Aroundtown Sa U/Adr

Thank you, and good morning to all of you. Thank you for joining us for Around Town's nine-month 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 CEO Barak Barhen, CFO Eyal Ben-David, Chief Capital Markets Officer Oshri Marsachi, 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 on 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 the presentation. The email address is info at aroundtown.de. With that, I would like to hand you over to Barak to start with the presentation.

Thank you, Katrin, and very good morning, everyone. With the improving microeconomic and capital market sentiment, we believe the outlook for the real estate market is now more positive. ACB started its rate cut cycle, which has helped foster optimism, and transaction activity is picking up again, providing greater stability and and certainty to property values. Subject to market not experiencing another setback, we are seeing signs that, on average, we have reached the bottom of the current cycle with the H1 revaluation. During this time, we continue disposing properties around book value and managing our leverage and will continue to do so in the coming periods as we look to strengthen our balance sheet and further reduce leverage. Looking ahead, we see that the environment is now more supportive for deleveraging measures with stable to slightly increasing values and more active transaction markets. Over the nine-month period, we also continued to take proactive steps to shrinking our financial position. Notably, we successfully executed several capital market transactions, including perpetual notes, exchanges, and tenders offers in Q2 and Q3, as well as senior and secure bond issuances in Q3. These transactions received strong investor demand and positive feedback, reinforcing our standing in the market, and the perpetual exchanges allowed us to regain equity content for the exchanged perpetuals under S&P rating methodology, while also reducing future coupon payments, thereby supporting the FFO. While in recent periods the focus has been mainly on deleveraging, we continue to execute on our operational strategy. As we mentioned in our H1 result, we reopened three large hotels in Brussels, Rome, and Paris. We are also upgrading hotels and converting selected office properties into service apartments, which will allow us to lift the internal growth potential within our portfolio. We will provide more details on this later in the presentation. On slide four, we summarize our financial performance for the period. Net rental income decreased only by 1% year-over-year, despite disposals, as we achieved a 3% like-for-like growth in net rental income as of September 2024. And despite this decline, adjusted EBITDA saw a 1% increase year-over-year. Our FFO1 amounted to 236 million euros, and the FFO1 per share stood at 22 cents, down 4% year-over-year, as our internal growth and operational gains were offset by higher perpetual coupons levels and increased finance expenses. Our nine-month result will position us to meet the upper end of the guidance range, which was already increased with the publication of the H1 2024 results. The combination of robust operational results and reduced cost of debt is driving better bottom line results. We continue to maintain a conservative debt profile with significant headroom to our bond covenants, LTV of 44% as of September 2024, and a strong liquidity position of 3.3 billion euros, covering 23% of our debt. With 1.5 billion euros of financing raised year-to-date across bonds and bank loans, we maintain access to all our diverse funding sources, thereby eliminating the refinancing risk of the past years. We did not revalue the portfolio in Q3, but will conduct a full portfolio evaluation as part of our full year report. Further details on our financial position and APIs will be covered in the upcoming slides. Oshri, please continue.

Thank you, Barak. On slide five, we provide a short summary of key achievements and strengths with a strong momentum and positive outlook. Our operational performance has been robust, particularly in the residential and hotel portfolios as a result of strong demand and operational improvements, which make up the majority of our portfolio. We achieved in this period a 2% positive rental income like for like in our office portfolio and believe demand will pick up once the German economy will grow again supported by rate cuts. Early elections in February next year may prove itself as a positive catalyst for this turnaround. While we experienced some devaluation in the first half of the year, the momentum has reduced significantly. And we believe we have reached trough levels and going forward, the outlook is more positive. We believe there is a potential for value increase driven by operational growth. On the green front, as part of our initiatives to certify the whole portfolio, we've also begun implementing green building certifications across our hotel portfolio. On the disposal side, we continue to make progress, which is further strengthening our balance sheets and enhancing our financial flexibility. Finally, with a successful completion of recent capital market transactions, we've effectively removed refinancing risk, ensuring greater flexibility to utilize our cash. Moving to slide seven, we provide an update on our disposal progress. Year-to-date, we signed 630 million euros in disposals around book value. Over the nine-month period of 2024, we completed 440 million euros of disposals around book value, achieving an average rental multiple of 17 times. These sales span across all asset types, with the majority being residential and office properties, as well as building rights, and are primarily in London, Berlin, Rotterdam and non-co-locations. While transaction activity has slowed significantly since interest rates began rising in 2022, we've consistently managed to sell across all asset classes in the portfolio, highlighting the strength of our diversified portfolio. Additionally, we continue to capitalize on development rights in top locations. As land and development rights remain scarce in prime areas, we are able to attract interested buyers for these rights. allowing us to further crystallize the value created in the portfolio from obtaining these rights. On slide 8, we present an overview of our portfolio, which has remained broadly unchanged. The portfolio continues to be well distributed across prime locations in Germany, the Netherlands and London, which together represent 89% of the total portfolio. Within these key regions, the portfolio is further diversified across top-tier cities. Berlin makes up 24%, London 8%, and both Frankfurt and Munich each account for 7%. These cities remain our largest markets, where we continue to see strong long-term fundamentals and significant upside potential, especially in the mid- to long-term. Further detailed breakdowns can be found in the appendix. Moving to slide 9, we provide an update on our key portfolio metrics and tenant base. As of September 2024, the portfolio is valued at 24 billion euros with an annualized recurring net rental income of 1.15 billion euros, reflecting a rental yield of 5.1%. The portfolio's vault remained strong at over 7 years. The maturity schedule is well balanced with no significant concentration of leases expiring in any single year. Vacancy stands at 7.6%, slightly lower compared to December 23, while in-place rent is slightly higher at 10.9 euro per square meter. With 25% reversionary potential across the portfolio, we continue to have significant internal growth potential to extract in the coming years. while also providing downside protection. Our tenant base remains highly diversified with over 3,000 commercial tenants and further supported by a highly granular residential segment. The top 10 tenants continue to account for less than 20% of total rental income with very low dependency on any single tenant. On slide 10, we provide an update on our office portfolio. The majority of our office portfolio remains concentrated in our top four locations Berlin, Frankfurt, Munich and Amsterdam, which together represent 60% of the total office portfolio. 58% of our office portfolio is BREEAM certified, reflecting a steady increase from 29% just one year ago. As of September 24, we've seen like-for-like rental growth of 2% in the office portfolio driven by indexation and rent reversion. Vacancy levels have reduced slightly over the quarter. The tenant structure continues to be strong and well diversified, with around 75% of tenants coming from the public sector, as well as multinational corporations and large domestic companies. With improving macroeconomic indicators and sentiment, we anticipate positive momentum in the office market. although we expect some lack in the recovery, consistent with patterns seen in previous cycles. We are further exploring conversion options in selected office assets into service departments. In addition, we started to identify assets that might fit to be used as data centers. Both asset classes could benefit from the strong locations of our portfolio. We have identified several sites for service departments and we are in negotiations with several strong national and international potential tenants. For data center conversions we are currently analyzing the ideal structure, how to extract that upside potential either through powered or shell or core locations and hyperscalers. We see a significant upside potential for this asset type and we follow our proven approach to analyze, identify, and get all relevant permits, including power, to lift the value potential. We are currently in an early stage and will update you further once we progress to build a long-term strategy. On slide 11, we highlight the ongoing normalization of work patterns in our office markets, particularly in Germany, where return-to-office rates have nearly returned to pre-pandemic levels In fact, Germany is leading the way in its seven largest office markets with an 89% return to office rate compared to pre-pandemic levels. The current average attendance rate in Germany's big seven cities stands at 72%, which represents a 10% increase from 2023, equating to approximately three and a half days per week in the office. This is significantly higher than the European average of 60% and well above the UK and US, where rates remain lower. To put this in perspective, the US return to office rate is currently just 66%, with some major cities like San Francisco and New York seeing attendance rates below 30%. This contrasts sharply with a trend in Germany, where there is stronger demand for office attendants. Among the top seven German cities, Frankfurt stands out with the second highest attendance rate, defying earlier expectations that remote working would disrupt office demand in this market. We do believe that a hybrid working model of office attendance as well as remote working options will be the concept to stay, but the impact of demand will be softer than previously anticipated. Several large corporations have recently announced a callback to the office, reinforcing the growing trend of traditional office work patterns returning. As a result, we are seeing a strong recovery in office attendance, particularly in markets like Germany, where the supply of office space remains healthy compared to regions like London and North America. On slide 12, we are pleased to introduce AT World. Our innovative user experience platform designed to redefine the way we engage with real estate. AT World goes beyond simply offering physical space. It leverages technology and digital solutions to transform properties and the real estate industry as a whole by reimagining how spaces are designed, used and interconnected. AT World aims to meet the evolving needs of tomorrow's workforce while enhancing the tenant experience today. Through the AT World App, tenants gain access to a very large network of flexible workspaces across hundreds of locations throughout Europe, leveraging Arantan's large portfolio and network. The platform allows users to easily find a suitable spot to work and collaborate and provides our tenants with options to attract new employees without being dependent on a single location, increasing flexibility, collaboration and employee satisfaction. We expect to expand the platform, including third-party space providers, and open it up to B2C members in the future. Moving to slide 13, our residential portfolio continues to demonstrate strong operational performance. As of September 24, we've seen like-for-like rental growth of 3.7% year-over-year, primarily driven by strong and increasing in-place rental growth. This is largely due to the ongoing supply-demand imbalance in the market. New completions remain at low levels and are expected to decrease further, while demand continues to rise. In the first nine months of 2024, building permits for new construction have dropped by 23%, totaling 15,000 apartments, compared to the same period last year. According to the German real estate association ZIA, There is currently a gap of around 600,000 units, which is expected to grow to 830,000 units by 2027. This persistent shortage of supply is expected to continue driving long-term rental growth, though significant changes would be required to address the gap. Moreover, the nature of Germany's regulated rental system means that inflationary pressures are reflected more slowly in rents, providing additional tailwind for mid-term rental growth. Meanwhile, the London portfolio, which operates without rent controls, has seen a faster capture of inflation and market rents. Since September 24, like-for-like rental growth in London was around 5%, further underlining the strength of the market. In both Germany and London, the residential market dynamics remain strong and sustainable positioning us for continued rental growth and long-term cash flow expansion. Frank, please continue with the next slides.