Aroundtown Sa U/Adr

Dear ladies and gentlemen, welcome to the Around Town SAQ1 2021 results presentation. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode, and after the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Mr. Villaris, Head of Sustainability, who will lead you through this conference. Please go ahead.

Good morning, everybody. Thank you for joining us for Around Town's first quarter 2021 with Dice Call. You should have received our press release and can view this presentation on Around Town's website, either on the home section or on the financial report of the investor relations section. I'm Sylvie Largis, Around Town's Head of Sustainability. With me today will be CEO Barak Bahen, CFO Egal Benderwitz, Chief Capital Market Officer Oshri Masashi, and our executive board member, Frank Sullivan. 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 Oshie Masachi, who will start presenting your hour results.

Many thanks, Sylvie. Good morning, everyone, and welcome to our first quarter 2021 earnings call for Around Home. Before diving into the Q1 results, I want to say that in the past few weeks, we have started to see a continuous trend of improvement to the imposed restrictions across our main locations as a result of the accelerated rollout of vaccines. Although our offices, retail, residential and logistic properties proved highly resilient during the pandemic and restrictions, as you all may know, the hotel industry suffered from a significant impact. The UK have already started to lift lockdowns and restrictions, allowing people to slowly return to a life pre-pandemic. Last week in Germany, restaurants have opened their outdoor spaces for guests again. Theme parks across the country operate under strict hygiene concepts, and in some parts of the country, leisure travelers are flocking to the hotels. In the Netherlands, we see a similar picture with restaurants and cafes open for the third week now, but still lifting further restrictions in a very cautious manner. We see this trend as a very positive signal and hope it will be the beginning of the recovery of our hotel portfolios. Q1 together with April and May were still difficult in terms of restrictions and travel bans under the pandemic as most hotels could not fully operate, which is reflected in the hotel's property's performance. Once again, the diversification in attractive asset classes in top locations has served us well as a protection during the COVID-19 pandemic and will also support a healthy recovery over the coming period. In our presentation, we will emphasize the main results of our business, financially and operationally, and highlight the strengths of our diversified portfolio. So let's start on slide 4, where we summarize our financial performance highlights for the first quarter of 2021. Starting with our net rental income, this resulted in 233 million euros, a decrease of 1% year over year, mainly due to our enhanced disposal activity. Our FFO1 before COVID adjustments amount to 125 million euros, a slight decrease in comparison to the comparable period. After impact of the extraordinary provision mainly related to the hotel properties, our FFO1 decreased to 87 million euros. Respectively, the FFO1 per share came in 26% lower year-over-year at 7.3 cents per share in line with our 2021 guidance. We will provide you a breakdown of the different FFO matrix later in the presentation. The like-for-like net rent income growth excluding hotels amounted to 1.3% in the first quarter, and including hotels was leveled at 0.1%. The APRA NCA for Q1 2021 stood at 11.4 billion euros or 9.6 euros per share and we maintained our strong financial and liquidity position and kept our cash and liquid assets position at 3.1 billion euros. We will go into more details of each KPI as we go through the presentation. Moving to slide five, we see an overview of the continuation of our disposal and share buyback program year to date. As the transaction markets remain competitive, we see years tightening, prices increasing, and hence we seize the opportunity to identify further mature and non-core assets for sale. In 2021, to date, we signed properties disposals above book value in the amount of over 970 million euros, and a rent multiple of 23 times, of which 420 million euros have been closed in Q1, at a 52% margin over total cost and a 6% margin over book value. Disposing non-core and mature assets above book value across all asset types and locations is a strong validation of our conservative valuations and upside potential of our portfolio. 39% of disposals were non-core retail and logistics assets across several non-core locations in Germany and the Netherlands, whilst the majority of disposals were made up of 53% of offices located in the key eastern cities of Germany, Berlin, Leipzig and Dresden. The remaining 8% were hotel disposals. Our assets held for sale as of March 2021 amount to 1 billion euros, of which over 50% is signed year-to-date. Through our successful disposal program, we capitalize on significant value creation and recycle the freed-up funds to strengthen our balance sheet. We pay shorter, more expensive debts and execute accretive share buybacks at significant discounts to NAV. As already announced end of March, we continue with our current share buyback program of up to 500 million euros until the end of this year, of which 24% has been executed as of 21st of May. That amounts to 120 million euros at an average share price of 6.4 euro and reflects a discount to APRA and TA of 33%. Moving on to our operations and the portfolio overview. Please turn to slide 7. We continue to focus on our two core markets, namely Germany and the Netherlands, which make up the vast majority of our asset locations with 86% of our commercial portfolio value. 64% of the portfolio is concentrated on the top cities alone. in these two countries such as Berlin, North Rhine-Westphalia, Munich, Frankfurt, Amsterdam and Rotterdam. For over a decade, we have focused on these two strongest economies in the EU, with a moderate unemployment level due to flexible employment regulations, a strong governmental financial support system and very low debt levels. Both countries appear to recover from a stronger base than other EU member states. Although both of these countries were not the fastest in terms of vaccinating their populations, we expect the economic rebound to be faster and with less negative long-term effects from the pandemic. Our diversified investment strategy into top European locations has always been one of our competitive advantages, especially in combination with a strong diversification across archetypes, micro-locations and tenant mix. On the right-hand side of slide 8, you can see a breakdown of the geographic distribution as well as the composition by asset class, of which the office portfolio is our largest asset segment, making up 51% by value and 65% combined with the residential assets through our proportional holding in Grand City. The hotel properties, which are still negatively affected by the lockdown, account for 24%. our high diversification elements protect us to some extent against macroeconomic or domestic uncertainty, which in turn will not have a negative impact on our complete portfolio. In Q1 2021, in line with our view to dispose non-strategic assets, we were able to reduce our retail exposure alongside office assets and maintain this at 7% of the portfolio value through many successful disposals above book values. At the same time, the exposure to logistics and industrial assets was kept at 4% after successful value creation and selling these assets above their book values. This allows us to focus more capacity on our three core asset classes, offices, hotels and residential. As seen on slide 9, We present you our tenant diversity with around 3,500 tenants from various industries across our properties with limited exposure to any single tenant. The rental income of our largest 10 tenants accounts for 20% of our group's total rental income. Our overall commercial portfolio amounted to 21 billion euros, not including assets held for sale in the amount of 1 billion euros. End of Q1, the rental yield stood at 4.6% and the vacancy rate at 8.9%, both similar compared to end of 2020, with a slightly longer vault of 9 years. We continue to work relentlessly on our letting activities in order to reduce vacancies in the coming periods. The collection rates for all our asset types, except hotels, recovered fast after the lockdown in Q2 of last year and was lifted and nearly levels off at pre-pandemic levels. On slide 10, we want to highlight our revisionary upside potential in our existing commercial portfolio. Our March 2021 rental income run rate, excluding the assets held for sale, amounts to 866 million euros on an annualized basis. If we don't assume any changes to today's market rents in the locations of our assets with similar asset quality, the get-to-market rent results in a 22% rental growth potential, including filling our vacancies. The majority of that potential is recognized in our office portfolio and will be a key driver of our future organic growth, as the majority of this upside will flow directly to the FFO1. This upside potential also serves us as a strong downside protection from the existing guest-to-market rent levels reflected in the 22% just highlighted. This upside ensures our interest rents have a strong buffer in case of weakening rents. Along walls of nine years and current asset valuations of less than half the replacement costs in our locations, further ensure long-term stable rental income and valuations in the long term. Our March 2021 redevelopment rights and projects, valued at 1.9 billion euros, have not been included in this revisionary potential and would add further growth opportunities. On slide 11, we want to highlight the resilience we experienced in the German and Dutch office markets during the pandemic. The two economies entered the pandemic in a very strong position, which has supported the resilience throughout the pandemic and will contribute to a relatively fast recovery. The gap seen between 2007 and December 2020 in the top German cities plus Amsterdam highlights that during the midst of the pandemic in December 2020, the vacancy Prime rent and pre-let ratios were all at much stronger levels when comparing to pre-global financial crisis levels in 2007. When comparing the same times of data points, values are further supported today by historically large spreads between prime yields to government bond yields. Stated by the Rating Agency Standard & Poor's last month, European real estate companies rated by S&P 500 were resilient during the pandemic and could prove resilient during the rest of the pandemic. As shown on slide 12, with 51% in value, our office assets represent the largest portion of our group portfolio. We continue to focus on central locations in top-tier cities such as Berlin, Munich, Frankfurt and Amsterdam. They alone account for 60% of our office portfolio. The chart on the left reflects the further diversification into additional top tier cities across Germany and the Netherlands. With a world of 4.7 years and no significant dependency on a single tenant or location, we maintain a well-diversified and robust tenant structure. Nearly half of the office rents come from tenants in the strongest industries such as governmental, infrastructure, health or energy. Our largest office tenant is the public sector with 28% of the rent and includes heavyweights like the Allianz, Deutsche Bundesbank, Orange, the German and Dutch governments and other insurance companies. From a letting activity perspective, we've seen since the beginning of the year stronger pick-up in demand for office space in comparison to former quarters. though we do see more caution in terms of space and length for which prospective tenants have enhanced sensitivity. We will have more to share later in the year when more restrictions will be lifted and the economic uncertainties start to fade. Our strategic investment in the residential sector through GCP is reflected on slide 13. Residential assets account for 14% by value of our group portfolio share, and have an average lease length of 9 years. This diversification to residential assets in the top German cities continues to prove its strength and resilience, whilst capital values increased further in Q1 of this year. GCP achieved a 1.8% like-for-like rental growth, whilst decreasing vacancies and values further appreciated. Residential rents in locations with high demand continue to increase, with the exception of Berlin, where rents were negatively impacted by the highly criticized rental cap until April this year. As most of you will be aware, the rental cap in Berlin has been removed last month, and we expect a catch-up effect in rents in Berlin over the coming periods. Capital values for German residential continues to increase across almost all main and secondary cities, including Berlin, also during the pandemic and lockdowns. I'll now hand you over to Barak, who will continue with the hotel portfolio.