Tag Immobilien Ag U/Adr

Yeah, many thanks, and good morning, everyone. This is Martin from GE. Many thanks for dialing in despite the summertime for H1 conference call. Let's start the presentation on page number four, the highlight slide, and perhaps it's worth discussing at this time already perhaps the five most important aspects of today's publication. First of all, look at our asset disposal activity in Germany. In total, in the first half of 2023, we sold more than 1,000 units, If you want to give me a breakdown between the different quarters, we sold 750 units in the second quarter, and 300 units have been sold in the first quarter. This number, so there's more than 1,000 units, excludes the so-called asset swap that we announced with the Q1 figures. So regarding this transaction, which was a disposal of 1,300 units and a parallel acquisition of around 700 units, we stepped back from the contract as the buyer was not able to prepare the financing due time. So this 1,050 units, just to make this clear, is a clean number without this asset swap transaction. And we think that's a quite successful number that allowed us to generate net cash proceeds, which is basically the most important figure we look at when realizing such transactions of 140 million. Looking back in the sales activity in the last 12 months, we came out now with nearly 2,000 units that we have sold, and we received total net cash proceeds of more than 200 million, which is for us, of course, something that helped us a lot regarding repaying debts. And that brings me to the second point. We've done really material repayments of unsecured debt in the last month. So alone in the first half of 2023, we repaid corporate bonds and promissory notes of unsecured of more than $300 million, and including the repayments regarding the bridge loan and all other repayments for unsecured debt in the last 12 months, nearly repaid $900 million of unsecured debt. On the other side, we were able to raise bank loans in quite significant amounts. So in the last three months, $490 million, out of which roughly $150 million in the first half of 2023. And it also helped us to create liquidity of around $380 million in total. So we see we have really broad access to the secured debt market, which is, of course, very helpful in these days. Looking at the financing conditions for the bank loans that we effectively signed in the last weeks and months, the average interest cost was around 4.38% and an average maturity of around six years. That translates this average interest cost of 4.3% and an average margin of exactly 1%. We've also been able to reduce the aerobic bridge financing materially. So at the end of the first quarter, the bridge financing stood at $250 million. When you look at the Q report at the balance sheet date, that bridge financing was already down to $175 million. And we did further repayments after the balance sheet date. So as of today, the bridge loan is down to $75 million. And for us, it's very clear that we will repay the bridge loan in full. towards the end of the third quarter, 2023. So then, finally, this bridge loan is done. Just to remind you, the final maturity would be in January 2024. So I think it's fair to say that we have been quite successful regarding asset disposals, regarding repayment of debt, regarding repayment of the bridge loan, but not to forget that the operation business in Germany and in Poland is running quite well. Clearly, we are fighting against high financing costs, so that's basically the reason why we saw a 7% decline in FFO1 year-on-year, but we could include the sales activities from Poland. The FFO2 showed a growth of 11% year-on-year, and EBITDR was growing in both businesses, so in the sales business and also in the operational rental business in Germany, which is, of course, good to know. In general, we saw rising sales numbers in Poland in the first half of 2023, So 1,817 units have already been sold. So that should be a good sign for a strong year regarding sales activities. Just to remind you, in total in 2022, we sold around 2,400 units. So 1,800 units already in the first half compared to around 2,400 units in the whole year 2022. So this clearly weekly year 2022 in Poland should be behind us. Looking at the portfolio devaluation, we think nothing that should surprise you. A devaluation of the German portfolio by 7.4%, following an already incurred devaluation of 5.5% in the H2 valuation of 2022. That brings valuation levels now down to 1,100 euros per square meter or across initially 5.9%. We'll come back to that a little bit later. Important is that the LTV still stands at 47.5%. So that means we just saw a slight increase in the course of the year despite this quite material devaluation. So the LTV was at 46.7% at the beginning of the year, now 47.5%. And that is clear that the asset disposal in Germany is up. There's a lot in this regard. And looking into the second half, I mean, clearly it's extremely difficult to predict integration results. But we know that on the disposal side, we have still some outstanding closings. We know that especially the fourth quarter in the Polish-based business is a very strong bond, so we expect a lot of handovers that will naturally reduce the LCB. So we're quite pleased that even in an environment with valuations falling in Germany, we're able to keep the LCB at least stable. And looking at other financing metrics, that's also worth pointing out, The interest cover ratio and the net financial debt to EPIC-R ratio still stand at a very strong 6.4 times and 10.1 times. And if you exclude the Polish sales business, the numbers are still at 5 times and 13.2 times. So that should be a good proof that our business creates a lot of cash to serve debts. Coming to slide number five, that's just a quick comment on FFO1 and FFO2. So year on year, as I've already said, a 7% reduction in FFO1 and an 11% increase in FFO2. Quarter on quarter, we saw increases in both businesses. In the FFO1, perhaps it's a little bit seasonal, we had lower maintenance costs in the second quarter, 2023, compared to the first quarter. Is this a real trend? No, it's not the case. But, you know, such items have some seasonality in this. In this case, we benefited from them. But we're on the good way to meet our full year guidance for 2023, despite the ongoing support businesses. And as I already said, the FFO2 was at €111.00. In the first half, we expect here, as always, a much stronger second half, as naturally the fourth quarter is always the strongest quarter in the sales business, as we have here. A lot of handovers that then finally lead to the result. Page number six shows you the highlights of the Polish business. First of all, rental revenues are growing, 2.7 million rental revenues in the second quarter, 1.5 million in the first quarter. More and more rental units are finished in Poland. We have now roughly 2,200 units on the market, and we expect that also the FFO1 from Poland will now grow as the renting process moves forward. strong development in the adjusted net income from, say, Poland, $14.4 million after $8.8 million in the first quarter of 2023. The main difference or the main driver for this result was also that the joint venture, the center bridge that we've already announced, was now founded or not founded. It already closed in the second half, and as we sold land bank into the joint venture, we also benefited here from this earnings-wise. We've looked at page number eight, the income statement. It's worth pointing out that net actual rent is still going despite sales activities in Germany. We will naturally see now the rent increases in Germany slowing a little bit down, not because we expect lower rental growth, but we had the closing of transactions at the end of the second quarter. We expect also one transaction to close at the end of the third quarter. So that means we have from disposals a rent reduction, but on the other side, we will have more rents coming from Poland, so that makes us very optimistic that the net actual rent should be at least stable in the next month and then going after that. It already certainly benefited here, seasonal, from some lower maintenance expenses and also some other lower property management costs, so that the net rental income was stronger in the second quarter compared to the first quarter. And finally, just a comment on net financial results. Don't be confused. If this net financial result in the P&L is showing some volatility, we have some interest rate swaps in place that are valued at a fair market value at every balance sheet date. So effectively, you see here a valuation loss of $5 million quarter-on-quarter. If you look at the really relevant cash net financial results quarter-on-quarter, that remained stable. Page 9 shows you in detail the EBITDA, FFO, and AFSO developments. I already commented that the EBITDA, not only in the sales business, also in the rental business, they were very positive, and that led, in fact, to the increase that I mentioned in the FFO1 quarter-on-quarter. Also, the AFSO increased quarter-on-quarter even a little bit more than the FFO1, as we had some lower numbers in our capitalized. Maintenance and monetization capex, also this is something more seasonal. So in general, we are not touching capex in the German portfolio. For the contrary, we are slightly investing more than in the past as we are clearly on the path to decarbonize our portfolio. But the good thing is that in overall terms, in overall numbers, this is still something very moderate. Page 10 shows the year per NTA calculation. We saw a 9% reduction in the first half of 2023, mainly driven by portfolio valuation, so this led to a reduction in the year per NTA per share of around €2.50. Page 11 shows the financing structure. Looking into that in a bit more detail, into the maturity 2023, you see at the balance sheet date, we still had some smaller maturities. But as Mark with his little staff, the 15 million promissory notes to 14 million corporate bonds in Poland have been repaid in July. So after the balance sheet date, we have some ongoing commercial paper that will renew from quarter to quarter. And we have RCFs that are used in Poland for the sales business, which are some balance sheet dates more used and some balance sheet dates less used. So effectively, 2023 is done. And looking into 2024, you see here, if this is a pure view from the balance sheet date perspective, the bridge loan still at $175 million. As I mentioned after the balance sheet, this bridge loan is already reduced to $75 million. So that's then the final repayment that we are doing now towards the end of the third quarter. And after that, what's left are very small unsecured maturities here in Germany, 59 million promissory notes. 23 million corporate bonds in Poland, so that's basically from existing cash. And what's left is 197 million of more classical bank loans in Germany. I've considered this as more kind of, you know, bread and butter, ongoing refinancing. So the overall statements regarding maturities, 2023 and 2024, is once this final repayment from the bridge loan is done, and now it's very, very visible, 2023, 2024 are basically years where no really material maturities are left, and that's, of course, very good for us to say. Looking at page number 13, that shows the life-like rental growth, which is not any spectacular or other developments that I was mentioning. So we had 2.1% total life-like rental growth, weaker than in the quarters before, but You know, this depends also on the development of vacancy rates. So if it is stronger, then, of course, the total like-for-like range growth is also stronger. So this number should increase now in the second half as we expect a reduction in vacancy rates to come. But overall, like for the current growth, exuding vacancy increased slightly to 1.6%. And the total investments per square meter, you see this on the top right of the slide, were 22.7 euros on an annualized basis, which is slightly lower than in the year before. Page 14 shows the developments in vacancy rates. Basically, fair to say that the vacancy rates in the first month of the year remain stable. But as in the past year, we expect now that in the second half, as the motivation projects are now finished, we will have renting successes. So that should allow us to reduce vacancy rates quite significantly. So at least the guidance that brings us to an overall vacancy rate at the end of the year between 4.2% and 4.5% should definitely be achievable. Page 16 shows the portfolio valuation in the German portfolio. As I said, we have had a portfolio devaluation of 7.4%. This comes on top of an already incurred loss of 5.5% in the second half of 2022. So that means we're already down 13% compared to the kind of peak at the end of the first half of 2022. An outlook for the second half relation for 2023 is, of course, extremely difficult. Are we already done in Germany or in our portfolio regarding relation losses? That would be too optimistic. So it's fair to say that we also expect for the second half of relation loss to be expected in the same magnitude like in the first half. That would be perhaps surprising, but important for us is, Also, a valuation loss in the same amount, if it would happen, is absolutely manageable for us. As I said, we are selling assets in Germany. We're selling assets in Poland that help us to keep the LTV stable. And that's, for us, the most important part that we know we can really manage valuation losses, even if they're larger than expected. But looking at the overall portfolio metrics now, valuation-wise, 5.9% cross-seed. 1,100 euros per square meter. If you look on the right side, that's basically the valuation level like three years ago, and that makes us optimistic that that's the largest part of valuation losses we've already seen. Clearly, as I said, something more will come in the second half of 2023, but the largest part should already be done, and that, of course, also does a good result. Looking at page number 19, quick look on the Polish rental business. So we have now more than 2,200 units in operation at the end of the first half of 2023. Another 1,000 units are under construction. So that means we will have around the middle of 2024 more than 3,320 units completed in Poland. And just to remind you, it's the best way to rent In Poland, it's more than double the average rent in our German portfolio. So that's the rental equivalent, the rental cash flow equivalent of nearly 7,000 units in Germany. So even with the units that are already finished, even with the units under construction, we will have already a material rental cash flow from Poland. And clearly the plan is, and you notice two scenarios that we already presented with the Q1 figures, clearly the plan is to grow the portfolio further. But we will clearly do this very moderately, step-by-step, and clearly do this to the largest part of financing with cash flow that is created within COVID. So we know that we create continuously surplus from a safe business. We can use this to start the next Swiss Venture for Rent project. So the mid-term target is to grow the portfolio over the next five years to around 10,000 units, and that should be a realistic scenario, and that is absolutely achievable. We also can say this without any external equity. Page 20 shows more details on the rental portfolio. As I said, 2,200 units. units which are under operation for more than one year of around 14%. The vacancy in these units which are for more than one year on the market is around 3.7%. Units which are under operation for less than one year, the vacancy is at 12.7%. And please have in mind that the last part of these units are not only finished within the last year, they're finished within the last month. So we had really strong rental results in the last weeks and months, and we are very optimistic that we can reduce this vacancy rate now in the next few months quite maturely. And then finally, page 22, the guidance for financial year 2023. To make it short, all guidances regarding FFO1, FFO2, and also other elements and other figures remain unchanged, so we are on good to achieve our guidelines, even though, as I said, we have effective problems. So, therefore, we are quite optimistic that 2023 will be a year where we deliver, in the end, quite good results for you. That's it from my side of an overview for the H1 figures. Thank you so much for listening. But, of course, we are now very happy to answer your questions.

Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by 2. If you are using a speaker equipment today, please lift the handset before making your selection. Anyone with a question may press star and 1 at this time. The first question comes from John Wong from Campen. Please go ahead.

On the bridge loan, you highlighted that you expect to repay it by the end of Q3. What hurdles does this still depend on?