Branicks Group AG (0QGG.IL) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Branicks Group AG Full Year Results Call 2024. [Operator Instructions] Let me now turn the floor over to your host, Jasmin Dentz. Please go ahead.

Thank you, operator. So welcome, everybody, to our full year results presentation for 2024. This call will also be webcast live on branicksgroup.com and a replay of the call will be available on our website shortly after the end of the call. Our CEO and CFO, Sonja Warntges, will now give you an overview of our financials and our guidance. After the presentation, we will be happy to take your questions. Please note that management comments during this call will include forward-looking statements, which involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's presentation. As always, all documents relating to our full year reporting have been made available on our website. I now turn the call over to Sonja Warntges for her remarks. Sonja, please, the floor is yours.

Thank you, Jasmin. Good morning, ladies and gentlemen, and also a warm welcome from my side to Branicks Q4 and Full Year 2024 Results Conference Call. Today, as usual, I'm joined by my colleagues from Accounting and Investor Relations. I will give you an overview on what has been achieved in the last year and I will present you our key numbers as well as an outlook for 2025. At the end, we are open for the normal Q&A session. Dear all, in terms of a rough overview about what we have delivered so far, I would like to highlight the topics mentioned on Slide #2. First of all, we achieved major milestones in terms of our financial consolidation and the reduction of our liabilities. Also the last EUR 40 million tranche was only due end of December. We already fully paid back our bridge financing for the acquisition of VIB in October. This financial instrument initially amounted to EUR 500 million and we are proud having achieved a complete payback as an important milestone in our financial consolidation. Our focus remains on further reducing our liabilities with a continuous focus on our covenants as well as on our liquidity. Looking ahead of us, the cornerstones of our future are defined and approved in a solid plan laying the foundation for shaping the company in the future. With regards to our disposals, Branicks was a very active participant in a challenging transaction market in 2024 selling 57 properties for a combined EUR 702 million. Following the original expectation that the market would not pick up again until the second half of the year, Branicks can look back on a very satisfactory transaction performance in the reporting year. Including the transactions in the fourth quarter, we reached our EUR 650 million to EUR 900 million disposal target and I can promise to you that we are in a very final stage to sign further disposals. Our transaction pipeline is well filled and our transaction teams are working successfully in order to realize the deals. With regards to our Commercial Portfolio, it continues to be a sustainable cash flow provider. Our clear strategic focus on the 2 asset classes, office and logistics, is once again reflected in the high percentage rate these 2 asset classes constitute with regards to their market value. Our portfolio continues to generate stable and predictable rents benefiting from the realized rent indexation. Compared to the prior year period, we saw a slightly higher like-for-like rental growth where we particularly saw strong renewal lettings. We also managed to increase the average rent from EUR 8.92 per square meter to EUR 10.20 per square meter. In this context, I would also like to mention that our teams continue to successfully negotiate new lease agreements like most recently to MyWellness GmbH in the Helio asset in Augsburg or Lilly in the Zircon Tower in Wiesbadenas well as the new lease agreement in Neustadt, Halle that we have also communicated via a press release. With EUR 8.8 billion assets under management, our Institutional Business remains the second strong pillar of our business model recording a 2.3% like-for-like rental growth during the reporting period compared to prior year. Thanks to our strong and solid setup within this segment, we are ready to benefit from a market upswing particularly with regards to increasing transaction fees. And last, but not least, we saw further progress regarding our Performance 2024 action plan. Beside from the continued OpEx reduction mentioned on the slide, we also saw progress on the other points of this program. For example: the mentioned reduction of liabilities, the realization of disposals and the concentration on the operational portfolio business. With regards to our financial maturities profile, we set the course already in the first quarter of the business year when the lenders of the 2024 promissory note loans amounting to EUR 225 million voted in favor of the company's restructuring plan. In doing so, the promissory note loans in question were extended to June 30, 2025. Another major milestone in the first quarter was agreement with the lenders of the bridge financing for the acquisition of the shares in VIB Vermogen AG completed in 2022 regarding an immediate repayment in the amount of EUR 40 million and an extension of the term concerning at the point still remaining EUR 160 million until end of 2024. The extension had been achieved on almost unchanged conditions. Since then, we were able to pay back EUR 40 million at the end of Q2 as well as EUR 80 million in Q3 and the remaining EUR 40 million in October 2024 and therefore saved the interest. With regards to our bank debt, we refinanced 2024 all maturities due with good conditions. And also in Q1 2025, we achieve to pay back EUR 4 million bank debt and rolled further back financing of EUR 27 million to 2030 and later; again a promise we delivered. And in addition to that, we managed to convert EUR 20 million bank debt maturity from 2025 to 2030 and later. And we also already successfully achieved the paydown of our promissory note ahead of plan. In January, a first amount of EUR 50 million had been paid back and they can count on us that we will pay back the outstanding amount. Let me highlight that in 2024 we successfully reduced our financial abilities in total by EUR 667 million to EUR 2.3 billion, which is a clear sign of our strength. In view of our EUR 400 million green bond, which is due 22nd of September 2026, I know that most of you are eager to learn about more about our plans. Please be ensured that of course we have this maturity in our head and exploiting different options in this regard. Nevertheless, it is too soon to talk about concrete steps. But let me underline that our focus to deleverage our balance sheet while monitoring our green bond covenant remains one of our highest priorities and clearly said, we intend to meet all obligations due in 2025 and beyond as planned. With 57.8%, the bond LTV covenant should have peaked and is expected to improve due to disposal and a further reduction of our loans. We are aiming to reduce our LTV further and to achieve an even bigger headroom in the midterm. With 2.0x, the ICR covenant had also enough headroom to the 1.8x threshold and we are confident to keep our interest cover ratio stable and of course above the 1.8x threshold. In terms of our average interest rate, it is important for me to underline that over the course of the quarter and due to the redemption of the bridge as well as due to additional optimization, we continuously improved this KPI during the recent quarter from 3.36% as of end of March to 3.21% as of end of June to 2.81% as of end of September to now 2.67%. One important element here is our ability to successfully agree financing conditions for our development projects as well as for our real assets. Having said this, let us now focus on our 2024 results starting with an overview of our key performance indicators compared to our guidance given at the beginning of last year. As you can see, we have delivered on them. And I think it is worth adding this, particularly our disposals result is remarkable given the challenging conditions on transaction markets. Let's now take a deeper look in the results of our real estate platform in 2024 shown on Slide #5. Our like-for-like rental income remained strong and our teams once again performed exceptionally well. The like-for-like rental income rose by 1.8% for the entire portfolio under management. In the Commercial Portfolio, we see a slight increase of 0.3% and a plus of 2.3% within our Institutional Business. In terms of square meters, the letting performance of the Branicks platform in 2024 declined by 13% year-on-year to 387,700 square meters mainly due to disposals. In total, assets under management with EUR 11.6 billion were slightly down compared to last year mostly due to disposals, which became effective in the course of the year. The Commercial Portfolio saw a decrease from EUR 3.6 billion to EUR 2.8 billion, which was a direct result of the disposals activities year-on-year. The Institutional Business was mainly affected by the evaluation. As of today, only 3.7% of the total annualized rental income would expire in 2025 if lease contracts are not prolonged. Over 85% of annualized rental income has a lease length until 2027 and longer. For larger expiries in 2025 and 2026, we already proactively started discussions with these tenants. On our next slide, you can see the development of our main income streams. Net rental income fell to EUR 150.2 million mainly driven by the selling. Income from associated companies that mainly consisted of deferred income from fund share decreased to EUR 5.9 million. The real estate management fees slightly decreased from EUR 50.9 million to EUR 48.2 million. Apart from recurring asset property and development fees, this number also includes fees generated from transactions that occurred as part of the settlement of the Global Tower mandate. Our income from rents and management fees on the platform with EUR 198.4 million was slightly lower year-on-year. Nevertheless, still showing a very high degree of recurring income streams. Now let's take a closer look on the development of the FFO year-on-year that were overall in line with our guided expectation on the upper end. The net rental income saw a decrease of EUR 14.4 million due to the disposals. Management fees decreased by EUR 2.7 million and the share of the profit from associates by EUR 0.5 million. Our adjusted OpEx development again had a positive contribution to our FFO. This was adjusted by EUR 6.1 million mainly due to legal and advisory costs in respect of financing activities. The increase of our adjusted net interest result amounted to EUR 8.6 million. This is adjusted by nonrecurring expenses amounting to EUR 26.6 million due to refinancing activities for bridge and promissory notes. In total and to sum it up, we see the FFO amounting to EUR 52.2 million for the full year of 2024. This is exactly within our guidance range. Moving to Page 8. You'll see that within our Commercial Portfolio, our ongoing optimization of the portfolio continued during the reporting year. Our 2 strategic asset classes, logistics and office, now account for 83% of the market value of the Commercial Portfolio. The EPRA vacancy rate was slightly up year-on-year mainly because of the end of some bigger rental contracts. Thereof, 3 are already rented and taking this into account, we would see a number of 6.5%. The WALT remained at a high level. Compared to former years what we lined out on our Page 9, our key performance indicators remained very solid. Our balance sheet portfolio leads to a robust annualized rental income and higher square meter prices. Our long-term efforts and achievements regarding letting activities support our levels of vacancy rates and our WALT. Another core element of course remains our Institutional Business. The split of our assets under management in this segment on Page 10 shown also demonstrates our focus on the asset classes, office and logistics. Our investment partner basis here continues to be well balanced without any dependencies from single mandate. Branicks currently manages 29 vehicles for a total of 171 institutional investments. Let me now also take the opportunity to highlight some of our project development of VIB. We are particularly proud to see that we not only realize successful disposals, but also creating new asset value within our development pipeline. As you see, all of them will be completed until 2026. We have been successful in letting the new spaces especially with our largest project in Erding and Ingolstadt. All projects mentioned here will have a total investment of more than EUR 200 million generating a targeted rental yield of approximately 6%. Due to the market conditions, I'm convinced that the strategic and operative setup that I have presented to you during the last minute is the right setup to ensure our success in the expected market environment. With regards to the office rental market, we share the optimistic view of JLL. We expect a trend towards a high quality office space accompanied by a trend towards small yet sophisticated spaces. All these things we can offer. Germany's logistics rental market is expected to remain stable in 2025 with a significant increase in take-up likely on the event of a strong economic recovery. However, both prime and average rents in the country's top markets are anticipated to see a slight rise over the course of the year. As I have mentioned before, we see a growing importance of sustainability topics in all asset classes. Also stress factors remain and the market continues to pose challenges. We expect overall positive market influences, especially a brighter investor sentiment and prospect of further interest rate cuts. In view of our expectations for the current business year, we expect gross rental income in the range from EUR 125 million to EUR 135 million, real estate management fees between EUR 50 million and EUR 60 million and an FFO I after minorities and before taxes of EUR 40 million to EUR 55 million. With regards to acquisitions, we foresee no acquisitions for our on-balance sheet activities and EUR 100 million to EUR 200 million within the IBU segment. Our disposal guidance plays a range of EUR 600 million to EUR 800 million whereas EUR 500 million to EUR 600 million in our Commercial Portfolio and EUR 100 million to EUR 200 million in our Institutional Business. Beyond our guidance for the current year, our midterm ambition remains unchanged. We strive to transform Branicks Group towards a profitable ESG-focused and value-generating asset expert with sustainably strengthened cash flows and financial position. Our ambitions are clear and we are working hard to achieve them. We will substantially improve our earnings and cash flows and therefore, the LTV towards 50% and return to net profit in 2026. In doing that, we want to monetize our ESG expertise. And we have a clear midterm ambition to further reduce our debt what will go along with improving the respecting KPIs. And having said that, I would now like to hand over to the moderator for your questions.

[Operator Instructions] The first question goes to Stefan Scharff from SRC Research.

Stefan here from SRC. My first question is about you have a bit rising vacancy rate in your Commercial Portfolio, it's from 5% to a bit more than 7%. Perhaps you can say a bit more about the office market. I think this is still on a sluggish level. It's not easy in terms of letting performance and also not easy in terms of transactions. What do you expect here for the rest of this year? And also what do you expect for next year? Beside this, the economy is still very difficult and we might get the third year of recession in Germany. And then my second question is you still have a strong focus on further deleveraging and you showed some good success for your debt profile already in the first quarter. What about the financing conditions here? And do you think the new Merz government will lead to a higher overall interest level perhaps?

Stefan, thank you for your questions. So as said, our EPRA vacancy rate is 7.4% and this is according to some end of contracts last year. So therefore, as I explained in my presentation, we have also got 3 new lettings concerning to the 3 letting contracts, which are the most square meters in this vacancy rate. This is mainly in Halle driven by Rewe and Smyths Toys and it's in Zircon Tower in Wiesbaden with Lilly and the pharmaceutical concern there. And if you take this into account, you would say it's around about 6.5%. And so I think we are very good in this letting area. We have 2 other contracts we are in discussions now so I have a good feeling about the rental expectations and the success. It is difficult to do this so you are totally right. Mainly it's driven by international companies, which have also the ESG aspect in their leasing contract and so on. But at the end of the day, we do not see that the interest is coming down. And as said, also speaking with JLL, we have the 2 major points here. The one is big spaces on a comfortable level and the other one is highly sophisticated small places. So it's the total market which we see is in question and we can offer both. So I think it's only a timing effect here. So the last question, the interest rate; I don't think that the ambitious challenges Merz is discussing now will lead to an increase of interest rates. It's my personal opinion, but I don't think that it will work in this way. So I think we will be stable with the last change during the last weeks. I think we will stay on this way. But I don't see it as a major point here on our business in the real estate world. I don't think this is mainly driven during the next 12 months from the interest rates. I think there are a lot of uncertainties and a lot of questions and with the transaction market and also the letting market mainly driven by foreign international investors and companies, this is an international aspect which drives the real estate market here. Can you repeat the second question?

No, that was the second question. That was fine. Just you expect some recovery in the office market. According to my data, the office market was still behind, let's say, logistics and even still behind retail in the last year, there was a small recovery in office, but not really a broad recovery. What do you expect here for this year?

Do you mean the letting or the transaction market?

Generally both. The letting is not easy. Some prime rents are up, but there is still reluctance to sign for big rental agreements I think at least in some important cities. And also for investment market, some buyers still prefer logistics or other asset classes much more than office?

I think that the letting market is very good and if you look on what the square meter prices are in the major cities, they are growing and the interest is there. So as said, I think there is the 2 pillars. One is the small sophisticated places, they have high interest; and the other ones are the big places. But what we see and you can also follow this here in Frankfurt very good and you see what's happening on the letting market here and also on the building or the development market and who drives the market. It's a very interesting story and we cannot see that the companies reduce the square meter prices. It's the other way around. If they change, they pay higher rents and if they stay, they also pay the index rent. So I can only say what I see and that is what I see. What's happening in the transaction market is that the prices went down, also the evaluations for office went down. I think we had the peak there. That's my personal opinion. And I see that the interest is there, but mainly driven from foreigners and from the international investors. We haven't seen the German investors coming back with interest. It's more a family office and the long-term investment basis in assets where it has to be done something, which have a good location and you have to have a special interest. It's some communities which want to buy and family office and institutional investors from outside and mainly driven by what can we do with this asset; do a refurbishment, do ESG investments and so on; to bring it up. So these are the most interesting office buildings.

Okay. And another question would be do you expect a little bit higher real estate management fees? Your guidance was here EUR 50 million to EUR 60 million. I think the main reason might be that you have in your mind higher sales in the Institutional Business than this year. This year the sales were about EUR 100 million and now it should be perhaps coming closer to EUR 200 million. What means higher fees also for the Institutional Business unit?

What drives the management fees is the -- I'd say it the other way around. Our major goal is to drive the real estate value. So at the moment it's not really a plan to bring it up, but it's a plan to stay with the amount. And you have to do a lot to stay with the amount and you have to invest and you have to do the right things in refurbishments in all these CapEx and TIs invested in an asset and what is the payback of this. And we see also these interest and these wishes from our institutional investors and we have a very detailed and focused plan on the major investments and on the major assets to drive the value, to bring it up or to stay with it and therefore, we get the fees out of these CapEx, TIs and these things. It's more investments in existing assets to drive the value than a transaction plan in these fees.

And the next question goes to Andre Remke of Baader Bank AG.

A couple of questions from my side, please. Starting with your comments on the transaction market. I'm a bit surprised that you do not see any impact from current 50 bps rise in interest rates. But however, looking at your current pipeline, could you elaborate a bit on that? You mentioned to be in final negotiation. What could be the volume here? And finally, on the transaction side, could we expect further disposals through your subsidiary [ deals ] this year or will you only do deals excluding that?

To come back to the interest rate, I don't think -- we saw it in the past. The market and the banks is not driven by the smaller changes in interest rates. So in the variables, but you have to see it on the long end and we don't see a real impact here on the changes and I don't expect them for the next 12 to 18 months. So if you look on what we have done in the last 12 months, we have realized interest rates in the secured market with the bank debt of 3.5% at the average. So it belongs a little bit to the asset and to the contract, but I don't see a real influence here. On the other hand the transaction market, as said in my last comments, we see big interest also in logistics as well as in office, but also in retail as well as letting transaction. But it's all about can I get a schnapsen so to say. So on the one hand, they think they can make a schnapsen; but on the other hand, they need real asset managers who know what they are doing. And I think the last point is the question mark some investors have at the moment. We can offer this and therefore, I think we can we can show this to investors as well as in our own real estate assets and make it. Therefore, we see the fees coming up in this year, but we also see it in the transaction market. And therefore, also the VIB guys are looking at their portfolio and see what can we do, what do we want to do. On the one hand, the developments which are new assets; do they want to stay with these assets or do they want to sell it is the 1 question. And the other question is every asset manager takes the question, are the assets in the real location and what do we have to invest in the future in these assets? And I think the Management Board of the VIB looks at these continuously and decides what to do. We also from the Branicks side look on our portfolio and look what we can do and invest in the portfolio, which brings a certain payback period and a certain amount in cash flow back. And therefore, it's a mix in our plans what we want to sell in 2024 on Branicks Commercial Portfolio and VIB logistics portfolio.

Okay. So it could be the case that you again sell any office properties from Branicks side to VIB, you will not rule this out?

Yes, yes, that can be the case, definitely.

And coming back to your mentioned negotiations and final negotiations, would you be able to put any figure on that?

At the moment, no. We have 1 transaction. I think we can communicate this in the next weeks. But the other ones are in a stage where we cannot speak about it.

Okay. Fair enough. Second question on your refinancing of the EUR 280 million promissory note. What is your current plan on that to pay it step by step or refinancing with other type of liabilities? What is your plan here?

No, the plan is to pay it back via a mix of certain things. The one is especially to sell assets and the other one is to get some of the liquidities free that we have also on the cash side. So it's a mix of different things, but we have a plan of this. And so the 30th of June is very near. We are driving this and see the concrete details that we can realize it. But as I said, it's a mix of the transaction on the one hand and getting free some restricted cash here over the next weeks and therefore, pay back the promissory notes.

But you do not strive for a further prolongation on that?

No.

Okay. Perfect. And then in the report, you mentioned impairment losses of EUR 237 million and the write-down of investments of I think EUR 130 million. Can you elaborate on that?

Yes. So the depreciation is on the one hand the normal depreciation. On the other hand, it is coming from the sales number. So when we had discussed transactions and had a contract, we had the market value in place. Therefore, we have written off the value and therefore, it's in the depreciation and mainly the closing of the transaction is in another quarter. So we have then sold the asset according to the written-off price, which is shown in the depreciation and therefore, it's all in the depreciation number then. And we had EUR 32.9 million special depreciation of existing assets, which we have also on the books. And this was mainly driven on VIB or these are all VIB assets because, as you know, when we bought the VIB company, it was on the peak of the prices and according to the purchase price allocation, we have them in our books. It's definitely the other way around on the VIB books because they do not have this purchase price allocation done. And therefore, we had to write off 4 assets on the VIB level and this stood at EUR 32.9 million.

And the write-downs of investments you mentioned, the EUR 133 million. This refers to what?

Yes. EUR 111 million is the selling of the shares of the VIB Retail Balance I. VIB has sold the remaining shares of the Retail Balance I. And the other one remains to the liability gets written off.

Okay. Probably 1 last question on your LTV because it's probably the most prominent issue at the moment you are working on. While you are currently at 60% and you still noted that you're expecting below 50% by course of '25. So it seems to me a bit ambitious. You are crystal clear convinced that you will reach it already this year.

That's a good question. So as mentioned, we have a very detailed plan for 2025, also 2026; what we want to sell and what we want to do with our liabilities. And therefore as you can imagine, we have a plan what we want to sell and to what price. And according to this, the KPIs develop in the said way. I would not say crystal clear at the end of 2025. This was always also the discussion yesterday with our Advisory Board, I would say in the range or in the year 2026. But at the end of the day, it relates to what we sell and to what price. You can imagine how the loan reduces and the value reduces. And the assets we have on our Commercial Portfolio, especially in the Branicks portfolio, have a higher LTV than in the VIB portfolio. And if we sell assets from the Branicks portfolio, the LTV reduces much faster than if VIB sells something. And what we have in the plan shows the KPI as we have communicated this. But life is going on during our planning. So if we sell other assets for whatever reason, it may take a little longer. But at the end of the day, it's our goal in saying this especially in the range of 2026 to reduce it to around 50%.

And the next question goes to Manuel Martin of ODDO BHF.

Actually 1 question remaining. On property devaluations, could you remind us or give us the figure by how much Branicks devaluated its Commercial Portfolio and how much percentage devaluation that was?

On the Commercial Portfolio, we had a devaluation of 6%. And for the Institutional Business of 7.4% and the average on the platform, this remains to 6.9%.

Okay. And a follow-up question on that. Do you think that has been the negative peak or might there come something else in 2025?

I think that was a negative peak. So we had 2 years around about 6% now and we have installed a department here to focus on devaluation and all these things. And to say the other way around, we have a clear view on what we have to do to stay stable or to increase for some assets and we are working on this plan. And therefore, I think one hand on the market, I think it's stable. And as you have seen on the residential market, it goes also the other way around. And I think also on the office and logistics market, we have seen the peak. And for Branicks itself, we are working very focused on rental contracts where we can do something as well as on refurbishment. And therefore, I think it was a peak to say clearly.

Okay. Really very last question. What's the rental yield of the Commercial Portfolio after the devaluation, please?

5.4% versus 5.2% last year.

And the next question goes to Markus Schmitt of ODDO BHF SE.

I have a couple. First of all on the cash. I mean could you maybe tell what the pro forma cash is of today and how much is restricted because you just mentioned to use some of restricted cash for the repayment of the promissory notes in '25? Can you give some number as of today, what is cash and what is restricted cash?

Definitely. End of last week, EUR 240 million cash and thereof around about EUR 80 million restricted.

Okay. And this is then the resource you would use then I mean by speaking to whoever has a claim on this restricted cash, getting free some of it and use it then for the promissory notes, at least part of it I would guess. Yes?

Definitely yes.

Okay. Good. Then on the LTV discussion, also a little bit of linkage to the valuation outlook. So I think to keep that simple that the 50% LTV target, which is I think the adjusted LTV obviously, I mean the main catalyst for this is then valuation gains when I understand that correct?

The 50% is the reported LTV to make.

Okay. But the main catalyst would be valuation I think and then maybe gains from selling assets above the book value when I understand your answer correctly from the former question.

Yes.

Okay. Good. And then again on the bond refinancing. So I mean I think you rule out a rights issue with that market cap levels and this would actually bring me to a classical amend and extend transaction. I mean you said there are some initiatives in place and something you're working on, but I think that's the most realistic scenario for me. I mean other options would be of course maybe private debt or again using some of the VIB cash resources with it and of course your cash position as of today is not too bad I would say too. But is there anything you can tell in what direction you want to go? Will it either be solved from the equity side or will it rather be solved on the debt side by like an amend and extend transaction?

You have mentioned the total portfolio of what we plan to do. But at the end of the day, I have to be serious and so it's too soon now to talk about this. We will do it the one way or the other. But at the end of the day, we have to solve the promissory notes at the end of June now, then we do 2025 and we are working on the options for 2026. And as said, we intend to pay back all our liabilities, but it's too soon to talk about the way we come there.

I have only 1 hurdle. It's a little bit mean maybe. But of course with no new equity in the business, I mean you would face then actually a high refinancing rate for the bond. I mean you're coming from a quite low coupon. And when you have to do amend and extend, you have to offer something to investors of course and I think you would promise then another big chunk of asset sales to bait them a little bit. But what you have achieved over the last year by reducing the average interest rate across your debt maturities, I mean I could imagine this will be offset then by a refinancing transaction in terms of the outstanding bonds. So I mean are you pretty convinced you can do this all without new equity in the business?

As said, we have to look at it. We have to look at the interest rate we have then in the market when we think about refinancing or anything like this and we definitely cannot do something we cannot afford. I think that's also clear. But it's too soon now at the moment to talk about this. Sorry for that.

And the next question goes to [indiscernible].

So you mentioned that you will return to profitability in 2026. What needs to happen for that?

Yes. As I said, we will drive our operational business, we will drive our transactions and we will drive the Institutional Business. And at the end of the day if this plan works and I'm convinced that this plan works, we will reach the goals I talked about it.

Is it also largely dependent on market valuations trending back upwards?

I haven't got the question. Could you please repeat it? I hear you not very clear.

Yes. Sorry about that. This is my last question. Is your plan to return to profitability largely dependent on asset valuations again rising?

No. I think as said some minutes ago, we plan with a flat evaluation and so I don't think -- as you see, we have now 6% and that definitely will go down. So at the end of the day, it's not all about valuation. It's more about the operations and what we can get out of the market from the operational side.

And the next question goes to Ingo Hillen of MMI.

Ms. Warntges, as you are Chairman of the Supervisory Board of VIB, you will be aware that a lawsuit to appoint a special auditor to evaluate potential claims filed already with the court and the court already set a date for VIB to reply. One of the most important points in that lawsuit is the loan provided by VIB to Branicks of back then EUR 200 million and now close to EUR 300 million. Remarkably, this loan was provided in a matter of just 2 to 3 weeks. My question on that especially as you stated that "all obligations will be met in 2025". What is the current state of thinking about the repayment of the VIB loan? And the second question, will that loan from VIB will be fully and on time be repaid in cash to VIB?

I'm not the Chairman of the VIB Supervisory Board. And the question, yes, we are in discussions with VIB what we are doing here and I think we are coming to a decision in the next weeks and then we can talk about what we are doing here when we have taken the decision.

Okay. I wonder if there is a decision. The loans that I knew of have a certain date and they should be repaid.

They have a certain date. And yes, at that date, they are due. That's right. And what we are doing afterwards, we are discussing.

And the next question goes to [ Josef Shawn ] of [indiscernible].

I've noticed that your corporate bond liability line item has reduced. Did you buy back any bonds in the recent quarter?

We bought back part of the bond, yes.

Is it part of the ongoing strategy that you utilize the discount of the bond to basically also generate some equity gains?

Yes, this was definitely the idea because the yield was very low and so we paid back some of the bond and get the EBITDA thereof.

Okay. Understood. Do you expect to continue this strategy if bond levels stay that depressed?

Yes, it's also 1 option which we are thinking of here. But at the end of the day, the most important point is to pay back the 2 liabilities and remaining cash or liquidity, we think about the options we can do that, but it's in our head.

Understood. What amount of assets have you sold in Q1 so far so until today and what net proceeds do you expect from these transactions?

Until now, we haven't sold anything. So the major parts will happen in Q2 and then Q4.

Okay. Because there were some assets I think in the held-for-sale bucket.

Yes, we had some. At the end of the day, we have 1 what we have in the held-for-sale is the shares of a fund so that's the so-called Unite office. It's in a fund and in a held-for-sale position in the balance sheet. It's the shares we have on this fund because we want to place it out if it's the right word, yes.

Okay. And that's going to be liquidated or how can we think about it?

No, we sell it.

Okay. You sell it. And what do you expect proceeds from that fund? Is around the EUR 100 million you have in your held-for-sale bucket?

Yes, but it's only the active side of the balance sheet. So if you look on the passive side, you see the loan according to this position and what we have now is EUR 35.4 million I think is the number of the shares we have in this fund and that's for sale.

Okay. So EUR 35.5 million net proceeds.

Yes.

Okay. And if I've looked through your Top 20 and I saw that you did sell Kosching I think your #2 or #3 asset from last year. Can you give us an indication what amount that asset was sold for and what net proceeds do you expect from or did you receive?

This is [ Jake ] speaking. On the Top 20, I think it is still on the list. So I don't know where you get the information from. On Page 189 in our annual report.

Let me quickly get it and then come back to it. From the rental yield, you said 5.4% for the Commercial Portfolio of the whole group I guess. What is the rental yield net of VIB so the rental yield of the pure Branicks portfolio?

We don't show this separately because for us it's 1 group.

Okay. Understood. And now back to I think you have like Kosching #1, you have like Zeppelinstrasse 33 and then you have like Kosching at #5, [indiscernible]. I think Kosching was in there as of fiscal year '23 I think and it's not in there anymore as of fiscal year '24.

Okay. You mean the interpark., So [indiscernible], you mentioned, right? That has been sold last year in a portfolio deal.

Okay. But you can't comment on the exact economics.

No, we agreed with the buyer that we don't comment on those items.

Okay. But that happened in Q4? Did I miss anything that it happened earlier?

No, it happened -- the signing was in Q2 and the closing was in Q3.

And the next question comes from [ Krip Aristidoe ] from [indiscernible].

So I've got a few on the balance sheet. There was an EUR 85 million reduction in loans for the financing of shares. Was that related to the retail fund you mentioned before or was that related to something else? It's in other receivables?

Yes, this is right. So when VIB brought up the fund, they had an investor and gave them a buyer's loan at the end of the day and when the shares were sold last year, the shares went out. They are under asset. They are under management at the moment, but they went out and also the liability went out of the balance sheet.

And this was repayment not a write-off, correct, in my understanding?

Couldn't understand. Could you please repeat?

This was a repayment. This wasn't a write-off of the receivables, correct?

This was a repayment.

Yes. There was a reduction as well in the DIC loan related to party line from EUR 18 million to EUR 5 million. What's the reduction there? Why did the reduction happen?

This was devaluation of a liability. So we have written off a liability with EUR 50 million.

Okay. And is there any color to that why you wrote it off?

It was kind of prudent that we wrote off this liability because we are not sure whether it comes or not.

I understand. That's the sponsor, right? We're talking about the sponsor.

I cannot really understand this, it's difficult.

That's okay. And about the rest of the loan to related parties, there's EUR 107 million left on the balance sheet. What do you use as your best understanding of that time frame to cover the rest of them?

At the moment, we think about -- or it is in the balance sheet that it comes back end of 2026.

End of 2026. Okay. I had a question on your disposals target. Do you have any color on what do you expect in the first half versus the second half given your intention, as you said before, to repay the promissory notes at EUR 280 million? That implies a good chunk of the disposals happening in the first half. So I'm trying to understand how you think about that.

Yes. In the first half year, around about EUR 300 million and the rest in the second half of the year.

Okay. So 1 last question, if you don't mind, like coming back on the loans to related party. Why do you have -- is the maturity for the 2 main parties for the loan to related party in 2026 for the Minotaur GmbH and [indiscernible]? Sorry, apologies for my pronunciation. What's the basis? Why do you think those will be repaid in 2026?

Yes. It's a discussion about ending of the Minotaur and there are warranties. And at the end of the day, we think that until end of 2026, they are solved and then the liabilities will be paid back.

[Operator Instructions] And the next question goes to Philipp Kaiser of Warburg Research.

Just a quick understanding. So the admin expenses, which were driven by legal and consulting costs, are due to financing consulting costs so there's nonrecurring and nothing legal.

Pardon, I couldn't understand. The line is at the moment not so good.

Just quickly repeat the question. Just an understanding. So the admin expenses are up driven by legal and consulting costs, but that is due to financing advice so nothing other legal.

That's for the refinancing of the bridge and promissory notes.

Okay. Understood. Then your operating income was quite high this year. Any particular reason for that? It's just a positive one-off?

This is mainly driven from the buyback of the green bond.

Okay. Perfect. And another item was quite high, service charge income a bit higher than usual. What's the rationale behind that?

This is mainly driven on the prior year coming in 2024 then, but for 2023.

Okay. And then just 1 last question with regards to your guidance on the real estate management fee. So you're guiding EUR 50 million to EUR 60 million this year. When we distract the Global Tower fee, the adjusted recurring management fee was roughly EUR 42 million now slightly negative revaluation on AUM should also weigh on the recurring revenue. So just wild guess for this year EUR 40 million in recurring. So you assume a pickup of the transaction market in the course of 2025. Is that right? And are there any signs yet that we see that there will come a pickup or recovery or what you call it?

No. As said, we expect a recovery, but we do not show this in the numbers. The drivers in the Institutional Business is the existing business. When we do lettings, refurbishments, special things, ESG and so on for the existing portfolio to stay with the existing value or to drive the value. So this is not driven by transactions.

Okay. But the kind of the recurring management fee as it was 2024 is roughly EUR 40 million and that will increase by roughly EUR 10 million in 2025. Just by maintenance or other services you offer? So what's the difference between the...

Definitely. Around about EUR 40 million is the normal asset and property management fee and there is a lot to do in the assets at the moment to stay with the existing value so do big lettings, do financings, do refurbishments and so on. So the CapEx NTI, the extra CapEx NTI and letting fees is the additional fees we expect for this year and not to sell or to buy or the fees are not mainly driven by selling and buying, but investing in the existing Institutional Business portfolio.

Okay. So it's purely then the recurring management fee. So you will definitely see that this extra fee not separately. So that's also included in the management fee.

Yes, it's in the management fee. So we do not summarize it in recurring because it's not a year-over-year effect. It's a onetime. We refurbish every year other assets. But it's in the range of EUR 10 million to [ EUR 50 million ], yes.

Okay. Perfect. So no real pickup is currently assumed in the real estate management fee coming from transaction and performance fees, just the basic recurrent management fee and additional services you charge?

Yes.

And the next question goes to Antonio Casari of Northlight Investment Services.

Very quickly. I was wondering can you please clarify the EUR 80 million of restricted cash are part of the EUR 240 million that you mentioned at the end of last week or are on top?

Yes, that's right. That's part of, yes.

Part of the EUR 240 million, clear. And what's the minimum cash to run the business?

Around about EUR 60 million.

EUR 60 million. Great. And last, is there any seasonality that we should take into consideration apart from, let's say, clearly one-off inflow or outflow from disposals? But in terms of Q4 versus Q1 in terms of you receiving fees or collecting and so on. So is there, looking at Q1, any seasonality in terms of cash flow that we should take into consideration?

No.

Okay. And very last question. When you look at the amount of disposal in the Commercial Portfolio, EUR 500 million to EUR 600 million, and you said EUR 300 million in the first half. When we think about net proceeds, is it too big an approximation to apply this 60% loan-to-value that you have across the property or you expect to sell property with lower level of debt attached to them?

Yes, 55% to 60% is I think a good run rate.

And the last question goes to Clark McPherson of Clearance Capital.

Just carrying on from the last question on disposals. Other than leverage, what should we assume to be the targeted net proceeds after also allowing for any transaction costs or taxes? Will there be a significant difference from that versus the net proceeds after leverage?

That's a difficult question. So it depends on what we sell and everything is different. So it's difficult to say this.

So are you able to give us a guidance on what net proceeds would be as opposed to targeted disposal amounts?

Around about 5% of costs.

Okay. Perfect. And then just on the balance sheet still, you have a little bit of bank debt. I think by Q1, it's going to be down to EUR 102 million plus EUR 40 million next year. Well, at least for the bank debt that you have due this year, what are the plans there or is that likely to form part of the disposal program or otherwise are you in discussions to extend any of that bank debt?

No. So what we have to refinance in this year on bank debt, one of it is refinanced because it was due on January and the other 3 we are in discussions with the banks and as done in the last year so they all went very smooth and with good conditions. So we expect them also to be refinanced in the same manner this year. So there are no bad vibrations or something like this. We get good conditions and we are still in discussions. Also they are due in the second half of the year, more in the fourth quarter. But we are focused on them and also talking with the banks and we refinance them.

Okay. Great. And then the final questions on the bond. Normally in sort of the high yield market, we'd like to see these bonds addressed at least 12 months before their maturity date or a clear plan. The question is this the time frame that you're working towards so towards the end of this year? And finally, have you had any discussions or been approached by bondholders who want to engage with you on working on some plan to refinance this bond?

Yes. As you said, I think to think about this and to take some action 1 year, third, fourth of the year before the due date comes is a good time frame. And yes, we are also always in discussions with bondholders. They are talking to us and we are talking to them. But at the end of the day, as said, it's too soon to talk about the options which we will take then. And now we are focusing on the next step. And yes, this is due in September 2026 so therefore, we have a half year to go and then we think about the options and talk about the options.

Ladies and gentlemen, as there are no further questions, I give the floor back to Jasmin Dentz.

Thank you. So this concludes our Q&A session and also our call. Thank you very much for joining us today. Our next IR highlight will be the publication of our Q1 2025 results on May 8, 2025. So please stay healthy and let's talk again soon. Thank you and goodbye.