Aroundtown SA (AT1) Earnings Call Transcript & Summary

Good morning, everybody. Thank you for joining us for Aroundtown's Full Year 2024 Results Call. You can view this presentation on Aroundtown's website, either on the Home section or under Financial Reports of the Investor Relations section. Guiding you through the presentation today will be CEO, Barak Bar-Hen; CFO, Eyal Ben David; Executive Director, Frank Roseen; Investor Relations, Timothy Wright; Chief Sustainability Officer, Limor Bermann and representatives from Grand City Properties are also present. [Operator Instructions] With that, I would like to hand over to Barak and the rest of the team, who will guide you through the presentation of our results.

Good morning, everyone, and welcome to our 2024 financial results presentation. 2024 presented an important year of stabilization, addressing and overcoming challenges. We started the year with significant macro uncertainties, elevated inflation levels and peak interest rates, which continue to have an impact on the real estate industry as a whole. However, throughout 2024, we saw the outlook improving with 4 interest rate cuts, signs of stabilization of the inflation rate and a better macroeconomic outlook. Accordingly, we took a proactive approach, which enabled us to improve our position significantly, both financially and operationally. We also took significant steps to enhance our financial position. We successfully executed capital market transactions, including perpetual note exchanges and tender offers and bond issuances. These transactions received a strong investor demand and reinforce our market standing. Our strategic operational perpetual exchanges allowed us to regain equity content under S&P's rating methodology while reducing future coupon payments. These measures, alongside bank financing and asset disposals have strengthened our liquidity position and reduced refinancing risk. While deleveraging remains a priority, we continue to execute our operational strategy. We reopened large hotel properties and are continuously upgrading our portfolio, such as by converting selected office properties into service apartments. Our diversified asset base has provided resilience with robust operational growth across all main asset classes, but particularly from our residential and hotel portfolio, which have recorded a very strong year. We have seen valuation momentum turn positive with recovery starting in the second half of the year. Our disposals and proactive financial measures throughout 2024 and prior periods have put us in a strong position to capture growth opportunities going forward. Looking ahead, we expect to see continued positive momentum in our operations, which we expect will continue to support growing property values. More details regarding these and other points will be given in the coming slides. We present an overview of our financial highlights for 2024 on Slide 4. Net rental income was EUR 1.2 billion for the year, decreasing only 1% compared to the previous year despite the impact of the disposals. The decrease was partially offset by solid operational growth reflected by like-for-like rental growth of 2.9%. Adjusted EBITDA was EUR 1.01 billion, slightly higher but 1% despite lower net rental income. We recorded FFO I of EUR 316 million, reaching the top of our guidance for this year after we had updated our guidance as part of our half year results due to stronger-than-anticipated operational performance. The full portfolio was revalued externally as of December 2024. We recorded a small like-for-like value decline of the 0.5% in 2024 compared to the values of 2023, but positive 1.9% compared to June '24. EPRA NTA per share of December '24 was EUR 7.4 per share, unchanged compared to December '23. Cash and liquid assets amounted to EUR 3.6 billion, signifying our [ strength ] liquidity position. LTV decreased to 42% compared to 43% as of December '23 and 45% in June '24. Our BBB+ rating was affirmed by S&P in December '24 as well as the negative outlook. More details on the financial results will be provided later in the presentation. Slide 5 highlights our strong progress in '24 and our strategic positioning for '25. In '24, we maintained strong operational momentum, particularly in residential and hotels while keeping our average vacancy rate stable. The key market shift occurred as property valuation began to recover in the second half of the year. With the ECB's rate cuts, refinancing costs improved, supporting transaction markets and yields. Our proactive liability management reduced leverage and [ restrengthen ] liquidity through our capital market activities since issuance of our bonds in July 24, we have seen our bond spread tightened significantly. This improvement in outlook as well as the hard work on improving our rating. Our credit metrics has allowed us to maintain our credit rating despite significant headwinds. We keep a strong focus on strengthening our credit rating and continuing asset disposals and liability management to enhance financial flexibility, but also keep our eyes on potential external growth. Assuming market volatility reduce, we expect operational improvements to drive property revaluation further, and we remain proactive in managing our finance expenses. Moving to Slide 6, where we present a summary of our like-for-like rental growth. Total like-for-like rental growth was 2.9% with all sectors contributing positively to the result. The like-for-like rental growth in the residential portfolio was 4.4%, benefited from the wide supply-demand gap, resulting in low vacancy and steady rent increases. The like-for-like in the hotel portfolio was 2.9%, benefiting from continuous recovery as business and leisure travel returned to normal levels. We also expect to capture further rental upside by repositioning hotels. The like-for-like in the office portfolio was 1.8% despite a slight decrease in occupancy. Here, our high revisionary potential can be utilized as a competitive advantage to maintain and attract tenants as we are able to offer more competitive rents while still capturing part of the upside potential. This revisionary potential also positions the office portfolio well for operational growth once economic activity rebounds. We see an improvement in the operational sentiment of the office portfolio with return to office increasing and decreasing supply. We continue to see strong demand from governmental tenants as well as from large corporations. On Slide 7, we present the proactive liabilities management undertaken during the year. In 2024, we successfully strengthened our financing platform by returning to the capital markets becoming one of the largest investment-grade real estate issuers in Europe. We raised EUR 1.15 billion in senior unsecured bonds, EUR 2.6 billion in perpetual notes through and exchanges and signed EUR 360 million in new bank debt financing. This reflects our strong market access and the confidence of a diverse investor base. The proceeds from these issuances were strategically used for liability management, optimizing our capital structure and debt maturity profile. We repaid EUR 1.2 billion in bonds, including buybacks and redemptions, reduced our perpetual notes balance by EUR 300 million and repaid EUR 120 million in bank debt. Additionally, EUR 480 million in bond redemptions have already been executed in early '25. As a result of our proactive liability management and effective hedging strategies, we kept our cost of debt stable at 2%. On Slide 8, we provide a detailed overview of our revaluation results. We recorded a like-for-like positive revaluation of 1.9% in June '24, which results in full year devaluation of 0.5%. This came despite higher cap and discount rates as a solid operational performance, particularly in the residential and hotel portfolio offset the yield expansion in the year. The valuation result per asset type was positive 1.1% in residential, positive 4.2% in hotels and negative 3.1% in offices. The recovery started in the second half of '24, partially offsetting the negative result of the first half and with positive valuation across hotels, residential and offices. Looking ahead, while there is recently some uncertainty regarding future interest rates, we see the overall outlook as positive, and we believe operational growth will continue to offset the potential negative impact on yields and the positive momentum in transaction markets continues. Limor, please continue on the next slide.

Thank you, Barak. On Slide 9, we provide a summary of our ESG progress and achievements in the year. We further increased the share of green certificate office properties in our portfolio, reaching 65% compared to 36% a year ago. As we mentioned last year, we started certifying our hotel properties with currently 30% green certified. We also continue to install solar panels, heat and power systems and EV sockets across the portfolio. These measures support our continued progress to reduce GHG emissions. In 2024, we made significant progress on our CO2 emission path, and we have now managed to reach a reduction of over 30% compared to 2019 levels and we are well on our way to reach our target of 40% by 2030. On the social front, we supported over 100 charitable projects with local partners through our foundation. We continue to maintain our high standards in relation to tenant service quality through our 2 certified service center and enhanced digitalization feature, including an AI-powered Chatbot for our residential tenants. Employee satisfaction is a very important to us. We continue to promote the physical and mental well-being of our employees by offering training programs and career pathway opportunities. We remain include -- included in several prestige indices such as Dow Jones Best-in-class Index in Europe, the Bloomberg Gender Equality Index, the MDAX ESG+ Index. Our efforts in transparent reporting were acknowledged on once again with our previous 2023 annual report, earning EPRA BPR and sBPR Gold for the 8th and 7th consecutive years, respectively. We have also been featured in the S&P Global Sustainability Yearbook 2025, an exclusive list of just 780 companies selected best on their S&P Global CSA performance out of over 7,000 participants across 62 industries, setting us apart from our industry peers. Finally, we made it to the Sustainalytics 2025 ESG top-rated companies list and received top rating from both Sustainalytics and S&P Global CSA, ranking within the top 4% and 5% of companies, respectively, demonstrating leading performance in our sector. Frank, please continue on the next slide.

Thank you, Limor. Moving to Slide 11, we provide an update on our disposal progress. In 2024, we signed EUR 935 million in disposals and completed EUR 740 million of disposals around book values, achieving an average rental multiple of 18x. These transactions cover a range of different asset types with the majority being residential and office properties as well as building rights, retails and hotels. The disposals was primarily located in noncore locations as well as in London, Berlin and Brussels. Despite the slowdown in transaction activity since interest rates began to rise in 2022, we have consistently executed sales across all asset classes in our portfolio. This reflects the resilience of our diversified portfolio and our ability to dispose assets even in a more challenging market environment. In 2024, we have seen a pickup in transaction levels and in buyers' demand, which enables to be more selective on disposals while we can still maintain a good level of sales. We still have EUR 330 million of properties, which were signed and not completed in 2024, plus another EUR 90 million of properties signed up for disposals after the reporting date, which will support our deleverage efforts. On Slide 12, we represent an overview of our portfolio breakdown. Offices comprised 38% of the portfolio, followed by 34% residential and 22 hotels, together making 94% of the total portfolio. The remaining 6% are logistics and retail. Looking at the geographic distribution of the portfolio, this remains well distributed across top locations in Germany, the Netherlands and London, which combined represent 88% of the portfolio locations. Our largest cities remain Berlin at 24%, London at 8% and Munich and Frankfurt at 7% and 6%, respectively. These markets continue to have strong fundamentals, and we see good upside potential in the mid- to long-term horizon. More detailed breakdowns and information for each asset class can be found in the appendix. Turning to Slide 13. We provide an update on our key portfolio metrics and tenant composition. As of December 2024, the portfolio is valued at EUR 24 billion, generating annualized recurring net rental income of EUR 1.15 billion, corresponding to a rental yield of 5.1%. The portfolio WALT remains solid at 7.6 years. The maturity schedule has no significant [ substraction ] of leases expiring in any single year, providing further downside protection. Vacancy is at 7.5%, slightly below the level recorded in December '23, while the in-place rent has increased slightly to EUR 11.2 per square meter. With 25% reversionary potential across the portfolio, we maintain strong internal growth prospects for the years ahead. And at the same time, we are well protected on the downside scenario. Our tenant base remains well diversified with over 3,000 commercial tenants and a highly granular residential portfolio. The top 10 tenants continue to represent less than 20% of the total rental income, highlighting limited exposure to any single tenant. On Slide 14, we provide an update on our office portfolio. Our office portfolio remains concentrated in our top 4 locations, Berlin, Frankfurt, Munich and Amsterdam, which together represent 60% of the total office portfolio. We continue to remain the largest landlord among listed European real estate peers in these top 4 cities. Please note that 65% of our office portfolio is green certified, an increase from 36% a year ago. The office portfolio achieved a 1.8% like-for-like rental growth in 2024, mainly driven by indexation. The tenant structure is well diversified with around 75% of tenants coming from the public sector as well as multinational corporations and large domestic companies. Market reports are indicating supply to remain low and as a result, driving office prime rents higher in 2025, with take-up to increase slightly. Further recovery in the market is also expected based on decisions from large corporations. We do expect that once the economy will start to recover, demand for office space will pick up and with a low new supply in the market, demand can outpace the supply fast. In parallel, we are exploring conversion options in selected office assets into service apartments. More information on these projects will be provided in the upcoming slides. Furthermore, we have started to identify assets that might fit into use of data centers. On Slide 15, turning to the German office market. We are seeing positive momentum, although still below long-term averages. Office take-up in Germany's top 5 cities grew by 4% year-on-year in 2024, and this is expected to accelerate to 8% growth in 2025. Vacancy levels have risen slightly to 6.8%, but they remain just below long-term averages, highlighting the stability of the office market and the low available supply in Germany. Importantly, return to office trends continue to improve. In Germany's Big 7 cities, the return to office rate has increased 89%, a strong 10% increase from the previous year. This compares very favorable to markets like the U.S. where the return rates remain much lower. Overall, the combination of increasing take-up, controlled vacancy levels and rising office attendance signals for growing confidence and stability in the German office market. Moving to Slide 16. We continue to unlock value by converting selected office properties into centrally located service apartments and long-stay accommodations. This allow us to meet rising demand in key urban locations while maximizing returns on under-rented properties. We have already secured leases with leading service apartment operators across 8 assets in Berlin, Frankfurt, Dortmund, Hannover and Rotterdam, totaling around 1,200 rooms for conversion. The project pipeline is well on track with permits already obtained for 3 projects in Rotterdam and Dortmund and the remaining assets in Berlin, Frankfurt and Hanover awaiting approval. Most of these projects are expected to begin operations in 2026 and 2027. Tim, please continue on the next slide.

Thanks, Frank. On Slide 17, we provide an update on ATworld, a user experience platform that aims to improve the experience of existing and new tenants by utilizing office and hotel spaces into a connected network of space, service and experience locations that will open new possibilities for businesses and people. The global launch was only a few days ago, and you can find more details on the ATworld's website. Through the ATworld app, our tenants and members gain access to a very large network of flexible workspaces across hundreds of locations throughout Europe, benefiting from our large portfolio network. The platform allows users to easily find suitable spot to work and collaborate across over 130 locations currently, which is expected to grow also through addition of third-party space providers to the platform. What makes ATworld special is that each location is unique and therefore, suitable for different needs from flex workspaces to locations for a quick meeting or quiet place for a call and hotel lobbies or cafes and reverting and everything in between. Many of the locations also offer ancillary services such as meeting rooms or even access to staff facilities in. ATworld provides our tenants with options to attract new employees without being dependent on a single location, increasing flexibility, collaboration and employee satisfaction. With this initiative, we are improving the tenant experience and responding to their modern needs, furthering our position as an innovation-first company while also supporting the attractiveness of our assets. Moving now to Slide 18. Our residential portfolio continues to demonstrate strong operational performance. We see a like-for-like rental growth of 4.4% in 2024, primarily driven by strong and increasing in-place rental growth, supported by the ongoing supply-demand imbalance. The number of approved new construction for apartments in 2024 in Germany fell to close to 200,000, the lowest they have been since 2010. According to the German Real Estate Association, ZIA, there is currently a gap of around 600,000 units, which is expected to grow to 800,000 units by 2027. This shortage of supply is expected to continue fueling long-term rental growth. In both Germany and London, the residential market dynamics remain strong and sustainable, positioning us for long-term cash flow growth. On Slide 19, we provide an update on our hotel portfolio, which continues to outperform. Our hotel portfolio comprises over 150 properties, which are well diversified across major European tourism and business destinations. These hotels are leased to third-party operators under long-term fixed leases, which are linked to inflation or include step-up rents. Our hotel portfolio recorded a 2.9% like-for-like rental growth in 2024, reflecting positive momentum within this asset class. Looking ahead, RevPAR growth is expected to remain at moderate levels and increase in overnight space and international arrivals will boost hotel performance, thereby supporting rental growth in our portfolio. Moving to Slide 20. We highlight some of our successful hotel repositioning, which will enable us to capture significant rental growth over the next few years. Through these initiatives, we will capture around EUR 60 million in annual rental upside over the next few years, of which around EUR 10 million has already been captured in 2024. For Rome in Brussels, we've completed full refurbishments and rebranding into the Autograph Collection by Marriott with further potential from additional room upgraded in Rome. Paris underwent a refurb under the Marriott Red brand and is now home to the largest events and conference hotel in Paris, which reopened before the Olympics. In Hilton Berlin, we converted underutilized spaces into 22 service apartments, catering to prime central location demand. In London, Kensington, we converted and fully modernized a former hotel into 70 serviced apartments across 2 properties. We have also rebranded and upgraded rooms in Hotel Bristol in Berlin. The hotel will be rebranded as a Vignette Collection, which is a new brand of IHG Hotels focused on luxury and lifestyle. We are also doing soft refurbs and are rebranding several hotels to better align with post-pandemic trends, focusing on digital services, service apartments and long-term stays. On Slide 21, we present ATechX, our PropTech Accelerator, developed in collaboration with prominent PropTech venture capital firms globally, Fifthwall and noa, and recently joined by real estate investors, Round Hill Capital, operator of over 140,000 residential units since 2002. ATechX aims to accelerate the growth of innovative PropTech startups by providing them with access to an extensive real estate portfolio, network, resources and expertise. This goal is to make a substantial impact on the real estate industry, foster breakthroughs and enable start-ups to scale rapidly. For us, ATechX offers several strategic benefits. It gives us access to promising PropTech solutions that can enhance our operations, creating new opportunities for investments with the potential for outsized returns and position us as an innovation-first real estate company. In 2024, we completed our first cohort of 6 start-ups in areas ranging from robotics to decarbonization. And of these 6 start-ups, we plan to deploy 4 of them in the business to drive efficiencies and cost savings. Our second cohort will be launched shortly. Moving to Slide 22. We present an update on CapEx for the year. In 2024, CapEx investments totaled EUR 346 million, representing a 1.4% ratio over the average investment property. This compares to EUR 335 million and a 1.2% ratio over the previous year. Expansion CapEx accounted for 40% of total CapEx in 2024, slightly up from 36% in 2023. These investments focus on generating additional income and value primarily through major refurbishment projects, selective conversions and new developments. Tenant improvements made up 24% of total CapEx, down from 29% in 2023 and largely reflect property enhancements negotiated as part of lease extensions and new lettings. Finally, other CapEx represented 36% of total CapEx compared to 35% in the prior year. This category mainly includes repositioning CapEx for the residential portfolio, along with various projects aimed at maintaining the high quality of the assets and supporting selective improvements and CO2 reduction initiatives such as roofs, facade insulations, LED lighting, energy-efficient heating and green installations. Now we move to Slide 23, and we are pleased to present Turnaround Capital or TAC, a European opportunistic real estate fund backed by Aroundtown. The current market presents significant opportunities with price dislocations driven by debt refinancing pressures, post-COVID CapEx backlogs, ESG requirements and fund life cycle ends forcing asset liquidations. TAC is positioned to capitalize on this environment by acquiring quality assets in strong locations at attractive price levels, benefiting from Aroundtown's network and management expertise to unlock upside potential. The fund will invest across key asset classes with Germany, the Netherlands and the U.K. as primary targets and additional opportunistic opportunities across the broader EU. Aroundtown will act as the general partner, and we aim to become a minority holder in the fund using this platform to drive external growth, benefit from acquisition opportunities while maintaining a disciplined capital allocation and keeping low leverage. Eyal, please continue from here.

Thank you, Timothy. On Slide 25, we present our financial results for the year 2024. Net rental income amounted to EUR 1.18 billion, reflecting a 1% decrease compared to EUR 1.19 billion recorded in 2023. The slight decline was mainly due to disposals, which was partially offset by positive like-for-like rental growth of 2.9%. Operating and other income amounted to EUR 361 million in 2024, decreasing by 12% compared to EUR 410 million in 2023. Operating and other income mainly includes expenses that are recoverable from tenants. As a result, total revenue for the period decreased by 4% compared to 2023. Property revaluations and capital gains amounted to a slight loss of EUR 125 million in 2024, significantly lower compared to the loss of EUR 3.2 billion in 2023. The full portfolio was revalued as part of the 2024 annual report by independent and certified external appraisers. In total, a small like-for-like value decline of 0.5% was recorded in 2024 compared to a like-for-like value decline of 11% in 2023. Capital gains amounted to EUR 2 million as a result of closing disposals slightly above book values. Total property operating expenses decreased by 14%, mainly due to lower utility costs throughout the year and no provision for extraordinary expenses for uncollected rents, along with the impact of disposals. Finance expenses amounted to EUR 235 million, increased by 2% compared to EUR 230 million in 2023. Finance expenses increased mainly due to net new debt for refinancing purposes, having been raised above the current average cost of debt as well as the expiry of certain hedging instruments since the beginning of 2023, which caused some debt to become variable at higher rates and higher rates within the cap portion of debt. These impacts were partially offset by higher interest income earned on AT's large liquidity balance, the new hedging measures taken to hedge and fix variable and cap debt at a lower fixed rate, the buyback of bonds at a slight discount and debt redemptions. Overall, the net profit for the period amounted to EUR 309 million compared to a net loss of over EUR 2.4 billion in 2023. On a per share basis, this results in earnings of EUR 0.05. On Slide 26, we present the development of the adjusted EBITDA and FFO. In 2024, we recorded an adjusted EBITDA of EUR 1.01 billion, slightly higher by 1% compared to EUR 1 billion recorded in 2023, driven by the strong like-for-like rental growth and higher profitability despite lower net rental income due to the impact of net disposals. FFO I was EUR 316 million in 2024, reflecting a decrease of 5% compared to 2023, but within the top of the updated guidance. The decline in FFO was mainly due to the higher coupon rates for the perpetual notes and higher financing expenses. The decline was offset by operational growth, which is reflected in the slight increase in the adjusted EBITDA. On a per share basis, the FFO I amounted to EUR 0.29 compared to EUR 0.30 last year. FFO II, which includes the disposal gain over total cost amounted to EUR 393 million, lower compared to EUR 449 million in 2023, mainly due to the lower volume of closed disposals as well as a lower FFO I. Moving to Slide 28, where we highlight our EPRA NAV metrics. The EPRA NAV amounted to EUR 10 billion, higher by 1% compared to 2023, reflecting EUR 9.1 per share as of December '24. The EPRA NTA amounted to EUR 8.2 billion, higher by 1% compared to '23, reflecting EUR 7.4 per share as of December 2024. The increase in EPRA NAV metrics is mainly the result of the profit attributed to the owners of the company. On Slide 29, we present an overview of our capital structure. LTV decreased to 42% from the end of 2023 as a result of the impact of net disposals and operational profitability, which offset the impact from property devaluations. Through the company's proactive measures, we were able to keep leverage below the 45% BOD guidance and we'll continue to take proactive measures to reduce leverage in the coming periods. Looking at the unencumbered assets, this amounted to EUR 16.9 billion as of December '24, reflecting 71% of our total rent, which continues to provide us with a large pool of assets, which we can see -- we can use to raise additional financing. Average cost of debt was 2% as of December 2024 and average debt maturity was 3.8 years, which when including the impact of the cash cover of our debt, the maturity is 4.7 years. Our hedge ratio stands at 98%. Our ICR was 4x and net debt to EBITDA was 10.7x in 2024. In Slide 30, we present our debt maturity schedule. As a result of the several actions we took during the year, we have reinforced our cash and liquid assets position, extending the maturity profile and covering upcoming debt maturities. In addition, in 2024, we have extended over EUR 800 million of undrawn credit lines with an average tenure of over 4 years. On Slide 32, we present our guidance for 2025. In 2025, we guide for an FFO I of EUR 280 million to EUR 310 million, reflecting EUR 0.26 to EUR 0.28 per share. Conservative rent increase, growth captured from successful hotel repositioning, cost efficiency measures and the impact of hedging measures and debt repayments will positively impact our guidance. However, full year impact of disposals from '24 and '25 and higher perpetual coupon payments compared to '24 will weigh on the FFO. [ Lyadh ], please continue.

This concludes our presentation. As always, you can find further material in our appendix. With that, we would like to start the Q&A. Before we invite your direct telephone questions, we would like to answer questions that we have received by e-mail prior to this call. For simplicity reasons, the team has taken the opportunity to group similar questions in order to answer as many questions as possible. Allow me now to read out these questions. For an update on the hotel portfolio performance and current market trends.

The sector is in general is benefiting from strong momentum and good tailwinds, which enable us to capture higher rents and new opportunities. We expect our hotel assets to continue to drive strong internal growth, increasing cash flows and being significant contributors to Aroundtown's revenues and profits. We are looking at several measures that will allow us to extract operational growth through targeted repositioning of hotels, expanding offerings such as a service apartment and long stays, supporting our tenants through digital solutions as well as soft refurbs and rebrandings. In '24, we recorded a 2.9% like-for-like rental growth in the hotel portfolio. The like-for-like rental growth was driven by several hotel repositioning efforts, which will allow us to capture approximately EUR 60 million in rental income increase over the next few years, which only a minor part is included in '24 results. In '24, the sector was supported by positive drivers such as large events taking place in Europe as well as resurge of corporates, groups and international travelers, adding to the positive momentum in this asset class, which we see continuing in the foreseeable future.

Can you provide insights into the letting activity in the office sector in 2024? What are your plans for the portfolio given the current market conditions? How do you see the letting activities in 2025?

In '24 and until today, the office sector continues to be impacted by the uncertainty in the German economy. And as a result, we continue to see a cautious approach from tenants regarding demand of new space and existing tenants reducing partially their space to adopt the new working trends, however, in lower volumes. On the other hand, this situation is reflected by higher prolongation rate in comparison to former periods. Our diversified and granular tenant base, revisionary potential and long-term average leases mitigate negative market conditions. In '24, we prolonged 280,000 square meter of leases with a WALT of 5 years and an average in-place rent of EUR 14 per square meter, and we signed approximately 9,000 square meters of new leases with WALT of over 6.5 years and in-place rent of approximately EUR 15 per square meter. In '24, we recorded a 1.8% like-for-like rental growth in the office portfolio. This was driven predominantly by rent indexation and step-ups with a slight occupancy decline on a like-for-like basis, which remains very manageable. Going forward in '25 and '26, we experienced in recent periods a further normalization of work patterns with a return to office rates increasing gradually across our locations. The reduction in volumes of space by existing tenants is decreasing, and many of our lease contracts already reflected the space adjustment done in recent years. Some tenants start increasing back their space to adopt the return to office trend, and we see increased demand for flex spaces going forward. To adopt this shifting environment, we created ATworld, a new workspace concept across hundreds of locations in our portfolio where tenants can flexibly adjust space demand and in the future will allow us to enter the B2C markets. We see the flexible space as a complementary to the traditional office space and with ATworld, we can offer our tenants the best of both worlds. From a macro perspective, we expect that demand will pick up with the further recovery of the economy. As there is a smaller amount of new construction and there is ongoing conversion from office space into other uses, supply remains constrained, and we expect to benefit in future from the supply and demand dynamics. In this regard, we are also in the process of conducting a conversion of offices into other uses and currently identify several locations, which we are looking to convert into service apartments. We are also exploring conversions into data centers, which could create significant value if successful. All in all, we are confident in our ability to navigate the current environment resulting from the economic uncertainty, and we expect that the portfolio will benefit from a positive catalyst once the context and market sentiment starts to improve.

Can you share more details on your rent like-for-like performance? What are your expectations moving forward?

For our total portfolio, we achieved a like-for-like rental growth of 2.9%. Berlin, Amsterdam, Hamburg, London and Utrecht recorded its over 4% like-for-like in the period. The hotel portfolio recorded a 2.9% rental growth supported by indexation and several hotel repositioning and reopenings. In offices, we recorded 1.8% like-for-like rental growth, driven mostly by indexation, while we saw a slight occupancy decline. The residential portfolio continues to perform very well on the back of strong fundamentals, recording over 4% like-for-like rental growth. Going forward, we expect continued strong performance, especially in hotels and residential. At the same time, we expect office performance to improve when the overall economic uncertainty is reduced. In the meantime, we will continue to explore conversions to further reduce vacancy and to unlock more value. We expect to see in 2025 a rental income like-for-like increase of 2% to 3% on average in our portfolio.

Could you provide some more details on your valuation results? What are your expectations for the upcoming periods?

As part of our '24 annual report, our full portfolio was valued by independent external valuers. As a result, in '24, we recorded a negative 0.5% like-for-like devaluation, primarily explained by slightly higher discount and cap rates, which resulted in further yield expansion. The average yield of the portfolio stands at 5.1% as of the year-end 2024 compared to 5% in 2023. While we have recorded a slight like-for-like value loss for the full year, we have been -- we have seen a recovery started in the second half of 2024. Accordingly, we registered a 1.9% positive like-for-like revaluation in H2 2024, partially offsetting the 2.4% like-for-like value decline recorded in H1 2024. The recovery in values was led by the hotel and residential assets, which registered positive like-for-like value changes of 4% and 1%, respectively. We recorded a like-for-like value decline in the office portfolio of 3%, reflecting a decrease year-over-year, but remaining broadly stable in the second half of the year. The positive valuation results were mostly driven by strong operational growth. Looking ahead, we expect to see the operational performance partially driving value increase, similar to what we have seen in the second half of 2024. We're currently seeing macroeconomic-driven volatility in base rates and yields, which could potentially slow down the positive momentum we experienced in the second half of last year. However, we do not see significant negative impact on values as we expect that on average, the operational growth will outpace the current negative drivers.

How do you plan to use your large liquidity position? When do you expect to go back to acquisitions mode?

In the context of the volatility experienced in the recent years, we view our large liquidity position as one of our key strengths in navigating the uncertainty successfully. In the past quarters, we have seen continued improving conditions and following our return to the capital market in the second half of the last year, we no longer consider it fundamental to maintain such high liquidity levels, and we might seek to redeploy our cash position in more accretive ways than the current interest income we generate from it. Our priority clearly remains strengthening our rating metrics under S&P's methodology in order to stabilize the credit rating, and we expect to see part of our liquidity to conduct liability management exercise and to repay debt as it matures. We would like to emphasize that we remain strongly committed to our credit rating, and we will evaluate our actions to support our credit metrics. We will consider acquisitions if they are accretive and part of the capital recycling and therefore, with a natural impact on our leverage. We rather expect to do acquisitions as part of the TAC fund, which we established late last year in order to utilize distress opportunities, should this arise. We expect to be minority in the fund, while the majority being various institutional investors. Aroundtown is acting as the GP of the fund and will benefit from a promote kicker.

Can you provide an update on your disposal activity? Has your approach changed in light of the improved environment?

In 2024, we signed EUR 935 million of disposals, and we closed EUR 740 million. 77% of closed disposals were offices, residential and hotels, 13% in development and invest properties and 10% in retail, logistics and others. The closed disposals were done at a slight premium to book value, and we recorded a capital gain of EUR 1.8 million. As of year-end, EUR 330 million of the signed disposals were not closed and of over EUR 120 million were closed as of today. In addition, EUR 90 million of disposals were signed year-to-date in '25. Going forward, we will continue to dispose properties and reduce our leverage and on the back of the market recovery and increased transaction levels. We would also execute disposals of properties to find accretive acquisition opportunities as part of our capital recycling.

How do you expect your LTV to evolve?

In '24, we took further actions to decrease our LTV. As such, we have managed to reduce the LTV ratio to 42% at year-end from 45% on June and 43% in '23. In '25, we expect leverage to reduce further from disposals, repayments of vendor loans as well as expected positive revaluations.

Will you pay dividend for 2024?

The actions we have taken in recent years allowed us to significantly strengthen our balance sheet and to improve our financial position. At the same time, the improvement in the overall market environment compared to the last year is encouraging. Regardless, the recent weeks have shown that the markets are not rock steady and geopolitical events can have an impact also on our industry. We still have time to take a decision about dividend until our AGM in June, and we'll assess the situation then, taking also into consideration our credit rating KPIs developments.

When do you expect to have the full portfolio green certified? And what is your plan there?

In 2024, we have made further progress on our green building certification. Starting with 36% of our office portfolio certified last year, we have currently certified 65% of our office portfolio. This was mainly driven by certifications in our German office portfolio as the office portfolio in the Netherlands was already fully certified. Notably, we have also obtained certification for 30% of our hotel portfolio. Going forward, we expect to continue making progress on this front as we continue to leverage the knowledge acquired. However, we have a large portfolio, and we also rely on the certifying bodies capacity constraints. We expect it will be -- it will take us a few years more to get the full portfolio certified. As part of the certification process, we are also analyzing improvement measures, which we put into action in the years following.

What are the implications of S&P's negative outlook on your BBB+ rating? And how does that impact Aroundtown's actions going forward?

We see our strong BBB+ credit rating as a key component of financial strategy and an important driver of our strong growth in past years. We conducted several credit rating supportive actions in the last period, such as the perpetual exchange, which restored part of the lost equity content under the S&P methodology, continued disposals, which support the leverage ratios under S&P methodology, suspended dividend payments and repaid debt and discounts. The bond issuances in July were also supportive as it extended our debt maturity profile as we use the funds to repay debt with short-term maturities. Compared to when S&P changed their outlook nearly 2 years ago, the market environment has significantly improved and as interest rates are reducing, inflation is in check and operations remain stable to strong. Due to our measures and the improved markets, our credit rate metrics continue improving as we move forward. That being said, as of year-end 2024, we remain above our thresholds. And going forward, we need to continue reducing leverage to ensure compliance with S&P thresholds in a timely manner, which would also position us stronger for growth opportunities in the coming period.

We saw you opened the new flex office concept. Can you give some additional details on ATworld? How much office space does ATworld rent from Aroundtown?

ATworld is our innovative user experience platform that leverages technology and digital solutions to reimagine how spaces are designed, used and interconnected. The platform allows users to easily find a suitable spot to work and collaborate and provides our tenants with options to attract new employees without being dependent on a single location. ATworld will primarily activate ground floor of office buildings and lobby spaces of hotels to create a vast pan-European network for members and our tenants and to create a new source of income. Further, the platform is open to third-party space providers. The platform can diversify our cash flow sources.

Could you provide some more details on the drivers of your 2025 FFO guidance?

We are guiding for FFO I in the range of EUR 280 million to EUR 310 million, reflecting EUR 0.26 to EUR 0.28 per share. We continue to see strong like-for-like rental growth in the range of 2% to 3%. The rental growth is supported by strong momentum in the operations of the residential portfolio as well as the positive impact of the reopening and repositioning of hotel. These positive drivers are expected to be offset by the impact of disposals. We expect finance expenses not to change materially in '25 compared to 2024. On one hand, we will see higher expenses coming from the '24 bond issuances, which had only a partial impact in '24. On the other hand, we will see the positive impact of repayments made in the second half of '24 and didn't have full impact in that year. Perpetual notes are expected to increase slightly in '25 due to the full year impact of the exchange and coupon resets. However, the increase in perpetual notes coupon is significantly lower than was anticipated at the start of '24 as a result of the successful exchanges.

Those were the questions that we received prior to this call. We can now start the open session for your questions. [Operator Instructions] The first question comes from Ellis Acklin from First Berlin.

Just a couple of topics to -- for me to follow up on. And looking at the information you gave about the conversion of offices into service apartments, I would be interested in hearing a little bit more about the decisioning behind that. Is that more a reflection of the near-term potential of keeping them as offices or more of an opportunity to convert them into the service apartments? And maybe some information on what the financial opportunity looks like by doing so. And then just a second question, a small one, if maybe you can talk about what sort of initial budget you might have planned for the TAC fund that you talked about today? That would be it for now.

Thank you for the questions. Referring to the conversion of office space, it's basically both, but we actually look more on the opportunity that arise through this conversion. We are able to get from the conversions that we already decided to do over 50% of the CapEx and a very nice upside in value once this is converted. So this is really an opportunity to go to the market where we have high demand on the side of the residential. Referring to second question, the TAC fund. So it's an opportunity fund in order to be used for acquisitions. So there is no commitment to do acquisitions. Only if we see that there are acquisitions that fit to the acquisition criteria, only then acquisitions will be made, and it will be funded by also a big institutional -- financial institution investors that join the fund. So the full -- not all the full cash outflow will be on the Aroundtown, on the group, but we will use other sources. And basically, this is the fund that we are going to use for the additional acquisitions that we will incur.

The next question comes from Pranava from Barclays.

I have a few questions around S&P ratings. I'm just going to put them all together. So I understand that you have disposed EUR 935 million signed in 2024, but there are also bits and bobs of acquisitions, EUR 420 million, if I'm looking at it correctly, but I understand only a little bit of that is actual acquisitions. Either way, in your own words, at the end of 2024, you're still above the S&P threshold. So if you didn't have these acquisitions, wouldn't that be more supportive? And I also note that you're talking about stabilizing the rating. Am I understanding it correctly that you expect it to be stabilized at the BBB+ level. But again, in your own words, it's been 2 years with the outlook being negative. So how do you see S&P stabilizing it at this level if you continue to stay above that threshold? And then finally, is there any disposals in the pipeline that we should be aware of? Because I believe S&P is expecting you to be disposing about EUR 1 billion or so just in the H1 this year.

Thank you for your questions around S&P. So in general, maybe not in the exact order, but as you also mentioned, as we wrote, many of the acquisitions were basically without any cash outflow this period and mainly was a conversion from loan to own. So we didn't have any material outflow. We also need to think when it comes to S&P about our ICR and disposals are reducing our adjusted EBITDA. So also if there are accretive acquisitions that supportive our ICR, it seems that we look at as support into our credit rating. In terms of stabilizing the rating, clearly, this is our goal. It's not dependent on us. It's a decision of S&P. It comes together also with the disposals. The expectation from S&P is that we will go back into the thresholds. In order to do so, we still need to do additional disposals, clearly also depending how valuations will be in Q1 and in H1. So there are several elements that are impacting the total thresholds with S&P. We do have a nice disposal pipeline. We already have signed disposals year-to-date that are not yet close about EUR 400 million. And in total, we have EUR 700 million in the held for sale. So we will -- we are expecting to dispose more than that. Many, many, many, let's say, negotiations, but didn't yet reach to a signing phase. We do expect in 2025 to continue to be a net seller to support our rating.

The next question comes from Kai Klose from Berenberg.

I've got 3 questions, if I may. The first one, could you indicate what is the amount of loss in rents annualized from this year's disposals, so disposals you've closed, but not -- sorry, you have signed, but not yet closed. Second question is on Page 20 of the presentation. You mentioned there is a EUR 60 million rent upside, of which EUR 10 million has been realized in '24. Could you indicate in hotels, could you indicate when and over which period the remaining EUR 50 million will be -- will come through? And third question would be when it comes to refinancings, would you currently go for a 10- or 5-year bond? And what would be the marginal cost of debt for each of both maturities?

Okay. I need to calculate -- maybe the team will calculate already now what is the less of the rent in the -- due to the disposals, but -- and I will try to answer to you during the call, if not, I will reply to you after. About the EUR 60 million potential rent to come in through the conversion. So EUR 10 million is already in 2024, and we are expecting about additional EUR 15 million to come in 2025 on top of the EUR 10 million and the remaining to be split for '26 and '27. Kai, please remind me the third question?

Third question was when it comes to issuing potentially a bond or mortgages, is it, first of all, positive preference 5 or 10 years? And what would be for each of those, let's say, maturities, the marginal cost of debt, roughly speaking?

Look, I don't have the exact calculation for that, but I can say that the base rate is increasing. It's -- we have currently a fixed rate of about 2% on our overall debt. Clearly, when we are coming to refinancing, we'll pay more than the debt that we have at the moment. But on the other hand, we have over EUR 3 billion of liquidity that is benefiting for -- as interest income from the current increase in the rate. So there will be a balance between higher interest income that we generate to the refinancing that we will do. If base rates will continue to rise also, we'll be able to buy all that at a discount once we do a liability management. So there are some parameters that are offsetting one each other. And we will -- let's say, now that we have access to capital and we've already proven it last July, we are waiting a bit, let's say, a bit closer to the date that we need to refinance. We are not going and in the past, we did it all the liability management 1 year to 2 years ahead the maturity. Now we have the liquidity on one hand. And on the other -- so we are waiting a bit closer to the maturities in order to actually do the liability management. I hope I answered your question.

The next question comes from Manuel Martin from ODDO BHF.

Three questions, if I may. For -- first question is on valuations. So if I understand it correctly, valuations is also an important factor during your discussions with Standard & Poor's on your rating. Could you share with us what's your impression or what do you hear from -- in the market or amongst surprises concerning the future interest rate evolution and potential impacts on valuation? That would be the first question. Second question on the conversions of office. Could you give us an idea of what volume you would like to convert when it comes to office space? And what could be the returns that you target here? That's question number two. Question number three, your fund that you are planning. Could you tell us or indicate to us at which stage you are on? And when do you expect notable contributions? And number four, are you going to continue to follow the project of converting office space into data centers? That's the last question, please.

Thanks for the questions. About the valuation, I mean we just completed and presented to you the full year results. So we really finalized the valuation about a month ago. And you see the results, which were positively across all the sectors in H2. I think that going forward, let's say, there is a volatility and increase in the base rate that could have an impact. As we mentioned before, we believe that going forward, we'll have, let's say, negative impact coming maybe from the base rates, but positive impact coming from the operational growth and like-for-like. And we expect that the like-for-like will outpace the increase in rates, but this is our estimation. It's not easy at this point of time already to foresee how it will go. We are positive, but we will update in the next quarters once we see and get more input from our valuators. About the conversions, so we have marked now about 1,200 units that can be converted to. It's about 40,000 square meters. We're continuously analyzing more and more properties to see if they fit and if the business model works. As mentioned before, we are expecting an average a 15% return on the CapEx that is for the conversion. About the fund, the fund is already existing. We already raised money to the fund. The fund already did several acquisitions. And not many because we are not -- we didn't see so many opportunities that will fit to our acquisition criteria, but we are monitoring the market. We see also the outflow of cash when -- and the credit rating impact. So we are taking things slowly and really will use opportunities that bring in accretive value. On the conversion side, as you say, about the data centers, it's another asset type that we start to learn and look at. We're already identifying several properties that could have a potential to get the grid and power approval. That's a thing that takes time from the authorities, and we will clearly update once we have more news about that element. Come back to Kai for your question about the loss of rent. So on the disposals, we have about annualized rent of EUR 40 million.

The next question comes from Rob Jones from BNP Paribas.

I've got a few questions and then at the end, a request. So firstly, you've had a few questions on S&P. I just kind of want to ask a simple one, which is, do you know specifically in terms of whether it's ICR or LTV or whatever it might be, exactly what S&P is looking for to take you off negative outlook? And I guess kind of linked to that, what that means in terms of disposal if you assume that asset values were constant. The second question is around the vendor loans. Obviously, good news on vendor loans that you obviously get 5% coupon when that buyer of your asset hasn't yet repaid the vendor loan. But any color on the EUR 0.55 billion of vendor loans in terms of either how much you expect to be reducing that receivables balance by, say, in '25? The third one on asset values. Are you saying that you think asset values could be flat to up this year, obviously, despite the recent move in risk-free rate bond yield? I'm slightly surprised by that. And then the last one was the request, which is you've seen your share price today, stock was down 6%. It's now marginally up. Part of that is the massive difference that we get between Bloomberg and Visible Alpha consensus data. I would massively, and I think investors would as well, really appreciate it if you could collect and publish consensus numbers. We're very happy to [ contribute them ] as I'm sure many other analysts will. And that, I think, can mitigate the risk of the stock being plus or minus EUR 200 million of market cap intraday on a results day. Yes, I appreciate any thoughts around that would be great.

S&P published in their notes end of last year, exactly what are the ratios that they expect. For memory, they expect us to be below 50% on debt to cap and to -- above 2.4 and above on the ICR. From the vendor loan side, we are expecting to collect this year about 60% from the remaining balance. In terms of valuations, as I said before, clearly, we cannot expect or cannot anticipate exactly what will happen. We see the changes that happen now in the last 2 months. And we see really big changes that are happening fast. So the positive [ almost ] sometimes and then to the negative, we saw what happened end of -- in H2 last year. So it is not easy to anticipate. I think our message here is, yes, there will be an impact from the increase in the base rate, but we believe that a lot of it will be offset by operational growth as we saw from the hotel side and also from the residential. And we'll keep you updated along the quarterly reports about the development there. And about your request, we're clearly considering it, and we'll talk to you offline about this subject.

The next question comes -- okay, just a second, please, because we have lost the line. The next question comes from Jonathan Kownator from Goldman Sachs.

A couple of follow-ups on disposals and cash. Just to confirm how much is exactly included in your disposal guidance? Is it what has been closed to date? Or have you included all the EUR 700 million for sale that you have? Or is it in between for the 2025 EPS guidance, please? And the second one, just to clarify, but I think you've alluded to that already, whether you intend to use your cash balance to repay some of the debt or whether that be opportunistic?

Jonathan, so from the EUR 700 million of assets held for sale as of year-end, already EUR 330 million are signed. On top of that, we signed another EUR 90 million year-to-date in 2025. And on top of the total EUR 700 million, we planned in our guidance around EUR 400 million more disposals. So let's say, about EUR 1 billion disposals in 2025 are included in the guidance along the year. In terms of cash repayment, yes, we are expecting to use partially the cash position to repay debt.

The next question comes from Neeraj Kumar from Barclays.

Just a quick one from my side. So we saw that Grand City raised $45 million equity by selling their treasury shares. As far as I remember, you like your stake in the Grand City. So I wanted to check any reason you didn't buy that stake given it was sold at more than 50% discount to NTA? And how do you compare it to the attractive acquisitions you have been undertaking in your own books? Also just wanted to check if you are looking to sell your own treasury shares in a similar fashion to deleverage as well.

Neeraj, thank you for the questions. No, we were not the ones who bought this stake in GCP. It was institutional investors that we understood approached them, look for -- to buy like a significant stake and they didn't find in the market. And therefore, GCP decided to sell. It's a small position, it was not us. We don't have at the moment any, let's say, considerations to sell part of our treasury shares. Clearly, it's always an option to do so, but there are no thoughts on doing it now.

With that, I would like to thank you all for participating in this call and the question you raised before and during the call. All the best, and goodbye.