Tag Immobilien Ag U/Adr

Ladies and gentlemen, welcome to the publication of Half Year Report 2024 conference call. I am Shari, the chorus 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 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 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.

Good morning all and many thanks for dialing in. This is Martin from THG. I'm very happy to guide you through our half-year results. I will try to make it quite condensed and short so that we have enough time for Q&A afterwards. Let's start on page number four, which summarizes the highlights of the first half in 2024. Looking at our results, FFO1 came in at 88.1 million. That's nearly exactly the level that we had last year, despite the disposals we made in the German portfolio during the financial year 2023, which are now effective in full and also to a certain part in the first half of 2024. A contribution to this very stable letting result was an increased like-for-like rental growth in the German portfolio of 2.7% that compares to 2.3% in the previous year, third year, stronger like-for-like rental growth so far this year. And also the vacancy rate developed very well. We stand now at 4.2% at the end of the first half, and that compares to 4.7% one year ago. Also in the Polish portfolio, the like-for-like rental growth is still very good at 4.5% after 10.8% last year. Clearly, this is a reduction, but as we said in a previous call, we expected that this like-for-like rental growth is to a certain extent normalizing after two very strong and exceptionally strong years, 2022 with more than 20% and 2023 with more than 10% like-for-like rental growth. So we're still very pleased that like-for-like rental growth came out at more than 4%. Looking into the sales results, the main driver for the sales result is clearly the business in Poland. The adjusted net income from sales in Poland was stronger than in the previous year, so increased by 9% to now $34.1 million after $23.2 million yesterday. than in the year before. We handed over more than 1,300 units compared to a little bit more than 860 units in the previous period. Looking at the current sales business, the number of sold units was lower, so 1,056 units we have sold compared to 1,817 in the previous period. But the sales volume, thanks to increasing prices, was still at nearly 200 million compared to 222 million in H1 2023. So a lower number of units sold, but on the other side, as already indicated in the course before, sales prices in Poland have seen a very strong increase, an increase of 20% year-on-year is still observable. Very important for this results call is to give you the message that the portfolio valuation loss in Germany was really moderate at 2.7%. And we clearly see the portfolio valuation losses coming down. And we expect that the values now have reached a trough. So the valuation loss in the German portfolio was 2.7%. in H1 2024 after more than 4% in the last half year valuation and more than 7% in the comparable period of the previous year. So all in all, in the last two years, we have devalued the portfolio in Germany by nearly 20%, 19% to be more precise, and the portfolio valuation stands now at 1,040 euros per square meter or a 6.5% gross yield. Looking at disposal results in Germany, we continued to sell in the portfolio. We achieved total sales prices of 78.4 million and expect net cash proceeds, so after repayments of bank loans, of more than 66 million. The average gross yield of units sold was at 5.2%. That was even more than the previous financial year, where the average gross yield of sold units was 4.3%. Please be aware that the closing of roughly 720 units with net cash proceeds of 58.8 million occurred after the balance sheet date, so therefore we will have additional cash inflows after the balance sheet date, which is not yet reflected in full in the balance sheet as of end of June 2024. Despite the portfolio devaluation in Germany, the LTV was further reduced. At the balance sheet date, it was 46.6%. If you take into account the closing of the disposals after the balance sheet date, we are already at 46.3%. That means we are very close to our LTV target of 45%. And as we know that we will produce still good cash flows from the operation of business in the second half of the year, that we will have perhaps additional sales in Germany, we are very confident that we achieve the LTV target by year-end. Net debt to EBITDR and the ICR are still at very strong levels, so nine times net debt to EBITDR and 6.7 times the ICR. And we are also very pleased that the rating agencies confirmed our very stable financing structure, so we received, I'm sure you have seen this, an upgrade in credit rating to BA3 from Moody's back in May, and also Standard & Poor's stabilized Yardbook from the BBB minus rating already in March. So that means we have two investment grade ratings available again. And this is, of course, a good tool for us to diversify our financing options. On pages five and six, you find more details on the highlights. I will not go into every number here. So let's go to page number eight. That gives an overview about the development of the EBITDR, FFO, and AFFO. Just some comments on this. So we saw a reduction, if you look at the half-year numbers in the EBITDA, by a little bit more than 1 million. So 120.1 million was the EBITDA for the first half of 2024, compared to 1.7 million more in the previous year. This is mostly due to the disposals in the German portfolios. As I said, FFO1 from the rental side was quite stable, despite the disposals, and we saw a higher AFFO as the modernization capex in the first half was a little bit lower than in the previous year, but we don't see this as a trend, so for a full year, you should expect a capex roughly on the level of 2023. On the right side, you see the calculation of the adjusted net income from sales last In Poland, again, half year 2024 was much longer than the previous year. So we came out at 34 million compared to 23 million. That means we're also on a good way to achieve our guidance here, especially the FFO2 guidance. And also for FFO1, if you take the first half of 2024, already $88 million. Analyze this, so the full guidance stands between $170 and $174 million. That should be very much achievable. Page 9 shows the APRA NTA calculation. Basically, APRA NTA is flat, so a $0.02 increase despite the valuation losses we recorded in the first half as our business still produces good cash from the operational business. Page number 10 shows the financing structure. So the average cost of debt is slightly increased to 2.3%. After 2.2% at the beginning of the year, the LTV, as I said, is already close to the LTV target. Now it's 46.6 and pro forma including the disposals after the balance sheet date at 46.3%, so very close to our target. As I said, good strength to investment-grade ratings back. And as I mentioned in the past, the investment-grade ratings were not so much needed for refinancing purposes, but of course, for us, investment-grade ratings are a good tool on one side to diversify our financing structure and on the other side to support the growth, especially for the Polish rental portfolio. Let's go to page number 12, where we give more insights On our rental growth and CAPEX allocation, important to point out that the rental growth is on a good way, as already indicated in the previous calls. So analyzing the like-for-like rental growth a little bit further, the like-for-like rental growth without vacancy reduction increased from 1.8% in the previous year now to 2.1%, and including the effects of vacancy reduction, we came out at 2.7%, so also stronger than in the previous year. This is achieved still with moderate maintenance and capex, as shown in the chart on the top right of the page, €22.2 per square meter, and this is really everything, so maintenance and capex, after €25 roughly the two years before. As I said before, you should expect that for the full year, this number will be roughly on the level of the two previous years. PES 13 shows the vacancy reduction, a quite similar development so far in the first half of 2024 compared to previous years. We know that always the first quarter and the first half is a little bit weaker, so the slight increase of 20 basis points in the course of the year is exactly what we have seen last year. So that means for the second half of 2024, we expect a reduction in our vacancy rate. And you know that we have guided for further vacancy rate reduction for the full year. So at year end, we should be clearly below 4% with our vacancy rate. Page number 14 shows more details on the portfolio valuation in Germany. As I said, we have now devalued the portfolio by 19%. And this is a quite extensive devaluation. And we think we are now on a level where we have really reached a trough so where we do not expect any material devaluations anymore. If we look at the historical development on the right side, with a 6.5% gross yield, we are even higher and materially higher than in December 2019 with a gross yield of 6.1%. On a per square meter basis, we're nearly exactly on the same level like four and a half or five years ago. And a 6.5% gross yield, which translates at perhaps something at 5.5, 5.6% net yield. That should be also in a world with high interest rate, a very, very reasonable valuation level. So therefore, we are very optimistic that the periods of devaluation are now behind us. This is also confirmed when we look at transaction prices that we currently see in the market from our own disposals. So we're really now selling very closely to our book values, that means slightly below, slightly above, and that should be also a confirmation for the valuation levels. Just as a side note, also the Polish portfolio was, of course, fully externally valued, at least so far as the rental portfolio is concerned. you know that the sales portfolio is very low cost. In the rental portfolio in Poland, we saw a valuation gain of around 3 to 4% valuation uplift. So contrary to Germany, the portfolio in Poland saw valuation increases, valuation uplifts in the last two years. Yeah, let's look at a bit more at Poland. Page number 16 shows you the detailed data on the rental business. As I said, black flag rental growth after two exceptional strong years now at 4.5%, which would be still a very good number. And the vacancy rate in the portfolio is already quite low. So it was 7.4% in June 2024. But if you look at the details, you will see that in the city of Lodz, the vacancy rate was higher. And this is due to projects that have been finished. and very close to the balance sheet, also one project in Poznań. So therefore, if we look at properties that are longer in the market, so for more than one year in operation, then the vacancy rate is already down to 2.8% as of June 2024. And this is, again, a strong confirmation of the demand in the Polish housing market. Total portfolio stands now at 2,629 units. By year end, we will have a portfolio size of around 3,350 units because also other units are currently under construction. Page 17 of the presentation shows the sales numbers in our business. As I said, the pure unit numbers. are down compared to the previous year, so 1,056 units sold in H1 2024. You know that our guidance for the full year was that we want to sell around 3,000 units. Let's look at the second half. We are still optimistic that sales numbers are picking up in the course of the year, although prices have increased quite strongly in the sales volume. That means the cumulative purchase prices or sales prices are still strong and in a good level. I mean, what do we observe in the Polish market at the moment? It's not the case that the demand is slowing down, but you know that at the end of last year subsidy program for first-time buyers of apartments which granted them cheap loans has ended and the new subsidy program is on the making. It has already been announced and already some details have been published and that would be quite similar like the previous program, perhaps a little bit more targeted on affordable housing, so a little bit more on families with lower income. But now we have simply the scenario that people are clearly waiting, is this new subsidy program coming through? So will it be effective in the third or fourth quarter? And that means we have a period where people simply wait until this decision is made. And the good news, I think, is that even if this new program is not coming, the demand will still be there. So then the uncertainty would be away and people would start to buy again. So therefore, we're still very optimistic that we will achieve good sales numbers, not only in the second half of 2024, also in the years to come. Page 18 shows the revenue recognition. And just to remind you that the revenue recognition depends or is done at a point in time where we hand over the apartment. So we have the completed contract method in the P&L. Once we hand over the keys to the client, the revenue is recognized in the P&L. The first quarters have been already strong, but traditionally, as you see here on this page, the fourth quarter of each year is the strongest, and this is also expected for the year 2024. So therefore, safe results, P&L buys should be also in a good way in 2024. And finally, on page 20 is the overview of our guidance. All guidances, all forecasts are fully confirmed this year. So FFO1 still stands at 170 to 174 million, and the FFO2, including the sales results in Poland, between 2017 and 2023 million. And as the results for the first half show in 2024, we should be on a very good way to achieve this. no new comments or outlooks on a dividend this is still depending on market conditions and as said in the previous course we will definitely come back to this at the latest with the results for the third quarter where we also publish the guidance for next year and if you look at market conditions i already commented on transaction market I already commented on devaluations now reaching the draft. We are optimistic that market conditions are going here into a positive direction. But let's wait how the next weeks and months are developing. And again, we will come back on this in November. That's it from my side as an overview over the half-year results. Thank you so far for listening. And 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 hands that will ask a question. Anyone who has a question may press star and 1 at this time. The first question comes from the line of Mariusz Pastu from Bernstein. Please go ahead.