Aroundtown Sa U/Adr

Dear ladies and gentlemen, welcome to the conference call of Around Town FA. As our customers request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. If any participant has difficulties during the conference, please press star key followed by the zero on the telephone for operator assistance. May I now hand you over to Katrin Kittesen, who will lead you through this conference. Please go ahead.

Hi, thank you and good morning, everybody. Thanks for joining us for Around Town's Q1 2022 results call. You should have received our corporate news and can view this presentation on Around Town's website, either on the home section or under financial reports of the industrial relations section. As stated, my name is Katrin Petersen. I am Around Town's group head of communications. With me today are CEO Barak Bahen, CFO Eli Ben-Zarit, Chief Capital Markets Officer Oshu Masati, Executive Director Frank Rosin, Industrial Relations Timothy Wright, as well as representatives 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. We asked you already before to send your questions through info at aroundtown.de. And please feel free to continue to send your questions via email also during this presentation. Again, the email address is info at aroundtown.de. I will now pass you over to Osteen, who will guide you through the presentation of our results. Thank you.

Thank you, Katrin. Good morning everyone and welcome to RoundTown's Q1 2022 earnings call. The first quarter of this year appeared to end with a positive push as the pandemic became less of a concern for market players and for society as a whole, probably due to higher vaccination rates and significantly lower death numbers than previously assumed. It didn't take long though until new challenges arose and the war and following supply chain disruptions and inflation overhangs added significant volatility. We all wish the war and suffering to be over soon and following to reach a stabilized and more predictable market environment. In the meantime, our team focuses on further strengthening the fundamentals of the business as we expect this year a negative macroeconomic environment before we see calmer waters again. As nominal debt yields increased across the board, we see that our continuous liability management and disposal activities in the past pay off, resulting in high current liquidity, which supports the company in these challenging times. The operational performance in the office and residential sectors continued to improve following the pickup from tenant interest we saw in the second half of last year. Hotels, on the other hand, had a difficult start into the first quarter, as the new wave of Covid infections hit most European markets and travelling subdued again. However, as most travel restrictions were lifted in March, we see a positive turnaround in the number of hotel bookings across our portfolio and reaffirm our collection expectations. So, while we are not out of the woods yet and it is likely things may get worse in the short term before they get better, we so far continue to see a stable momentum in rent activities going forward. On slide 4, we provide a summary of our financial performance highlights of Q1 this year as we continue to make every effort to stabilize or improve the fundamentals of our company. Later, we will discuss each of these numbers in more detail. The net rental income increased year-over-year by 32% to €309 million, which is mainly due to consolidation of Grand City Properties' rental income this year. As we continue to navigate carefully through uncertain times, we maintained in Q1 of this year a strong cash and liquid assets position of €2.2 billion, which has decreased over the last quarter as we repaid about €800 million of shorter-term debts. we maintained a low average cost of debt of 1.2% with nearly six-year average maturity. Ever for One resulted in 90 million euros after COVID adjustments, reflecting a 3% year-over-year improvement, but 10% on a per-share basis due to the share buyback impact. The like-for-like rental change came in at 0.9%, not including Grand City's performance yet. Moving to slide 5, you see an updated list of our signed disposals for Q1. The total balance of signed disposals is 1.1 billion euros, of which half a billion were signed last year and 600 million signed year-to-date. Of the signed deals, about 130 million euros has been closed in the first quarter at a 66% margin over total cost, with 3% margin over book value. The average disposal rent multiple came in at 27 times. 60% of closed disposals in Q1 were located in secondary locations of Hamburg, 22% in Stuttgart, 7% in Berlin, and 11% of disposals were located in non-co-locations such as airports and secondary cities in North Rhine-Westphalia. The segment split of disposals was made up of 71% of offices, and 29% retail and others. We continue to demonstrate strong disposal activities and achievements above our book values. By means of our successful asset rotations, we capitalize on significant value creations and recycle the funds into our own portfolio at a higher quality. Having kept our last share buyback program by 500 million euros in January this year, we continue to execute the buyback up to 1 billion euros by end of 2022, of which about 60% has been already executed as of last week. Let's continue to the operational results starting from slide 7. Having increased our position in Grand City over the last few years, we see in these volatile markets that the contribution of its quality residential assets located in strong metropolitan locations has a positive impact on the overall stability and diversification of the group's portfolio. As a result of our careful asset rotation strategy, by the end of Q1, our portfolio diversification remained stable quarter over quarter and we maintained the same split of 44% in offices, 30% in residential, 18% in hotels, and the remaining 8% in logistics and retail. With 92% in value, our portfolio maintains the focus on the European key markets across top tier cities of Germany, Netherlands and London. As illustrated on slide 8, we present our tenant diversity with around 3,500 commercial tenants from various industries across our properties with limited exposure to single tenants and additional 65,000 residential units from Grand City. Our tenant dependency remains low, as the rental income of our largest 10 tenants remains less than 20% of our group's total rental income. Around Home's group portfolio platform at the end of Q1 2022, including the consolidation of Grand City, amounted to 28.9 billion euros and about 1.2 billion euros net rental income run rate. The long walled is stable at 7.6 years for the group. At the end of Q1, the rental yield remained stable at 4.3%, whilst the vacancy rate of the group was 7.9%. We continue to see further rent increase potential across our asset segments, but anticipate that in the current market conditions, it might take longer to realize them. As shown on slide 9, our office assets represent the largest share of our group portfolio value with a steady 44%. We continue to be a significant 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 locations of Germany and the Netherlands, such as North Rhine-Westphalia, Amsterdam, Rotterdam, Hamburg, Dresden or Stuttgart remain our focus as shown on the pie chart. With a balanced average lease term of 4.5 years and no significant dependency on a single tenant or location, we continue to maintain a well-diversified and robust tenant structure. We also maintain a strong tenant industry base with over 45% of rent deriving from governmental, energy, IT, health and infrastructure segments, about 30% of tenants originating from the public sector. We expect to see an increased level of conversion activities of office space for alternative uses in the market over the next period, mainly for secondary office space versus prime space where demand has been resilient after the pandemic, which in turn will translate to a positive impact on office like-for-like lettings. Please now move to slide 10. Since the beginning of this year, we are all encountering several additional external challenges, such as rising debt yields, inflation, and the ongoing war in the Ukraine. Office rents in our key markets remain stable, with a slight increase in prime locations, and transaction real yields remain stable too. As you can see from the slide, Q1 2022 has been a continuation of last year's second-half positive momentum in many aspects. Nonetheless, we remain cautious for the remainder of the year, as the war in the Ukraine that yields rates and inflation creates more potential headwinds for the recovery of European real estate markets. Our strategic long-term investment in the residential sector through Grand City is reflected on slide 11. Since April, the holding rate in GCP crossed the 50% mark and today stands at an effective holding rate of 54%, excluding shares GCP holds in Treasury. We further increased our diversification to strong residential assets in the top German cities plus London that provide a strong addition to our commercial portfolio. Representing now the group's second-largest segment, with 30% of portfolio value after offices. With 77% value exposure in North Rhine-Westphalia, Berlin, Dresden, Leipzig, London, as organic growth drivers, Grand City is complementary to Aranton's top-tier investment locations and further adds to the asset class diversification and balances the portfolio between asset classes with different fundamental drivers. Additional key cities include Munich, Hamburg and Frankfurt. Green City recorded a like-for-like rental growth of 2.8% this quarter, of which 0.5% derived from occupancy increase and 2.3% from impact rent. Both achievements are not included in the results of the roundtable for this quarter, but will be included in the next periods. The recent increase in debt yields, together with cost inflation and the fact that many residential rental agreements in Germany are not linked to CPI, puts pressure on all German residential equities, which increases their discount to the NPA. On the other hand, the housing shortage and pressure on rent levels remain, and we continue to see strong demand for condominiums, which keeps high capital values for German residential assets. We are using this opportunity to carefully increase our position in GCP at a high discount to its NPA. Frank, please continue.