Deutsche Konsum Real Estate AG ($DKG)

Ladies and gentlemen, welcome to the H1 2025-2026 Financial Results Conference Call. I am Sandra, the Chorus Call operator. The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Kyrill Turchaninov, CFO. Please go ahead, sir.

Thank you. Hello, and welcome, everybody, to Deutsche Konsum Real Estate AG earnings call -- analyst call for the first 6 months of the financial year '25-'26. We will start the presentation on Page 4, where we have highlights for the first half of the financial year. So we have a year-on-year comparison on the rental income, which decreased as expected, predominantly or mostly due to the asset sales. FFO year-on-year went up by EUR 5 million or so. And of course, there are many moving parts behind FFO. Rental income is down due to sales, the property operating expenses as well. However, the major moving part or the major effect comes from the interest expense, which is about EUR 5 million lower than in the first 6 months of the prior financial year. Last time, we reported that last time was in February, we had our last earnings call, we reported that the contract for the sale of 8 assets was signed in December. And in April this year, it was closed. The cash we received was EUR 10.2 million. However, EUR 24.5 million of the total sales proceeds was used to pay down debt, which was secured by those assets. As we also mentioned last time, Obotritia did not pay back the loan of EUR 16 million, which was, of course, on the balance sheet fully provided for and exclusively accumulated interest. We looked at various options for how to proceed with this, and we have also consulted our legal advisers. And under the circumstances, we decided that the best possible scenario is to enter into a term sheet, a binding term sheet with Obotritia, which effectively replaces the existing unsecured noninterest-bearing EUR 16 million of receivables with an instrument, which is a debt instrument, interest-bearing and secured. We are in discussions right now to finalize the contract, but the term sheet with main heads of terms was already agreed and signed with Obotritia. The KPIs after debt-to-equity swap are as expected. Last time, we said that pro forma loan-to-value is going to be around 41%. And indeed, after the successful execution of capital increase and debt-to-equity swap, LTV is 41.1%. Other KPIs were also affected as expected by such debt-to-equity swap. The average weighted debt costs are higher than in the first quarter of the financial year, and those were 2.92% at that time. The effect is again due to debt-to-equity swap. We do not have the debt, which was used for debt-to-equity swap anymore on the balance sheet, and it was noninterest-bearing in the in the first quarter of the year. Let us turn to Page 5, where we have some highlights or some information on the restructuring plan. As we already said on a few occasions, the Extraordinary General Meeting on the 4th of December approved the capital increase and the debt-to-equity swap, which was formally in effect with the registration on the 13th of February this year. The new shares in amount of EUR 59.6 million approximately were issued, which also included 166,000 shares for cash contribution and the entire share capital increased as shown. Also, as expected and communicated, the voting rights of the shareholders that holds more than 5% of the shares are VBL with 60.5%, of Obotritia or Mr. Rolf Elgeti with 11.8%, and the free float of about 27.7%. Even though the debt-to-equity swap was, of course, a major part of the restructuring plan, we still have to continue with our sales to stay on plan and obviously to reduce debt from the beginning of the restructuring and the beginning of restructuring was that Q2 of the last financial year, so from January to March '25. And since then, about EUR 78 million of sales volume was executed. The market remains difficult. There are obviously known geopolitical macroeconomic factors. So both sides, the investor side and also the financing side are affected by this development. We can now turn to our portfolio details, which are on Page 8. At the end of the 6 months, well, on the 31/03/26, we have 148 assets, 3 assets closed in the 6 months. Well, the sale, which I mentioned earlier of 8 assets closed in April, so that was after the balance sheet date. The developments on the KPIs for the properties are as expected with one notable exception, and that is the decrease in annualized rent as well as the increase in the vacancy rate. Now the 2 major events happened. One of a large tenants that we have did not renew a lease in one particular property for a substantial amount of square meters. And unfortunately, earlier in the financial year, one tenant declared bankruptcy, and therefore, we also have vacancy due to that as well as the reduced annualized rent. There are some offsetting leases. In the 6 months, we signed a total of 15 commercial leases, which excludes the small leases for the very small actually some apartments. However, those are and are not enough to offset the loss due to the vacancy. We can now turn to Page 10, where we show our tenant structure, which did not show significant changes or developments other than those expected from the asset sales. One of the major items here is the CPI-linked rent. So we are still into 84%. So a substantial part of our commercial leases are linked to CPI, which especially is valuable and provides obviously stability in the current inflationary environment. We also have details on Page 13 on our financing. We show here a maturity profile. And as last time or in last presentations, a bulk of this happens in '27. That is certainly due to our restructuring and various agreements which we have entered with the creditors. The maturities are in September '27. And until then, there are no maturities. The small amount of about EUR 100,000 shown for '26 is not actually a maturity due. It is a repayment of some loans -- minor loans with normal amortization, but for completeness purposes, it is shown. And in terms of the financial KPIs, that's where we now, in the balance sheet and the P&L, obviously, see the effect of the debt-to-equity swap. So the reduction of total financial debt by about EUR 132 million is certainly predominantly driven by EUR 119 million or about EUR 119 million of the debt-to-equity swap. Now obviously, there has been other normal amortizations as well as amortization due to asset sales. The total cost of debt, as I mentioned on the first slide or,, actually on Page 4 is up, but that is because of the effect from those financial instruments, which were noninterest-bearing in Q1 and now are converted into equity. Overall, the effect of the debt-to-equity swap and the asset sales restructuring plan as expected. There are challenges in executing the restructuring plans on the sales side due to many factors. However, we are on track and are optimistic. With that, we will be concluding the presentation part, and we'll open the call for questions. Operator?

[Operator Instructions] It seems that there are no questions. Back over to you for any closing remarks.

Well, maybe we just give a few seconds more for people to have a chance to ask questions.

Yes, sure.

Right. Well, I suppose there are no questions at this time. Thank you very much, everybody, for listening to our call and until next time. Operator, we can now close the call.

Thank you, sir. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.