Tag Immobilien Ag U/Adr

Ladies and gentlemen, welcome to the TAC Immobilien publication of Interim Statement Q3 2025 conference call. I am George, the course 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 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, sir.

Yeah, many thanks and good morning, all, and very welcome back from our side. Many thanks for diving in for Q3 results. As always, let's start on page number three of the presentation that shows comprehensive overview about our results in the first nine months and also gives the first outlook on the guidance for 2026. Let's start with the operational development first in the first nine months of 2025. SFO1 in the first nine months of 2025 came in at roughly 136 million compared to the previous year, just a 4% increase. And that's important to point out that this increase was mainly driven by our EBITDA contribution from our rental business in Germany and in Poland, which increased by 6% year-on-year. Looking at the sales results in Poland, we had a result that was more or less on the previous year level, so a little bit reduced, 34 million was the sales result compared to 38 million in the previous year. But as already stated in the previous conference calls, we expect that in the fourth quarter of this year, we will have a large number of apartments handed over, and as you know, As the result is realized, when we hand over the apartments, we expect a quite strong increase in the fourth quarter, 2025, for the sales results in Poland. But very positive for development in the sales number. You see this on the right side. We sold in the first nine months 1,973 units in Poland. That compares to 1,435 units in a nine-month period in the previous year, and especially the third quarter was a very strong one. I will come back to this a little bit later. Looking at the LCV development, it's quite strongly down at 42.3%, also driven by a capital increase that we conducted in August 2025, already to partially finance the ready-for-end acquisition. We issued 7% of the share capital, total gross proceeds at $186 million, but also the operational development was quite helpful in reducing the LCV. Of course, fair to look at a kind of performer LTV post the closing of the R4R acquisition. This performer LTV would stand at 46.1%. So even after the acquisition, the LCV is down compared to the beginning of the year and already very close to our LCV target of 45%. So in a normal course of business, we would expect that we quite quickly, perhaps in the first one or two quarters of 2026, already at the LCV target of 45%. Looking at the guidance, firstly for 2025, we increased the FFO1 guidance. to 174 to 179 million. If you look at the results that we have achieved in the first nine months, that should be all in a good way. As always, we expect in the fourth quarter of the year a little bit more maintenance in the German business. So, therefore, perhaps the Q4 result in FFO1 is a little bit weaker than in previous quarters. will be a little bit weaker, but clearly better results than expected in 2025 for the total year. On a per share basis, taking into account the higher share count after the capital increase, FFO1 guidance is then more or less unchanged. For 2026, we expect a quite strong increase. So the guidance range for 2026 is between 187 and 197 million. It assumes a closing of the R4R portfolio at the beginning of the second quarter or at the end of the first quarter. I will come back to this a little bit later in more detail. So this is quite strong growth that we predict in FFO1, 9% in absolute amounts, 4% on a per share basis. Even stronger is the growth that we expect in the FFO2 guidance. So firstly, we also increased a little bit the FFO2 guidance for 2025 following the increased guidance in FFO1. But if you look at the results that we predict for the Polish sales business in 2026, where we expect nearly 50% growth, you see that the increase in FFO2 that we expect for 2026 will be quite material. So the new guidance stands between $279 million to $295 million. That's an increase of 19% in absolute terms and still on a per share basis of 14%. As we've already announced, we want to increase the payout ratio for our dividends. For the first time, for the dividend paid for the financial year 2026. So this is a dividend that is paid out then at the beginning of 2027. And the new payout ratio is set at 50% of FFO1 compared to 40% of FFO1 for the guidance for this year. And this translates into a quite strong growth in the dividend of nearly 30%. On page four, you'll find more details on the financial performance and the German portfolio. I don't want to discuss with you every figure, but that's interesting at the bottom of the page that we have begun also to acquire in Germany again. So, yes, it's still a quite small number. So 367 units acquired until end of October 2025, but perhaps there's more to come in the next week. So we are finding opportunities, yes, on small sizes on one side, but if you look at the average acquisition multiple or the gross yield that we achieved, around 10%, so these are really high-yielding assets, quite attractive portfolios, still reconsiderating these portfolios, locations that we know very well in Eastern Germany. And so we're happy that we acquired also some units in Germany. And yes, of course we have to invest into these properties, but not massively. So therefore we see opportunities in the German market as well. Although clearly as already mentioned in the previous course, the main capital allocation is currently happening in Poland. Let's jump to page number seven of the presentation where you'll find more details on the FFO1 development I think I already mentioned the main highlights, so an increase by 4% year-on-year. Just as an explanation, if you look at the table, you'll find also one-offs that we eliminate. In this case, we're eliminating gains, and a netted number is 1.9 million. So just as a background, you'll find also more details in the interim report. You hear eliminating subsidies that you received for modernization work, so therefore we have for the first time since longer ago was already one of that we eliminated here. Let's go to page number eight. Page number eight shows you the development of FFO2, which is based on FFO1 plus the Polish state business asset The third quarter was already a good one, so the adjusted net income from sales in Poland came in at 17.6 million compared to 11.6 million in the second quarter, and I think the first quarter was even lower. But once again, we expect now for the fourth quarter as a result of high handovers, a quite strong result, so therefore we are very confident that we achieve our four-year guidance for the sales results in Poland. Page number nine shows the development of the APRA NTA also on a per share basis. We still had a growth in the third quarter despite the capital increase conducted obviously below the NTA, but this impact was not meaningful. You see this on the chart. So the dilution effect on a per share basis was 35 cents. That means the net profit that we achieved during the first nine months was far higher than this smaller dilution effect. You see that we had in the first half a positive impact on the NTA per share from the portfolio revaluation of 69 cents. If you remember the numbers, we had in Germany a value increase of 1.4% in the first half of 2025. If you ask us what is the expected valuation result for the second half of 2025, I mean, obviously, as of today, we have not the precise number, but we expect that the value uplift in our German portfolio should be very similar to what we have seen in the first half, so something around 1.4%, like in the first half of 2025. That's a good estimate. Yes, of course, on one side there's a small value increase, but it's important that we are now seeing the third valuation in a row in Germany where values are growing again, and that's, of course, helpful not only for the NTA, but should also support the LCB development at the end of 2025. Then I'm on page number 11 of the presentation that shows the maturity profile. And what I wanted to explain here is our quite strong cash position that we had at the end of the third quarter. So in total, the group had available non-restricted cash of 1.35 billion euros, which is of course for us quite exceptional high, but out of this 1.35 billion, roughly 565 million is then designated for the purchase price payment of the ready-for-rent portfolio, which is still outstanding. And we have a lot of maturity next year, which is the $417 million convertible bonds maturing in August 2026. So we have the cash already in the balance sheet, and we will use part of our cash position to repay these convertible bonds. So a kind of normalized cash position after the payment of the purchase price for the resident rent portfolio and after the repayment of the convertibles is around $300 million, $350 million. And that's still a good cash position, but it's good to have it because we still want to grow and want to continue to grow, especially in the Polish rental portfolio, and the cash will be, of course, the basis for this. Let's come to the German business. And I'm now on page 13 of the presentation. Quite good development that kicked in in vacancy reduction. So as always, in the first quarter of the year, we had a slight increase in vacancies. So we started the year at around 3.9%. Now here we present also the vacancy rate from October, which is already down to 3.6%. And when we look in our business in the last days and weeks, How this develops, we clearly expect further vacancy reduction until the year ends, so therefore the German portfolio, which should perhaps not be a surprise, is still performing very well. Looking at the like-for-like rental growth in Germany, that was a little bit reduced compared to the previous year in the first nine months, so 2.3%. in the basis like-for-like rental growth and 2.6% in the like-for-like rental growth, including vacancy reduction. But as said, firstly, we expect a stronger impact from vacancy reduction in the fourth quarter. And secondly, regarding the basis like-for-like rental growth, It's not a trend that this is going down in the future. So, therefore, we should also see here an improvement in the fourth quarter of 2025. There's simply also kind of seasonality in there, depending on, you know, certain rent increase, if you do in a quarter or do not in a quarter. It's clearly on an increasing path. And the guidance for 2026, which I explained a bit later, will also confirm this. Let's look at the Polish business, and I'm now on page 15 of the presentation that summarizes the Rezifrent acquisition. I mean, we have presented this back in August when we signed the contract, but I have some sentences that are necessary regarding the closing. As you perhaps know, with the press release after the signing in mid-August, we announced that we expect the closing to happen at the end of the third quarter or in the course of the fourth quarter 2025. Basically, there's just one main condition for the closing, which is the approval by the Polish Antitrust Authority. We have to accept that the Polish Antitrust Authority extended the process for looking at this project. This is something where we have not really a chance to accelerate this. So that's still all on a good way. So we expect the approval to happen. We expect the closing to happen. But as it is the first transaction of this kind in the Polish rental market, so there has not been an acquisition of this size before. As it is basically the first time that the Polish antitrust authority needs to look at such an acquisition and at such a market, The Polish Antitrust Authority told us that they now want to conduct their own market research, so that means they will reach out to other landlords, they will do some investigations around customer behavior, and that should take some time. So, therefore, it's a base case. At the end of the first quarter of 2026, beginning of the second quarter of 2026, the approval and the closing of this transaction should happen. Let's look at page number 16. So after the acquisition closes of the rental for rent portfolio, we are almost at our strategic target that we announced some time ago. So close to 10,000 units will be the rental portfolio size at the end of 2026. But that doesn't mean that we are stopping now the growth in our Polish rental business. So we already have units under construction, and we want to start additional construction of around 2,300 units in the course of next year, so in the course of financial year 2026. And this construction takes roughly two years. We will finish them in the course of 2028. So that means we will continue to grow in the Polish rental sector even behind the acquisition of the RSI4N portfolio, because we simply see the market as attractive. We have a great team and a good platform there. We have a good cash position, as already mentioned before. So a large part of this 2,300 units that we want to start to construct next year is basically already financed from the cash that we have on the balance sheet. And therefore, the further growth in the Polish rental sector is clearly a time for us. Page 17 shows the operational development of the Polish rental portfolio. To keep it short, they're still very good and strong. So the vacancy in the units that have been on the market for more than one year is still at a low 2.4%. And the like-for-like rental growth is still at a very good 3.4%. So that means rents in our Polish portfolio are still growing despite the really exceptional growth that we've seen in 2002 and 2023. And it gives us, of course, confidence for the further development of this portfolio. So that was the rental business in Poland. Then a quick look on page number 18 regarding the sales business and a look especially at the sales results. So as already mentioned, the number of units sold in the first nine months and especially in the third quarter of 2025 was higher than in the previous period or in the previous quarter. So we sold 815 units in the third quarter compared to 566 in quarter before and it means another quarter or another number of units sold in the fourth quarter, like in the third quarter, would bring us more or less exactly to a full year's guidance of 2,800 units. And we also see that the sales volume is increasing. So it's not only the pure number of units sold that is stronger, but also the sales volume saw a quite strong increase. So if you add up the first quarters, first three quarters of 2025, we're at a sales volume of 327 million that compares to 261 million in the previous year. And we're very happy about this, that we simply observe still quite strong margins. So we're selling in Poland still at gross margins and expect also this to happen in 2026 above 30%. So sales prices remain on high levels. And that creates quite exceptional results in the Polish state's business today and in the next year. And that brings us more or less to the guidance for 2026, which is shown on page number 21. So firstly, a look on the FFO1 guidance for 2026. As I said, an increase by 9% in absolute terms and by 4% on a per share basis. The rate that we set for the FFO1 guidance is quite broad this year. So from 170, sorry, 187 million to 197 million, so 10 million. And the reason for this is simply the estimate that we needed to do for the reservoir end closing. So the guidance assumes that the reservoir end closing is happening at the 31st of March. That would be exactly the midpoint of the guidance. So if it happens a little bit earlier, So more at the beginning of the first quarter, then we would be more at the upper end of the range. If it goes more toward the end of the second quarter, then we would be more or less more at the lower end of the range. So therefore, there's a bit broader range in FFO1 guidance, but again, still, despite the little bit delayed closing, an increase, 9% in absolute terms, 4% on a per share basis. strong increase in the net income from sales in Poland that we expect. So nearly 50% increase as a result of high handovers next year and high sales prices and good margins that we currently achieve in Poland and also the joint ventures that we have in Poland now since I think three years create for us a quite nice service income that also add up to this development. On the FFO2, it's a quite strong increase, 19% in absolute terms, plus 14% on a per share basis. And as already mentioned at the beginning, you should also expect a quite strong increase in the dividends on a per share basis. So an increase that should add up to up to 30%. Page 22 of the presentation explains in more detail the development in the expected FFO1 for 2025, which we also increased a little bit today, and the expected FFO1 for 2026. And as said, the reserve for rent acquisition is not factored in for the full year. You see this here that we assume the closing for this purpose of the 31st of March, 2026. So that's, of course, a main driver for the overall FFR1 development, but also the existing German business and the existing Polish rental portfolio, which we grow, as discussed, strong in the future, and contribute to this development. And finally, a look at page 23, we find the key assumptions, the underlying assumptions that we expect for our guidance for 2026. Of course, also the WDR, more or less all businesses are expected to increase, so quite strongly, if we look at 2026 numbers. Just to mention one or two things. So firstly, we still expect further vacancy reduction in the general portfolio. So whatever we exactly achieve here in 2025 will not be the end of the development. So there is further potential in the portfolio. As you see, we expected also the like-for-like rental growth in Germany should be better next year compared to this year. So that's a surprising trend that the rents in Germany are increasing. Rental growth in Poland should still be above 3%. So we still see growing rents there in Poland. And not only rental business, but as mentioned, especially the sales business is running very well. So when we look into, for example, the sales numbers, the sold units that we expect next year, we expect that we sell around 2,900 units, and that should be even on the basis of a little bit higher prices. So the sales volume that we expect in Poland in 2026 should be close to half a billion euros. That's it from my side as a quick overview about our nine month results and the guidance for financial year 2026. Many thanks so far for listening, but now I'm of course very happy to take your questions.

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