Tag Immobilien Ag

Ladies and gentlemen, welcome to the TAG Immobilien Publication of Interim Statement Q1 2026 conference call. I am Hilly, the conference call operator. I would like to remind you that our participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a 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 zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Martin Thiel, CFO and co-CEO. Please go ahead.

Yeah, many thanks and good morning all. This is Martin. Welcome to our Q1 2026 earnings call. Let's start right away with page number three of the presentation, and I'm coming to the highlights. We think it's fair to say that the first quarter of 2026 was a very good one. Just looking at the FFO1 that came out in Q1 2026 at 49.3 million after 44.9 million in the comparable quarter in the previous year, so that's a 10% increase. So this is definitely a good start into the year, looking at some operational figures like like-for-like range growth. In Germany, we came out at 3.3% per annum, which is quite good. And in Poland, like-for-like range growth also remained quite high at 3.2% per annum. So a strong start into the year from the rental business. And also the sales business developed quite well. Looking at the development of the net income from sales in Poland, we achieved in the first quarter of 2036 a net income of 12.7 million. That compares to 5.0 million in Q1 2025. And also the number of units sold in Poland was in the first quarter of 658 units, stronger than in the same quarter of the previous year, so then in Q1 2025 with 592 units. Talking about the projects that we have ongoing, I think that's of course very much of interest. The antitrust approval for the Resilient Forensic Portfolio Acquisition opponent that we signed last year in August is still outstanding, but we really expect now shortly the decision. So therefore, we still assume that the closing will take place in the second quarter of 2026. So this should now happen really shortly, and what it can tell you is that, firstly, unchanged, we expect a positive decision. So an antitrust approval without any condition. And secondly, this approval is basically the only material outstanding closing condition. So once this approval is there, the closing will take shortly thereafter, so that's two weeks after the approval, we will have the closing. So therefore, as previously communicated, the unchanged expected closing to take place in Q2 2026. Second project refers to the state's business. Well, to make it short, we still look into strategic alternatives for Robit. Honestly, the main strategic alternative is your potential public offering existing of Robit shares on the Warsaw Stock Exchange. This is continuing to be evaluated, so not really a very different use that we can give you, but just to repeat what we have already said. It's the full year 2025, I must call. Firstly, we are fully committed to remain the majority shareholder for WIC, so this is not a strategic change. So this is not a sell-down of the state business. You know that we like this business a lot, that it makes for us a lot of sense to continue with both businesses in Poland, with the state business as well as with the rental business. So therefore, in all the considerations that we have, we are committed to remain the majority shareholder of ORBIC. And a second comment, which is also important for us, it could be an opportunity, but it's not a must. So therefore, if everything remains as it is, if we continue to be the sole shareholder of ORBIC, that's definitely not a great outcome. So let's look where we end up here. These strategic alternatives are still being evaluated. Looking into the balance sheet, for NTA, as not unusual for the first quarter, was more or less flat, but a quite nice increase year-on-year with a 7% growth. LTV is stable at a quite low 41%, but to be fair, that economically real LTV is more the performer LTV after the Polish acquisition. So once we have the closing of the reservoir in transaction, the LTV will be around 45%, which is very good. So even after the closing of this quite material acquisition, we are more or less exactly at our LTV target of 45%. There is an outlook for the next earnings call, which is the earnings call for H1 2026. As always, we will have also a full portfolio valuation with the H1 figures. And what we can give as an outlook is that we expect for the German portfolio a valuation result, which is more or less in line with the two previous semi-annual valuations. Just to remember, we had an H1 to H1 2025, a value increase of roughly 1.3%. In the second half of last year, we had a value increase of 1.8%. So somewhere in that range should be also the valuation results for the general portfolio in H1 2026. With today's results, we fully confirm, again, all of our guidance, so FFO1, and FFO2, this is fully confirmed, and as said, as we expect the closing for the FFOM transaction to happen in Q2, 2026, this is of course then very supportive for the guidance. Dividend pays out is for the 2025 financial year, 40% of FFO1, so therefore, We will have a decision next week in our AGM on a dividend for financial year 2025, which is 40 cents. As in the previous year, a script dividend option will be provided for our shareholders. And just to remind everyone, for this financial year, so for financial year 2026, we'll have an increased dividend payout of 50% of the 401. That's it with the highlights, and then let's move quite quickly to page number seven, a little bit more details on the actual results. Just repeating that FFO1 had a quite strong development, also quarter on quarter. So also comparing Q1, 2026 with the previous quarter, with a quite nice increase of around 4 million from a higher EBITDA of more than 5 million compared to the previous quarter, partially offset by a higher financing cost of roughly 1.3 million euros. And also on a per share basis, there's also an increase quarter on quarter by two cents, so therefore we should be on a good way to achieve our targets in financial year 2026. Page number eight gives some more details on our Polish safe business and the FFO2. And don't be confused that between the quarters, between Q1 2026 and Q4 2025, the result changed. So as always, nearly always, The fourth quarter is the strongest of the year, so therefore, as expected, Q1 2026 compared to the previous quarter was weaker. But as said at the beginning, compared to the start into the year 2025, we're already better this year. And this year, we will have a similar result development as last year. So over the quarters, you should expect growing results. with the strongest results then coming into play in Q4 this year, as most partners are headed over towards the end of the year, as nearly in every year. Let's take a look at page number nine. APRA NTA, as I said, remained more or less unchanged compared between the quarters. As I said, we expect, again, a positive variation result, so they should support the APRA NTA development in H1 2026. And if you compare the NTA development year-on-year, so Q1 2026 with Q1 2035, that's quite a nice increase of 7% per annum. Page number 10 shows the financial structure. As said, LTV currently at 41.0%. Performa after the R4R portfolio acquisition, we're at 45.3%, so right at our LTV targets. That's to assume that S&P confirmed its rating could be minus with a positive outlook. And already in March, 2026, Woolies has its rating BN3 with a positive outlook since June, 2025. We are right now in the discussion every year around this time of the year with the agency. And in general, we should have on the ratings definitely a good development as our financial metrics are quite strong. So not only the LTV has in the meanwhile a quite low level also, and that's also shown on this slide, that has potential depth to ABTR ratio standard 8.6 times. in the ICR level of more than six times. So this should be very good finance metrics also to support further banking developments. Page 11 shows the maturity profile. And just to explain, as I think we already did in the last conference call, We have indeed a quite strong current cash position of nearly 1.3 billion euros at the moment, which is good to have, but a lot of that will be used firstly for the R4R portfolio acquisition payment price, that's around 565 million, and our main maturity this year, the conversion response due in August 2026 of 470 million, will be repaid from this existing cash. So therefore, a lot of the cash that we have in the balance sheet is also designated as for purchase price and payment of , but still we are left with a quite sizable cash position, which is good as we want, as you know, to invest further in our Polish and also the German . Let's take a look at page number 13. Developments operationally of the German portfolio was quite good, especially very strong like-for-like rental growth. It was 3.3% in total. That's for us the highest like-for-like rental growth that we had in the last roughly three or four years. And this was mainly driven by higher rents from rent increases from existing tenants, which are basically Each bigger increases higher tenant turnover. So this basic like-for-like rental growth, which is more or less a rental growth without any big investments, was close to 3%. That should be a very strong number. Plus, with the help of some vacancy reduction, we ended up at 3.3%. Perhaps you've noticed that vacancy in our German portfolio increased by some 30, 40 basis points in Q1, but that's a normal seasonal pattern, so you will see in the following quarters that the vacancy rate in the German portfolio will go down, and we expect on a year-on-year basis a declining trend in vacancy, so as we started the year with 3.2%, you should expect that the vacancy rate at the end is lower than at the beginning, that would be also in line with what we have done. Page number 15 gives an overview of the Polish rental portfolio development. Vacancy here in all the units that we have finished for at least 12 months ago, so they are now stabilized. that are in the market for a longer time, is still at a very low 2%, so that should be a good proof that the demand is really strong. And rent growth is continuously there, so we could be at 3.2% in Q1 2026, at 3.4% and 3.2% in the years 2025 and 2024. On pages number 16 and 17, we see some figures regarding the policy space. I think I already mentioned that the sales results in Q1 were quite good. So 658 units sold compared to 592 units in the comparable quarter of the previous year. And also the number of apartments handed over, that's on page number 17, was with 311 units sold. And finally, again, summarizing our statement on the guidance, which is presented on page number 19, we are confirming again all guidance for 2026. So FFO1, the adjusted net income from State of Poland, and FFO2 should all be as expected and communicated in the part month. That's it from my side, so hopefully comprehensive and quick summary of Q1 2026. Thank you so far for listening, but of course, now 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 one on the 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 two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. The first question comes from the line of Marius Pastu from Bernstein. Please go ahead.

Hi, good morning and thank you for the presentation. I've just got one question from my side on the ESPO guidance range. So if we're now assuming the Ready for Rent acquisition completes at the end of the second quarter, which I think is predicated on one of the slides, Do you still think you'll be at the lower end of the guidance range, or is there upside potential here based on your operational performance being quite strong so far this year?

Good morning, Martin. Thank you for the question. First, you're right that when we issued the guidance in November last year, we said the press conference is closing at the end of the second quarter, 2026. That would mean we are at the lower end of the guidance range. Looking at the actual development since then, I would say there's a good chance that we have got a little bit better, so more towards perhaps the midpoint of the guidance. But let's see. Let's have the closing first. Let's follow the development of the operational business next month. But at the moment, it looks as if we are very comfortably positioned within our guidance range.

Okay, great. Thank you.

The next question comes from the line of John Wong from . Please go ahead.

Hi. Good morning, Martin. Thank you for taking my questions. Just looking at life-like rental growth, in Germany it is now ahead of that in Poland. If I look at the implied life-like excluding vacancy reduction in your guidance, it would suggest a normalization over the remainder of the year. So if this rent increases to existing tenants, is that linked to any specific reach people this quarter, or how should we look into this number?

Yeah, good morning, John. And as you know, we have a portfolio with several locations, so we're not so much dependent on two or three big locations, and therefore also not so much dependent on two or three very important reach big outcomes. So it's really across the portfolio. It's simply true that we are, that we have started the year a little bit better than expected. But, you know, I think our total, like for like growth guidance, the upper range was 3.1%. Now we have 3.3%, so still very close to that. Yeah, good that we had this start into the year, but honestly, 10, 20 basis points more, if that's not, you know, a big deviation from what we originally guided. Yeah. We're very confident that we keep a good point of growth in the remaining quarters of the year.

And then just on that 1.6% that you're increasing to accessing tenants, to what level could this go in your portfolio and how sustainable do you consider it?

Firstly, there's definitely a strong number. So perhaps don't read too much into it if, for example, in the next quarter, there's more than 1.4 or 1.5. So there's a certain swing in that. But basically, as we've always said, we own a very, call it, normal German residential portfolio, although we are located in what we call secondary locations. And we know since now several years that also in this location, the norm is very strong. So it increases step-by-step. We have a portfolio where the rents are only very, very few occasions above need-to-beg levels because we have not had any big modernization programs in the past, so we can really go along with every need-to-beg increase and increase the rent step-by-step afterwards. So difficult to say where is the limit, but If you look at that again, in total, if rents are growing, including vacancy reduction with 3.3%, there should be room for improvement in the future.

Okay. That's fair. Thank you.

The next question comes from the line from Andrew McGrath from Green Street. Please go ahead.

Hi. Good morning, Martin. Thank you for the presentation. Two questions from my side, please. Firstly, on capital allocation, you're at 41% LTV today, 45.3% pro forma post, go to your rents, so effectively at targets, and your share price trades at a meaningful discount to NTA. So I guess my question is, where does buying back equity rank against incremental Polish rental construction and further German acquisitions in your capital allocation framework today? That is the first question.

Good morning, Andrew. So firstly, to be clear, We have communicated that we want to grow further in Poland, especially in the rental business. So we want to start and have already started construction of new rental units this year. So it should be a construction start in total of roughly 2,000 apartments, and this will continue in the future. For this investment, there's no external equity needed. We have a quite moderate payout ratio regarding the dividend, so it will be for this year, I guess, a little bit more than last year, so 50% of FFO1, but we keep the full cash, the full net profit from the state basis in the balance sheet. And that very naturally allows us to grow the portfolio without hurting the LCV. And if you analyze the LCV development of last year, there was a quite natural deleveraging impact only from the result that we create. When it comes to German acquisitions, The most likely outcome is that we are buying here step-by-step portfolios of 200, 300, 400 units, as we did in Q4 last year. By the way, we are still looking at the market, so we're also happy to buy in Germany. We know the market very well, as we can easily integrate this in the portfolio, but this is a more opportunistic approach. We have clearly in Poland as a kind of benchmark, so why should we buy in Germany at lower yields compared to opportunities that we potentially have in Poland. I mean, it would also not be excluded to buy a larger portfolio in Germany. It's purely numbers-driven, but I think it's more likely that you will see the small acquisitions. And then finally, if it really comes to a larger acquisition, whether this is Germany or whether this is Poland, again, like the HFRL transaction, yes, this would be the only case where we look into potential equity as we have done last year, quite targeted, moderate equity contribution that kept the LCV on a reasonable level. But that's the only case that we have in mind. let's say, a very strong growth driven by a large acquisition that, and only that, could require equity.

Okay, that makes sense. So, to be clear, you would not consider a share buyback at this stage using some of your cash that would be net of the proceeds, the amount for resi for rent, and then your convertible payback, you wouldn't consider a buyback with residual cash?

No, not at this point in time. We think we have good growth opportunities ahead of us, especially in the Polish market.

Okay, that's clear. Thank you. And then my second question is on Polish vacancies, so specifically of the stabilized portfolio. It ticked up to 2% from 1.3% last quarter, but is it just curious, what is driving the 70 bps drift in the stabilized bucket? Is it just general market softness, tenant turnover, or is it something else?

This is purely tenant turnover, and if you follow that with our internal reporting on a monthly basis, you know, any swing between, call it 1.5 and perhaps 2.2, 2.3 percent, something like that, it's very normal. Perhaps you remember that most rental contracts in Poland have a maturity of one year. So, for example, when we started a project some time ago, rented it out, Perhaps a lot of contracts are ending to the same time after one year, so then in one month a little bit more renewals, and in the next month a little bit lower. So everything that is, let's say, around the 2% is a very normal vacancy rates number, which is, again, a quite strong one. So a vacancy rate in stabilized portfolios around 2%, It's from our point of view a good confirmation for the strong demand in the Polish market.

Okay, that's very helpful. Thank you, Martin.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. The next question comes from the line of Thomas Rothäusler from Deutsche Bank. Please go ahead.

Hi, morning. A couple of questions. First one is on the Polish PRS market. I mean, just wondering if you see photo players keen to divest. You know, wondering if you see photo acquisition opportunities, basically, and also what magnitude would you be willing to execute?

Yeah, good morning, Thomas. In a Polish residential market, I mean, firstly, most landlords are private persons. Not that different to Germany, but of course, you have also other institutional players in the market. I think in total, institutional landlords own currently around 30,000 apartments. This number is growing. And a lot of these institutional owners are backed by private equity. So their investment horizon is perhaps naturally some five, six, seven years ahead. ending perhaps not everything this year, but in the next one, two, three years. So there will be opportunities on the market, and, of course, we will look at that. So also to make clear, an acquisition like last year's crazy foreign transaction with 5,300 units is unusually in size. So we will look at such portfolios. That's very clear. We are a natural buyer. These acquisitions... Normally, it should be perhaps of a little bit smaller size, but that could be a very nice add-on to the growth we have ahead of us anyway because we're building on the own land bank, and that's perhaps also important to repeat. It's not a must. So we have a quite natural growth plan by building every year, let's say, 1,500 to 2,000 apartments on our existing land bank with the existing platform and if acquisitions are coming on top at good terms, then yeah, of course, we will look at it.

So should we see the planned IPO or the potential IPO as a way to reallocate capacity or capital from build to settle to build to rent? Correct? Correct.

which would not be really a new strategy, right? So as it is currently, we produce a lot of cash in the sales business, which is then more or less flowing into the rental business. And whether this is then from proceeds of potential investments disposal of shares or past that, or whether this is year by year by a dividend that OBIC or the same business producing is basically the same. So, of course, with a different timing, but the overall strategy, the overall thinking would be unchanged.

Okay. Second question is on the RACI for rent approval by the Polish authorities. I mean, Assuming it would not get approved in total, how could potential conditions look like? Do you have any idea?

Well, firstly, to make this clear, we do not expect this. So, therefore, we are not speculating about potential conditions because we think our that our position is very strong. So yes, after this acquisition, we are Poland's largest landlord with in total a bit more than 9,000 units out of 1.2 million rental apartments in Poland. So we are far away from a situation where we can dictate rental prices. So therefore, we are unchanged from the very beginning, very positive on this. We can understand, and believe me, for us it's also very hard that the time is now extremely long. So we are waiting now for the decision since it's eight or nine months, but hopefully it's really coming shortly, and of course we will inform the market once the decision is there.

Okay. My last one is on Poland rental markets overall. controls?

No, that's not the case. And perhaps this is not the case because the rental market in Poland is definitely much smaller, for example, compared to Germany. As you know, in Germany, roughly 50% of the people are living in rented apartments. In Poland, it's around 15%. So therefore, when we follow discussions about about the residential market, let's call it like this. It's more about potential support for buyers of apartments, but not so much about rent controls. So we don't really see a discussion important currently.

Okay, thank you.

We now have a question from the line of Kai Klose from Berenberg. Please go ahead.

Yes, good morning. I've got three quick questions, if I may. The first one is on the D2S, the Develop to Sell portfolio in Poland. If I saw this correctly, you have estimated now, or you estimate now this total investment cost for 2,300 euros is from memories, and it was about 2,200 euros. Is this because of higher land costs and or of higher construction costs you have already envisaged? Yes, I'm good, go ahead.

Sorry, Jeff, I interrupted you, but if I answer this correctly, yes, you have always inflation in construction costs and land prices. Currently, this is still moderate, but the number that we are presenting here is really the actual construction costs for all the apartments under construction and in the safe process, and that could also be then a difference depending on which location is under construction, on sale, and which land price the underlying location has. So, therefore, there's a quite, you know, over swing from the product mix and at least 100 euros per square meter difference.

Got it. And second question is on the service segment. Could you indicate if we might see a bit of a swing or there's a stronger increase from higher energy costs that you then use or could use also for higher income in your service segment in Germany? Or is it more coming through in 2027?

This is sometimes more something for 2027, but you're right. So if this development, that would be something positive with higher energy prices. I mean, we don't like to see it because that drives inflation and then increases the cost, but that's for the energy business. In the past years, that could be indeed helpful, but that's more something for 2027.

The last question would be on page 22. You mentioned that the cash-effective income tax in Q4 were at 9.6 and 9.9 in Q1 2026, or this quarter. Could you just explain this reduction because of your tax initiatives you had at the end of the last year?

I mean, this reduction is because in Q4 last year, we had more handovers in the sales business Okay. Therefore, high tax burden from that. So it's purely coming from higher tax expense in the sales business in Q4 last year.

Got it. Thanks.

The next question comes from the line of Stephanie Dorfman from Jeffrey. Please go ahead. Mrs. Dorfman, your line is open. You can talk.

Hello, can you hear me?

Yeah, good morning, Tiffany.

Okay, hello. Good morning, Martin. Sorry for that. So, yeah, most of my questions have been already answered, but maybe a follow-up on the vacancy rate in Germany. I was wondering about the assets you bought last year. Have you been able to reduce this vacancy? I mean, the increase in vacancy is driven by this portfolio or other locations and and so on, and how much is the vacancy currently on the asset required, and maybe a second one, a follow-up on the price in Poland and so on. What would be your expectations going forward, and what kind of gross margin can we expect on the safe business going forward, please? Thank you.

And regarding the first question, This is correct. All the acquisitions that we have signed in Germany in Q4 last year have closed in Q1 or already at the end of Q4 or the 1st of January this year. So there's also a slight impact from that. that could be out of the 40 basis points, perhaps 10 basis points. So, therefore, it's perhaps a little bit higher than did this increase in maintenance rates in previous years. As far as I remember, in the last three to four years, you always had an increase of, let's say, 20, 30 basis points in the first quarter, which is a quite kind of seasonal development. Also, perhaps, Some of the modernization programs or most of the modernization programs that we have for vacancy reduction is then more finished in a third or fourth quarter of the year. In the acquired properties, between or some weeks after we have just closed the acquisitions, you don't see any movement in vacancies. And that's very natural. So, therefore, the reduction of that will come, perhaps even not in the next weeks, but more towards end of this year or in the course of 2027. But, yeah, good to have this opportunity, good to have portfolios acquired where we can reduce the reckoning rate in the future. And regarding the Polish safe business, At the moment, it looks quite strong, so the amount is there. Sales prices are even slightly increasing, and that's good to see. Of course, a little bit unknown is the construction cost. Mostly that's a question also for 2027, 2028. And the unknown is, of course, the development of energy prices. If you ask us, do we see already something like stronger construction price inflation? No, that's not the case. Yes, clearly, this could happen. But, yeah, at the moment, we are optimistic that we can keep our margins. Let's see how this develops in the next weeks and months. And we see clearly that this question now more often, very naturally, And one answer that we also gave is, if we are wrong, so if we see more construction price inflation in the future, we still have a buffer for that. So we're operating to gross margins that are, in many cases, close to 35%. So if these margins are weaker in the future, that would still be a very profitable and good business.

Thank you.

Once again, to ask a question, please press star and one on your telephone. We now have a question from the line of Kanat Mitra from Barclays. Please go ahead.

Hello. Yeah, hi, good morning. Hi, good morning. Thank you for taking my question. I have a couple of questions. Is there a potential for valuation uplift for the receipt for rent portfolio acquisition given that there have been five rate cuts in Poland and you signed it back in August? That's my first question. And the second question is what is the potential EBITDA margin for that business and what kind of margins can you help it manage in the future once it's integrated in the portfolio. Thank you.

Yeah, happy to answer this question. As you know, we acquired the hedge fund portfolio based on a gross yield for rent that we expect for this year of around 7.5%. That should be, you know, for us a very good, reasonable price. And now it will come then after the closing, which is hopefully then taking place soon, first time for a valuation of the portfolio. In general, we are convinced there should be room for valuation uplift. The question is, are we really realizing this or part of this already on day one? Because the natural discussion that we will have with the value is that we more or less acquired the portfolio just recently. Now, if you want to, this is one of the advantages that we have, that we have a longer period between signing and hopefully soon coming closing. So it's between August and today. Indeed, there have been interest rates cast. So yes, there's potential, but honestly, I just can speculate about this. So we have obviously no valuation results yet, but in general, if let's take a more midterm view over the next one, two, three years, we should have a good valuation development, especially in this portfolio. And the APTR margin should be quite high, or let's be more specific, the incremental APTR margin. So we got it already for 80% APTR margin because we're taking here over the portfolio, plus also some people that would help us with the day-to-day business. But we're not taking over management. We're not taking over management. you know, back office or administrative functions. We're fully integrating this into our quite strong team and platform. So, therefore, this acquisition, all projects that are finished in the future, all potential acquisitions in next year will contribute quite strongly to the EBITDA margin from the rental business.

Thank you. Thanks for your answers.

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

There are many thanks from our side for dialing in, for listening to the call and for the questions. As always, if there's anything left, please feel free to contact us any time. That's it from our side. Have a good day and talk soon.

Ladies and gentlemen, the conference is now over. Thank you for choosing our call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.