Aroundtown Sa U/Adr

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.