Tag Immobilien Ag

Ladies and gentlemen, welcome to the TAC Immobilien publication of Interim Statement Q3 2025 conference call. I am George, the course call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Martin Thiel, CFO. Please go ahead, sir.

Yeah, many thanks and good morning, all, and very welcome back from our side. Many thanks for diving in for Q3 results. As always, let's start on page number three of the presentation that shows comprehensive overview about our results in the first nine months and also gives the first outlook on the guidance for 2026. Let's start with the operational development first in the first nine months of 2025. SFO1 in the first nine months of 2025 came in at roughly 136 million compared to the previous year, just a 4% increase. And that's important to point out that this increase was mainly driven by our EBITDA contribution from our rental business in Germany and in Poland, which increased by 6% year-on-year. Looking at the sales results in Poland, we had a result that was more or less on the previous year level, so a little bit reduced, 34 million was the sales result compared to 38 million in the previous year. But as already stated in the previous conference calls, we expect that in the fourth quarter of this year, we will have a large number of apartments handed over, and as you know, As the result is realized, when we hand over the apartments, we expect a quite strong increase in the fourth quarter, 2025, for the sales results in Poland. But very positive for development in the sales number. You see this on the right side. We sold in the first nine months 1,973 units in Poland. That compares to 1,435 units in a nine-month period in the previous year, and especially the third quarter was a very strong one. I will come back to this a little bit later. Looking at the LCV development, it's quite strongly down at 42.3%, also driven by a capital increase that we conducted in August 2025, already to partially finance the ready-for-end acquisition. We issued 7% of the share capital, total gross proceeds at $186 million, but also the operational development was quite helpful in reducing the LCV. Of course, fair to look at a kind of performer LTV post the closing of the R4R acquisition. This performer LTV would stand at 46.1%. So even after the acquisition, the LCV is down compared to the beginning of the year and already very close to our LCV target of 45%. So in a normal course of business, we would expect that we quite quickly, perhaps in the first one or two quarters of 2026, already at the LCV target of 45%. Looking at the guidance, firstly for 2025, we increased the FFO1 guidance. to 174 to 179 million. If you look at the results that we have achieved in the first nine months, that should be all in a good way. As always, we expect in the fourth quarter of the year a little bit more maintenance in the German business. So, therefore, perhaps the Q4 result in FFO1 is a little bit weaker than in previous quarters. will be a little bit weaker, but clearly better results than expected in 2025 for the total year. On a per share basis, taking into account the higher share count after the capital increase, FFO1 guidance is then more or less unchanged. For 2026, we expect a quite strong increase. So the guidance range for 2026 is between 187 and 197 million. It assumes a closing of the R4R portfolio at the beginning of the second quarter or at the end of the first quarter. I will come back to this a little bit later in more detail. So this is quite strong growth that we predict in FFO1, 9% in absolute amounts, 4% on a per share basis. Even stronger is the growth that we expect in the FFO2 guidance. So firstly, we also increased a little bit the FFO2 guidance for 2025 following the increased guidance in FFO1. But if you look at the results that we predict for the Polish sales business in 2026, where we expect nearly 50% growth, you see that the increase in FFO2 that we expect for 2026 will be quite material. So the new guidance stands between $279 million to $295 million. That's an increase of 19% in absolute terms and still on a per share basis of 14%. As we've already announced, we want to increase the payout ratio for our dividends. For the first time, for the dividend paid for the financial year 2026. So this is a dividend that is paid out then at the beginning of 2027. And the new payout ratio is set at 50% of FFO1 compared to 40% of FFO1 for the guidance for this year. And this translates into a quite strong growth in the dividend of nearly 30%. On page four, you'll find more details on the financial performance and the German portfolio. I don't want to discuss with you every figure, but that's interesting at the bottom of the page that we have begun also to acquire in Germany again. So, yes, it's still a quite small number. So 367 units acquired until end of October 2025, but perhaps there's more to come in the next week. So we are finding opportunities, yes, on small sizes on one side, but if you look at the average acquisition multiple or the gross yield that we achieved, around 10%, so these are really high-yielding assets, quite attractive portfolios, still reconsiderating these portfolios, locations that we know very well in Eastern Germany. And so we're happy that we acquired also some units in Germany. And yes, of course we have to invest into these properties, but not massively. So therefore we see opportunities in the German market as well. Although clearly as already mentioned in the previous course, the main capital allocation is currently happening in Poland. Let's jump to page number seven of the presentation where you'll find more details on the FFO1 development I think I already mentioned the main highlights, so an increase by 4% year-on-year. Just as an explanation, if you look at the table, you'll find also one-offs that we eliminate. In this case, we're eliminating gains, and a netted number is 1.9 million. So just as a background, you'll find also more details in the interim report. You hear eliminating subsidies that you received for modernization work, so therefore we have for the first time since longer ago was already one of that we eliminated here. Let's go to page number eight. Page number eight shows you the development of FFO2, which is based on FFO1 plus the Polish state business asset The third quarter was already a good one, so the adjusted net income from sales in Poland came in at 17.6 million compared to 11.6 million in the second quarter, and I think the first quarter was even lower. But once again, we expect now for the fourth quarter as a result of high handovers, a quite strong result, so therefore we are very confident that we achieve our four-year guidance for the sales results in Poland. Page number nine shows the development of the APRA NTA also on a per share basis. We still had a growth in the third quarter despite the capital increase conducted obviously below the NTA, but this impact was not meaningful. You see this on the chart. So the dilution effect on a per share basis was 35 cents. That means the net profit that we achieved during the first nine months was far higher than this smaller dilution effect. You see that we had in the first half a positive impact on the NTA per share from the portfolio revaluation of 69 cents. If you remember the numbers, we had in Germany a value increase of 1.4% in the first half of 2025. If you ask us what is the expected valuation result for the second half of 2025, I mean, obviously, as of today, we have not the precise number, but we expect that the value uplift in our German portfolio should be very similar to what we have seen in the first half, so something around 1.4%, like in the first half of 2025. That's a good estimate. Yes, of course, on one side there's a small value increase, but it's important that we are now seeing the third valuation in a row in Germany where values are growing again, and that's, of course, helpful not only for the NTA, but should also support the LCB development at the end of 2025. Then I'm on page number 11 of the presentation that shows the maturity profile. And what I wanted to explain here is our quite strong cash position that we had at the end of the third quarter. So in total, the group had available non-restricted cash of 1.35 billion euros, which is of course for us quite exceptional high, but out of this 1.35 billion, roughly 565 million is then designated for the purchase price payment of the ready-for-rent portfolio, which is still outstanding. And we have a lot of maturity next year, which is the $417 million convertible bonds maturing in August 2026. So we have the cash already in the balance sheet, and we will use part of our cash position to repay these convertible bonds. So a kind of normalized cash position after the payment of the purchase price for the resident rent portfolio and after the repayment of the convertibles is around $300 million, $350 million. And that's still a good cash position, but it's good to have it because we still want to grow and want to continue to grow, especially in the Polish rental portfolio, and the cash will be, of course, the basis for this. Let's come to the German business. And I'm now on page 13 of the presentation. Quite good development that kicked in in vacancy reduction. So as always, in the first quarter of the year, we had a slight increase in vacancies. So we started the year at around 3.9%. Now here we present also the vacancy rate from October, which is already down to 3.6%. And when we look in our business in the last days and weeks, How this develops, we clearly expect further vacancy reduction until the year ends, so therefore the German portfolio, which should perhaps not be a surprise, is still performing very well. Looking at the like-for-like rental growth in Germany, that was a little bit reduced compared to the previous year in the first nine months, so 2.3%. in the basis like-for-like rental growth and 2.6% in the like-for-like rental growth, including vacancy reduction. But as said, firstly, we expect a stronger impact from vacancy reduction in the fourth quarter. And secondly, regarding the basis like-for-like rental growth, It's not a trend that this is going down in the future. So, therefore, we should also see here an improvement in the fourth quarter of 2025. There's simply also kind of seasonality in there, depending on, you know, certain rent increase, if you do in a quarter or do not in a quarter. It's clearly on an increasing path. And the guidance for 2026, which I explained a bit later, will also confirm this. Let's look at the Polish business, and I'm now on page 15 of the presentation that summarizes the Rezifrent acquisition. I mean, we have presented this back in August when we signed the contract, but I have some sentences that are necessary regarding the closing. As you perhaps know, with the press release after the signing in mid-August, we announced that we expect the closing to happen at the end of the third quarter or in the course of the fourth quarter 2025. Basically, there's just one main condition for the closing, which is the approval by the Polish Antitrust Authority. We have to accept that the Polish Antitrust Authority extended the process for looking at this project. This is something where we have not really a chance to accelerate this. So that's still all on a good way. So we expect the approval to happen. We expect the closing to happen. But as it is the first transaction of this kind in the Polish rental market, so there has not been an acquisition of this size before. As it is basically the first time that the Polish antitrust authority needs to look at such an acquisition and at such a market, The Polish Antitrust Authority told us that they now want to conduct their own market research, so that means they will reach out to other landlords, they will do some investigations around customer behavior, and that should take some time. So, therefore, it's a base case. At the end of the first quarter of 2026, beginning of the second quarter of 2026, the approval and the closing of this transaction should happen. Let's look at page number 16. So after the acquisition closes of the rental for rent portfolio, we are almost at our strategic target that we announced some time ago. So close to 10,000 units will be the rental portfolio size at the end of 2026. But that doesn't mean that we are stopping now the growth in our Polish rental business. So we already have units under construction, and we want to start additional construction of around 2,300 units in the course of next year, so in the course of financial year 2026. And this construction takes roughly two years. We will finish them in the course of 2028. So that means we will continue to grow in the Polish rental sector even behind the acquisition of the RSI4N portfolio, because we simply see the market as attractive. We have a great team and a good platform there. We have a good cash position, as already mentioned before. So a large part of this 2,300 units that we want to start to construct next year is basically already financed from the cash that we have on the balance sheet. And therefore, the further growth in the Polish rental sector is clearly a time for us. Page 17 shows the operational development of the Polish rental portfolio. To keep it short, they're still very good and strong. So the vacancy in the units that have been on the market for more than one year is still at a low 2.4%. And the like-for-like rental growth is still at a very good 3.4%. So that means rents in our Polish portfolio are still growing despite the really exceptional growth that we've seen in 2002 and 2023. And it gives us, of course, confidence for the further development of this portfolio. So that was the rental business in Poland. Then a quick look on page number 18 regarding the sales business and a look especially at the sales results. So as already mentioned, the number of units sold in the first nine months and especially in the third quarter of 2025 was higher than in the previous period or in the previous quarter. So we sold 815 units in the third quarter compared to 566 in quarter before and it means another quarter or another number of units sold in the fourth quarter, like in the third quarter, would bring us more or less exactly to a full year's guidance of 2,800 units. And we also see that the sales volume is increasing. So it's not only the pure number of units sold that is stronger, but also the sales volume saw a quite strong increase. So if you add up the first quarters, first three quarters of 2025, we're at a sales volume of 327 million that compares to 261 million in the previous year. And we're very happy about this, that we simply observe still quite strong margins. So we're selling in Poland still at gross margins and expect also this to happen in 2026 above 30%. So sales prices remain on high levels. And that creates quite exceptional results in the Polish state's business today and in the next year. And that brings us more or less to the guidance for 2026, which is shown on page number 21. So firstly, a look on the FFO1 guidance for 2026. As I said, an increase by 9% in absolute terms and by 4% on a per share basis. The rate that we set for the FFO1 guidance is quite broad this year. So from 170, sorry, 187 million to 197 million, so 10 million. And the reason for this is simply the estimate that we needed to do for the reservoir end closing. So the guidance assumes that the reservoir end closing is happening at the 31st of March. That would be exactly the midpoint of the guidance. So if it happens a little bit earlier, So more at the beginning of the first quarter, then we would be more at the upper end of the range. If it goes more toward the end of the second quarter, then we would be more or less more at the lower end of the range. So therefore, there's a bit broader range in FFO1 guidance, but again, still, despite the little bit delayed closing, an increase, 9% in absolute terms, 4% on a per share basis. strong increase in the net income from sales in Poland that we expect. So nearly 50% increase as a result of high handovers next year and high sales prices and good margins that we currently achieve in Poland and also the joint ventures that we have in Poland now since I think three years create for us a quite nice service income that also add up to this development. On the FFO2, it's a quite strong increase, 19% in absolute terms, plus 14% on a per share basis. And as already mentioned at the beginning, you should also expect a quite strong increase in the dividends on a per share basis. So an increase that should add up to up to 30%. Page 22 of the presentation explains in more detail the development in the expected FFO1 for 2025, which we also increased a little bit today, and the expected FFO1 for 2026. And as said, the reserve for rent acquisition is not factored in for the full year. You see this here that we assume the closing for this purpose of the 31st of March, 2026. So that's, of course, a main driver for the overall FFR1 development, but also the existing German business and the existing Polish rental portfolio, which we grow, as discussed, strong in the future, and contribute to this development. And finally, a look at page 23, we find the key assumptions, the underlying assumptions that we expect for our guidance for 2026. Of course, also the WDR, more or less all businesses are expected to increase, so quite strongly, if we look at 2026 numbers. Just to mention one or two things. So firstly, we still expect further vacancy reduction in the general portfolio. So whatever we exactly achieve here in 2025 will not be the end of the development. So there is further potential in the portfolio. As you see, we expected also the like-for-like rental growth in Germany should be better next year compared to this year. So that's a surprising trend that the rents in Germany are increasing. Rental growth in Poland should still be above 3%. So we still see growing rents there in Poland. And not only rental business, but as mentioned, especially the sales business is running very well. So when we look into, for example, the sales numbers, the sold units that we expect next year, we expect that we sell around 2,900 units, and that should be even on the basis of a little bit higher prices. So the sales volume that we expect in Poland in 2026 should be close to half a billion euros. That's it from my side as a quick overview about our nine month results and the guidance for financial year 2026. Many thanks so far for listening, but now I'm of course very happy to take your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. Our first question comes from . Please go ahead.

Hi there. Good morning. Thank you for taking my questions and for the presentation. I've got two questions from my side. Firstly, on the FFO2 for next year, I see that's being supported by quite a significant ramp up in the level of target handovers. Are you able to mention how many of these handovers are already pre-sold and fixed? And then secondly, on the delayed closing of the acquisition in Poland, Is there any risk that they place additional requirements on the deal for it to close or that it potentially gets delayed beyond your expectations? Any further comments here will be helpful. Thank you.

Yeah, good morning. Good morning, Marius. To answer your first question, the first is absolutely correct. So we expect quite strongly increased number of handovers next year. So as shown on page 23, this number of units should be around 3,200 units, so including what we hand over in joint ventures. compared to 2,100 for this financial year. So that's, of course, the main driver of the increase. The pre-sale ratio is quite high, so that should be today almost at around 80%. So we have very high visibility on our results for next year, and as you know, The moral or the technical risk is that, as always, a larger part of the handover should be in the fourth quarter next year, and we need to hand it over until the 31st of the financial year to realize the profit in the balance sheet and the P&L. So if it's handed over on the 1st of January, then it would be next year. But, you know, economically, we have a quite high visibility on that result for 2026-36 already. And regarding the resi-for-rent closing, I mean, we're very confident that this closes, and why are we? In fact, we are, yes, on the one side, after the acquisition, Poland's largest landlords with roughly 9,000 units. But if you look at the overall market, we are a very small part. So we have 1.2 million rental apartments roughly in Poland, out of which we own 9,000. So it means we are far away from dominating the market. We are far away from a situation where we can set prices, we're really price taker, and we're competing really against a large number also of private landlords. So therefore, all the arguments on our side, but what we have to respect, and as already mentioned, is that it takes time, that the Polish anti-thrust authority basically says, well, this is the first transaction of its kind. We've never looked at the rental market before. We need to, or we want to do our own market research, And this isn't something where we, you know, not have the influence on the timing, but the estimated we've given, so something around 31st of March, 2026, should be the best estimate that we have as of today.

Okay, thank you very clear. And then just sort of as a slight follow-up to my first question. if you're now kind of looking at selling around 3000 units or just below 3000 units for next year, could we then think of around that level being a good kind of sales and handover assumption beyond the 2026?

Yes, perhaps we're even a little bit more optimistic because we see a very good development in the policy market. I mean, as you know, the overall fundamental data is quite excellent in this market. But now interest rates are going down in Poland quite significantly. We see simply more buyers coming back to the market. For more people, it's more affordable also, again, to buy apartments. So as of today, if you look after 2026, we're even more optimistic that this number is potentially also something we can increase.

Very clear.

Thanks very much.

The next question comes from Andrew McGriff with Green Street. Please go ahead.

Hi, Martin. Good morning. Thank you for the presentation. Two questions from my side, please. Firstly, on capital allocation, how are you thinking about this with respect to both the built to rent and built to sell platforms in Poland? Are you seeing better relative returns in built to sell right now? And then my second question would be on the dividend. So announced back in August, your intention was to increase this to at least 50%. And today, of course, you've confirmed this. Does this decision to bump up to 50% therefore mean that you aren't seeing much in the way of further acquisition opportunities? And then also perhaps just a bit more color on why 50% given your pro forma LTV? Thank you.

Yeah, good morning, and thanks for the questions. Perhaps I'll start with the second one, which is a little bit related to the first one. So we currently pay out or want to pay out 50% FFF01 for the dividend for financial year 2026. That's correct. That means... we are paying or we have the payout ratio defined in relation to FFO1. So that means we are keeping the full sales result in a balance sheet. And that simply helps us to grow and to grow more or less in two businesses. Firstly, in the sales business. And secondly, strategically, even more important for us to grow in the rental business. So 50% of FFO1 is, in fact, a smaller part of the total cash flow that we generate here. And that's how it should be. So with an increased payout ratio, we are not hurting our ability to grow, and we are not hurting our LCV target. So that means In a kind of base case, so we construct apartments on our own, we don't need really, you know, additional equity. I mean, the equity issues that we did this year in Ogles, that was clearly on the back of an exceptional acquisition, like there was a foreign portfolio with 565 million. But this... Dividend policy allows us really to grow. And regarding capital allocation, I mean, on TAG level, we are supporting quite significantly the growth of the rental business. because here you need or you cannot finance that in full. It's very clear. So you need additional funds or kind of equity proportion for the construction of the apartment. Whereas in the safe business, this business is to a very large part financed by a customer. And the business, as you can see from the numbers, is generating a lot of cash surplus. So therefore, just to give an additional comment, As of today, there's no single shareholder loan in our sales business, meaning in our subsidiary Robic. This company is really funding the full growth on its own and is able to grow. So, therefore, we are not shrinking or limiting the sales business. We're very happy if this business is growing as well, but it's doing this based on its own cash flows.

Okay. That's very clear. Thank you, Martin.

The next question comes from John Wong with . Please go ahead. Hi.

Good morning, Martin. Thank you for taking my questions. Just on that delay, when you're talking about that the antitrust authorities conducting their own market research, what do they consider as the market? And what's the risk that they consider institutional market in isolation?

Good morning, John. That's the purpose of the market research that the Antitrust Authority is conducting, that they simply want, based on their own research, an overview of how does this rental market in Poland look like. So how many landlords are on the market? Is there a differentiation between the landlords? Are they really different segments or is it one rental market? the view of the customer is the deciding one. So that's the purpose of this antitrust approval. So if the customer tenant is looking for an apartment, is there only one type of landlord he normally rents from, or is it a broad market? And the second option is the case, right? So we know from customer service that, of course, most important for the choice of the customer is the price of the apartment, location of the apartment, standard of the apartment. So a decision is more or less never really based on from whom am I renting for. And if you look at Internet platforms, you cannot even select offers based on who is renting out the apartments. But this is something that you can read currently in reports issued from In fact, the Antitrust Authority and we have to accept this as, okay, that's all good. We see this, but we have not investigated that on our own. So, therefore, we have to accept that this takes them some weeks. And, therefore, the approval and the closing of the resin foreign transaction is postponed.

Okay, that's very clear. Thank you. And just looking at the development start for Build to Rent, it's quite a significant step compared to what you historically have had under construction. At the same time, you said that there's scope for more units in the Build to Sell segment. So just trying to understand, are you growing your overheads or was the platform underutilized? And how should we think about the run rate of developments for both segments?

Yeah, the platform is definitely able to do this. So an additional 2,300 units construction start in the rental business compares units of under construction that we had in total. For example, when we've taken over Wobbeck, it was, I think for a sales business, it was between 6,000 and 7,000 always units. And it's not far away from that today. And yes, we have in 2022, 2023, after we also sold at that time with lower number of units, reduced the number of employees, especially in the construction department. And we have increased this in the past month. But it was never changing in overhead or as already mentioned, we have never weakened our margins by doing that. So the platform has definitely the potential to do this. So we are not concerned that With this new construction start, we are, how should I say it, overstretching the capability of the platform.

And just on run rate, how should we think about it in, say, 26, 27, in terms of new development starts?

If you want to now look for the rental business, firstly, we decided we give this year by year. But as we said, we want to grow further. So perhaps 2,300 units construction start is a bit more the upper end on what could be a future run rate. So if you ask us for a base case, let's assume that perhaps around 1,500 units, perhaps a little bit more. is a good estimate for something that we can start every year. And again, this number of units could be financed purely from the cash surplus that we get from the sales business, plus, of course, from the now really growing cash flow from the existing rental portfolio, plus then some additional debt that we get back from TRG level without hurting the RTV target. That's what's important. a very visible growth opportunity based on cash flows that we produce in the portfolio already, based on financing assumptions that are not aggressive, and we know that the L3 is not going up while we carry out this plan.

Okay, clear. Thank you.

Our next question comes from Thomas Neuhold with Kepler-Souvreau. Please go ahead.

Good morning, everybody. Thank you for the presentation, taking my questions. I have two. The first is on the bullish build-to-hold portfolio. If I compare Q3 figures with Q2 figures, obviously you reduce the number of units which you want to build quite significantly. I was just wondering, did you move units from build-to-hold to build-to-sell? or did you just reduce the speed of the rollout after the acquisition you just did recently? That's the first question.

Yeah, good morning, Thomas. Yeah, indeed, with some projects we repeated a little bit because, you know, although the cash position is quite good, to be too aggressive to start construction with a lot of units and then on top of that the acquisition without having the financing in place, that could have been, you know, perhaps a little bit too to do aggressive. But no, more or less the plan to grow the portfolio is still unchanged. It's been a time shift of some months, but overall it has not really changed. That's a little bit more, as I said in the answer before, what we want to start in 2026 compared to what should be the run rate in the future. But the plan is clearly to grow the rental portfolio further.

My second question is on the 2024 FFO1 guidance. If you do a simple math, that implies an FFO of 39 to 43 million in Q4. You achieved 45 last year in Q4. So I was just wondering, you mentioned there's a certain seasonality and modernization spending. Is this seasonality stronger this year, or is this just a conservative guidance?

Perhaps we always feel comfortable to be more on the lower end or more on the conservative side, but also to make clear that there should be a little bit more maintenance in the fourth quarter. So therefore, the range 174 to 179 is really something that we absolutely believe in, and it should not be aggressive. And so, therefore, we think it's appropriate to set the guidance in this range.

Thank you.

The next question comes from . Please go ahead.

Hi. Can you hear me? It's Thomas. Hi. Yes. Actually, two questions on the German business. I mean, you referred to attractive acquisition opportunities, and I think you mentioned yields of 10%. What would be the maximum amount you would allocate here? I mean, let's assume there would be an opportunity to acquire a large German portfolio.

Yes, once again, good morning. Yes, then we would also do more, but is this a very realistic case that in such years you find large portfolios, and again, to be fair and to be fully open, the 10% gross yield is, of course, a little bit, needs to be seen in relation to some additional modernization work that we need to spend. So after the modernization work, perhaps we are ending up at a to call it like this, of perhaps 8%, which is still good. But the situation in the German acquisition market is that you find such opportunities, but more in the smaller sizes. If there would be something larger on the market, we would be happy also to take this opportunity. Always having in mind that we have good growth perspectives in Poland and you know our growth is there. But we did not, how should I say it, stop the acquisitions in Germany. We are not saying that we only want to acquire in a certain size. It's really dependent on the market. So if you ask me for a realistic estimate, yes, we got continued to acquire in the course of 2026. If we have a chance to buy something larger, happy to do it, but you should expect more something in the sizes of some hundred units per quarter.

Okay, okay. Great. The second one is on the Poland rental business. I mean, you plan to grow further through constructions, I mean, How about acquisition opportunities, the likes like we saw with your recent portfolio acquisition?

That's definitely also in the future an option. This is when acquisition was, of course, regarding the size, exceptional. So a portfolio of 5,320 units in Poland is not on the market every quarter. But as already mentioned in the past, we are not the only large landlord in Poland. If you look at other larger landlords, like Helsingborg, for example, most of them have an investment horizon of perhaps five or seven years. So in some cases, also private equity banks, they will exit at some point in time. And yes, we will definitely look at such portfolios and also happy to acquire in the future. If then the pricing fits, that's another question. But generally, we're very open to further acquisitions in the Polish range market as well.

Okay, thank you.

Our next question comes from Ceylin Suhuin with Barclays. Please go ahead.

Good morning, Martin. Can I ask you two questions, please? The first one is about you raised the capital in August for the transaction closing now in end of March, best case. What are you planning to do with the cash until it gets deployed? So that would be my first question. And then my second question is, can you tell us what you have assumed regarding the rolling of the convertible bond maturing in August? and also if there is any script dividend assumption into your FSO 1 and 2 balances. Thank you.

Yeah, good morning, Celine. Firstly, you're correct. We raised the capital for the acquisition, so the capital increase plus the bond issuance already in Oval. This cash is currently on the balance sheet in our bank account. That's the reason. And while we have the strong cash position, we've already converted this into Slotty because we need to pay the purchase price in Slotty, so there's no current currency exchange risk into debt. Good news is that currently we get on deposits in Slotty interest income of around 4%. So that reduces a little bit the earnings impact from the delayed closing. There is a situation regarding cash for the ready for rent portfolio and for the convertible bonds maturing in August 2026. We are simply repaying this convertible bonds from the existing cash position. So as I mentioned, the cash position, strong cash position that we currently have will be reduced in 2026 by firstly the purchase price payment of REZI for rent and secondly the repayment of the 417 million convertible bonds in August. And after that, we still have a cash position of around 315 million, which we then use for the further growth in the Polish rental portfolio. And then regarding the last question, we have based our guidance for financial year 2026 on the current number of shares outstanding. If we, again, opt for a script dividend, it will be decided in March. So we will give you the guidance with the full year figures. But if you look at the impact from the last or from this year's script dividend, that would not change our per-share guidance. So it's not that meaningful. Let us decide, please, in March where we stand there, if we say it makes sense to support the way to grow further by another script dividend or if we change back to a full cash dividend. And that's not decided already. But, again, the impact is not that material.

Thank you, Martin.

The next question comes from Manuel Martin . Please go ahead.

Hello. Good morning, Martin. Two questions from my side, please. On the Polish business as it is growing continuously, have you thought about hatching one day? Because for the time being, I think THG is unhatched. Might it make sense to do that one day, and if yes, at which point?

Yeah, good morning, Manuel. Firstly, that's to explain our financing structure in Poland. The Polish state's business is fully financed in Zloty. So on one side, of course, our main financing is coming from customer prepayments, which are obviously in Zloty. Secondly, we have local bank loans also issued on the Warsaw Stock Exchange, some bonds in Zloty. So that's fully financed in Polish Zloty. Regarding the rental portfolio, it's financed in Euro, in EPSO terms, even after the ESIFO rent portfolio acquisition. I think the total debt, which is allocated then to the Polish rent portfolio, is around 10% of our total debt. So that's not but it's still a manageable portion. For now, every slotty that is earned in Poland stays in slotty and is reinvested. This will change in some point of time. So at some point of time, the rental portfolio will be even more meaningful. That will be the point in time where we transfer cash from Poland to Germany, for example, to pay a higher dividend for our shareholders. And at that time, which is now 2026, we will look into hedging strategies for this cash flow. But as we are a long-term investor in Poland, we don't need to hedge any equity portions or other things at one point in time. Right now, it's more about the future cash flows that we will then start to hedge in the future.

Okay, I see. Second question from my side. The The potential value increase of the TAG portfolio in the second half of the year, this plus 1.4%, is this including capex measures or is this what we might see as a value increase coming from the market? Do you have any view on that for the time being?

I think this includes the capex impact like in the figures before. So the 1.4 that we had in H1 and I think it was 0.9 in H2 last year is the like-for-like value increase. So after capex measures, if you eliminate that, the pure valuation result that is in the P&L is a bit lower. So it's not then perhaps 1.4, it's more 0.9 or 1.0. So that's not a super huge impact, but it includes capex.

Okay. Thank you very much.

The next question comes from . Please go ahead.

Yes, good morning. I've got three quick questions for me. The first one is on page 15 of the nine-month report. The impairment losses were nine months, 3.5 million. So 1.5 million in Q3, so a little bit higher. Is this mainly, I assume it's mainly for the German portfolio, but maybe you could explain what is the reason for the slight increase, Q and Q. is on page 17. We had quite a strong interest in other services for the in Poland. Could you remind us, is this now more or less completed, or can we expect any more or significant contribution in Q4? And last question is on the government grants of 3.4 million. This was 1 million in H1. Could you also remind us what can we expect for and maybe beyond for this item? Thank you.

Good morning, Carmen. Thanks for your questions. Firstly, to explain the volatility impairment losses, firstly, that's more or less probably from the general portfolio. We're always doing in the third quarter of a year an update, so compare what we have seen in the past nine or 12 months in reality compared to our estimates, and therefore there's always an adjustment. I think this year it's a little bit up. Last year, if I remember right, it was a little bit down. So there's a slight volatility always in Q3. But overall, if you compare that on an annual basis, and this is also true for definitely next year to come, there's overall not an increase in impairment losses in German portfolio. I mean, to the contrary, I think this number is getting a little bit better year by year. So it's more technical as we do this update every year at the end of the third quarter. The other services in Poland indeed contain the services that we do for the joint ventures in the sales business. What are we doing here? So we own normally 50% of the joint venture company, and we do in addition the full construction work. We're doing the full planning process. We're doing the sales. We're doing the customer service. And for all this, we get then fees. And there's some volatility based on the number of apartments sold in the JV. So if we sell more in one quarter, obviously the service fee is higher. But also here, perhaps it makes more sense to analyze the fully figure. So what you have already seen, 2024. And what we will see in 2025 is perhaps a good estimate for the years to come. I said perhaps to give a general flavor of the size of our joint venture business, we are selling in the sales business, I would say there's between 20% to 25% of the total sales business currently within JVs and the remaining part, so 75% to 80% is really fully for the old bus. And regarding the government grants, that's difficult to predict because this is then coming once we really received the approval from the government. This is mostly related to subsidies for monetization work. And as I explained during the presentation, if this happens, we are eliminating this from FFO1 because as we are capitalizing the expenses, it makes no sense although it would be, of course, some positive impact, but it makes no sense conceptually to include the grants or the subsidies in FFO1. So whenever it comes, we will eliminate this from FFO1.

Thank you very much. And just a technical question, where do I see the elimination in the FFO calculations?

And in the FFO bridge, so you'll find this in our interim report. And if you look in the presentation on page seven, you'll also see this elimination. Okay, okay, okay, perfect. Thanks so much.

As a reminder, if you wish to register for a question, you may press star and one. Our next question comes from Simon Stepping with Core Book Research. Please go ahead.

Hi, good morning team. Thank you for the opportunity to ask questions. First one would be on page five of your presentation. You show the Polish portfolio overview and more precisely on the rental business. You show your gross asset value of almost 730 million. So in regard to that, my question would be, what's your LTV on that portfolio? Do you gross debt? And I would also be interested in the debt split. So how much of the debt is, for example, in shareholder loans?

Yeah, good morning, Simon. Well, to give you the figures here, on the Polish rental portfolio, we have bank financing of 190 million euros. And the remaining part is the shareholder loans. And we are deciding for shareholder loans because in the meanwhile, it is cheaper for us to issue on TAG level bonds and then to grant to our subsidiary in Poland this proceeds as shareholder loans. because the margins that we have in our bonds today are lower than the margins that we get from bank loans in Poland on the rent-to-business. Just to give you the dimensions, so currently a five-year TARG bond is trading at a margin of around 120 basis points. That's more or less exactly the margin that we get from German banks. Perhaps German banks are a little bit cheaper, but the difference is not that huge anymore. Polish bank loans would be margins of perhaps 180 to 200. So therefore, we're financing debt to a larger part for these economic reasons from a group perspective via shareholder loans. And if we then, grant the flows or the financing for the Polish rent portfolio via shareholder loans, as I explained, or if we put in some equity into our subsidiary in Poland, that's more or less completely tax-driven. So at the moment, I think we have roughly $200 million of equity, remaining part of shareholder loans, and I said $190 million of bankers.

Okay, great. Thank you. And for 2026, do you plan any net investments from Germany into Poland due to ramp up in the rental portfolio or you cross finance that only from your sales business in Poland?

Yeah, we use also part of the existing cash from that. So if I simplified it a little bit, what we have is cash position in the balance sheet as of today is enough to finance the construction work for the rental portfolio in 2026 and 2027.

Okay, great. Thank you. And last question would be in regard to FFO. I think it's page seven. Then you show on a quarterly comparison from Q2 to Q3 and also nine months, 25 to 24, your AFFO decreased materially. I think it's 16 million on a nine-month period basis. And then obviously you have higher modernization capex, but could you comment on that? What are you using it for? Is that a run rate for the future in regard to capex? and that would be much appreciated. Thank you.

Well, I mean, we are now on a level where modernization topics for basically energetic modernization of the buildings in Germany has reached a level that we expect it to continue in the future. So, we have ramped that up more or less year by year. It's not a linear function, so also this CAPEX has a kind of volatility depending if we start new projects or if we do it a little bit later or earlier. But we are now simply on a level that we basically already predicted when we published our decarbonization strategy back in 2021. So we should not expect, how should I say, very strong growth in the years to come.

Okay, thank you. Ladies and gentlemen, this was our last question. I would now like to turn the conference back over to Martin Thiel for any closing remarks.

Yeah, again, many thanks for dialing in and for listening to our call. As always, if there are any questions left, please feel free to contact us. Happy to answer that anytime. Have a good day and hope to see you soon on conferences or at the latest in March next year for full year results. Many thanks.

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