Aroundtown SA (AT1) Earnings Call Transcript & Summary

Good morning, everybody. Thank you for joining us for Aroundtown's H1 2026 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. With me today are CEO, Barak Bar-Hen; CFO, Jonas Tintelnot; Executive Director, Frank Roseen; Chief Capital Markets Officer, Timothy Wright; Chief Sustainability Officer, Limor Bermann; Deputy CEO, Kamaldeep Manaktala; 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, and thank you for joining us for our H1 2026 results presentation. The macro and geopolitical backdrop has remained mixed throughout the first half and the volatility has persisted over the past month. We did not experience any material impact on our operations from these external factors and come with good H1 2026 results, well on track to meet our 2026 guidance. Against that backdrop, our diversified portfolio continues to deliver. Residential and hotel, which together are 53% of the portfolio, keep benefiting from strong market tailwinds paired with our ability to identify and extract upside potential, while the office segment remains relatively stable despite the lagging economic activity. Over the first half of the year, we executed several measures that continue to drive growth. We concluded the share-to-share exchange offer for GCP, and we continue to increase our exposure to the residential segment. We continue to execute our share buyback program launched in January, taking advantage of the market volatility and repurchasing our own shares at a significant discount to NAV. We closed disposals around book values, recycling that capital into accretive uses such as the share buyback. And having strengthened our balance sheet sufficiently, we resumed our dividend payment for 2025 after 3 years. Taken together, these actions support our earnings both on an absolute and on per share basis and position Aroundtown well. These efforts have resulted in a substantial and attractive EUR 340 million shareholder return so far in 2026. Despite the ongoing volatility, capital markets have remained open throughout. And after the reporting period, we continue to be active, issuing across multiple currencies and instruments and further extending our maturity profile and in parallel have bought back shorter debt. This is a direct result of our proactive approach, refinancing our upcoming maturities early and maintaining a sufficient liquidity position, which together mean that market volatility is currently not impacting us immediately with sufficient liquidity to cover our maturities this year and next. We continue to monitor development closely, and will keep taking advantage of windows of opportunity to further optimize our debt profile. With a strong operational base confirmed guidance and a solid liquidity position, we remain on track for the remainder of 2026. On Slide 4, we present the financial highlights for the first half of 2026. Net rental income amounted to EUR 591 million, stable compared to H1 '25 despite the net disposal carried out over the last period, driven by solid like-for-like rental growth of 2.7%. Adjusted EBITDA amounted to EUR 500 million compared to EUR 501 million in H1 '25, similar to the rent development and reflecting a stable cost base. FFO I amounted to EUR 144 million, 4% lower compared to EUR 150 million in H1 '25 and in line with our guidance and mainly as a result of higher financing expenses. In H1 '26, the full portfolio was externally revalued, resulting in stable valuation compared to December '25. EPRA NTA per share came in at EUR 8, increasing 3% compared to EUR 7.8 of December '25, supported by the share buyback, which was executed at a deep discount to NAV. We continue to make progress on obtaining green certificates and now 76% of our commercial portfolio is green certified with 81% of offices and 72% of our hotel assets holding green certificates. We have also obtained our first BREEAM Outstanding score, the highest BREEAM score. Liquidity remains high at EUR 3.9 billion in addition to over EUR 1 billion of unused credit lines while maintaining wide headroom to covenants. We will discuss these items in more detail later in the presentation. Tim, please continue on the next slide.

Thank you, Barak. On Slide 5, we present some of the main drivers supporting our FFO I generation, which -- and which are expected to offset increasing finance expenses over the coming years. We expect to continue extracting solid top line growth in our portfolio, mostly from reletting as well as indexation. Over the coming 3 to 4 years, we expect around EUR 100 million of additional rental income based on a like-for-like growth of around 2% to 3%. Furthermore, the investments in our portfolio through conversions, redevelopment and repositioning is expected to increase our rental income in an amount of EUR 55 million until 2030 from current projects, including ramp-ups from completed projects from previous periods. More details of this, we will show you in the next slides. We further increased our FFO following the increase in our stake in GCP. We increased our stake in an attractive 10% FFO yield, which will result in EUR 10 million additional FFO from '27 onwards. Our higher contribution to the residential market in Germany and London has increased a market which benefits from strong and structural fundamentals and from very defensive cash flows, which will strengthen our FFO generation going forward. Additionally, the share buyback is highly accretive on an FFO per share basis. We continue to execute the program initiated in January, utilizing disposal proceeds realized at around book values to buy our own shares at a significant discount to NAV. This delivers FFO I per share accretion with the impact only partially realized this year and fully captured in 2027. These measures, once fully completed over the next few years are expected to offset the increased interest expenses in the coming years under the assumption that refinancing rates stay unchanged. Moving to Slide 6. Here, we outlined the progress achieved on accretive capital allocation and capital recycling in the first half of the year. We closed in H1 disposals of EUR 350 million and signed around EUR 390 million year-to-date, executed around book values and at a rental multiple of 17x. The disposals were led by hotels alongside disposals of mainly development rights, offices and condominiums. From a geographic perspective, disposals activity was mainly concentrated in non core and other locations, Leipzig, Berlin, Wiesbaden and Paris. In addition, we have EUR 400 million of investment properties classified as held for sale as of the reporting date. The proceeds are being recycled into accretive uses such as for the previously mentioned share buyback program. We also acquired high-quality residential assets at an average yield of over 7%, and we continue to execute accretive CapEx measures in our portfolio with office conversions into servic$6 apartments at a yield of around 14% and hotel repositionings at a yield of around 13% -- going forward, we expect to continue selling assets and reinvesting into opportunities at high yields, creating meaningful accretion while returning capital to shareholders. Frank, please continue.

Thank you, Tim. Slide 8 shows our balanced portfolio across various asset classes. Hotels make up 20%, residential 33% office, 34%; logistics and retail, 6%; and finally, development and invest properties, 7%. Through various measures that we present on the following slides, we have been actively reducing our office exposure in favor of asset classes with more stable long-term fundamentals. Our properties are concentrated in top European locations with Germany, the Netherlands and London representing 89% of the portfolio Berlin is our largest city at 23%, followed by London at 9%, Munich at 7% and Frankfurt finally at 6%. These markets offer strong long-term fundamentals and meaningful upside potential. For more details, please see the appendix. Continuing on Slide 9, we provide an update on the main portfolio KPIs. As of June 2026, the portfolio value stands at EUR 25.2 billion and generates EUR 1.16 billion in annualized rental income, resulting in a rental yield of 5%. We note that the yields are based on current contractual rents and do not include future agreed rent wrap-ups. This is mostly relevant in the hotel sector, where significant contractual rent increases for the recent hotel reopenings are yet to be included. Including these stabilized rents, the hotel portfolio yield is 5.7%. The office yield of 5% reflects the vacancy of the respective assets. The WALT remains solid at 7.3 years, supported by a balanced lease maturity profile that adds further downside protection. EPRA vacancy stands at 7.6%, stable compared to 7.6% in December 2025. In-place rent increased to EUR 11.8 per square meter. We note that the EPRA vacancy definition and applicable market standard does not include properties under major refurbishment or development. The development rights and invest properties accounts for 7% of our portfolio and includes around 700,000 square meters of existing square meters with about 90% vacancy. The embedded potential from these developments on the future rental income growth of the company will be extracted over the coming years, and we present further details of the development portfolio in the appendix. Slide 10 shows our operational performance reflected in continued solid like-for-like rental growth across the portfolio, which once again demonstrates the benefits of our diversified portfolio. Total like-for-like rental growth was 2.7%, with a stronger contribution coming from Berlin, Rotterdam, [ Utrecht ]. Residential assets representing 33% of the portfolio delivered a like-for-like rental growth of 3.5%, driven by construction supply-demand imbalances across our portfolio locations, low vacancy levels and the reversion upside we continue to capture. Hotels, which account for 20% of the portfolio, achieved a like-for-like rental growth of 4.4%, driven by indexation and contractually agreed rent step-ups, new hotel openings and the repositioning measures completed in recent periods. These 2 asset classes make up 53% of the portfolio and continue to provide a strong foundation for rental growth in future. In offices, which make up 34% of the portfolio, we achieved a like-for-like rental growth of 0.9% despite the muted market activity, driven primarily by indexation and rent reversion and offsetting a slight increase in vacancy. This has supported our gap to market rents, would give us a competitive advantage to retain and attract new tenants. Over the last 12 months, we renewed 160,000 square meters of leases at an average WALT of 5.1 years and signed new leases for 130,000 square meters at an average WALT of 7.8 years. For the full year, we expect total portfolio like-for-like rental income growth in the range of 2% to 3% -- on top of this organic growth, we have significant embedded upside to extract through development and conversions from the development and invest portfolio, which amounts to 7% of the portfolio as well as targeted investment within the operating portfolio. These assets will drive strong organic growth and increase the overall portfolio asset quality. We are also progressing well with office conversion into service apartments, and we have recently delivered another project this time in Dortmund and have started the construction phase for a project in Berlin. We have also obtained the permit for a project next to Frankfurt Central Station. The Bau-Turbo regulation provides further momentum by streamlining change of use processes and shortening approval periods, and we have received good feedback from municipalities for around 120,000 square meters of offices. Our data center conversions in Berlin, Munich and London are also progressing with power and permit approvals expected this year. We are also intensifying and adding new space within existing properties, such as our property in Kassel, where we are building another pre-let logistics hall for an existing -- one of our existing tenants on site. Kamaldeep, please continue on the next slide.

Thank you, Frank. Slide 11 provides an overview of our rental upside from our main conversion and repositioning projects, which are in execution and which we expect to complete gradually over the next 3 years. The expected rental upside for these projects is EUR 55 million by 2030, which includes the step-up rent following the ramp-up phase of already completed projects. Starting with the office to serviced apartment conversions. These projects generally fall within the same zoning framework and require only a standard building permit, which is usually be obtained within 6 to 12 months. We have several projects running in Berlin, Dortmund, Frankfurt and Hanover. The rent achieved are similar or even higher compared to office rents with longer lease terms of 15 to 20 years, which reduces vacancy, supports rental growth and creates stable income streams. We are in discussions with several different operators who are looking to expand and are interested in our portfolio. In the hotel portfolio, we are refurbishing the hotel in Hanover City Center, opposite the historic new town hall, which is expected to reopen in a few months. We have started works on the former InterContinental Hotel in Frankfurt and are renovating an additional 260 rooms at Cardo Hotel in Rome. In the Hotel Bristol in Berlin, we are nearly completed with the full modernization of the rooms and common areas. And in Paris, we are working on a phased modernization of the rooms. We also completed the comprehensive renovation of our hotel in Baden-Baden after several years and handed it over to the tenant who opened the doors in July. In addition, we are also working on several further hotels, executing smaller targeted modernization and refurbishment projects agreed with new and existing tenants. These projects have a remaining investment budget of around EUR 225 million, which is to be invested gradually over the next years. The CapEx is mainly included in our expansion CapEx and is executed at an expected yield of around 12% on the total CapEx budgeted, resulting in an expected yield uplift of around EUR 55 million, including from ramp-ups of completed projects. As other projects have been completed in recent years, we do not plan a significant increase in the CapEx per year, although we do note that the investments can fluctuate from period to period depending on project progress. On Slide 12, we walk through 4 properties that show our repositioning and conversion strategy in practice, where we have delivered very strong results, increasing significantly both the quality and the income generated from the properties. In Rotterdam, we took a single-tenant office building that was facing a soft office market and repositioned the 28,000 square meters into a mixed-use asset combining service apartments, offices and leisure. We have signed a 15-year lease with a tenant operating the serviced apartments, which were delivered earlier this year. The refurbishment of the remaining spaces is progressing well, and the full asset is now 82% pre-let. Based on the current letting status and considering the full investment, the project is already yielding 16%, and we expect a yield of 19% on CapEx invested once the property is fully let. In Rome, we took over the former Sheraton Roma, which is the largest hotel in Rome's prime EUR business district and carried out a comprehensive repositioning, upgrading the rooms to a modern standard, adding new food and beverage and improving the wellness offers. The property was launched under Marriott's Autograph Collection. It is now let on an 18-year lease at a stabilized yield on total CapEx of 11%. As shown on the previous slide, we are executing further works in this hotel, bringing additional rooms to be opened by 2027. In Dortmund, an underutilized office building next to the main station was converted into 52 serviced apartments. The serviced apartments are let on a 15-year lease at a yield of 10% on CapEx. On the prime location of Kurfürstendamm in Berlin, we modernized the Hotel Bristol that had become outdated when we bought it, refurbishing all rooms and suites, both ballrooms, the restaurant and 14 meeting rooms and relaunched it as a luxury lifestyle hotel. It is now the first German hotel in IHG's Vignette Collection, BREEAM certified and let on a lease with 21 years remaining, with the investment executed at a yield of 19% on CapEx on a stabilized level. Across these 4 assets, attractive returns on the CapEx invested and long-term leases give us strong visibility on the income these properties will generate going forward. These examples demonstrate the process of our value-add strategy and how we can combine our in-house expertise across asset types with the quality of our locations to unlock embedded value and secure long-term stable income streams. On Slide 13, we present our hotel tenant base updated for the disposal activity and the new leases signed. The group has been operating in European hotel business for over 2 decades. Keeping and building up relationships is an integral part of our business culture. And over this period, we have developed good business relationships with a broad range of hotel operators. In recent periods, we signed several new leases, resulting in a further strengthening of the tenant mix. The broader operating environment remains supportive. Demand across Europe continues to be underpinned by a mix of business travel, public sector activity, events, culture and leisure, which enables our tenants to maintain healthy operations. Our priority is always to have long-term leases with experienced operators in addition to our in-house capability to operate hotels on an interim basis. This ability to replace tenants with limited impact on the hotel operations and a long-term value is a key competitive advantage and reduces dependency. More information on our hotel tenants and their background is available on our website. Turning to Slide 14. We set out how the expropriation debate in Germany has developed and why we see the most recent steps as a positive for our residential portfolio. The starting point was the referendum initiative in September 2021, where the Deutsche Wohnen & Co. enteignen campaign secured support for socializing portfolios held by landlords with more than 3,000 units. Our assessment regarding the expropriation topic has always been consistent. Germany has a structural gap between housing supply and demand and moving existing apartments from one owner to another does not close it. What closes the gap is building and converting more housing, which is why we regard regulations such as the Bau-Turbo, which we discussed earlier, as a measure that addresses the problem, while socialization risks are lowering exactly the investment the market needs. The more recent development came in July following the conference of construction ministers, the federal coalition committed to introducing nationwide legislation that would prevent individual states from using socialization laws to transfer privately owned rental housing into public ownership. The reasoning put forward by the construction ministers was that the threat of socialization itself holds back housing construction and weakens Germany as a place to invest, which is in line with our view. We note this is a coalition commitment and not enacted legislation, and we will follow the legislative process closely, but we welcome the aim to safeguard housing investment and establish clearer legal certainty, which also significantly lowers the perceived expropriation risk attached to Berlin residential and investment risk in German residential real estate as a whole. Limor, please continue on the next slide.

Turning to Slide 15. We present a practical example of how we integrate sustainability investments into our refurbishment strategy, combining improved environmental performance with tangible financial value creation at a residential asset in core Leipzig location. We combined the energy upgrade of the building with a planned major refurbishment. This allowed us to implement the sustainability measures in a high cost-efficient way -- the works included full reinstallation of the facade and the roof, new windows, floor heating and air tightness improvements alongside balcony extensions and the additional of a barrier free lift. The total investment amounted to EUR 3.8 million net of subsidies, supported by a EUR 2 million KfW subsidy and brought the building to a KfW 40 energy efficiency standard. The project delivered strong results on both sides. The EPC improved from F to A, final energy demand declined by more than 75% and the primary energy demand by more than 85%. At the same time, we created tangible value at the asset level, adding 26 residential units and over 2,100 square meters of lettable area. The improved quality and the positioning of the property also supported reletting at significantly higher rents. This is a clear example of our approach using integrated CapEx to reduce energy consumption and operational costs, while at the same time, improving the asset quality, increasing lettable area and unlocking rental and long-term value upside. On Slide 16, we outlined our BREEAM strategy and highlight some further milestones achieved in our green certification program. We use the BREEAM methodology as a framework to create clear pathway for improvement of the sustainability of our portfolio. It allows us to implement targeted measures to improve the overall score of each property. The methodology is very transparent. This allows us to use together with existing and prospective tenants to set clear targets, driving tenant satisfaction and retention. Our current goal is to fully certify our commercial portfolio, and we have made good progress so far. Currently, 76% is certified. We expect to certify the remaining assets over the coming few years. In the meantime, we have started recertifying some of the properties that received their initial certifications 3 years ago. Here, we are aiming to gradually improve the score and reach at least very good in the long term. One -- on this slide, we also show the progress made in this regard. We see strong improvements in score for the vast majority of properties that have undergone recertification. We also highlighted some recent recertification achievements. Our Astropark office property in Frankfurt achieved the highest BREEAM score, Outstanding. This is the first building in our portfolio to reach this level and only fourth building in all Germany to do so. It is also our first recertification in Germany ever to achieve this rating. In addition, we received BREEAM Excellence score for our office property in Berlin close to Checkpoint Charlie, building further on the first excellent certification in our portfolio in Neu-Isenburg, which we achieved earlier this year. In Leipzig, we achieved the BREEAM Very Good rating, reaching our minimum targeted level already in 1 cycle and increasing significantly from a past score received on the initial certification of this property in 2023. Jonas, please continue on the next slide.

Thanks, Limor. Moving on to Slide 18. We present our financial results for the first half of 2026. Net rental income amounted to EUR 591 million, stable compared to the first half of '25, with like-for-like rental growth of 2.7%, offsetting the reduction in rent from net disposals over the past periods. Finance expenses amounted to EUR 142 million, higher compared to the first half of '25, primarily reflecting the refinancing measures carried out during '25 and the first half of '26. As part of the H1 '26 report, we conducted a full revaluation of the portfolio for the certified independent third-party evaluators, recording stable valuations compared to the end of '25 with slightly positive revaluations across the main segments, office, residential and hotel. Overall, profit for the period amounted to EUR 218 million compared to EUR 578 million in the first half of '25. On a per share basis, net profit amounted to EUR 0.08. Moving on to Slide 19. Adjusted EBITDA amounted to EUR 500 million in the first half of '26 compared to EUR 501 million in the first half of '25. The result was underpinned by solid operational performance, offsetting the impact from net disposals over the period. FFO I amounted to EUR 144 million, 4% lower compared to EUR 150 million in the first half of '25. The decline was primarily a result of higher financing expenses, partially offset by reduced contribution to minorities, reflecting our increased holding in GCP as well as lower perpetual note attribution following the perpetual refinancing from last year. On a per share basis, FFO I amounted to EUR 0.13 compared to EUR 0.14 in the first half of '25, supported by the share buyback executed in the period. The benefit from the lower minority contribution following the GCP transaction was offset by the higher effective number of shares outstanding on settlement, leaving the transaction broadly neutral on a per share basis. FFO II, which includes the disposal gain over total costs amounted to EUR 268 million, higher compared to EUR 200 million in the first half of '25, reflecting the higher disposal margin in the current period. During the first half of '26, we closed EUR 350 million of disposals, generating a gain of EUR 125 million over total costs. On Slide 21, we highlight our EPRA NAV metrics. Our EPRA NAV KPIs were supported by the net profit recorded in the period and by the increase in equity attributable to owners arising from the higher holding rate in GCP. These effects were partially offset by the share buyback program and by the recognition of the dividend, both of which reduced equity attributable to the owners. On a per share basis, the metrics benefited further from the accretive impact of the buyback, executed at a significant discount to NAV, offset by the shares delivered in connection with the increased GCP stake. EPRA NRV amounted to EUR 9.6 per share as of June '26, higher by 2% compared to EUR 9.4 per share at the end of '25. EPRA NTA amounted to EUR 8 per share compared to EUR 7.8 per share as of December '25, reflecting a 3% increase. EPRA NDV amounted to EUR 6.9 per share, higher by 5% compared to EUR 6.6 per share at the end of '25. On Slide 22, we highlight the breadth of our capital markets activities across currencies and instruments. Within the period, we issued CHF 160 million 7-year bond and 2 Australian dollar transactions of AUD 300 million each over 5 and 10 years, all in January and hedged back to euro. On the perpetual side, we issued EUR 750 million at AT level in January and EUR 600 million at GCP level in April, refinancing the full perpetual note stack and using the proceeds to buy back notes with the '26 call dates as well as high coupon instruments. Due to the timing impacts, part of this refinancing was completed in July after reporting period. Furthermore, after the reporting period, we issued approximately EUR 1 billion of secured senior notes -- sorry, apologies of senior unsecured notes. Our first euro benchmark of '26, EUR 850 million 5-year bond at 3.625% coupon alongside CHF 180 million 7-year bond, our third Swiss franc issuance in less than a year. The euro benchmark was placed with a concurrent tender offer under which we bought back around EUR 0.7 billion of bonds across years 28, 39 and 40. In addition, approximately EUR 1.1 billion of Series 38 and GCP Series G were redeemed at maturity. Together, these measures reduced gross debt year-to-date and further extended our average debt maturity schedule. On Slide 23, we present our pro forma debt maturity profile, which incorporates the recent issuances, buybacks and redemptions across our debt stack. Following these measures, our maturity profile has been extended and our near-term maturities effectively. Our average debt maturity now stands at 3.9 years, extending to 4.7 years when accounting for our liquidity position. We continue to maintain strong financial flexibility supported by broad access to financing across capital markets, a solid BBB rating from S&P, a high level of unencumbered assets across diversified asset types and geographies as well as established mortgage banking relationships. In addition, we have EUR 1 billion of undrawn revolving credit facilities. Our hedging ratio remains high at 95%, and our cost of debt stood at 2.4% as of 30th of June. Following the refinancing of the reporting period, the cost of debt stood at 2.6%. We continue to maintain significant headroom to all our bond covenant thresholds. We present on this slide the coupon of the debt maturing each year. While current financing rates are higher than the debt which matures over the next year, from 2029, the cost of debt is similar to the current refinancing rates. We generally take a proactive measure to refinance ahead of time, which front loads the impact of the higher financing expenses, but smoothens the impact of refinancing at higher rates over several periods. The rent increase measures, which we outlined earlier in the presentation, will catch up by the end of '28 and will fully support earnings growth. On Slide 24, we present an overview of our debt metrics and a solid financial profile. Our loan-to-value stood at 43% compared to 41% at the end of '25 and remains within our Board of Directors' guidance of 45%. The increase was mainly a result of the share buyback as well as some investments, partially offset by the proceeds from disposals. We continue to maintain a substantial pool of unencumbered investment properties amounting to EUR 17 billion or 69% of rental income, which supports our strong access to bank financing. Our ICR stood at 3.3x, impacted by the higher financing expenses and net debt to EBITDA at 11.3x, impacted by the share buyback. Together with the financing structure that remains well diversified across straight bonds, equity, perpetual notes and bank debt, these metrics underline the conservative approach we continue to apply to our capital structure. On Slide 25, we present the resumption of our dividend distribution. The dividend approved during the period and paid on 6th of July 26 marked the resumption of dividend payments following the decision of the Board of Directors to suspend distributions from 2022 financial year in order to strengthen the company's financial position. As the company has successfully taken measures to strengthen its position, the decision was made to once again to recommend a payment of a dividend to the AGM. Together with the EUR 250 million share buyback program, this implies a EUR 340 million allocation to shareholders in 2026. Going forward, our dividend payout policy is set at 50% of FFO I per share. This is designed to balance an attractive shareholder return with conservative financial structure. On Slide 27, we present our guidance for '26. We guide for FFO I in the range of EUR 275 million to EUR 305 million, translating into EUR 0.24 to EUR 0.27 per share and a dividend per share of between EUR 0.120 and EUR 0.135 based on our payout policy and subject to AGM approval. The guidance is supported by the conservative rent increase assumptions, the contribution from acquisitions and a lower minority contribution following our increased stake in GCP. It further benefits from cost efficiency measures, the net positive impact of the perpetual note transactions on our total coupon and the share buyback. These are offset by the full year impact of disposals closed in '25. The effect of disposals closed year-to-date in '26 and expected from held-for-sale portfolio as well as the impact of the proactive refinancing executed in the recent months.

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 liberty to group similar questions in order to answer as many questions as possible. Allow me now to read out these questions. Could you update us on your external growth strategy and where you currently see the most attractive opportunities?

Our approach remains centered on capital recycling and on extracting growth from our existing portfolio. In H1, we continued to sell assets around book values and redeployed the proceeds into several accretive opportunities while keeping leverage stable. We assess the deployment of that capital holistically across acquisitions, accretive investments in our own portfolio and other measures such as the share buyback. On external growth, we continue to scan the market actively. The recovery remains asymmetric with smaller and more leveraged players continuing to face refinancing pressure. We believe this creates opportunities to acquire quality assets at high yields. Strategically, we intend to continue to increase our weighting towards the living segment, meaning residential, hospitality and mixed-use while gradually reducing office exposure through disposals and conversions. We note that external growth remains opportunistic and disciplined, and we will transact on the back of low-yield disposals and where deals meet our acquisition criteria. balancing between acquisitions and other opportunities such as high-yield CapEx investments, share buybacks and debt repayments, supporting our balance sheet, FFO per share and interest coverage metrics.

Thank you, Kamaldeep. Regarding office, how do you assess current leasing conditions and valuations? What is your outlook going forward?

Letting conditions remain broadly consistent with recent periods. Demand still needs to recover, largely reflecting the subdued economic activity in Germany. As mentioned, we let and prolonged 290,000 square meters in the last 12 months at EUR 14.8 per square meter, which is similar to comparable periods. The current market situation puts pressure on occupancy level, however, limited. We see vacancy ratios increasing slowly in a pace of about 1% this year, which is very limited. As long as the current market environment remains, we expect this pressure to continue. We do record positive rental income like-for-like from offices as the in-place rent increase more than offsets the occupancy pressure. Our activities to reduce office vacancy include reletting, conversion to residential via Bau-Turbo, conversion to hospitality units, conversion to data centers and disposals. We believe that these measures will keep occupancy levels stable around the current levels while increasing our rental income. As to the office property valuations in 2026, we continue to expect value to broadly remain on current levels as rental growth continues to offset the negative macroeconomic volatility. With the reduction in the macroeconomic volatility, we expect to see more positive impact of the rent growth fueling value growth.

Thank you, Barak. With your shares still trading at a significant discount to NAV and the current program close to completion, would you consider increasing the size of your share buyback?

We are very pleased with how the program has been executed. Since launching it in January, we have repurchased shares at an average discount of around 67% to EPRA NTA per share as of December '25. This has delivered meaningful accretion on both FFO I and NAV per share. And together with the resumed dividend reflects around EUR 350 million returned to shareholders in '26. We believe this program was particularly accretive as we utilize proceeds from disposals executed around book value to buy back shares at a deep discount to intrinsic value. We continue to view share buybacks as one of the instruments within the broader framework of capital allocation and capital recycling. And we assess these options with the objective of deploying capital accretively while maintaining a strong and conservative balance sheet and interest coverage ratio. Therefore, share buybacks similar to acquisitions will be on the back of disposals, keeping our leverage and balance sheet in a strong position.

Thank you, Jonas. Following successful completion of the share exchange offer, do you intend to continue building your stake in GCP?

After the completion of the offer, we have selectively increased our holding to around 84% currently, up from 81.5% at the completion of the exchange offer. This increase was carried out through open market transactions on an opportunistic basis. We retain the option to continue increasing our stake opportunistically through open market transactions, but do not have a specific ownership target we wish to achieve at any price. In our view, GCP's FFO yield remains highly attractive and increasing our exposure to the German and London residential market strengthens our earnings profile. As with other measures, we evaluate the metrics of each option on an ongoing basis to ensure capital is deployed where it creates the highest value.

Thank you, Timothy. Where can we expect to start to see FFO I per share growth?

We put a lot of focus on FFO per share performance, and we are well positioned to meet the 2026 guidance. The FFO I per share result comes after 3 years of declining FFO, where we refinanced large positions of our debt, refinance and reduce the perpetual notes balance while executing disposals of mainly low-yield and development properties, increasing our share in GCP and executing a highly accretive share buyback program, which will have a full year impact next year. For 2027 and 2028, we expect the pressure on FFO I to continue given we have a number of cheaper legacy debt maturing in those 2 years, which we will balance between repaying from our cash balance and refinancing at comparably higher rates, which we usually do proactively ahead of time. That mechanically will increase our gross finance expenses in 2027 and 2028. While we are executing many measures to increase rents, which we expect will offset those increases in the midterm, the short-term impact of the increased finance expenses could result in a soft temporary decline in FFO. This impact will also be softened in the FFO I per share due to our share buyback program, which will have a full year impact next year. We will provide the guidance for 2027 with the full year 2026 results as usual. However, in the midterm, our measures expect to contribute FFO growth drivers in the coming years as we outlined in the presentation. On the perpetual side, we have already refinanced all outstanding notes, but could do a similar recouponing exercise as we did previously to reduce the ongoing cost of market volatility subsidized. We expect 2029 to be the inflection point. From that year, the cost of debt maturing is in line with our marginal cost of debt. So the refinancing headwind will reduce massively, assuming rates do not change. At that point, EBITDA growth flows through to FFO rather than being absorbed by rising interest costs. And the EBITDA growth is, therefore, throughout like-for-like rent growth of 2% to 3% per year, additional rent from repositioning and conversions and accretive capital recycling where we redeploy disposal proceeds into value-accretive opportunities. Those drivers are offsetting the '27 to '28 finance expenses over time. And from '29, they translate directly into FFO per share growth and more than that if rates can come down.

Those were the questions that we received prior to this call. We can now start the open session for your questions. We would appreciate it if you could answer them one by one.

And the first question comes from Ellis Acklin from First Berlin.

Chance to ask a couple of questions. You covered most of my topics already. Two smaller questions that I do have open. First one, looking at the LTV now, which has crept up to about 43%. My question is how much of the current balance sheet capacity do you realistically think you can deploy here? And should we expect future acquisitions to be funded mainly through just strictly through disposals and [TAC] as well? Or maybe will leverage be involved? And then second question, more on the housekeeping side. If you could maybe just give us a current expectation for your financing expenses for 2026 and 2027 given the recent portfolio -- debt portfolio optimizations.

Thank you very much for your questions. Yes, so the LTV increased slightly. You're right. Obviously, the share buyback that we've done acquisitions, investments and so on. Now as we outlined several times, we see the disposal proceeds as the recycling measure to fund growth opportunities, which are acquisitions, but also conversion projects and so on. So the selling of lower-yielding investments into higher-yielding investments, that's where we see a leverage-light measure to increase our earnings going forward? Jonas, do you want to take that?

In terms of the question on the financing expenses, yes, have increased. Now if you look at the quarter-quarter actually in H1 about EUR 72 million in Q2, it was compared to EUR 70 million in the first quarter. So it have modestly increased quarter-by-quarter. Now going forward, you see that we did the EUR 850 million already to basically take away a lot of the refinancing pressure that we would otherwise have in the coming periods. And this on a pro forma basis, increasing our cost of debt to 2.6%. Now at which kind of -- when we will see additional financings coming through, clearly also depending on what happens with rates. We see a lot of volatility, but we'll continue to update you over the period.

The next question comes from Jonathan Kownator from GS.

Just a follow-up actually on the capital allocation. Should we understand essentially that you expect to be net neutral in terms of acquisitions versus disposals and that you're happy with current level of leverage?

Jonathan, look, we have our internal guidance, so we have headroom there. Clearly, we will utilize that headroom also and it doesn't mean that necessarily we will go up. A lot of factors are playing into it. But we feel comfortable in the leverage that we are and utilizing those headrooms for the opportunities that are coming. But again, the opportunities depends on revaluations going forward, disposals, acquisition opportunities, which come first and so on. And we always try to keep some headroom. So up to 45% is there, but we clearly are also working on decreasing it.