets. For instance, following the unfortunate flood disaster, we donated funds to a local partner to help with the cleanup, provided accommodation to local volunteers in our hotels, and encouraged the engagement of our employees during our Social Day 2021. Finally, Around Home puts a strong emphasis on corporate governance. executed responsibly by the board of directors and the management body. We direct our efforts to maintain a high trust received from our stakeholders to balance interests. Our efforts to improve corporate governance have been recognized by institutions such as APRA and Sustainalytics on many occasions over the last years and we have received awards as recognition of our focus and strong progress in this area. I will now hand you over to Yael to present to you the financial results.

Thank you, Oshri. On slide 22, we present the profit and loss results for the first nine months of the year. Our recurring net return on income in the first nine months resulted in €755 million. That's a growth of 38% compared to the two years ago, resulting mainly from the consolidation of the GCP and including the TLG merger, and subsequent disposals. Excluding GCP, the rental income increased by 21%. In this figure, as well as the adjusted EBITDA and FFO, we exclude the impact of the assets that are already marked for sale despite their positive cash flow. Our life-for-life net rental income excluding hotels amounted to 1.2% in September. Although the hotel business experienced a rebound during Q3, The impact of the lockdown in the first half of the year left its scar, and the hotel segment reduced the like-for-like growth to 0.6% over all years of the year, of which 0.9% comes from interest rates and minus 0.3% from occupancy decrease. Please note that the like-for-like calculation does not include GCP. We'll start to include GCP in the like-for-like calculation in the next period. We recorded property revaluations and capital gains in the amount of 322 million euros from revaluing around 60% of our portfolio in the first nine months. We will revalue the remainder of the portfolio by the end of this year. Capital gains gained at 32 million euros for the nine months, fueled by additional strong disposals above book value. Due to the challenging start during the first six months of this year, The collection of elements remains subdued, and we booked an extraordinary provision in the next amount of €25 million for Q3, or €100 million for the first nine months, in line with our guidance. The collection in Q3 was improved, and a lower provision was required. Administration and other expenses only slightly increased, whilst finance expenses decreased further due to our ongoing liability management optimization efforts. The deferred taxes expenses decreased from €267 million to €64 million year-over-year, in line with the evaluation recorded in the period and relevant tax rates in the locations of our properties. The net profit for the nine-month period amounted to €650 million, generating 40 cents earned per share. Moving to slide 23, the adjusted EBITDA amounted to €715 million in the first nine months of this year, just marginally down compared to the same period last year, and mainly as a result of further successful disposals. The adjusted EBITDA calculation is already after excluding over €9 million contribution of assets classified as L4L, and therefore referring only to the recurring long-term portfolios. Positive contributions derived from our proportional holding in GCP for the first half of the year and other JD investments for the complete period, which contributed 92 million euros in the first nine months. In the graph below, you see the accreted growth of 20% of the adjusted EBITDA before JD contributions in the past two years as a result of net acquisitions. The consolidation of GCP in the third quarter further supported the growth to 36%. Slide 24 provides a detailed view of our platform operations. Our FFO1 for the first nine months amounts to 267 million euros or 23 cents per share. Both figures are in line with our full year 2021 guidance range. The decrease on the absolute level continues to be mainly the result of our successful disposal as well as the provision for uncollected brands. On the other end, our disciplined debt repayments, which improved the FFO in the long term, leads to lower costs of debt and provides more stability from longer debt maturities. In addition, we start to see the effects of our share buyback programs and have been able to increase our FFO1 per share slightly year over year, offsetting the decrease in absolute FFO1. The FFO1 per share before COVID adjustments increased by 11% to 31 cents year over year which again emphasizes the positive effects of the share buyback program and indicates the performance that can be achieved once lockdowns are permanently lifted and the economy rebounds. That figure is also a good reflection for our efforts to work on multiple options to increase shareholder value long-term when rents will recover. Please keep in mind that the consolidation of GCP has no effect on the SFO results. As we continue to apply the relative share in GCP as before, but now we deduct the minority whereas before adding only our share in GCP's FFO. As a result of further successful disposals in the third quarter, the total profit from disposals in the first nine months amounted to 383 million euros. The FFO2 therefore increased to 650 million euros from 581 million euros 12 months earlier. On slide 25, we provide again a detailed breakdown of all three EFRA energy metrics and the change since end of last year. Since December 2020, the EFRA NTA per share increased by 5% dividend adjusted to 9.8 euro per share, or 11.4 billion euros in total. Clearly, our ongoing buyback program had a positive effect on this figure. Note the following EFRA guidelines. Goodwill is being deducted, and therefore any change in goodwill is neutral on all NAV metrics. You can see in the table the deduction of the goodwill from GCP and TOG. For the consolidation of GCP, we kept the GCP's assumptions in regard to the inclusion of deferred taxes and realtor transfer taxes. We will give more information in the year-end results. The ongoing significant discount of the share price to the differentiator share in the face of our disposal of the buff book values presents how accretive the ongoing share buyback is to all our shareholders. It also highlights the perception mismatch of valuations between the real estate transactional market compared to the stock market. This was further underlined by recent M&A deals in the market where we operate. With that, now back to Oshri to conclude the final part of the presentation.

Thanks, Eyal. Maintaining a healthy capital structure is a top priority for us in the long term. Our strong fundamentals and conservative financial ratio continue to be the basis for our group strategy, and they have proven to be essential during times of the ongoing pandemic. Our debt maturity profile on slide 26 shows shows no major debt expiries coming up until the beginning of 2025, except for one low-coupon €600 million senior bond expiring in Q3 of next year. As mentioned earlier, the LTV increased to 39% in September, which is mainly due to the consolidation of GCP, where debt must be consolidated at market values following IFRS accounting treatments. Nevertheless, GCP's conservative debt profile is supportive for the company and impacts positively the company's financial metrics. As we remain significantly below our LTV policy of 45% and maintain sufficient headroom through all our governance. Moreover, as a result from our ongoing liability management efforts, we further reduce our low average cost of debt to our historic low of 1.3%, with an average maturity of 5.8 years and a stable interest cover ratio of over 5 times. We also increased the holding of our unencumbered assets to 82% of the rent, representing 23.5 billion euros of the portfolio value, which provides additional sources of capital for us if and when required. From a rating perspective, Standard Imports has always applied the relative consolidation of Grand City properties, and therefore the leverage is expected to remain in line with the current level. GCP has a very low cost of debt and a very clean debt schedule for the next five to six years. Contributes to Roundhome's conservative financial policy, of course. The Grand City property's high cash level will further support the strength of the group. Once again, we emphasize our long-term rating targets A from currently BBB+. We feel the consolidation with Grand City Properties as a positive support to our long-term rating in terms of price and asset type. As always, you can find a more comprehensive list of our financial policies in the appendix. We are glad to reconfirm our full year 2021 guidance on slide 28. With the Q3 results finalized, we are on track to achieving our guidance figures presented already at the full year 2020 results. Our expectations for the full year 2021 FFO1 have not changed and is in the range of €340 million to €370 million. Moreover, we continue to assume a collection provision in a net amount of €120 million for this year. The main reason is the lockdown period in the first half of the year that had a very negative impact on the hotel business as well as the ongoing travel restrictions that we see unfolding across Europe again. Up until last week, our current share buyback program reached 80% of the 500 million euro program. The effect of the buyback program on a per share growth level from last year and this year have started to positively impact our results and the full shareholder benefit will be starting from next year. Therefore, we still expect the FFO1 per share to be in the range of 29 to 31 cents, up from 27 cents last year. Finally, we still see our expected 2021 dividends per share in the range of 22 to 24 cents, based on a 75% dividend payout ratio. Further, we regularly update the information in the appendix and encourage you all to take a look again. That concludes our Q3 2021 presentation. I will now hand you over to Sylvie, who will lead the Q&A session.

Thank you, Ossi. Before we invite the direct telephone questions, we would like to answer questions that we have received by email prior and during this call. For simplicity reasons, we have taken liberty to group similar questions in order to answer as many questions as possible. Allow me now to read out these questions. First question. Can you please provide an update on the office market and your location? What is the current trend and what is your expectation going forward? Do you experience an impact from working from home?

The economic activity in Germany and the Netherlands started to show signs of recovery after the impact of the crisis. However, the recovery may slow down by the steps taken by governments against the increased infection ratios. We feel that the service industry is growing and the demand for new employees is strong, which in turn is supporting the demand for office space. It is also reflected in the decreasing unemployment rate in Germany and the Netherlands. The effect of the pandemic remains. but they are becoming less noticeable and we start to see a certain level of normalization. The office market is gradually recovering in line with the economy. We saw in the last nine months gradual increases in letting activity from pent-up demands with more new lettings in comparison to the comparable periods and demand for prolongations remained strong. We signed 126,000 square meters of new lettings in the first nine months of 2021. 40% more than in the same period last year, at an average rent of 15 euro per square meter and a wall of 6.8 years, and 250,000 square meter prolongations at an average rent of 13 euro per square meter and a wall of 4.3 years. We find new lettings and prolongations at higher rents than last year's period and at similar walls. The trend across most German cities is positive, with a good lasting momentum in comparison to the low levels a year ago. Certain markets in Germany, such as Cologne, Dresden and Leipzig, have recovered especially fast from the initial impact of the pandemic. Most notably was the performance in Dresden. The office market reached record rent in occupancies during 2020 and 2021. These performances provide an indication of the resilience of the office market, which enters the crisis from a strong position of historic low vacancies in our portfolio's markets. Prime rents have thus hardly changed in some markets, and although vacancy rates increased slightly, they remain significantly below historical levels. Regarding working from home, There was a reversal in the trend during summer as employers and employees welcomed the return to the office workplace after the long lockdown last winter. We have seen that both employers and employees generally prefer to work from the office, and once the restrictions were lifted, home office became less common. Furthermore, in Germany and the Netherlands, commuting times, which are a key driver of work-from-home demand, are generally low due to affordable living conditions in central cities. Nevertheless, we believe long-term a hybrid solution will emerge which provides more flexibility and increases workforce motivation. With the current increasing infection rate in Germany and the Netherlands, we expect that working from home will increase in the short term, but we see this a temporary situation which will not impact significantly the long-term working pattern. Long-term, a sensible balance will be reached and digital solutions will support this working style.

Next question. How do you assess the valuations of your office portfolio?

We are confident about our valuations. All our valuations are performed externally by professional valuators and valuations tend to lack transactional market evidence. In the past months, we have seen a very strong support in the transactions as well as the capital market. We are selling office properties above our book values. Additionally, many market transactions, including very large ones, being executed at new record high values and low yields in areas of our portfolio locations. Additionally, in the capital market, several M&As have been launched for the German office players at prices which reflect a premium to NAV and thus significantly above book value. This evidence, paired with the operational robustness, provides us with strong comfort about our portfolio's conservative valuations and further potential upside to capture in the future.

Next question. What is the development on the hotel market? How do you assess the future performance?

The hospitality industry has shown signs of recovery potential during the summer, mainly due to lower travel restrictions on the back, of lower infection rates and increasing vaccination rates. However, the effects of the pandemic remain, namely unpredictable infection rates, constantly changing travel restrictions, and potential virus mutations. Thus, the related uncertainty of potential further lockdowns or other restrictions would significantly impact the hospitality industry remains. We are in a different situation compared to last year as we have successful vaccinations and the majority of the population in industrialized countries is vaccinated. Therefore, we hope for an improving performance from softer and shorter restrictions when infection rates are too high, such as those we currently see, as compared to the hard lockdown beginning of this year and last year. We have seen strong summer season for leisure hotels driven by growing domestic leisure demand and pent-up demand from lockdown period, similar to what we have seen last year and much in line with what we have expected. but the recovery remains unsymmetric with the demand for business and international travel only slightly recovering. We are seeing some increasing demand coming from the business and constant travel. However, this is still far from pre-pandemic levels. This demand driver remains significantly impacted by the prevailing uncertainties and constantly changing travel restrictions. While the recent lifting of U.S. travel restrictions is welcome news the increase in infection rates may reduce the willingness of people to travel or force governments to impose new restrictions. As a result of the recent increase in infection rates, it remains difficult to make a qualified assessment about the next year. While governments currently are trying not to implement new lockdowns, the future development remains uncertain and more drastic measures such as the long lockdown period at the beginning of the year may come back or other restrictions that burden our tenants may be implemented. We therefore remain cautious in our outlook for the coming series and focus on maintaining the strong dialogue with our tenants, working with them on a month-to-month basis to find long-term solutions. Since we do not expect the long hard lockdowns as we had last year and we assume hotels will stay open, we do expect 2022 to perform better than 2021 and hope development in the coming months will provide us with more clarity.

Next question. How do you see the recovery of your hotel collection rates?

Our collection rates improved significantly during the summer months, mainly from a strong recovery in the leisure travel after the lockdowns have been lifted. Collection rates increased from 34% in H1 to 60% in Q3 2021. the collection rate in October was also 60%. We have not yet reached a further recovery, though, as the recovery of business and international travel is pending. We cannot give a qualified assessment about the timing of the full recovery, as the uncertainties about the pandemic effects remain. Although we are in a different situation compared to last year, it depends on how governments and the public will react to the currently increased infection rate, despite high vaccination rates. Hopefully this year will be the last uncertain winter and the recovery will be stronger next year than this year. But we need to stay cautious regarding the outlook. We do expect further demand drivers to recover next year, namely in business and international travel, but we expect a full recovery will extend into the years after.

To continue to successfully sell properties above bulk value, will this support further devaluation gains? Are you planning to dispose much more this year? When do you expect to become a net buyer again?

On the basis of the last three years, Arundown has been a net buyer and has increased its commercial portfolio by over 11%, or by over 60%, including the consolidation of DCP. This increase is not including 1.7 billion euros of assets held for sale, which were expected to be disposed in the upcoming series. In 2020, we have completed the merger with TLD with a portfolio of nearly 5 billion euros. And in the last two years, we focused on improving the portfolio quality through non-core and mature disposals, which increased the overall portfolio's concentration on strong asset classes in top tier cities, which value upside potentials. Moreover, in the last two years, we also carried out an accretive share buyback program in amount of 1.4 billion euros so far, which is economically a reinvestment into our existing portfolio at a very attractive price. In addition, we increased our stake in global worth. The leading office player in Central Europe in approximately 30% indirectly helped through a joint venture. As for the disposals, we completed disposals in the amount of over 2.5 billion euros year-to-date. The disposal above book value provides us with sufficient comfort for our property valuation, but also do not surprise us as external valuations usually lag the transaction market. We believe our portfolio remains to have upside potential for the future to come. The disposal proceeds are utilized for share buybacks and debt repayments. As we repay shorter and more expensive debt, we extend our average debt maturities and lower out our cost of debt further. Lower financing expenses are increasing the FFO long-term, and together with the share buyback, we utilize the disposal process to create shareholder value on a per share basis. We can predict how the market will develop in the coming years. We remain committed to our acquisition criteria and acquire properties where we see significant value creation potential, something which we do not see as much as in current competitive markets environments. When such deals are available in the market, we will also acquire more. Considering we continue to get attractive offers, we will continue disposing non-core and mature properties. At these attractive prices, we can secure large portions of the future potential already now and direct the funds into further shareholder value, enhancing measures. We currently have an advanced disposal pipeline of over 1 billion euros. In addition, we are working on several further internal growth opportunities from lifting our rent revisionary potential, which will contribute to a long-term FFO growth and value increases, as well as executing selective top-tier central development projects, which will increase future cash flows once constructions are finalized.

Next question. Can you please elaborate on your revaluation gains of the period And what are your expectations for the future?

In the reporting period, we have had around 60% of the portfolio revalued in comparison to around 90% in the same period last year, in which we were focusing to have clarity of the pandemic-related lockdowns on our portfolio valuations. We will have the rest of the portfolio revalued by the end of the year, and we expect valuations to be supported by stable market values and our proposals above book value. In the first nine months, we recorded the valuations and capital gains in the amount of 322 million euros, of which 32 million euros are capital gains, which are the results of property disposals above full value. The life-for-life valuation increase was 0.8%, net of capital, and including the portfolio which was not valued yet. We have seen value stability across the portfolio, with the majority of the value increases in Berlin, northern Australia, Utrecht, Leipzig, Hamburg, Wiesbaden and Stuttgart. And the majority was in the office for sure.

Next question. What is your strategy towards obtaining green building certifications for your portfolio?

We currently have a few selected assets with a green building certification as we mainly focus on buying existing properties where green building certificate was not the focus when the buildings were constructed. Nevertheless, our teams are working to increase the number of green buildings within the portfolio through refurbishment and new builds when economically feasible. While we still see a rather low demand from tenants for green building certifications in Germany, we have noticed that tenant awareness for green building certifications has increased in the Netherlands. We expect the market and tenants will change requirements and we are adapting accordingly. We expect this demand will translate into higher rental prices. The capex spending for the green upgrade could be covered by governmental subsidies, higher rent and higher demand for those assets, which results in lower vacancies. At this stage, we do not see overall demand from tenants in Germany on greener leases or buildings, but we expect the demand will come. We have therefore started a pilot project of green in-use certifications in our Dutch portfolio. We have scanned and analyzed approximately one-third of our Dutch portfolio for suitability of green building certification. Based on the assessments, we believe that half of these assets can be certified fast as they either already fulfill all requirements or only need minor investments. We are starting with the low-hanging fruit where only a small amount of alterations and upgrades are necessary or even in some cases where none are required and the only cost are that of the certificate. We are utilizing the experience we will gather from this pilot project to apply to our portfolio locations with a goal to increase the share of green building certificates of our portfolio.

Next question. As your portfolio is mainly made up of existing assets and less new builds, what is your plan to upgrade your portfolio in the future to comply with the energy requirements?

Our capex investments are targeted as a tenant fit of space expansion and maintaining and or upgrading the asset quality, which includes improving the environmental footprint through isolation, heating system, etc. Which means that our ongoing capex spending are including many of these upgrades. Naturally, the market and with its tenant requirements are changing. We are adapting accordingly. We see a special in the Netherlands and increasing demand from existing and prospective tenants for greener assets, mainly focused on buildings with green building certification. We expect this demand will translate into higher rental prices. The cap expending for this green upgrade could be covered by higher rent and higher demand for those assets, which result in lower vacancies. We do not see overall demand from tenants in Germany on greener leases or buildings, but we expect the demand will come. In addition to our ongoing cap expanding, we have a target to increase our property's energy efficiency and increase the generation and storage of renewable energy. In practice, this means installation of solar panels, increasing energy utilization through CSP and CCHP, electric vehicle charging stations, replacing insufficient fossil fuel heating systems, switching to energy providers who provide climate-neutral energy, and engaging tenants for more conscious energy. water and waste usage and energy saving methods. The energy investment program will be deployed gradually and will both enable us to significantly improve the energy efficiency and is a future value driver. Please see more details in our presentation in the appendix as well as in our sustainability reporting available on our website.

Next question. What is the rationale for the delisting of TRDs?

As a part of the realization of synergies from the merger, the financing process for TLG has been streamlined and merged into Ransom's platform, a process that started with the issue of substitution of TLG's bonds and perpetual notes last year. Ransom has a far more efficient access to the capital markets for financing and therefore the benefit of the listing of TLG on the Frankfurt Stock Exchange no longer outweigh the costs and the administrative efforts of the listings. Furthermore, as maintaining the listing results in a considerable amount of administrative expenses, both related directly to the listing as well as indirect costs, the management of both TLG and Roundhorn determined that the termination of the listing combined with a delisting offer by Roundhorn would be in the best interest of TLG.

How much more is left of the current buyback program and when do you expect it to end? Will you do another share buyback program once the current one runs out?

Of the current 500 million euro share buyback program, 80% has been executed so far and runs until the end of this year. We bought back our shares at a 35% discount to anything. We have the option to execute further share buybacks considering our large cash balance and the continuous strong disposal of the bus book value. We will evaluate if and when to execute another share buyback program after the count has ended. Decisions regarding the further share buyback programs will always take into account maintaining sufficient headroom to our healthy financial ratios and credit rating.

Can you please provide an update on your development process?

Our strategy regarding the development project is to identify underutilized or unused land or conversion rights in our existing portfolio. After obtaining building rights, we are either selling these rights and thus materializing on the value creation, or on a selective basis in top locations at a high pre-lead ratio we consider developing ourselves. We are exploring how the pre-lead ratio will develop before making a decision. Note that receiving the building rights, especially if there is a change in use or height or size, is a lengthy process, sometimes taking several years, and it is dependent on the municipalities and thus not fully in our control. Identifying and lifting development rights is another untapped value creation potential we are lifting, but please also note that the total development value makes up only 6% of our total assets and is only one of several value creation aspects we are tapping. You can find an overview with a breakdown per asset type and location in our presentation, which now also includes GCP. Additionally, in the appendix of the presentation, you find detailed info on several development projects, including the status. Please note that the development projects include existing properties, which require major refurbishments or expansion of available space, but do not require full development, as well as new construction projects, including for which we have building rights, but did not start the construction. also included a hotel for which we bought forward plans in CAPEX project and utilized the lockdown period to execute the work faster than when they executed during the active operations as initially planned. We just finalized the refurbishment of two hotels, one in central Cologne and another one in Davos, which have reopened for the winter season this month. Just recently, we obtained a pre-permit related to the building rights for two further office properties in central Berlin, one for a 2,000 square meter property which can be converted into over 7,000 square meters and is located at Alexanderplatz. The other office building is in central Berlin, which will be combined with an adjacent building from the GOG portfolio, allowing us to create a higher share of metro square meters for the combined properties of around 7,000 square meters from currently 2,000 square meters. This case is another example of how we are utilizing synergies from the combination of the two portfolios. Further, we obtained the pre-permits to convert the 18,000-square-meter overground garage of the Berlin Hilton on Gendarmenmarkt into service apartments. We also recently signed the disposal of the development rights in central Berlin at Warschauer Straße, around the corner from the Mediaspring, above Buchwald.

Next question. Do the increased inflation rates have any material impact on your business? Do you see increasing inflation rates to higher interest rates?

From the rental income perspective, we are mostly covered, as the majority of the leases are linked to the CPI. From the cost side, a certain level of inflation will follow through to us. The main price drivers currently are energy, raw materials, electronics, and workforce, not all of which impact our business. Increased prices impact our CAPEX and construction activities, but are rather immaterial on our total performance. The main impact we see is in the personnel expenses. We have been able to offset higher costs in our operations with higher efficiencies and from economics of scale. The increased price are the result of base effect and the supply shock, both an effect of the pandemic, which resulted in a lower prices last year, while a strong recovery of the demand outpaced still lower supply this year. The ECB believes this price rises to level next year and that inflation won't be sustainable on this level. Thus, the ECB is keeping interest rates low, also to offset the pandemic effects across the entire EU. Markets are expecting somewhat higher inflation to remain for a slightly longer time, which can be seen in increasing yields in medium-term maturities. However, the long-term yields have remained relatively flat, indicating low sustained inflation expectations. Regardless, interest rates still remain much below historic levels. Furthermore, it is more important to look at the spread between rental yields and interest rates, which is on a historic high level, so even an increase in the interest rate may only bring the spread back closer to average levels.

What is your opinion on the outcome of the expropriation referendum on Berlin residential landlords?

Our Berlin residential portfolio accounts for about 7% on a full consolidation basis of Grand City. The result of the referendum is not binding and is rather a statement of Berlin's residents that a solution to the Berlin undersupplied market needs to be found. The newly elected government in Berlin is currently forming and has mentioned that it aims to set up a commission of legal experts to assess whether it is possible under constitutional law to implement an expropriation as per the referendum results. This committee is expected to work on this over the next year. However, the clear consensus among legal experts is that it will not pass legal scrutiny. The newly elected government in Berlin does not believe that the expropriation is the right tool, with the newly elected mayor of Berlin stating that a dialogue between all parties and the creation of new housing combined with rental regulation tools which are already available, would be the only solution to solve the housing problem in Berlin, and that expropriation would not result in a single new apartment, in line with our opinion and the opinion of most experts. We do not see any logic in the call to expropriate large residential landlords in Berlin, which is counterproductive to what the expropriation movement states it is trying to achieve. which is to reduce the pace of the rent increases across all rental apartments in Berlin. Not a single new apartment would be created as a result, and the measures only favor a selected number of tenants of the targeted units, which comprise only around 10% of Berlin's residents, but is paid for by all the city's residents. The Berlin authorities estimate the total cost of expropriation to be at least 30 to 38 billion euros. The city of Berlin is clearly not in the financial position to fund this measure at an equitable level, and if it were, these funds would be put to much better use in developing new social housing in Berlin for those households who actually need it most.

Your rent, like for like, turned positive from a negative position in June. Can you please expand the piece and give more breakdown of type and location?

The like-for-like growth of rental income was plus 0.6% compared to minus 0.7% in June due to the positive performance in the in-place rents like-for-like to plus 0.9% as well as lower negative impacts of the hotels to minus 0.9% for minus 3.4% in June. And excluding the impact of the hotels, the rent like-for-like increased was plus 1.2%, which was supported by new lettings and prolongations at above-average rent, slightly offset by an occupancy decrease of 0.3% on the like-for-like basis. The largest increase was in the office portfolio and were in Dresden, Utrecht, Leipzig, Hamburg, Amsterdam, and Berlin. The hotel like-for-like decreased slightly by 0.9% due to temporarily reduced rents in certain situations and on a selective basis. Although the pandemic-related effects remain to impact our letting performance, we are gradually improving the performance, fully offsetting the negative effects of the hotel portfolio performance. This also validates the stability of our portfolio, which is the result of a strong diversification in different asset types, location, and tenancy, which captures different performance drivers. Assuming the gradual recovery of the economy is continuing, we believe to continue achieving positive and increased performances going forward, from capturing our portfolio's rent, revisionary potential.

Next question. What is the provision for uncollected rent you created until September, and how much do you account for in your guidance?

As I said before, we accounted 100 million euros of ordinary provisions for uncollected rent in the first nine months, of which 25 million in Q3 alone. We assume collection rates for Q4 around similar levels as in Q3, under the assumption that hotels will not fall under new lockdowns, and thus a concept for extraordinary provision of about €120 million net for the entire year.

Those were the questions that we received prior to this call. We can now start the open session for your questions. We would appreciate if you could ask all your questions at once, and we will answer them one by one.

Ladies and gentlemen, if you have a question for our speakers, please dial 0 and 1 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial 0 and 2 to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. And the first question is from . Your line is now open. Please go ahead.

Yes, good morning, gentlemen. Thanks for the very detailed presentation. Just two things from my side. Now that almost everyone believes that the travel recovery is going to take a number of years now, can you maybe give an indication what you think what level of recovery we need to see, particularly in business travel, before we can stop living in a world where hotels are struggling to pay their rent. And then a second question, if I may. You noted a 1.2% like for like excluding hotels. Would you please break that down into occupancy and in place rent, please? That's it. Thank you.

Thank you for your question. Referring to recovery and when you see business levels. So we saw a summer which was good. Occupancies went well in most, mainly in the leisure hotels where we saw high occupancy and very high collection rate. Most of our hotels, about 85% are in the four-star that actually attract business and leisure together. We need to see improvements. in this domestic travel for business and also international travel. There is no right number or percentage to say because each hotel has its own cost structure and it's also depending on the average room rates that the hotels are actually demanding. But let's say that I think occupancies need to on average run above the 50% in order to start seeing a strong recovery in this sector. Referring to the like-for-like and the breakdown, so excluding hotels, we have 1.7% in place rent like-for-like and minus 0.4% on occupancy like-for-like. Thank you for your question.

The next question is from Manuel Matin of the VHS. The line is now open. Please go ahead.

Thank you. Good morning, ladies and gentlemen. I have three questions which are regarding your valuation gains. The first question would be if you could give us a breakdown of your valuation gains, a breakdown in terms of asset classes. That would be the first question. The second question would be How much of your commercial portfolio has been valued as of nine months? And third question would be, do you have an outlook for us or for Q4 on valuation gains for your commercial portfolio, especially for hotels, which might be a bit tricky, I must confess and guess. Thank you.

Hi, Manuel. Thank you very much. So, as I said, we valued 60% of the portfolio, and by that we mean the commercial portfolio that we valued. We valued about this 50% to 60% in each of the asset classes, and since the life-for-life valuation was about 0.8% higher, positive, so basically... All the values that we have were actually validated as of today as well. The output for the hotels, we expect the hotel value to remain stable. That's what we saw in the nine-month valuations that we did for the hotels, but we are not expecting any material change on that item. Thank you. Thanks.

The next question is from Rob Jones, BNP Payback, for Lensnet Open PCOS.

Yeah, thanks. Good morning. Apologies if my questions have already been covered earlier. I was trying to listen to two conference calls at the same time, which is a bit of a disaster. But just one on buybacks and one on capital allocations. So you've obviously done $400 million to $500 million now to 80% of the buyback. I guess my question is... if we see the share price continuing to trade roughly where it trades today, is there a reason why we shouldn't expect you to announce a further, say, $500 million buyback at the time of the full year results, so kind of see one next year? And then the second question is on acquisitions. Obviously, we've been a clear net seller in recent times at a small premium to book value, which is helpful in terms of A, accruing values, and B, leverage reduction. Obviously, the downside is it's earning by losers because, of course, you're selling assets and paying back debt at a lower yield. Which one of you would give us any color on going forward to, say, 2022? Do you still expect to be a net seller? I presume the answer is yes. Or are there potential for greater quantum acquisition opportunities going into next year? Thank you.

Hi, Rob. Thank you for your questions. In terms of buyback, as we said before, once we completed the existing program, and depending on keeping a very healthy financial structure and ratio of the handroom for our rating, we will consider going into an additional program. I don't know yet the size, fully depending exactly on the timing and what we see in the market, if we see additional opportunities. But this is for sure something that we have on our table to consider. In terms of acquisitions, how do we see next year? So we really hope to start seeing good opportunities in the market that will suit to our acquisition criteria. The market, the asset market is very strong. and we see transactions at very low yields that we feel comfortable to sell in this environment. At the beginning of the pandemic, we did think that we would see more opportunities at a deeper discount. It didn't arrive yet, but we don't see them yet. Maybe we'll see them next year. Normally, it takes two to three years after a crisis that such opportunities arise. Maybe they will come up next year, and if they will come, yes, we will come back in a much bigger volume of acquisitions. Thank you for the question.

The next question is from Murat Kamal Varki. Your line is now open. Please go ahead.

Good morning, everyone. I wanted to listen more about the net debt reporting. So I see around town reported a net debt of around 8.1 billion in H1, whereas Grand City reported a net debt of 3.2 billion in Q3, which added simply would bring the net debt to 11.3 billion. I see the net debt reported in this quarter is 12.4 billion, so there's a breach of around 1 billion. I understand some of it might be in share buybacks, but can you please help me understand if there are any other variables over here?

I think that one of the things that you cannot match is when a round town initially consolidates Grand City, it has to revalue the debt of Grand City, not at amortized cost as Grand City is booking, but actually on a fair market price, which increases the debt that a round town puts in its financials preferring to dissipate debt. And I think that closed most of the gaps you have on top of the buyback. If it doesn't work out for you, give us a call after and we'll guide you through the numbers. Thank you very much.

Thank you all for your time to participate in this call and the many questions you have submitted via email and during this call. As always, we are available for further discussions, and we look forward to meeting many of you in person already at the various conferences in the coming weeks. So then, thank you for your questions again. Stay safe and take care. Goodbye.

Ladies and gentlemen, thank you for your attendance. The call has been concluded. You may disconnect.