Aroundtown Sa U/Adr

Good morning, everybody. Thank you for joining us for Around Town's H1 2025 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. Guiding you through the presentation today will be CEO Barak Bahen, CFO Eyal Ben-David, Executive Director Frank Rosain, Chief Capital Markets Officer Timothy Wright, Chief Sustainability Officer Limor Behrmann, Deputy CEO Kamal Deep Manatkala, Designated CFO Jonas Tintenort, 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. With that, I would like to hand over to Barak and the rest of the team who will guide you through the presentation of our results.

Good morning, and thank you for joining us for our H1 2025 results presentation. Over the past month, we have observed positive developments, and we believe that we could be at a turning point. At the macro level, the struggling German economy is showing signs of recovery with sentiment improving, and GDP growth is expected to return to positive territory. Government stimulus plans are driving investments in critical infrastructure and we are beginning to see the positive effects from renewed private sector activity. At the same time, financing conditions have eased following the ECB's rate cuts. The trend in the transaction market has followed and accordingly, we have seen more transactions across the virus markets. However, this recovery has not been symmetric across all market players with smaller players and less liquid players continuing to face refinancing challenges which can open growth opportunities for us. Throughout the recent period, we focused on strengthening our balance sheet and reducing leverage. The measures we have implemented, including significant disposals for active liability management exercises and exchanges of perpetual notes, Our activities demonstrated our longstanding financial discipline, which resulted in 5% decrease in our LTV from 45% in June 2024 to 40% as of June 2025, and created a high headroom to capture growth opportunities and scale up our strong operational platform, putting us in a strong position to capture the opportunities to come. We're also encouraged by the continued support of our investors. Strong demand for our recent bonding issuances underscores both confidence in our strategy and the broader recovery in the market sense. Significant headroom relative to our leverage metrics and rating thresholds, we have the flexibility to pursue selective and accretive opportunities. This allows us to begin shifting our focus back toward external growth and the creation of additional long-term value. We will walk you through this development and more in the upcoming slides. In addition, we have some updates to our management. After 17 fulfilling years serving as the company's CFO, Eyal has decided to step down from his position. Jonas Tittenhout, already serving as the WTCFO for the last three years, will be appointed as the new CFO of the company. Our key banking partners have been working closely with Jonas for many years. The change is part of an ordinary leadership transition and will become effective until the end of the year 2025. To ensure a smooth transition, Eyal will remain as an advisor over the coming years. Earlier this year, Timothy was appointed as Chief Capital Markets Officer of the company, complementing our management. Many of our investors and analysts who cover us know Timothy well for many years in his previous role as Head of Investor Relations. He has gained long-standing experience in capital markets and especially investor relations within the group for more than a decade. Further to that, Kamil Deep, who has previously been our CEO of Hotels, was promoted to be WT CEO. On slide four, we present the financial highlights for H1 2025. Net rental income amounted to 591 million euros, stable compared to H1 2024, despite significant net disposals over the last period, as a result of a solid like-for-like rental growth of 3%. Adjusted EBITDA amounted to 501 million euros, stable compared to H1 2024, despite disposals of around 800 million euros since the end of June 2024. FFO1 amounted to €150 million, slightly lower, mainly due to higher perpetual note attribution, which offset the strong operational growth. In H125, the full portfolio was externally revalued, resulting in a positive like-for-like value change of 1.4%, compared to December 24, driven by strong operational performance. EFRA NTA came in at 7.8 euro per share, higher by 5% compared to December 24. We continue to make progress on obtaining green certificates. 60% of our commercial portfolio is green certified, with 72% of offices and 55% of our hotel assets have green certificates. LTV stands at 40%, significantly below our internal board of directors long-term guidance of 45%, maintaining our wide headroom to covenants Liquidity remains solid at 3.4 billion euros, and we have gross debt reduced by around 720 million euros in H125. Tim, please continue to the next slide.

On slide five, we summarize our key strategic growth drivers. Now that we believe that the market has reached a turning point, we see ourselves well positioned to take advantage of the rising opportunities. We will continue to focus on internal growth and operational efficiency, In parallel with our ongoing disposal activities, our transaction teams remain alert to external growth opportunities. We are exploring the feasibility of converting some of our properties into data centers where power is accessible, and we continue focusing on innovation as long-term solution for ESG and efficiency. We will go into detail of each point in the following slides. On slide six, you can see our internal growth drivers. We continue to drive growth through rent reversion, targeted investments, and operational efficiency. We have a rent reversion potential of approximately 26% to capture by closing gaps to market rents, reducing vacancy rates, and benefiting from indexation as well as the regulatory mechanisms in our German residential portfolio. Our focus on locations with strong fundamentals further enhances this reversionary potential, which continues to expand over time with increasing market rents. Through targeted CAPEX measures, we aim to extract new income drivers as well as capture the embedded potential faster. The measures include repositioning and upgrades of properties, as well as select conversion projects. These measures are executed on a selective basis at a low risk and high accretion to rent. On slide 7, we present our strategic realignment, which marks a shift in our approach from a defensive stand to a focus on driving growth. Over the past four years, we have executed a disciplined deleveraging strategy, disposing approximately $10 billion of primarily non-core but also mature assets since 2020. We have also rebalanced the portfolio asset types over this period, with the office share reducing from 44% in 2021 to 38% now, while residential increased to 34% from previously 30% and hotels increased to 22% from 18%. These efforts have not only improved asset quality, but also enabled us to successfully navigate the past challenging period, as well as supported our balance sheet strength through targeted disposals and liability management. Our investment property portfolio has evolved accordingly, decreasing from 29 billion in 2021 to 25 billion currently. We have positioned ourselves well to restart external growth, supported by a conservative financial profile, and substantial equity balance of 3.4 billion euros. Our strategy is designed to balance growth with financial discipline, maintaining significant headroom to covenants, and capitalizing on market opportunities as they arise. On the next few slides, we present the drivers behind our planned top-line and bottom-line growth through a balanced combination of internal and external drivers. On slide eight, You see, as we believe, we are at the turning point and start seeing opportunities arise. We are putting back our focus on external growth. We are utilizing our wide deal sourcing network built over two decades, which provides us access to accretive off-market transactions. We are currently in initial stages of screening a sizable pipeline. Our external growth strategy is expected to be further supported by capital recycling, disposing of low-yield assets to support funding of acquisitions with high return potential, all while maintaining a conservative balance sheet. On this slide, we also present our main acquisition criteria. Our primary focus remains on accretive acquisitions and locations with strong fundamentals. We have launched the Turnaround Capital Fund, our European opportunistic real estate fund to support our acquisition strategy. TUC is a real estate investment fund set up together with institutional investors designed to support growth in real estate properties by seizing market opportunities and acquiring quality properties in locations with strong fundamentals, enabling us to pursue selective accretive acquisitions in a leveraged light manner. TAC has secured 400 million euros in capital commitments to date, of which the group component is about 60%, with potential to scale up to 1 billion euros, so our position will be diluted as the fund grows. We are the external partner of the fund and plan to use this platform to drive external growth while maintaining a disciplined capital allocation and keeping low leverage. On slide 9, you can see another key growth area that we are looking at, which is data centers, a real estate asset class where we see potential for additional internal growth, and a growing asset class which may become another layer of diversification in our portfolio over time. Here we outline the strong fundamentals of the German data center market. Germany hosts one of the world's largest Internet exchange points, making it a key low-latency hub for data exchange. Frankfurt ranks among the top global data center locations, with Berlin, Munich, and NRW also seeing very high demand and planned investments from major cloud providers. Importantly, our portfolio overlaps with the top five data center markets, Berlin, Hamburg, NRW, Frankfurt, and Munich, positioning us well to benefit from this long-term growth trend. On slide 10, we present the opportunities we see in this market and our strategy to capture value from the data center sector. Data centers are one of the fastest growing asset classes in real estate, with high investment expected for the coming years. Data center capacity is expected to increase by 78% in Germany over the coming years, and as the highest demand areas show strong overlap with our portfolio, we see potential to create significant value in this segment. We are pursuing a dual track approach to take advantage of this opportunity. In the short term, we are reviewing partial conversions of commercial and development assets into edge or co-location centers. Through this approach, we obtain incremental grid approvals and utilize existing building infrastructure with targeted upgrades to enable low latency compute in key locations. Mid to long term, our strategy is to unlock full building conversions for hyperscalers or wholesale co-location use. This will be unlocked by securing higher energy capacity and full permits over time. Currently, we're making progress in our analysis of the portfolio to identify optimal data center locations. We have already filed for permits and secured initial power allocations for selected sites, including in Berlin. Turning to slide 11, where we give an overview of two projects through which we aim to be part of shaping the future of real estate. We put a strong emphasis on innovation and continuous improvement, exploring new and innovative ideas in order to drive meaningful change in the real estate sector. At the forefront of the strategy is ATEX, our PropTech startup accelerator developed in collaboration with leading PropTech venture capital firms, FifthWall and NOA, alongside real estate investors like Roundtower Capital and, since July, also Bonovia. Europe's largest listed real estate company, which validates the necessity of innovation in our industry and the effectiveness of the accelerator and puts Roundtower in the front line. Through ATEX, startup gains access to mentoring and resources to accelerate innovation in areas ranging from asset optimization, energy efficiency, financing, and climate tech, allowing startups to test their ideas in real-world environments and get immediately feedback to improve their product. This translates into PropTech solutions that enhance NOI and create risk-mitigated investment opportunities. We will discuss some updates relating to ATEX later in the presentation. In addition, we launched AT World earlier this year, our next-generation workspace platform. With now over 270 locations and growing rapidly, driven by third-party space providers joining the platform, the network's endless scalability offers great flexibility to users at low cost. AT World provides a wide range of different spaces, tailored in the varying needs of users, from hotel lobbies and office common areas to cafes and dedicated co-working locations, all within a user-friendly mobile app. You can sign up for a free membership trial and try it out or reach out to us under thisisatworld.com if you would like to know more. Now let's discuss our portfolio. Frank, please continue on the next slide.