Aroundtown Sa Ord

Ladies and gentlemen, welcome to the conference call of Around Town SA. At our customer's request, this conference may be recorded. As a reminder, all participants will be in a listen-only mode. If any participant has difficulty seeing the conference, please press start key followed by zero on your telephone for operator assistance. May I now hand you over to Mrs. Catherine Peterson, Head of Group Communications, who will lead you through this conference. Please go ahead. Thanks, and a very good morning to everybody. Thank you for joining us for Around Town for the Year 2021. I am Katrin Petersen, Head of Group Communications, and with me today are CEO Barak Bahen, CFO Eyal Ben-David, Chief Capital Markets Officer of Osri Masachis, Executive Director Frank Rosin, Investor Relations Timothy Wright, and Representatives from Grand City Properties. You should have received the company's corporate news and you can find the financial results also on Around Town's website, either on the home section or under financial reports of the investor relations section. For the duration of the call, all participants will be in a listen-only mode. Following our presentation, you will have the opportunity to ask questions. We have already asked you in advance to send us your questions via email. and please continue to send them by email also during this presentation. The email address is info at aroundtown.de. I repeat, info at aroundtown.de. And I will hand you over to Ashley now, who will guide you through the presentation of our full year results. Thanks.

Thank you, Kathleen. Good morning, everyone, and welcome to Roundtable's full year 2021 earnings call. This year, a new chapter in the development of the pandemic has started. With increasing vaccination rates, we are in a better situation than when the pandemic broke out and after the last full lockdown was lifted in summer of 2021. After nearly half a year of lockdowns and travel restrictions across our markets in 2021, summer arrived. The market started to open again and we experienced strong weather travel demands. During the same period, also pent-up demand in the office market pushed new lessons, which supported our like-for-like performance. Meanwhile, residential markets have remained very robust during the entire time. Nevertheless, we remain cautious, as uncertainties remain alongside additional negative macroeconomic changes, such as increased interest rates, cost inflation and supply chain disruptions. The Omicron variant resulted in the highest infection rates in our market, which led to new restrictions towards the end of 2021, but appeared less severe on the economy than the hard lockdowns. Unfortunately, the world, and especially Eastern Europe, is already facing new challenges from the tragic war in Ukraine. We believe that the diversification in attractive asset classes in top locations We continue to serve as well as a protection for future challenges, help us to meet our targets and as a catalyst when markets recover again. Let's start on slide 4 with Around Home's key achievements of 2021. We have further expanded our dominant position in Europe and the company grew to nearly 40 billion euros in total assets. This has turned Around Home to the largest landlord in several key cities in Germany and a leading asset owner across the most attractive asset classes in Europe. By means of further asset rotation and time disposals of €2.8 billion above book value, as well as an increased focus on our top tier locations, we enhanced our portfolio quality and mix of asset classes. At the end of last year, the office and residential segments accounted for nearly three quarters of the portfolio. The increased economies of scale and well-timed capital recycling of non-core assets continue to strengthen our portfolio. Since the successful tender offer for GlobalWorth last year, Around1 continues to hold a joint controlling stake of over 60% together with our joint venture partners, CPI. We continue to increase our engagement with the management and operations of GlobalWorth to identify additional value drivers and growth potentials in the portfolio. We further strengthened and simplified our portfolio with a delisting of TOG end of last year and consolidated Grand City properties since the second half. With a dominant investment position in Grand City properties, which is now over 50%, excluding treasury shares. To emphasize the priority we give ESG-related projects, we summarize some highlights from 2021 on slide 5. Strongly believe that our long-term investments in ESG are not just benefiting the environment and society, but lift our asset values and unlock further rent increase potential. In 2021, we continue making good progress on many ESG-related topics, as we put a strong focus on increasing our share in green building certification, continue our energy investment program and engagement with our communities. One year ago, we successfully launched a pilot project for green building certification in the Netherlands and as a result, 30% of our portfolio in the Netherlands obtained a green building certification from only 2% in 2020. We rolled out the strategy in further locations and we continue to strive for more property certifications. Our sustainability score further improved to be among the top 4% globally across all industries and we also engage with multiple other ESG rating agencies that all have different focus when assessing the performance. All this effort pays already off. whilst we see a round one being included in ever more sustainability indices and obtaining April Gold Awards across all significant categories. On slide 6, we provide a glance of our financial performance highlights of 2021. We will discuss each of these numbers in more detail in the financial section, but I want to confirm that our 2021 guidance has been met, including keeping our strong financial profile and debt structure. Please note that Grand City Properties has been consolidated in the roundhouse financial since July 21, which is reflected in those figures except for the like-for-like result, where GCP is not included yet. The net rental income increased year-over-year by 8% to 1.1 billion euros. The expected dividend for 2021 is 23 cents per share, based on our payout dividend policy of 75%, and is subject to approval at the AGM in June 2022. As we continue to navigate carefully through uncertain times, we manage also at the end of 2021 a strong cash and liquid asset position of 3.2 billion euros, whilst repaying 2.3 billion euros of shorter and more expensive debts over the course of the year and issuing 1.3 billion euros cheaper and longer debts. We continue to make every effort to improve the fundamentals of our company. Slide 7 breaks down how we achieved a 10% total shareholder value growth in the course of 2021, leading from €9.5 per NTA per share in December 2020 to €10.4 per share, including the dividend payment in 2021. 575 million euros of the ongoing 1 billion euro share buyback program for 2021 and 2022 has been completed so far, which was funded by strong disposals and therefore remained leveraged mutually. As a result of the share buyback at current discounts, we expect a positive impact on the NAB and FFO1 per share. Let's move on to the operational results starting from slide 9. Having increased our position over the last few years and consolidating Grand City, we see that the contributions of its quality residential assets located in strong metropolitan locations has a positive impact on the overall portfolio of the group. As a result of the consolidation with GCP and our asset rotations by the end of 2021, our portfolio diversification has become more balanced, with 44% in offices, 30% in residential, 18% in hotels and the remaining 8% in logistics and retail, with an overall vacancy rate of 7.7%. With over 90% in value, our portfolio further increased the focus on the European key markets of Germany, Netherlands and London. Two-thirds of the entire portfolio is located in the top cities of these markets. We emphasize that these elements of diversification protect us to some degree during uncertain market conditions linked to macroeconomic or domestic uncertainties, but also during times of political change and even the tragic war in the heart of Europe we must all witness. Such events will therefore not have an equal negative impact on our entire portfolios. On slide 10, we highlight the value growth of our investment platform from December 2019 to December 2021. Over these two years, the scale of investment properties grew by 61% from €18.1 billion to €29.1 billion, which includes the merger with TLG, the consolidation of Grand City and the capital recycling measures. Excluding the consolidation impact of Grand City, The investment properties grew by 9%, despite selling 4.7 billion euros of assets. The higher portfolio quality becomes evident in the increase in value per square meter over time, which increased by over 18% to 2,880 euros per square meter since December 2019, excluding Brent City. Moving to slide 11. you see an updated split of our client disposals for the full year 2021. €2.8 billion client disposals, of which €2.3 billion have been closed in 2021, had a 37% margin over total cost, with 3% margin over book value. 38% of disposals were located in non-core locations. The segment split of disposals was made up of 42% of offices, 31% hotels, 22% retail, logistics and residential as well as 5% development rights. These disposals of non-core and mature assets above book value once again validate the conservative external valuations of our portfolio. With over 5 billion euros of signed disposals above book value, we could prove over the last two years that by means of our successful asset rotations, we capitalized on significant value creation and recycled the funds into our own portfolio at a higher quality. We did this by executing the equity share buybacks at a huge discount for our IPRA NTA, which creates long-term shareholder value and further repays shorter and more expensive debts. Having tapped our last share buyback program by 500 million euros in January this year, We continue to execute the buyback of up to 1 billion years by end of 2022, of which about 57% has been already executed as of last week. As illustrated on slide 12, 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 a different 65,000 residential units from Grand City. Our tenant dependency remains low as the rental income of our largest 10 tenants accounts for less than 20% of our group's total rental income. A round-sum group portfolio platform at December 21, including the consolidation of Grand City, came in at 29.1 billion euros and 1.2 billion euros net rental income run rate. At the end of 2021, The rental yields further compressed and resulted in 4.4%, whilst the vacancy rate of the group reduced to 7.7%. We see further rent increase potential in our portfolio, and we will continue to work hard to optimize these metrics. As shown on slide 13, our office assets represent the lion's share of our group portfolio value with 44%. We continue to be the largest office landlord amongst listed real estate companies in Berlin, Frankfurt and Munich. These three locations alone make up 56% of our office portfolio value. Additional key cities of Germany and the Netherlands, such as Amsterdam, Rotterdam, Hamburg, Dresden or Stuttgart, remain our focus as shown on the pie chart. balanced average lease term of 4.6 years and no significant dependency on a single tenant or location, we continue to maintain a well-diversified Entrobus tenant structure. We also maintain a strong tenant industry base with over 45% of range deriving from governmental, energy, IT, health and infrastructure segments. Please now move to slide 14. In 2021, we saw the second strongest year in office transaction volume in Germany ever recorded. Office rent remained stable with a slight increase and was left by the largest cities in Germany. And although vacancy levels in the market increased, they are still at historically low levels. 2021 was a stronger year for office lettings in our markets than the previous year due to the relief pent-up demand after lockdowns were lifted in June 2021. However, we remain cautiously optimistic for 2022, as the war in the Ukraine and the number of COVID infections keep European markets on the edge. We cannot rule out further setbacks from macroeconomic or geopolitical risks in the course of this year. Our historical and strategic investment in the residential sector through Grand City is reflected on slide 15. By the end of 2021, we have increased our diversification to strong residential assets in the top German cities plus London, representing now the group's second-largest segment with 30% of the portfolio value after Auschwitz. With Berlin, North Rhine-Westphalia, Dresden, Leipzig, London and other German key cities as organic growth drivers, Grand City is very complementary to Ralfon's top-tier investment locations and further adds to the asset class diversification and balances the portfolio between asset classes with different fundamental drivers. Throughout the pandemic, the German residential asset class has proven to be one of the most resilient types of European real estate, and Grand City could book for its portfolio a like-for-like rental growth of 2.8% and a like-for-like capital value increase of 8% and 21%. Both achievements are not included in the 21 like-to-like results of Around Town. As the housing shortage and pressure on rent levels continue, we see strong demand for condominiums. The demand-supply gap results in strong operational performances and in turn growing capital values for German residential assets across almost all main and secondary cities during 2021 and well into 2022 in spite of the ongoing pandemic. I'll now hand you over to Frank, who will continue with the hotel portfolio.

Thank you, Audrey. On slide 16, we summarize our hotel portfolio. The third largest asset class in our portfolio. Our hotels are located in top tier cities across European countries, such as Germany, the Netherlands, Belgium, the UK, France and others. The majority of these countries enjoy for decades already a very high proportion of domestic travel demand. we ensure a strong geographic diversification that spans across multiple operators and hotel types. Our hotel portfolio remains stable with a 15 years wealth and 85% in the four-star category that captures both leisure and business travelers. Due to the increased share in residential assets and hotel disposals above book value, the share of this asset class reduced from 24% in December 2020 to 18% in December 2022. Please move to slide 17. There was a distinct imbalance between the first and the second half of 2021, as the first half was dominated by heavy travel restrictions, and therefore our collection rate was only 34%. During summer, we saw a healthy rebound in the booking number, and in particular amongst leisure hotels, and the collection rate for the hotel portfolio improved to 60% in Q3. However, the impact of the Omicron variant took its toll on the pace of the recovery and is resulting in a collection rate of over 55% in Q4. As a result, a 2021 full year collection rate for hotels came in at 48%. Looking at the chart, it is fair to say that during the summertime of 2020 and 2021, the combined of the United States in Germany, Belgium and the Netherlands were not inferior when comparing to 2019, before the outbreak of COVID-19. The steep increase in bookings during the summertime of the last two years shows that people want to travel and validates the exact same case for quality hotels in top destinations. The collection rate in Q1 2022 is so far around 45%, But as most travel restrictions across Europe have been lifted in March, our expectation for the hotel collection rate is to come at 60 to 70% for the full year 2022. Of course, assuming that the sector will not be confronted with new COVID lockdowns and that the impact of the war in Ukraine will remain limited. On slide 18, we summarize our remaining logistics and retail portfolios. During 2021, we achieved a significant volume of asset rotations in both asset types due to stronger e-commerce and stronger demand on assets and goods which benefited positively by the pandemic. Both asset types remain no-core for us and we aim only to hold on to the most assertive assets while we will continue to recycle the capital of the mature and no-core properties. Our remaining position of these two asset types at the end of 2021 to the 2% in logistics, down for 7% two years ago, and 6% retail, down for 9% during the same period. At the end of 2021, their walls were 4.8 years and 4.9 years respectively. The top investment location for both asset classes remained Berlin, with 40% of the assets value in segments, as we strongly believe in the growing importance of Berlin and the upside potential of the city. Parag, please continue.

Thank you, Frank. We present on slide 19 the composition of our development and building rights portfolio, which accounted for 5% of the total assets at the end of 2021. It is therefore not material on a group level, but it is a growth driver that gains more attention as we identify additional value by obtaining sellable building permits, as well as selective construction initiatives ourselves, where we see most significant developer upside and the lowest risk. Given in the shortage in new supply across many prime locations and increased asset values, the development portfolio implies significant upside potential that we already experienced last year. In 2021, we signed around €350 million of development rights for disposal above book value. Composition of development rights is illustrated on the two pie charts, which also account for Grand City with nearly half of all rights values in Berlin. On a standalone basis, Grand City also identified most development rights in its Berlin portfolio. We consider the German capital as the most attractive location in Germany for development due to its growth importance and severe shortage of housing. In terms of asset type breakdown, 43% of this segment are offices, which matches the undersupply of high-quality and green office space in several prime locations. 40% of this portfolio was identified for residential and mixed use, and the remaining 17% for hotels. The locations of our largest development tribes include Berlin, Paris, Frankfurt, Munich, and Rotterdam. These five hubs together make up over 70% 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 3LESS agreements, we will also undertake projects ourselves for which we engage third-party developers. Once again, we added additional development projects to the appendix of this presentation for which we recently obtained building permits or free permits. On slide 20, we want to show you some examples of our disposal of development price we achieved in 2021. These three examples in central locations of Dresden and Berlin shall give you an idea of the potential of this segment in our portfolio. Please note that it can take several years to obtain building permits as the cooperation with the municipalities can be very slow. Unfortunately, lockdowns in the past two years worsened this situation. On a positive note, though, time is on our side as we see values of development stands in top location increasing steadily. On slide 21, we present our CapEx investment for 2021. The CapEx investment resulted to 1.7% as a proportion of the average portfolio value. Of the three CapEx categories, 55% went into expansion programs, of which 5% are Grand City pre-letting modifications during the second half of 2021, that allow us to create additional lacing space or enhancement of existing space. This is followed by 27% of tenant improvements. A next part of expansion capex, ESG-related capex, is including other capex section and will continuously increase over the years as we identify additional measurements to lift our asset quality to a higher green standard with the aim to reduce our carbon emission by 40% by the end of the decade. I'll now hand you over to Eyal to present you the financial results.

Thank you, Barak. Please move to slide 23, where we present the profit and loss results for 2021. Our recurring net rental income resulted in 1.08 billion euros. That's a growth of 41% compared to two years ago, resulting mainly from the consolidation of GCP and TLG and subsequent disposals. Excluding GCP, the rental income increased by 15%. As always, in this figure, and also in the adjusted EBITDA and SFO, we exclude the impact of the asset sales for sale, despite their positive contribution. Our like-for-like net rental income, excluding hotels, amounted to 1% for the full year. Including the hotel segment, the like-for-like growth amounted to 0.3% overall, of which 0.8% comes from interest rates, and minus 5% from occupancy decrease. Please note that the like-for-like calculation does not include GCP yet. We will start to include GCP next year. We recorded property revaluations and capital gains in the amount of 810 million euros, which includes capital gains of 66 million euros for the full year, and is the result of the disposals above good value. Due to the challenging start during the first half of 2021, and the emergence of the Omicron variant towards the end of the year, the collection in the hotel rents remains subdued, and we booked an extraordinary provision of 125 million euros for the full year. For 2022, we expect a higher collection rate in the range of 60 to 70%, assuming no further lockdowns will impact the hotel recovery. Administrative and other expenses influenced by about 10% mainly as a result of the GCP consolidation, finance expenses came in about 10% lower year over year due to our liability management efforts to reduce cost of debt and extend debt durations. Current taxes were up 12%, which also impacted by the GCP consolidation, while deferred taxes reduced compared to previous year, mainly as a result of deferred tax income on derivatives. As a result, the net profit for 2021 amounted to nearly 1.1 billion euros, generating 55 pence earnings per share, a 10% increase year-over-year. On slide 24, we see the adjusted EBITDA before the contribution from JVs, which increased year-over-year by 12%, from 777 million euros to 871 million euros in 2021. This figure is already after excluding 12 million euros contribution of asset sales are classified as L4 sales, and therefore referring only to the recurring long-term portfolio. Positive contributions derived from our JV investments in the amount of 104 million euros in total, which mainly includes GCP for the first half of 2021. In the graph below, you see the accretive growth of 12% of the adjusted value that before JV contributions in the past two years as a result of net acquisitions. The consolidation of GDP in the third quarter further supported the growth to 36%. Looking at our platform operation on slide 25, we recorded in 2021 an FFO1 of €353 million, or 30 cents per share. Both figures are within our 2021 guidance. The marginal decrease compared to 2020 on an absolute level, continues to be mainly the result of the successful disposal activities. You can see the positive effect from our share buyback programs as they increase our FFO1 per share by 11% year over year, more than offsetting the slight decrease in absolute FFO1. The FFO1 per share before COVID adjustments increased by around 11% to 41 cents per share year over year, which again emphasize the positive effects of the Share Buyback program. This provides a good indication of the potential we can achieve when rents will recover. Please keep in mind that the consolidation of GCP has no effect on the SO4 results, as we continue to apply the relative share of GCP as we did before. But now, we deduct the minority, whereas before, adding only our share of GCP is SO4. The total profits of the quotes from disposals in 2021 amounted to 615 million euros, as a result from the completed disposals of 2.3 billion euros. The OCEFO-2, therefore, increased to 969 million euros from 933 million euros last year. On slide 26, we provide an overview of the development of the EFA-NTA and the NRV matrix over the last two years. Year over year, since December 2020, the total APRA NCA increased by 3% to 11.6 billion euros. On a per share basis, that is a growth of 7% to 10.2 euros. Also here, the positive impact of our ongoing share buyback program is demonstrated. Also, please continue to conclude the final part of the presentation.

Thank you, Yael. Since going public, we've been proactively managing our debt maturity profile and maintaining a defensive capital structure that is for us not only a top priority during times of rising interest rates, but even more so when funding was more attractive. Slide 27 underlines the attention we have given to our debt maturity profile in recent years, as we have no major debt expiries coming up until the beginning of 2025. This protects us in the mid-term from potential interest rises, as our liquidity covers the maturities for the next year, and 97% of the debt interest is hedged. In 2021, the LCV increased to 39%, which is mainly due to the consolidation of GCP. Nevertheless, Grand City's conservative debt profile is supportive for the company and impacts positively the company's financial measures. Furthermore, as a result from our active liability management effort, once again, we further reduced our low average cost of debt to a new historic low of 1.2%, with an average maturity of 5.7 years and a stable interest cover ratio of 4.9 times. We also increased again the holding of our unencumbered assets to 83% of the rent, representing nearly 24 billion euros of the portfolio value, which provides additional sources of capital for us if and when required. Our strong fundamentals and conservative financial ratios continue to be the basis for our group strategy and they have proven to be essential during times of ongoing pandemic. As highlighted during the presentation, we met all KPIs of the announced guidance for 2021. On slide 29, we have now added our guidance for some KPIs for 2022. The total FFO1 will benefit from our liability management and improve hotel collection rates. Therefore, we expect FFO1 to be in the range of 350 to 375 million euros. As a result, we expect the FFO1 per share to be in the range of 31 to 34 cents, up from 30 cents in 2021, due to the accretive share buyback program that will benefit all shareholders. Our expected dividends per share for 2022 should be in the range of 23 to 25 cents based on a 75% dividend payoff ratio. That concludes our full year 2021 presentation and I will now hand you over to Katrin who will lead the Q&A session.

Thank you. So before we invite your direct telephone questions, we will now answer questions that we have received by email prior or during to this call. For simplicity reasons, we have grouped similar questions in order to answer as many of them as possible. Allow me now to read out these questions. First one going to Ashwin, please. Can you elaborate on the development of the office market and your performance, and what do you expect for this year?

The office market started showing signs of recovery starting from middle of 2021. Despite the surge in infections over the winter months, the office market in Germany and the Netherlands has remained relatively stable. Market vacancies have slightly increased and market rents remain stable. On the one hand, we see positive letting activity, but on the other hand, macroeconomic changes such as increase in interest rates, cost inflation, supply chain disruption, the war in Ukraine, upcoming changes in regulations due to environmental changes could negatively influence the office market. And therefore, we remain cautious regarding the pace of recovery. In Germany, where restrictions have been longer and stricter compared to other countries, home office was mandatory until last week. We experienced that office employees prefer to keep a home office flexibility but are less willing to share debts or being forced on which days to take their home office. We believe that the home office concept will remain part of the office working environment, with partial impact on office demand. We already saw an increased demand from employees for partial participation by employers for their home office days, such as office equipment, internet and more. And therefore, we believe that employers will do their most of the economic savings of working from home to the productivity of the employees. In German top cities, commuting times are shorter compared to other Western European top cities, as residential rents are more affordable and office rents are also comparably lower, which reduces the incentive of corporates to reduce their office footprint. In the Netherlands, remote working has been a working concept already prior to the pandemic, and thus the impact is expected to be lower. Besides the corona pandemic, the conflict in Ukraine created new uncertainty in the market. Although it didn't have a direct influence, currently we cannot assess the potential impact of the conflict on the Western European economy and the implications of new letting activities. Although we do not have any investment in these countries or Russian tenants, which might be sanctioned, There could still be potentially indirect implications on the German and Dutch economy, especially the availability of sufficient energy and energy prices. In 2021, we signed 160,000 square meters of new office leasing, which is 30% more than in 2020, as an average rent of 14 euros per square meter and a wall of 6.5 years. Office lease prolongations total 350,000 gm and an average rent of 12.5 EUR per gm and a walk of 4 years.

Next question going to Barak, please. What is the situation of the hotel market and the performance of your hotels? When do you assess collection rates to recover?

The recent months have been negatively impacted by new restrictions relating to a surge in infection rates, especially in Germany. The new restrictions limited the access of unvaccinated people to hotels, and only triple-vaccinated or double-vaccinated with daily testing were allowed to enter. Although not a full lockdown, this restriction still reduced the demand of hotel visitors. Furthermore, with the increased infections, the portion of the population in quarantine has increased significantly, also impacted the travel demand. As these restrictions were enacted later in Q4, the Christmas season usually has a higher demand, our collection rates stay relatively stable with 55% in Q4 and 60% Q3, resulting in a full year 2021 collection rate of 48%, which was significantly impacted by the full lockdown in the first half of 21, where we had a collection rate of 34%. Looking into 2022, as these new restrictions have been lifted only in March and thus impacted in full the first entire quarter of 2022, which adversely impacted our collection rate in Q1 this year. However, we expect the upcoming months to show recovery, especially in the summer months within the leisure hotels. We currently expect for 2022 the collection rate to be within the range of 60 to 70% in comparison to the 48% of 2021. We therefore expect 2022 to perform better than 2021. Since the proportion of the hotel portfolio decreased due to the disposals activity and increase in residential portfolio, we expect a smaller negative impact in 2022 overall results. The UK already fully lifted all restrictions and in turn reduces uncertainty, which is improving planning certainty of international and business travelers. However, we note that it's not enough for restrictions to be lifted that the market normalizes. The level of infection rates and quarantine requirements still impact planning ability to a certainty extent. Furthermore, for full recovery, we need to see international and business travel, as well as conferences and fairs recovering, which we believe still needs more time as recovering is at slow pace and will probably be delayed to 2023-2024.

The next question is going to Ashley, please. Can you elaborate on the considerations to increase your stake in GCP?

We've always had a focus on the residential market in Germany through our investment in Grand City. That focus increased over time through Grand City's growth and our increased holding rate over time. The increased position in the residential market increases the quality and strength of our portfolio. German residential is the strongest asset class in Europe and the additional diversification into London adds an additional value driver based on very strong and sustainable fundamentals. As long as Grand City trades in a significant discount to its NTA, we expect to continue increasing our stake gradually by participating in Grand City's script dividend option and by acquiring shares in the market. The strong and resilient performance of the German residential market is basically the result of the persistent gap between supply and demand. Demand in metropolitan locations is steadily increasing due to the positive net migration and the reduction of household sizes. Supply is not catching up due to the bureaucratic hurdles delaying building permits and the increasing prices of land and construction costs, which reduce attractiveness to build rental units in a regulated market. We believe these strong fundamentals would support strong, stable, and steadily increasing long-term cash flow generation, which subsequently lifts property values.

The next question for Barack, please. The like-for-like for 2021 without hotels was 1%. In which asset types and locations did you have the strongest like-for-like performance? Did you expect the like-for-like to recover further in 2022?

We didn't include Grand City in our 2021 like-for-like, which by itself recorded 2.8% like-for-like in 2021. Grand City properties will be included starting 2022. Therefore, the main contributor to the like-for-like was the office sector, with 1.3% life-by-life in 2021. Of the overall 1% life-by-life without hotels, 1.7% came from in-place rent increase and 0.7% came from occupancy decrease. We experienced the strongest life-by-life performances in Frankfurt, Leipzig and Utrecht.

And the next question is going to Asli. What are your disposal plans for this year? How much disposals did you sign in 2022 so far? What type of assets are you disposing? Are you targeting acquisitions?

The strong transaction market enables us to recycle capital and to increase the quality of our portfolio, which is made up of mostly offices and residential properties. The disposals together with the share-by-back programs are creating accretive shareholder value while increasing the strength of our portfolio. We signed in 2021 2.8 billion euros of disposals, of which 2.3 billion have been closed last year. So far in 2022, we have around half a billion of signed disposals which haven't been closed last year. Additionally, we signed this year around 100 million euros, but we are continuously receiving attractive offers across all artists' classes, at or over our book value. We review the offers based on the unlocked asset potential we see in the properties, the periods and investment needed to unlock it and compare it to the offer price. We see the disposal pipeline of about 1 billion euros, but we'll provide more development updates in the coming periods. Important to reiterate that we continue to utilize the arbitrage situation of disposal above book value and buying back our shares at a deep discount to book value. This creates long-term shareholder value as evident in our FFO per share growth, more than offsetting the decrease in absolute FFO. As long as we continue to receive good offers for our properties, which are either non-core and the disposals improve the focus and quality of the portfolio, or matured where we lifted the majority of the value and can utilize the funds into a share buyback and debt repayment, We will continue as this opportunity currently creates the largest shareholder return. Disposals above book value, also of development rights, validate how conservative our portfolio is. Overall, the transaction markets are competitive, which are supportive of property valuations to ensure their yield compression, but less attractive for significant acquisition, with prices already reflecting the potentially future value uplifts. So currently, as regards to external growth, we wait to find acquisition opportunities which follow our criteria. In the meantime, we focus on existing properties and continue to extract building rights and develop whenever it is economic.

The following question is going to Timothy. Can you please provide an update on your development project?

The development rights in Vespa 4E amounts to $2 billion and includes many potential projects. You can see in the appendix of the presentation that we added further projects, which reflects our ongoing progress with our development projects. They further include hotels for which we brought forward CapEx programs in order to utilize the period of lockdowns and restrictions. Thus, we're able to execute CapEx programs faster instead of executing them in parallel during running hotel operations and bringing new products to the market faster. In 2021, two hotels were reopened, the hotel in central Cologne and the hotel in Davos, which reopened just before the winter season. Further, we demolished the former retail park and broke ground in a residential development project comprising around 166 units across 11,000 square meters of available space in Berlin. In Berlin Tiergarten, we are about to start the demolition of a 2,000 square meter property and, through integration with the surrounding buildings, will result in over 7,000 square meters. These projects and many others are presented in the presentation. As part of our value creation process, we extract and maximize development rights and then consider if to dispose or to develop the projects ourselves. We recently signed the disposals of a few projects, 25,000 square meter office in central Dresden, which is under construction and 40% pre-let, and a mixed-use 25,000 square meter property in central Berlin at Baschauer Strasse, for which we obtained preliminary building rights a 17,000 square meter logistic park in the north of Berlin at the city highway. These projects have been told about book value and thus validate the values of our development rights.

The next question is going to Eli. Can you please elaborate on your reef valuation gains? Which assets have outperformed which locations? Did you record yield compression? And what do you expect for the next period?

Poverty devaluations amounted to 744 million euros in 2021. Around 500 million euros are evaluation gains that occurred through GCP since consolidation in July 2021. Excluding GCP, the devaluation gains reflected a total light-for-light value growth, net of CAPEX, of positive 1.3%. Including the CAPEX, the light-for-light in the period amounted to 4.3%. The year compression amounted to 0.2% and was across the portfolio, but especially in Berlin and LRW. GCP reported like-for-like value growth of 8% for the full year 2021, which is not included in our total like-for-like, and will be included in 2022. The German residential market continues to show strength in increasing valuations. The commercial values remain stable across our portfolio. The higher value increases were in Berlin, NRW, Utrecht, Leipzig, Munich, Hamburg, Wiesbaden, and Stuttgart, and the majority was in the office portfolio. The hotel portfolio, like for like, was 0.5% positive. Going forward, we expect to continue to see stable values, and we take caution due to the recent negative master economic development.

And another question for AIPC. In the beginning of the year, you received authorizations from the shareholders to increase the share buyback potential, and recently you increased the running program by another 500 million euros to 1 billion euros. Will you continue buying back more shares after the current program is finalized?

We increased and extended the buyback program as we continued to utilize the arbitrage situation of disposing properties at strong book value and buying back shares at a significant discount. This situation results in a significant shareholder return in the long run. The impact of the buyback of last year you can see in the SFO1 and NAV per share increased of 11%, fully offsetting the slight decrease of 1% in the absolute amount. We will consider our next steps depending on the market conditions once the current program has ended. Note that of the current €1 billion program, close to 60% has been utilized so far.

This question is going to Ashri. On the impact of the currently high inflation, can you please provide us an overview which portion of your rental contract contains an inflation link? How does higher inflation impact your costs?

Rental agreements in our commercial portfolio are mostly CPI-linked or includes a separate rent flow. Rent increases for residential properties in Germany are regulated at 20% in a three-year period and 11% in terms of markets. There is a time lag between the actual increase in CPI until it is translated to rental income as the CPI-linked indexation takes place once a year or once reaching thresholds of CPI increases within a timeframe. It is hard to estimate the indexation impact on 2022. Note that many leases are adjusted in the end of the year, so we expect to see most of the impact on our income statement for the beginning of 2023. From the cost side, we are experiencing the impact of higher prices to some extent, mainly in personal expenses, although the main price drivers currently are energy, raw materials and electronics, but not all of these impact our business in a material way. The increase in energy costs are mostly passed on to our tenants, so here also we expect a limited impact. Increased prices of raw materials impact our tactics and construction activities, but currently with no material impact on our overall performance.

Next two questions for Eli, please. Which main assumptions did you account for in the 2022 guidance?

We made conservative with hotel collection rates of 60 to 70% and no significant acquisition. We incorporated disposals in the amount of 1.5 billion, including the 1 billion euros health for sale portfolio, of which half a billion of disposals are already signed.

The market is expecting interest rates to increase on the back of higher inflation rates. How will higher rates impact your company?

Higher interest rates can impact us in three main aspects. Current cost of debt, new financing and valuations. Our current debt is 97% hedged for fixed interest and has long averaged debt maturity of 5.7 years, so we don't see a significant short-term impact here. Our high cash and liquid assets balance of over 3 billion euros can cover debt maturities for the next years, which gives us an additional hedge against the material impact. We do not have any material financing needs. Our funds for motivation are highly positive. and our cash position can easily cover our current CAPEX and development programs. We have 24 billion euros of unencumbered assets that gives us additional financial flexibility and in several level terms in comparison to the current interest environment. Our disposal activity also flows into our cash position and supports the financial strength of the company and eases the need for new debt. Regarding property valuations, we don't expect a material impact due to a few factors. The valuation applied a 10-year GCF method, and the real interest rate, net of inflation, would need to be elevated for many years to have a material impact on the valuation method. Besides, valuations are mostly driven by the property market fundamentals. If real estate interest, net of inflation, will increase significantly, then valuations can be negatively impacted. Also, higher interest rates and inflation increase construction costs, which further reduce the incentive for new construction and thus keeps supply low unless market trends catch up in line, which in turn has a positive impact on our existing assets.

The following question is for Oshki. Does the Ukraine and Russia war and the increased rates impact the transaction market?

Currently, we do not see a significant impact of the war or of the increase in rates on the transaction markets, but it is still purely to assess. Deals which were in negotiation before the recent events have been closed, and we don't see yet a change of direction here. However, the ability to raise financing in the recent weeks has decreased, and certain players might have difficulty to raise funding at attractive pricing if the current situation gets worse. It is hard to estimate at this stage where the trend is going, but given our high liquid position coupled with strong and well-established capital market access, any negative change in the market may be an opportunity for us. We are well prepared to capture attractive opportunities when and if they arise. As for the impact on disposals, we have signed around half of the health for payroll portfolio and expect to complete the disposal of the remaining half in the next 12 months. We have no need to dispose additional properties and would do so only if the price is attractive for us.

The following question is going to Frank. Your share of green building certificates increased in your Netherlands portfolio to close to 30%. Are you going to increase this portion and how much of your total portfolio is currently green certified?

We started last year in the Netherlands. with a pilot project for green building certification, where we had only one building certified. We choose the Netherlands for the pilot as a demand from tenants for green properties exists in comparison to other locations. We analyze the portfolio to find out if the building is either legible already and or which adjustments are necessary before we enter the certification process. Currently, close to 30% of the buildings in the Netherlands are green, certified, and we expect to reach the 40% level by the end of this year. We started applying the knowledge that we gained from the pilot in other locations. Our goal is to gradually have more and more properties of our portfolio certified. Please note that green building certificates were not in the focus when our buildings were constructed, and therefore we have to obtain the certificates ourselves.

Another question for Eli. Will you offer a script dividend also this year?

We have a dividend policy to pay out 75% of FF1 per share, so we expect to pay 23 cents per share, which reflects a yield of 4.2%. We will suggest the dividend to the AGM, which takes place in June. As of previous years, we expect to also offer an option to elect a script dividend, which has been sought after by our shareholders in the past.

So, yes, those were the questions that we received via email. So, we will now start the open session for Q&A. We would appreciate if you, during that, can ask all your questions at once, and we will answer them one by one. Thank you. Ladies and gentlemen, if you have a question for our speakers, please dial 0 and 1 on your telephone. Keep heading out into the queue. When the name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial 02 to answer your question. If you're using speaker equipment today, please lift your hands up before making your selection.

Remembering please for the first question.

And the first question is from Alice Eklund for spelling. Your line is now open.

Yes, good morning, everyone. Thanks for the very detailed presentation. Just one question for now on my side. Do you plan on making a COVID extraordinary provision for this year? And if so, is this already factored into your guidance that you just gave? Thank you.

Thank you. Yes, we plan to have an extraordinary provision for this, which reflects basically the 60% to 70% collection rate, and it is already included in our guidance. Thank you.

The next question is from Manuel Martin, AutoBase. Your line is now open.

Thank you. Hello, gentlemen. One question for Marcel. Could you elaborate a bit on the valuation density? I'm particularly interested in how much Euro valuation gains or losses you had in the office business and how much valuation gains or losses in Euro you had in the hotel business. I mean, you already said that 500 million profit comes from GCP in terms of valuation. Maybe you could elaborate on the 309 million remaining in that regard, please.

Hi, Manuel. Thanks for the question. So, the main valuation came from offices, which amounted to about 200 million euros. The overall, except of the residential part, we have about 250 million euros of valuation case, 257 to be accurate. So, about 200 million in the office. Another 30 million we recorded in the hotel sector. And the rest was relatively proportional with the logistics and record portfolio. Thank you for the question.

The next question is from Bartizan MSG. Your line is now open.

Hi, good morning. Thank you for your presentation. The APRA, you comply with APRA best practice recommendations on quite a few metrics. APRA has now also published best practice recommendations on loan-to-value ratios. Do you intend to start disclosing LTV on that basis? And have you calculated what your LTV would be on those new APRA best practice recommendations? Thank you.

Hi, Bart. Thanks for the question. We just noticed, I mean, the publication of this new matrix was just recently published, and we will explore it in detail following our reports. We will continue to report our current LTV metrics. We closely notice that part of the new APRA calculations, including hybrids as Z, we, as you know personally, think it's different. We look at it more as an equity content, but we will explore it. And we will follow, let's say, the presentation of the LTV as well, and we'll consider how to present the next APRA LTV calculation in the future. Thank you.

The next question is from Jonathan. Your line is now open.

Good morning. Thank you for taking my question. Two questions, if I may. The first one, the 18 offices is about 10% currently. Can you let us know where it are the highest concentrations in what you're doing to address this, and where do you think this vacancy is going to evolve, shall we say, in 2022? That's the first question, please. Second question, in the guidance, I think you've given already a few assumptions. Can you just please confirm what assumption you're making in terms of the buyback in that guidance? Thank you.

Thank you, Jonathan. About the buyback, I will start with the second part. So, we assume about half of the remaining program to be completed by the year-end, in terms of the guidance. Referring to the office, the distribution is relatively across the portfolio. We are doing a lot of latent activities. which, as we said before, is comprised of, on one hand, prolongation of existing tenants to prevent tenants to move out, and on the other hand, new Latin activities to bring new tenants in. 2021 already performed better than 2020, and in some areas even better than 2019. We currently, all of us feeling that changes in the macroeconomic environment. We hope that this will not make an interruption or a significant interruption to our related activities, but we will continue to update you on a quarterly basis on the development and the like-for-like in this sector. Thank you.

There are no further questions. I hand back to the speaker for closing remarks.

Thank you all for your time to participate in this call and the questions, of course, that you've submitted before and during the call. As always, we remain available for further discussions and we look forward to meeting many of you in person again at various conferences in the coming weeks. So then, stay safe and goodbye.

Ladies and gentlemen, thank you for your attendance. This conference has been concluded in a disconnect.