Tag Immobilien Ag U/Adr

Ladies and gentlemen, welcome to the TAG publication of Annual Report 2025 Conference Call. I am Valentina De Cono, 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 one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Martin Thiel, CFO and co-CEO. Please go ahead.

Yeah, many thanks and a warm welcome from our side. This is Martin. Many thanks for diving in into our conference call for the full year 2025 results. I think today we can present a very decent set of results. Presumably you have already seen our press release announcing that we have exceeded all guidances that we just have basically raised back in November last year. So, therefore, we are quite happy to guide you a little bit more through the details. Let's start on page number three, the highlights and the slides. And perhaps we start with FFO1, our rental result, which came out at 181 million euros. That's a 3% increase year on year, even a little bit better than the guidance that we raised in November, which was 174 to 179 million. And I think it's fair to say that this was mostly driven by a strong operational development, so the EBITDR from total rent business was also at the upper end of what we assumed, driven by very decent like-for-like rental growth in Germany, still at 3% unchanged to the previous year, and an increased like-for-like rental growth in Poland compared to the previous year, which came out at 3.4%, last year at 3.2%. Vacancy rates in both countries are effectively very low, So in Germany, we are down to 3.2%. At the end of the year, we started at 3.6%. At the beginning of the year, for those of you who are following TARG since some more years, this is for us quite a change. So in the meanwhile, we are at very low vacancy rates that we achieved throughout the years, coming back from vacancy rates that have been, of course, quite higher in the past. Ratings rate in Poland in all the units that you rent out for at least one year is basically at the lowest rate possible, 1.3%. That shows the strong demand that we have in this country. Continuing with Poland and looking at the sales results, the sales result was also a little bit better than expected, so it came out at $68 million. That's also a 3% increase year-on-year, slightly above the guidance. As expected, the fourth quarter was strong in terms of handovers, so as planned, we had a quite strong increase in the sales results in the fourth quarter due to this increased number of handovers. And in general, the result was also stronger than expected because the gross margins that we had achieved on the back of strong sales price developments in the past is in the mean by quite strongly above 30%. So that was also a little bit better than expected. Therefore, this increase. Number of units sold in Poland amounted to a little bit more than 2,800 units. So that was exactly more or less what we have planned. Looking at the acquisitions in financial year 2025, firstly, you are all aware that we signed in August 2025 a contract with Renzi for Rent to acquire 5,300 new rental units. We're still waiting for the Antitrust approval. We expect this now to happen in the second quarter of 2026. I know that we originally expected that earlier. We can tell you that there's basically nothing new. So, simply, we need to be patient. We have to respect that the Polish antitrust authority takes its time to make its own market research to look at the market themselves. But unchanged, we are very confident that we get and unconditional antitrust clearance. So therefore, we hope that now in the course of the second quarter of 2026, this clearance is coming and this is basically the only condition for the closing. But also in Germany, we increased the portfolio. So we signed acquisitions for around 1,200 units, mainly at the end of the third and in the course of the fourth quarter in 2025, mainly in core regions where we already are. So that means in Eastern Germany, high gross initial yield of around 10%. I think I already mentioned in the last call that some of these portfolios that we have acquired have a certain capex backlog. Taking this into account, the gross energy yield is still around 9%, which should be attractive. So that means we are also growing in Germany, of course, not in a dimensions country like in Poland, but we are very open to take advantage of some opportunities that we see here in the market and to grow our portfolio also in Germany. APRA NTA showed a quite strong growth, up by 10% even after the dividend payment and after the capital increase that we have carried out in August this year. This stands now at nearly 21 euros at year-end. The LCV ratio came down significantly from 46.9% to 41% at the end of the year. But to be transparent, it's perhaps reasonable to look at the performer LCV in this case because after the expected closing of the Polish acquisition, this LCV stands at 45.3%, which is still a good ratio because that means even taking into account the closing of the transaction, we've basically already achieved again our LCV target. Today we are confirming all guidances for financial year 2026. We are also confirming that the payout ratio for the dividend for financial year 2025 is as communicated 40% and that leads based on one euro per share, FFO1, to a dividend per share of 40 cents. We will offer, again, a script option for our shareholders so everyone can choose, like last year, between a cash component and new TAG shares. This is something that we think in our sense as we are growing the business, as we're still investing, makes sense. So that gets a little bit more equity into our business and the higher share count that could come from that share option is already taken into account for the guidance range. Then let's move on to the financials. So perhaps you can skip the next pages and move on to page number seven. where we show more details on the FFO1 and EBITDR calculation. As already mentioned, also EBITDR increased quite strongly from the rental business in both countries. So in Germany and, of course, in Poland, where we have a growing business, means we have finished some units in this year. And, of course, the larger increase will come hopefully quite soon in the course of 2026 when the rental foreign transaction is closing. Again, FFO1 came out at 181 million after 175 million in the previous year. And one thing that we want to clarify, because we received some questions in the last quarters, is that the one-offs you see here are more detailed splits on the right side. And you can see that we are treating subsidies that we get for energetic modernizations in a way that we're excluding this income from subsidies in FFO1. The rationale behind it, we are capitalizing the expenses, so the capex doesn't affect FFO1, so therefore we think it makes sense also to exclude the related subsidies from FFO1. So don't be surprised that we are reducing our FFO1 And this is one of, because we think that is simply something which is systematically correct. In AFFO, this is included because also here the related expenses are deducted. So just to clarify this, but this is a treatment that has been the case also in the previous quarters. Coming to page number eight, you see more details on our FFO2 development. FFO2 is basically FFO1 sort of result from rental business. plus the result from the sales business in Poland, which was, as already mentioned, in the fourth quarter quite strong, so more than 90% increase quarter-in-quarter due to the higher number of handoffs. Page number nine shows the redevelopment of the APRA NTA. I already mentioned that the increase was quite strong with 10%. And that's important to point out that a large part of the NTA increase is really coming from the operational business, that means from the net profits. So we see this here on the right side of the chart that this was an impact of plus 1 euro and 60 cents. Yes, of course, the portfolio valuation results have very , but it's fair to say that our ongoing results, so the rental business in Germany and in Poland, as well as the state business in Poland, are really contributing to a strong APRA NTA per share. Switching now to the financing structure, which is shown on page number 10. I already mentioned that the LTV is down to 41% after 46.9% at year end 2024. And yes, it's true that the capital increase that we carried out in August this year helped in reducing the LTV, but also here to make clear that our operating business has also a significant impact on the LTV. That means if you look at the impact that the operational results had in this LTV reduction, out of the 5.9 percentage point reduction, roughly 1.8 percentage point was purely coming from the business that we are conducting, that means from the cash that we generate from the German and the Polish business. So that means we have a quite natural deburring process, which is, of course, important to know for us in the future. So that means we can invest as in 2025 without hurting our LCB wishes. Next financial debt to EBITDR was at a strong 8.8 times. ITR also at a strong 6.1 times, but this has also been quite strong in the previous quarters. Page number 11 shows the maturity profile, and here perhaps just a quick comment from my side. You see larger maturities come up in 2026, but this is basically as of today, all refinanced, especially the 470 million convertible bonds. It's already refinanced in a way that we currently sit on a strong cash position of 1.3 billion euros. which is then used, of course, to pay the purchase price for the reserve foreign transaction, which is around 565 million, but also to repay this convertible bond of 470 million. So larger maturities, but even larger cash position that we currently have in the balance sheet, just to make this clear. Coming to the German business, and I'm looking now on page number 13, as said, vacancy rate development was quite strong. So in 2025, a development like in the previous years, so in the first one or two quarters, even a slight increase in vacancy rate and then a strong reduction. So we were happy that we could reduce vacancy on a life-like basis by 40 basis points compared to the previous year, which is a strong result. And if you ask us if there are more potential to reduce that, yes, we are convinced that we can bring vacancy to a lower range. So perhaps we are quite soon even at 3% or below that number. like for like rental growth in Germany was also quite decent. So 3% if it includes the impact from vacancy reduction, but excluding this effect from vacancy reduction was also 2.6% slightly better than in the previous year where we had 2.5%. Pitch number 14 shows you the development in the portfolio relations. So basically the value increased a little bit We recorded a very increase of 3.1% within the German portfolio after 1.4% in the first half of 2025, which is, as far as we see, in line with the overall market with peers, and which is a good development. So the years of portfolio devaluation are clearly behind us. I mean, clearly today we have more uncertainty in the markets. how interest rates are developing on the back of the Iran war, which is now taking place since a little bit more than two years. But whatever is coming, we're not concerned about our portfolio valuation that we have a portfolio with a high yield. So a 6.6% gross yield, that is really something that also would digest increased interest rate environment as we have shown in the past. Just to mention that we have changed our value this year. So the year-end valuation for 2025 was for the first time carried out by JLL. So after, I think, 12 or 13 years cooperation with CBOE, We decided to change the value, but this had, you know, not really a special background. We simply thought after such a long time, it's good to have a fresh pair of eyes to look at the variation and to change the value from time to time should also be from a corporate governance perspective something positive. If you ask us, has there been any change in the relation results, we can tell you that that has been not the case. So we have seen that relation results between JLL and CDRE are very close together. Moving on to the Polish business and looking at page number 16. I already mentioned at the beginning that the vacancy rate in the portfolio for all apartments that we have on the market for at least one year is very low. So it came out at 1.3% at the end of financial year 2025. And very positive was the development in the like-for-like rental growth, so we came out at 3.4%. That means rents are still growing despite still being the exceptional growth that we've seen in 2022 and 2023. The rents have increased in total by more than 30%, and that should be a strong sign for the market. Looking now at the sales result in Poland, And the third and the fourth quarter of 2025 have been quite strong. So we sold, you see this on the top right of this slide, page number 17, more than 800 units in each quarter. And we see that there's more demand in the market. So interest rates have gone down in Poland, all discussions around potential subsidy programs that we have followed for some months. in 2024 and 2025 are now off the table. We have received a lot of building permits. So we have an attractive offer at the moment. And therefore we are selling simply more and are very confident that we have potential to grow these numbers even in the future. Next slide shows you the handovers as expected. Revenue was strong in the fourth quarter of 2025 as planned. the largest number of handovers was taking place in this quarter, and the total number of handovers was, I think, exactly in line with what we had planned. One comment to an announcement that we made today in our press release, perhaps you've seen, that we communicated that we're currently looking into potential strategic alternatives for our Polish subsidiary Robic, including capital market transactions, and one of these potential strategic alternatives is an IPO of Robic on the Warsaw Stock Exchange. Please understand that at the moment we cannot comment this really in detail and we can't confirm that we are looking into such options. We can't confirm that this could be something that makes real sense for Robic to grow the business, to take advantage of really the tailwind that we currently see in the market. What we can also confirm is that for us as TARG in all the alternatives, this would not be a strategic shift. So there's no plan to say that Robic, I think already commented in today's press release that we will be the majority shareholder of Robic also in the future. So give us some time to look into these alternatives and we're here not under pressure, but we think it's worth to evaluate such options. And then some final comments on the guidance, and I can here be short. You see on page 20 the summary of the guidance for 2026, which is unchanged to what we communicated back in November when we published the Q3 results. So we can confirm as of today everything that we have forecasted back in November. That means we are expecting quite strong growing results for the next year. Just to clarify for purpose of the guidance, for the FFO1 guidance, the closing of the RSI for rent transaction is assumed if we look at the midpoint for the 31st of March. If we look at the lower end of the guidance, The closing is assumed for the 13th of June, so therefore we have enough buffer in our guidance range to the expected closing. That's it from my side. Thank you so far for listening, but of course I'm now 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 handsets while asking a question. Anyone who has a question may press star and 1 at this time. The first question comes from Andrew McCrease from Green Street. Please go ahead.