Aroundtown Sa U/Adr

Good morning, and thanks to all of you for joining us for Around Town's first half 2024 results call. You can view this presentation on Around Town's website, either on the home section or under financial reports of the investor relations section. I am Katrin Petersen, Around Town's group head of communications, and with me today will be the CEO, Barak Bakhen, CFO, Eyal Ben-David, Chief Capital Markets Officer, Oshri Massachi, and Executive Director Frank Rosin, Head of Investor Relations Timothy Wright, Chief Sustainability Officer Limor Bermann, and representatives from Grand City Properties are also present. 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, but please feel free to send us your questions via email also during this presentation. The email address is info at aroundtown.de. I repeat, it's info at aroundtown.de. And with that, I'd like to hand you over to Barak to start with the presentation.

Thank you, Catherine, and good morning. We believe we're entering a turning point of the real estate cycle as doubtly contains more positives than negatives. The capital markets, which are usually ahead of the cycle, are open again and showing positive momentum Drilling by strong investor demand, a significant slowdown in devaluation is indicative of soon reaching the bottom, the risk of severe recession has diminished, and interest rate cuts have begun. We continue to focus on our strategy of reducing leverage, extending our debt maturity schedule, and lifting our portfolio's upside potential. Our presentation will outline the details of this strategy. Since Q1, we have had several very successful capital market transactions, starting with the perpetual notes exchange and tender transactions in Q2, followed by senior unsecured bond issuances in July. All transactions have met strong investors' demand, and we received positive feedback from our investor community, strengthening our position in the markets. With these transactions, we have provided clarity on upcoming perpetual coupon levels, reduced the debt refinancing risk, and further diversified our funding sources, which are all credit rating supportive measures. Slide four provides a summary of our financial performance. Due to our creative like-for-like rent increase and further operational efficiency gains, the adjusted EBITDA increased by 1% year-over-year, although we have seen a 1% decrease in net rental income due to our successful disposals. The net rental like-for-like growth amounted to 2.9% in June 24. Our FFO1 resulted in €154 million, 12% lower year-over-year, as higher perpetual coupon levels and higher finance expenses continue to weigh on our operational achievements. We expected the increase in the perpetual and financing expenses, but have seen stronger-than-expected EBITDA growth, which enabled us to increase our full-year guidance. Post the full portfolio revaluation in H1, our portfolio value reduced by 2.4% on our like-for-like basis compared to December 23, ignoring the positive impact from CapEx. We will further discuss about the value changes later in this presentation. Due to the devaluation, the EFRA NTA per share reduced to €7 per share. We have maintained a conservative debt profile with an LTV of 45% as of June 24, a large headroom to our covenants, and a strong liquidity position of 2.7 billion euros, which covers 19% of our debt. This does not include our recent unsecured bond issuances in July. Our liquidity is in addition shrinked by unused credit lines. Osri, please continue.

Thank you. Please turn to slide 5, which presents our recent capital market activities. We issued in Q2 2.5 billion euros of perpetual notes through the exchange and tender offer transactions at an acceptance ratio of circa 80%. In these transactions, we regained 650 million euros equity credit, which is supportive to our credit rating and gave liquidity and certainty to our perpetual holders. In July, we issued 1.15 billion euros senior unsecured bonds for the first time since December 21. The issuances were seven times oversubscribed, which proved the investor interest and confidence in our company and strategy. Through these issuances, we have further diversified and strengthened our funding sources, in addition to the secured bank debt funding and disposals. We utilized our funds for proactive liability management and bought back shorter-dated debt in the amount of 675 million euros and redeemed further 445 million euros year-to-date. This includes debt at relatively lower coupons, as well as variable coupons. The average coupon of the variable debt was 5.5%. We thus extended our debt maturity profile and reduced refinancing risk. In addition, we bought back circa 230 million euros of perpetual notes, which supports our FFO. We continue with slide 6. where we show the progress on our disposal strategy in order to reduce leverage and strengthen our balance sheet. Year-to-date, we have signed 475 million euros of disposals around book value. In H1, 340 million euros disposals have been completed around book value at a multiple of 17 times. We sold across all our other types, of which the majority was residential and offices. mainly located in London, Berlin, Rotterdam and non-core locations. The signed but not completed disposals in the amount of around 270 million euros will support our deleveraging strategy in the next periods. We continue to deliver on our disposal strategy. In recent months, we feel the sentiment improving and expect the transaction market activity to increase further with a progressive easing of cost of financing. So far, the deals remain to be smaller tickets and big funds have not yet returned to the investment market in a large scale. We sell mostly to family offices, high net worth individuals, tenants, municipalities and developers. We will continue disposing properties to further strengthen our balance sheet, de-lever and support our credit rating. Moving to slide 7, where we want to highlight the positive operational momentum, supporting stabilization and a positive operational outlook. Residential, which makes up 33% of our portfolio value, is showing consistently strong operations, driven by the widening supply-demand imbalance, resulting in robust growth and a stable source of FFO. Hotels comprises 22% of our portfolio. The positive momentum in the hotel market continues. In recent months, we reopened several large hotels, which were closed for extensive refurbishment. which will operationally grow in the coming period. Lastly, offices make up 39% of our portfolio. The office sector continues to benefit from indexation, which offsets the lagging pickup of the German economy. Our portfolio continues to embed significant upside to market rents, which positions us well for when economic activity picks up again. interest rates decreasing, supported by improving sentiment in transaction markets, we believe we are close to a stabilization of values, with a positive operational growth becoming the main driver of further yield expansion. On slide 9, we provide our portfolio overview, which has remained broadly stable. The portfolio remains well distributed among top locations in Germany, the Netherlands and London, together making up 89% of the portfolio locations. Within these main regions, the portfolio continues to be well diversified across top tier cities. Berlin at 24%, London at 8%, and Frankfurt and Munich at 7% each remain our largest cities. We continue to see positive long-term fundamentals in these markets, and we continue to see solid upside potential, which can be extracted in the mid to long term. Further detailed breakdowns can be found in the appendix. Moving to slide 10 and our main portfolio KPIs and details on our tenant base. The portfolio is valued at 24 billion euros as of June 24. Annualized recurring net rental income of 1.15 billion euro, thereby reflecting a rental yield of 5.1%. The portfolio's walls remained long at over seven years. As you can see on the slide, the maturity schedule remains well balanced over the coming years with no significant concentration in any given year. Vacancy is 7.9%, stable compared to December 23 and March 24. In-place rent increased further, reaching 10.9 Euro per square meter. Our tenant base remains highly diversified, with over 3,000 commercial tenants further supported by the highly granular residential segment. Top 10 tenants continue to account for less than 20% of rental income, And we also provide here an overview of some of our quality commercial tenants. On slide 11, we provide an update on our office portfolio. The majority of the portfolio continues to be in our top four locations, Berlin, Frankfurt, Munich, and Amsterdam, which comprise 60% of the office portfolio. The tenant structure remains strong and well diversified, with around 75% of our office tenants in the public sector, multinational or large domestic corporations. As of June 24, the office portfolio saw a like-for-like rental growth of 2.4%, with indexation and rent reversion contribution of 3.3%. Office vacancy reduced slightly in the quarter, but demand remains impacted by the weaker economy. While we see improvement in sentiment, tenants continue to exercise caution on the large occupancy decisions, and delay space prolongations or decrease space when prolonging, which we expect will continue until economic activity starts to pick up more, particularly in Germany, which is still lacking long-term average levels. As we have seen macro indicators and sentiment improving, we expect positive momentum to also pick up as the economy turns back to moderate growth, albeit with some time lag, in line with previous cycles. Turning to slide 12, on this slide we provide some data underlining the healthy fundamentals of the German and Dutch office markets, which are well positioned to benefit from an acceleration in economic activity. These markets entered the economic environment that we have seen the last few years with record low market vacancy. The vacancy has only increased moderately since 2018, remaining at healthy levels due to strong fundamentals such as healthy supply-demand dynamics and no dependency on single industries. Looking at key US and UK markets, on the other hand, significant increases in vacancy due to their oversupply and industry dependency can be observed. Looking at historic averages, it is clear that despite an uptick in market vacancy levels, the current level still remains well below historic averages. The key driver of office demand is economic activity, and this significant correlation suggests vacancy will fall when economic growth accelerates once more. Moving to slide 13 and our residential portfolio, which continues to show very strong operational performance. The residential like-for-like rental growth was 3.8% year-over-year as of June, driven mostly by strong in-place rental growth as vacancy has reached a low level and thus occupancy increase is expected to contribute less going forward. Momentum in in-place rental growth remains strong as the supply and demand gap keeps widening with new completions at low and decreasing levels while demand continues to increase further. Building permits for new construction decreased by 23% to 85,000 apartments in H124 compared to last year's period. The German Real Estate Association estimates the current gap to be around 600,000 units and expect this to increase to 830,000 units by 2027. Significant changes are required to change the current trend, let alone reducing the gap meaningfully. And therefore, this is expected to continue to provide tailwinds for long-term rental growth. Furthermore, the nature of the German regulated rental tables will result in past inflation being reflected only slowly, therefore contributing to higher rental growth over the mid-term. The London portfolio, which does not have rent control and therefore a faster reflection of inflation and market rent, continues to perform very well with a like-for-like rental growth of over 5% as of June. We see the dynamics in the German and London residential markets strong and sustainable which will drive growing cash flows also in the long term. Frank, please continue with the next slides.