Tag Immobilien Ag U/Adr

Yeah, many thanks and good morning all. Many thanks for adding in into our conference call for the Q1 2024 results. As always, I will try to give you a brief overview about our results and latest developments. And after that, we, of course, have a lot of time for Q&A. So let's start on page number four, which is the summary slide, so where we want to show you the highlights from our point of view, most important developments in the first quarter. Firstly, FFO1 increased year-on-year by 5%, so we came out at an FFO1 of 44.6 million in comparison to the previous year that's around 2 million more, so a 5% increase year-on-year. We think a good development that we can grow our rent results even in this quite elevated interest rate environment. German portfolio showed quite solid performance, like for the grantor growth, including the impact from vacancy. Changes was 2.4%, so a little bit more than in full year 2023. Vacancy rate slightly up by 20 basis points, but we know this now for many years that the first quarter in terms of vacancy reduction is always a little bit weaker, so 20 basis points up. But if you compare that with one year ago, so March 2023, where vacancy rate was 4.7, you can clearly see the positive trend. Looking to Poland, quite strong sales results in Poland, so we handed over more than 800 units in the first quarter of 2024. And also on the sales side, the quarter was quite strong. So in terms of units, it was a little bit less than in the previous quarter. So we sold 636 units. For example, in the previous quarter, it was 709 units. And in the quarter one year ago, 972. But as prices have increased in Poland very strongly, So we see currently a year-on-year increase of around 20%. The sales volume, so the cumulative sales prices, were at $118 million, so more than in the previous quarter and even more than in the first quarter one year ago due to this strong increase in sales prices. Rent business in Poland was also very strong. Like-for-like rent growth is still above 10%, 10.1% exactly. If you look at the vacancy rate of the portfolio, the rental portfolio in Poland, which now comprises 2,600 units, it was at 9.8% compared to 7.2% at year-end 2023. But don't be confused about this increase in vacancy rate This was purely driven by new apartments that came into operations as well at the end of 2023 and additionally in the first quarter of 2024. So looking at apartments that are in operation for a longer time, so at least more than one year, the vacancy rate is 2.6%. So just a temporary impact from new apartments coming into operation. Looking at disposals in Germany, we had basically, after the balance sheet date, quite strong disposals, at least in our sizes. So we sold, from January to May 2024, 780 apartments in Germany. The total sales prices are above 67 million. And we expect next cash proceeds, so after repayment of respective bank loans, of nearly 60 million euros. The average gross age of the units that we sold was 5.3%, and you should expect a closing of these disposals mostly at the end of the second quarter this year, perhaps a little part at the third quarter 2024. The LTV was reduced in the first quarter by 140 basis points. So we are now almost at our LTV target. So a quite strong reduction from 47% a year in 2023 now to 45.6%. And this was purely driven by the high cash generation that we had, especially in the Polish state business. So any impact from disposals will come after the benefit sheet date So, therefore, it was, from our point of view, a very successful quarter in terms of delivery. And if you look at the cash metrics, which have been always quite strong in our company, they improved further. So, net debt to ABDR is now at around 8.7 times, and the ICR is still at 6.7 times. So, that's quite a good value if you compare it within the sector. On page five, you'll find further highlights on the German business. I don't want to get that much into details. Just a quick note on page number six, where you'll find more KPIs on the Polish portfolio. We have changed our presentation a little bit and have here a more clear separation into the rental business and the sales business. And we also included additional figures regarding the sales business. So we are disclosing, you see this on the bottom right for the first time, an NTA for the sales business, also Net Depth for the sales business, And if you look in the appendix on pages 22 and 32, you find also some additional information on the sales business, which is perhaps helpful in understanding this business. So, for example, in the appendix we show also historical sales results, EBITDA. Perhaps this is something which is helpful for you in understanding the business and its perhaps future development a bit more. Let's go to page number eight. where we showed the development of the EBITDA FFO and AFFO. Also, the EBITDA development was quite positive, saw an increase quarter-on-quarter if we compared it with the fourth quarter of 2023 by 7 million. The fourth quarter of 2023 was, when it comes to the German business, a little bit weaker as we had some higher maintenance and also some receivable right of the Polish market. Rental business is contributing quite stable. EBITDA already at 3.2 million in this quarter, and you should expect increasing EBITDA contribution from the Polish rental business in the following quarters. As this business is growing, I will come back to that in a second. Quarter and quarter, FFO1 increased by 5.5 million, and so this is clearly an outcome of the good EBITDA development. We had even a little bit better financial cash results, which seems to be surprising, but please remember that last year we still had at least a part of the bridge loan from the Robic acquisition on the balance sheet, so therefore we are now benefiting from a little bit lower financial costs than in the previous years. This comes to page number 10, and I was already referring a little bit to financing costs. If you look at the average cost of debt that we have, which is also shown in the slide, it is still at 2.2%. If you compare that with the average cost of debt end of last quarter, it's the same number. If you compare that with the average cost of debt one year ago, it's nearly the same number. So I think at that time it was around 2.1%. So that means in this interest rate environment, we're able, let's say, to limit the increase in average financing costs. And if you look at maturing debt, you see this on the bottom left of the page, the average coupons of the financial debt that is maturing in the course of 2024 stands at 2.97%. Average cost of debt of financial debt that is maturing next year stands at 2.8%. Looking at current financing conditions, for example, for new mortgage-secured bank loans in Germany, it's around 4%. For a Polish mortgage-secured debt, it's perhaps more around 5%. So that means, yes, we will see an increase in our average cost of debt, but not debt materially. So we're really able to keep this in balance. As I said, TVA has been reduced quite strongly. financial ratios like ICR and Net Depth in strong shape. And we are very happy that this was also seen by S&P. Perhaps you have noticed that S&P confirmed some weeks ago the BBB-investment rate rating and changed the outlook from formerly negative now to stable. And we can also tell you that we are in discussions with our second rating agency with Moody's, where we are still non-investment grade rating at BA1. and stable outlook. So, I mean, extremely difficult to predict any outcome here, but we are very confident that we are also on a good way. Looking at LTV development going forward, of course, important will be any further valuation declines in the coming quarter. We have not yet received any results from the half-year valuation, which is understandable because we are still in May. But we think, and that's unchanged compared to what we said with the footy figures, that the vast majority of any portfolio devaluations should be behind us. So we have already developed our German portfolio by around 16%. Perhaps some more percentage points in a low single-digit number will follow in the course of 2024. We can't give you an exact guidance. Is this more in the first half or is anything additional to come in the second half? but that we perhaps still are within the total 20% as a rough ballpark number, total devaluation that seems for us very clear. We see this on the transaction market when we compare current valuation levels to our sales prices. We see this also by simply looking into our current portfolio metrics. The portfolio in Germany already stands at a gross heat of 6.3%. and a value per square meter of only €1,060, so therefore we are quite confident that we will not have any major negative impact from further devaluations from the German portfolio. And when it comes to the Polish portfolio, which is of course smaller, but here we have the opposite, so here we should expect a clear positive trend when it comes to valuations in the next quarters. Page number 12 and page number 13 shows the development in operative terms of the German portfolio. I already mentioned that we are in a total like-for-like rent growth of 2.4%, slightly above what we have achieved last year. And page number 13 shows the vacancy development. You see, when you look at the first quarter of 2024 and compare it with the first quarter of 2023 or 2022, always a small increase of 20 basis points, so we expect a similar development like in the previous years, slight increase in the first quarter, stable towards the second quarter, and then in the third and fourth quarter, we should see a development that clearly is a vacancy reduction for the full year. Looking a little bit more into Poland, I'm now on page number 15 of the presentation. We again saw quite strong like-for-like rental growth year-on-year of more than 10%. We expected in the course of 2024 rents will stabilize a little bit more, which is understandable after the very strong increase that we had in the last two years. So if you remember, we saw in the market and also in our portfolio 20% like-for-like rental growth in 2022, around 10% in 2023. So rents were up by almost 30%. So therefore, we would be not surprised if the like-for-like rental growth is coming down in the course of 2024. The rents are stabilizing on a very high level, but looking forward, we are still very much convinced that we continuously will see a good and sustainable like-for-like rental growth. in the polish portfolio perhaps on a more how should i say sustainable numbers of something around four or five percent like flagrant growth as we have seen before the war in ukraine started before inflation picked up that should be a very natural number for us i already mentioned don't be confused about a higher vacancy rate not of 9.8 percent this is due to new apartments that came into operations in which The break-ins rate for units and operations for more than one year is already down at 2.6% as of March 2024. Page number 16 shows the development of the Polish built-to-hold portfolio, the grant portfolio, and the message we want to send out here is clearly that we are investing again. We know that for quite a while, so for nearly one and a half years, we stopped investments in new construction stages as refinancing was the first priority. This is now done, and so we are constructing again. There are 1,200 units under construction currently and further 900 units in preparation, and in preparation means that construction is going to start very shortly. The midterm target is unchanged. We want to get to 10,000 residential units by year end 2028, which will be then, at the latest then, a quite meaningful portfolio for us. On page number 17 and page number 18, you see our views about our sales results and the revenue recognition in Poland. I already mentioned that prices were up quite strongly, 20% year-on-year that we had in terms of the total sales volume, a very successful quarter with $118 million. And just to give you an impression about the strong cash inflow of the Polish sales business, The net financial debt in our Polish sales business is currently even negative, so we have currently more cash in the balance sheet than debt. This is simply a result of the strong inflow from customer prepayments, from sales results that we had in the past quarter, as this business is running very well. And finally, on page number 20, some words about the guidance for financial year 2024. First of all, all the guidances are confirmed and unchanged. If you look at the run rate for FFO1, we even simply multiplied it with four slightly above the guidance, so that looks very much achievable. Of course, interesting is the dividend. We simply ask you here for some more patience, so we will look at that clearly in the course of the next quarters, and we will come back to you at the latest with the Q3 results when we publish the new guidance for 2025. This will be, as always, in November of this year. Clearly, we see market conditions improving, so we see I think that's fair to say some more interest on the transaction market. We also see still good financing conditions with our banks, perhaps slightly improving financing condition on the unsecured side. So this all looks good, but I mean, we have achieved now a lot in terms of deleveraging. We have really delivered our company to our LTV, very close to the LTV target. So therefore we think it's, worth waiting a little bit with this decision a little bit more, but we will clearly come back to that not too late. That's it from my side as an overview of the first quarter 2024. Again, we think quite successful in terms of operational development with growing results in rental and MSS business, and also successful in terms of the leveraging as we are now with our LCB very close to the LTV target. And as a third key message, we're starting to invest and to grow the rental portfolio in Poland again, which will be, when looking to the future, very important for future results. So many things so far, and now we are, 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 one on the touchstone telephone. You will hear a tone to confirm that you have answered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to choose only answers while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from the line of John Wong, Fun Lunch at Kempen. Please go ahead.

Hi, good morning, Martin. Thank you for taking my questions. If I remember correctly, last quarter you said you aimed for $100 million of sales in Germany, of our net proceeds, if you will. You already know over half. Is this 100 million still the right target, or is it a bit on the conservative side?