Tag Immobilien Ag U/Adr

Ladies and gentlemen, welcome to the TAG Immobilien Publication of Annual Report 2024 Conference Call. I am Yousef, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and that this 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 followed by 0. The conference must not be recorded for publication or for broadcast. At this time, it's my pleasure to hand over to CFO Martin Thiel. Please go ahead.

Yeah, many thanks and good morning all. This is Martin. Welcome to our annual report 2024 conference call. Many thanks for dialing in. Perhaps this year, a kind of special situation is we already published our preliminary results roughly one month ago at the end of February. We can tell you upfront that Compared to the preliminary results, the final results did not change. So basically, all numbers were confirmed. After now, the audit is completed. But let's start with the presentation on page four, which is the highlights slide and perhaps to summarize the main messages for today's photos. Firstly, FFO1 came out even slightly above our guidance at 175 million. Guidance range was 170 to 174 million. And what was better than expected was the rental result in our German business. And here the ABDR, so the operational business in Germany, was performing quite well. We had a very strong fourth quarter from the energy business. But what was even more important is that we had quite decent like-for-like rental growth in the German portfolio of around 3% in 2024 after 2.3% in the previous year. And the vacancy in our residential units in Germany fell to 3.6%, so a reduction of 40 BOS basis points in the course of 2024, which was for us, if you remember our history, where vacancy rates stood some years ago, definitely a big success. But not only the rental business in Germany and FFO1 performed very well, also Poland showed a very strong development in 2024, and here namely the sales business was stronger than expected, so we ended up with a net income from sales in Poland of 66 million, and it was quite significantly above our guidance, which stood between 46 and 52 million. And this increase in the sales result in Poland was due, on the one side, to better EBITDA, so better operational development, So we had higher margins in the projects that we handed over that we originally expected. We also sold part of our land bank, not too much, but we used here simply opportunities to sell part of the land bank. And on the other side, we had better than expected interest income in Poland because during the course of the year, we had a strong cash position. And as a consequence, not only the net income from sales in Poland was above the guidance, also FFO2, which comprises the rental result, FFO1, and the net income from sales was better than expected. Looking at sales numbers in Poland, we sold around 2,000 residential units compared to 3,600 units in the previous year. So yes, this was less than expected. and, of course, less than the previous year. But perhaps two comments on this. Firstly, 2023 was clearly an exceptional year with tremendous sales results. But on the other side, and that's also important, sales prices in Poland in the course of 2024 increased by another, depending on location, on average 5% to 10%. So that means that the sales volume that we achieved was still on a very good level. And if you look into 2025 to give an outlook already now, we see that we have increasing number of units sold already in the fourth quarter 2024. So therefore, our expected number of units sold for 2025 should be at around 2,800 units. This is in line with the guidance that we already gave you in November last year. looking at the balance sheet firstly NTA per share grew in 2024 by five percent despite greater portfolio or valuation loss in the first half 2024 in the German portfolio so still a quite decent result and in the second half of 2024 the trend from valuation losses in Germany which lasted now for more than two years stopped so we had a even slightly positive increase of 0.9% and this is clearly good news. But German valuation levels remain on a, from our perspective, quite moderate level. So we are valued now at a gross yield in Germany of 6.6% compared to 6.3% at the beginning of the year and a value per square meter of slightly above 1,000 euros. The fourth point to mention is that our strong liquidity position, so the liquidity position was already quite good at year end with a little bit more than 600 million euros of cash in the balance sheet after the issuance of a 500 million corporate bond in August last year. And we increased this cash position by issuing new convertible bonds in March this year of 332 million. So on a pro forma basis, the cash position stands at nearly or more than 930 million euros. This is good for two things. Firstly, all upcoming unsecured debt maturities in the next two years are already covered. But secondly, and it's also important, now we really have the basis from the strong liquidity position to grow in Poland. And as you know, in Poland, we've got ambitious investment plans in our rental portfolio. So therefore, the basis for further growth is now clearly there. And as a last point from the highlight slide, all guidances for financial year 2025 are fully confirmed and are unchanged. We are proposing a dividend for the next AGM, which takes place in May this year, of $0.40 per share. So that translates into a paid ratio of $0.40 of FFO1. And we will offer our shareholders also the choice between a cash dividend and new TET shares, so meaning a script dividend. Let's move on to page number five. You'll find a lot of details. Perhaps a quick look at the disposals in Germany because we haven't touched this yet. So we sold in financial year 2024, 1,400 units. Their total selling price of 143 million. The average gross yield at which we sold was 5% and we even managed to achieve a slight book profit of 6.6 million. Looking forward into 2025, Basically, our disposal program in Germany is now You should not expect really major disposals in Germany in the course of 2025. But clearly, opportunistically, we will also look at the market to dispose something if we can really exit at a price which is then more meaningful above book value or also but it's really a smaller share, perhaps some non-core assets that we will sell. But on the other side, we're also looking at potential acquisitions in Germany. You should not expect here really strategic and very large acquisitions, but If we see opportunities in the market in sizes like we bought in previous years, so portfolios, 30, 14 billion euros in East Germany, high yielding in markets that we know very well, so just to give an infinite idea, yes, we would also be happy to do such acquisitions. Page 6 shows you more details on the Polish portfolio and perhaps just to remind you that we also disclose, you see this on the bottom right, the NTA and the net debt for our Polish sales business and perhaps interesting to realize that although this business, the sales business, delivers an adjusted net income this year of 66 million, last year even 83 million, The share of this business in the NTA is very small, so it's just €3.29, because most of this business is not reflected in the NTA. For example, the full goodwill is excluded, and also most projects are billed as cost, so therefore the NTA impact of this very profitable business is still small. Moving on to page number eight, we'll see more details on the EBITDR FFO and AFFO Regulation. As said, the EBITDA in the German rental business was even stronger than expected and was basically on the same level like last year, despite the disposals within Germany. So not only the $1,400 million sorry, that we sold this year, also the year before we sold around 1,300 units. So that means we've been able to keep the EBITDR in a German business, in a German rental business stable, and that means on the other side, as we have now stopped our disposal program, or at least the formal disposal program, there should be definitely the expectation from our side that the EBITDR also in the German business is growing. Also, the Polish rental business delivered a quite nice PDR contribution. It's still quite small with 12.2 million, but we will discuss this in a second. This will grow in the future quite strongly. I said FFO1 above expectations up year-on-year by around 2%. Also AFFO is up by 12% year-on-year because of slightly reduced modernization capex, but don't see this as a trend. So modernization capex is simply something which has a kind of swing. So, therefore, you should not expect a strong increase in capex in the future. That's not the case. But on the other side, please don't read too much into that. If the AFFO is in some year a little bit higher or a little bit lower than in the previous year because capex simply has this cyclicity. Page number nine shows you the APRA NTA development. I already mentioned the 5% increase despite the valuation loss that we still had in the first half of 2024 in Germany. If we eliminate this on a performer basis, so if we would have had a valuation result of zero, the APRA NTA growth would have been around 8% year-on-year, and that shows us that our business, the rental business in Germany and in Poland, as well as the sales business in Poland, even in a situation with zero relation effects, leads to quite decent per share growth. 8% per year should be here, a quite strong number. Page 10 shows you the financing structure. We are now at average cost of debt of 2.6%. The average maturity is 4.4 years. The average maturity will increase a little bit now after the issuance of the new convertible bonds after the balance sheet date. So this convertible bond from March is not included in these figures. LTV is at 46.9%, so that's still above our LTV target, but from our perspective, it's not far away. You perhaps remember that it's been already at an LTV of around more 46%. But what we did in the second half of the year, especially in the fourth quarter, is that we did some quite significant investments in land bank in Poland, especially for the sales business. So, for example, in the fourth quarter alone, we had net investments here of around 100 million euros. And this 100 million investment in land bank in Poland increased the LCV by around one percentage point. So that means, as we have now, really a quite strong land bank. So in Poland, if we look at both businesses, rental business as well as sales business, this comprises around 27,000 potential residential units compared to around 21,000 residential units at the end of the previous year. Therefore, not really big investments are needed in financial year 2025, and that should very naturally come down or bring down the LTV. And additionally, as already discussed, we are proposing, as already announced, quite, yeah, let's say, reasonable, moderate dividend payout that ensures on one side further growth, but also keeps the LTV under control. You can find more details on Financing, especially the maturity profile on page number 11, again, with the pro forma liquidity that we have of around $930 million, everything that is coming up when it comes to unsecured financing is already refinanced and that should bring us in a good position as of today in a situation where markets are more volatile than some weeks ago. Let's move on to page number 13 that shows you some data from the German portfolio. As already mentioned, a quite strong development in like-for-like rental growth. So 3% total like-for-like rental growth. You see this on the bottom left, including vacancy reduction. But perhaps even more interesting and positive is the trend in what we call basis like-for-like rental growth. So that's the light blue color, which came out at 2.5%. And that's a rental growth, which is more or less purely driven by tenant turnover and rent increasing from existing tenants. So from the Beach Beagle, for example, it has increased from 1.5% in 2022, which was the same number the year before, to 1.8% now, sorry, 1.8% in 2023, 2.5% now. So that shows you that also in our regions, we've got very strong underlying dynamics and rental growth is picking up even if we leave out any impacts on vacancy reduction. Page 14 shows you the development of the vacancy rates, once again, over the years. So we're very happy that we're now at a vacancy rate in the German portfolio of 3.6%, starting from 4% at the beginning of the year. And this is, for us, really a very good achievement. So we show here the development from 2021 onwards. If you would here also show some years before, you would see that the vacancy rates have been in our portfolio clearly higher as we had acquisitions with higher vacancy rates in the past. So that shows us that the assumption that we had some years ago that also in the secondary cities portfolios will show very strong development was right, and we still think that there's room to improve this. So the 3.6% rate should not be the end of the development, so they should clearly go down again in the course of 2025. Page 15 shows the portfolio relation in Germany as an overview. We still had a yield expansion in the course of 2023, so in the course of 2024, by around 30 basis points. As said, we are now valued at a 6.6 gross yield, and 6.6 gross yield in a world with interest rates that we have as of today that clearly increased now in the last weeks is still a very reasonable valuation yield from our point of view. our portfolio still delivers a quite decent cash yield even if financing rates are on a level as they are today or at a slightly increased level from the last week or last weeks. 1,040 euros per square meter is the value now on average for the portfolio. Also, this should be a quite moderate level. An outlook for 2025 is, of course, too early. I mean, let's see how the development in interest rates is now in the next weeks and months. That clearly needs to be observed. As of now, we do not see values under pressure. So normally our base case for 2025 is something like a flattish or a stable valuation. At least we have not factored in any valuation gains or losses into our business plan. Let's move on to the Polish portfolio. Quick look at page number 17, which shows the rental business in more detail. So still good like-for-like rental growth in Poland with 3.2% after two exceptional strong years. So more than 10% last year and more than 20% the year before. So definitely the success that rents are still growing in Germany, in Poland after these two strong years. Vacancy in the total portfolio was 4.9% at year end, but some of the units or some of the projects have been completed towards year end. So if you look at the portfolio and just look at the apartments that are finished for more than one year, the vacancy rate in the portfolio was just 1.5%. Page number 18 shows the planned development of the Polish B2H portfolio. We have 3,200 apartments finished at year-end 2024. Around 1,500 units are already under construction. So that leads to an average or to a number of units finished at year-end 2026 of around 4,700 units, so two years of construction time. And also the further growth is very visible. As I already said, we have now a strong liquidity position. We have a huge length bank that we can use for the rollout of the rental portfolio. And we have an excellent team, a great platform in Poland who can execute this. So although it's a midterm plan over the next around four years, We think this growth in the Polish B2O portfolio is very visible and that will deliver quite strong EBITDA venture growth. We give you some numbers here on the right side. These are numbers that you already know from our last presentation, just to remind you. This EBITDR growth from the Polish rental portfolio will lead to growth in EBITDR from the rental business of around 25% in the next four years. And on top of this, you will for sure see some further growth in the EBITDR of the German portfolio. Pages 19 and 20 give you more details on the Polish sales business. but I think I already mentioned the main messages, so less number of units sold in 2024 than in the very strong year 2023, but based on higher sales prices and also the number of units that we handed over in 2024 was lower than in the previous year, but this was clearly already expected and again, in the units that were handed over, we had even better margins than we expected. So a typical gross margin in our sales business is still above 30%, more around 32%, and that has not really changed. To the contrary, it has even slightly improved. Over the last two to three years, the sales prices have increased. And finally, on page 22, a look at the guidance for financial 2025. I can make it short so the guidance is unchanged for FFO1 for net income from sales in Poland and also from FFO2. Looking at a strong result that we presented from 2024 we were very confident that we are on a good way to achieve these numbers. That's it from me. Thank you already for your time and to listen to the presentation but I'm now very happy to answer your questions.

Ladies and gentlemen, we'll now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You will hear a tone to confirm that you have entered the question queue. If you wish to remove yourself from the queue, you may press star followed by 2. Participants are requested to only use handsets while asking a question. Anyone who has a question may press star and 1 at this time. The first question comes from Marius Pastou from Bernstein. Please go ahead.