Peach Property Group AG (PEAN) Earnings Call Transcript & Summary

Hello, and welcome to Peach Property Group AG FY 2024 Results Conference Call. [Operator Instructions]. I will now hand over to Gerald Klinck, CEO. Please go ahead.

Yes. Thank you, Lydia. Yes. Also from my side, a warm welcome to our management call here. I hope the slides will be interesting for you. And I'm also happy to discuss or give you answers on your question at the end. Last time, I think we had some technical issues because no Q&A popped up there. Hopefully, today, we have a little bit more communication between you and us. So maybe I'll hand over to the next slide here, and this is, let's say, the changes of our executive management. Here, you see that Marcus Schmitt, our COO, left the company at the end of last year and also Andy Steinbauer, who was in charge for Letting & Sales, will leave the company end of March, so in a couple of days. So I don't want to miss it here. Very big thanks to you guys. I hope you're on the call here. Thank you for the effort you made to Peach, to the tenants and the employees and also to the shareholders. Thank you for your commitment and all the best for you for your next, let's say, jobs and other functions. With that, if someone is leaving. I'm very happy that someone joined Peach, and this is Stefanie Koch, our new COO, very happy to have you here beside me on the Board. Steffi has joined since 15th of March with a lot of experience in the sector and focusing on our challenges on the operational side, and I'm very happy to have Steffi with me here on the board. So welcome, Steffi. Next slide. And as you know, we deliver for you here, 2 service slides, let's call it that way, to have on the glance the most important KPIs of Peach in the portfolio. And here on the first slide, you see on the left-hand side, the locations of our portfolio. And the main driver, which we have here last year was our big sale of more than 5,000 units closed at the end of the year. So roughly 20% of the portfolio and with that also from cash flows went from our balance sheet that was good for us because it was totally in line with our portfolio strategy and it delivers EUR 120 million of net cash, which we can -- a good news -- uses for that. And with that we also lost EUR 185 million of secured debt, which gives us a big step forward in the restructuring of the balance sheet. That was, I think, the one of the main drivers last year. The next thing is also when -- if you see the vacancy, and that is what I mentioned before, it was in line with our strategy. We were able to reduce vacancy. Focus here clear on North Rhine-Westphalia with better occupancy rates than before. That's also good. I think in terms of valuation, this is what you see in the bright blue column here. our valuation also decreased in terms of multiples. We are now in the ballpark between 16 and 18, if you look on actual rents or target rents, we feel comfortable with that valuation that was -- and these both effects the sale and also the smaller hit here in valuation are the main drivers for our loss in 2024. Having said this, LTV also decreased, I would say, significantly on the level of almost 50%, which is good for us for refinancing purposes. It's the right step into the right direction. And with the support of our shareholders until the end of the year, we were able also to make an equity increase, and that gives us additional EUR 120 million of cash in -- that's the reason why the EPRA NTA per share diluted here dramatically from EUR 47 down to EUR 20. That was the issue price of CHF 5 per share and that was the reason why we see the dilution here on the EPRA NTA. That was the main driver. Yes, put it in a nutshell, it was EUR 250 million of net cash, which jumped on our balance sheet was good. So portfolio has decreased about focus on North Rhine-Westphalia with better KPIs. And that gives us good opportunities to start into the year 2025 with the next challenges we have in front of us. So on the next page, you will see what I mentioned before, the clear focus on North Rhine-Westphalia. And also the other numbers, I think it's good to highlight here the vacancy in strategic and in the nonstrategic portfolio decrease compared to pre-transaction, which is from our side is good. And with that, I move on to the next slide. What's happened in 2024, so far. I think focus here was here the last three things in November and December with the EGM and the capital increase and the portfolio transaction mentioned before, and in 2025, we also had reached some milestones. We were able to get use of our EUR 240 million funds in January, and we were able to repay a part of our bond, which is due in November this year of EUR 127 million. And also the promissory notes are, let's say, are gone now. We also used cash from the EUR 240 million to repay that as well. So as I mentioned, Steffi joined us in March, and that is a little bit new here. We signed yesterday a term sheet with one of a big bank here in Germany with LBBW. I'm very happy to achieve that with my team because it gives us two things. One thing is reputation is increasing back for us. That's good because we are able to acquire a new secured financing bank. That's good. And secondly, it is a facility by EUR 120 million. The uses of that is repayment of EUR 30 million of secured existing debt, which matures in future time. So we make effort here. And the remaining almost EUR 90 million, we can use for further repayment of the bond, which is due in 2025 in November. So this is the next step on our, let's say, changes on the balance sheet to bring our facilities which are due here in future time down, hopefully here closer to 0 so that's good. So on the next slide, it's operational performance. I think you -- we had a similar slide last time where we want to explain to you how the EBITDA is developing from the last date to this date here end of 2024. I think for us in this is key to mention that the year 2024 was a year of a transformation for the company, and we are not done, but we are, let's say, on a good track to do so on balance sheet and also on our operational performance. I think that is to mention here. And that's the reason why also the EBITDA decreased from last year from EUR 66 million to EUR 62 million. So we lost a little bit. Reason for that is we adjust our risks in the balance sheet, also on P&L effects, put some one-offs into it, some write-offs so that's the reason why you see in the other operating expenses here, some one-offs in it. And these are higher than our rent increase. So that was more or less the main reason to, let's say, why the EBITDA decreased in 2024. Still good news, and this is our rental income is on a sustainable track of increasing in line, I think, also with market and with our peers and that is, say, my good news or my hope also for 2025 and onwards that we are coming back on the track of operational performance for 2025 and onwards. Next page gives you a little bit of some details of these columns, which you saw before in the other slide, the four slides here. So rental income, as I mentioned before, we are in a good situation that our rent is still increasing on a CAGR of 3.7% per year here compared to 2022. Vacancy is still high, this is a clear focus for us and also the challenge for Steffi, the COO, together with the team to focus on vacancy reduction because that is one of our key EBITDA driver also for future days because it -- obviously, rent is coming into our accounts, but we also lose the cost for unoccupied assets, and that gives us the best yielding compared to others. That is really a main focus on it. And these are the biggest drivers, as I mentioned before. So this is one, I think, take away from this slide. The other takeaway is still that we have a high fluctuation. The tenant improvements to spend in this fluctuation assets is linked to that. From my point of view, fluctuation should be reduced the next time, but also we have to focus on our tenant structure. But we have the tenant improvement and the CapEx for that we want to generate from our portfolio strategy to get rid of our nonstrategic and take the sales proceeds and reinvest it in our assets. And therefore, fluctuation is also a good opportunity to catch up to market rents. And that gives us also good yields and good operational performance in future times. With that, I move on to the next slide, where some more details on the rental potential you can see in, let's say, we have still the upside between the existing rents and the market rents by roughly 16%, which is good, and we achieved that. If you see on the green column, you see our new lettings, which are in line with market rents. So there is still, let's say, an upside with new lettings of 16%, which shows that we catch up to market. Unfortunately, we can't achieve that very quick. It's a process driven by fluctuation. And this is something why I think the rent increase in future times is, let's say, also driven by this effect, which is also good for us. The similar situation you will see in the nonstrategic. So nonstrategic is not, let's say, crap. It's more or less the same quality of assets which we have in the strategics. It is more driven our nonstrategic that it's -- most of them are scattered locations. We are far away from our Peach Points. So it is, let's say, not so efficient for us to maintain these assets and this is what you see later on in the vacancy as well. If you look on these nonstrategic assets, so it's a good start there, but we have to focus also on asset management on the nonstrategic to increase operational performance there and was also an impact on hopefully good sales prices on that. Next page. Vacancy rate decreased. The most impact was the sale of the 5,000 units where we also sold some vacant units. That's the reason why we have here a clear drop. Maybe to mention here on this slide, sometimes numbers flying around regarding vacancy. Here, you have the 6.6% vacancy. That is the cutoff date at end of 2024 with our resi units. So 6% of our resi units at the end of the year were vacant. You saw maybe the 8.4% at the beginning of our slides, that is the whole period, if you compare the whole period of rents, which we want to collect and the vacancy. And that is also driven by all asset classes. So there's also the commercial assets in it, which is not dramatically high with us and also parking space are included in these numbers. That's the reason why sometimes we have here different vacancy KPIs in our slides. Hopefully, it helps you a little bit my explanation regarding the difference between all of this. Key focus, as I mentioned before, for the COO and for the whole group here is a focus on the reduction of vacancy furthermore. And this is what you see on the upper left -- on the upper right side of this slide, 200 almost 270 units are ready to let out. So we spend in it in these units, and they are on the letting process roughly a little bit less than 600 as the date of end of December, let's say, vacant, and we have to put here TIs in it and bring them back to the letting process. In terms of the nonstrategic, as I mentioned before, the biggest impact on our vacancy there are the scattered units and we have to find solutions here to bring that down before going into the sales process with these assets. On the next slide, the next column was the expenses from letting. If you see it maybe the two main drivers are the repairs and maintenance and the direct administrative expenses, they went up. And overall, we have the situation that Peach was able to almost balance set out the higher cost and, let's say, also savings on the other hand. There is a slight impact of a catch-up effect in the personal maintenance. That's the reason why we increased here slightly. But also, there's obviously the inflation and cost drivers in the past also has an impact in here. Okay. That is, let's say, together with our income streams, where clear focus is on the second focus is on cost efficiency. So we also focus in 2025 in our cost efficiencies. And we have clear focus on reducing costs on a day-by-day basis here and have a clear focus on that. So operational performance in line with the balance sheet measurement, which I mentioned before, is a clear, clear target for 2025, bring the cost down and bring the rents up. Next page, development of personnel expenses. I think one-off driver is really the change of the executive management. Remember, last year, we had, let's say, more or less two CFOs in the company, I joined the company. So I think Marcus left. So I think we have a lot of changes at the company, which also drives costs, I think that is a one-off effect in 2025 next year, we have, let's say, on the executive management, Steffi and myself on the Board, these are things as was one of the main drivers in terms of selling impact, together with inflation, we have here a slightly increase in these costs. I want to mention that also we were able to make a joint venture together with the buyer of our big sale. So we create a joint venture win-win-win situation for our employees because they have, let's say, work to do for future days. And we have also good on and offboarding process for the buyer and us. But with that, we have more than 30 employees who moved on to the new buyer, which has also an impact on cost for us because these costs, we never show again here in 2025. I think that was a good step forward for all of us and has an impact on 2025 numbers in terms of salary. Next page, operational costs. I hate it, but I have to mention again. I think it's a kind of one-off. We see here some fees, expenses for third parties increased dramatically compared to 2023 that was more or less in line with the repositioning of our strategy as a company. We do not see these costs in 2025. So I'm looking forward to come back to let's say, to comparable numbers from the past. And the second one is also a one-off effect of our ancillary cost billings of the year 2023, which is a write-off because this is a loss in terms of not collecting it from our tenants. Next slide, Page 17, is also a little bit of a service for you to have the operational KPIs in 2024 in one slide. I hope that helps for your analysis. And with that, I'm moving on to the financial performance, starting with the CapEx. CapEx is back on track. If you see the square meter numbers in the past, we catched up with investments, which are needed in our assets coming back in 2024. On normal levels, we spend the main part of it and tenant improvement, which gives us yielding. Part of it, we will see in 2025 because it was a little bit back ended our investments. So as you maybe remember from the further slides, the 370 units, which are ready to let out, we will see this impact in our numbers in 2025. And with that, let's say, with the tenant improvement yielding, as I mentioned, in terms of vacancy reduction. And the second thing is catch-up to market rents. Next page. Portfolio valuation. We think that the devaluation reached bottom line. So there was a slightly decrease in terms of valuation compared to last year. This gives us 2% together with the CapEx, which are not covered then by this effect is a little bit of 4% loss in terms of valuation. We think that we are now on the bottom -- reached the bottom, as I mentioned at the beginning of the presentation. The impacts for 2022 and 2023 are the external effects or impact, as we all know and what we see in the industry here, together with our peers. If you look on value per square meter, we are in the ballpark of EUR 1,300 per square meter. I think that is not the lowest in the sector, but on a very low basis. Also, as we all know, cost of new construction are even higher so we feel comfortable with this valuation. And in terms of multiple, as I mentioned before, multiple of 16x on target and 18x on actual rent gives us, I think, a good position today that we do not see some further devaluation from today's perspective further on. Next page. This is the debt structure. I think one of the most important ones together with the operational performance is to look on our debt structure. What we achieved, you see there here on the left-hand side in 2025, the promissory note and parts of the unsecured bond is away now. That was good. So the green one is left. The green one here, which is left is roughly EUR 173 million. Together, we see LBBW new facilities that will decrease on a level of in a ballpark of EUR 80 million, EUR 85 million, which is good. So the unsecured bond is on a good way or on a good track to be totally refinanced at the end of the year. Secondly, you see a little bit more than EUR 200 million of our unsecured -- of our secured debt. We are in contact to the banks who are delivering that. We had a good response on that. The LTV or the debt there is more or less in the ballpark of 8 to 9x so that is, let's say, the risk, let's put it that way, is limited that we are not able to refinance it to extend it. At the moment, this is our best assumption that we come together with these banks and have and extension of these secured lending further on. And we have a look on our smooth maturity profile. So you can expect that we split -- may the EUR 200 million and split it over the next I would say, 4 to 6 years. Having said this loan-to-value is significant reduced. We come to that on the guidance a little bit later on. At the moment, I feel better than last year with the LTV, but we are not there where we want to position Peach in the midterm basis. So LTV should be further decreased. I think all the other numbers are in line with expectation in terms of debt-to-EBITDA multiple. We are closely to 19x at the moment This is still too high. With operational performance in the next years, I would say, in the next 1 to 3 years and further decrease regarding regular amortization we're heading here into the direction of a multiple of 15, 14 further onwards with ICR levels above 1.80. And that gives me here the possibility to come back with Peach in the secured market with one more percent of our debt. So this is where we want to position Peach in midterm time to go back to the secured financing because cost of capital in that sector is even more attractive compared to the unsecured market at the moment. Next page, as I mentioned before, with the operational KPIs. We have here the overview of all our financial KPIs in 2024. So update on ESG. I think very important stuff also for all of us in the sector. We will release our sustainability report in May this year. So we are good on track on that. In terms of our, let's say, rating category here, EPRA, we are at gold. We changed Sustainalytics to CDP, and also get a good rating. I think the B rating is the best what you can get from CDP. So we are totally on track with our transparency and our disclosures here, we feel comfortable on that. But so in the next slide, we are still here on the track of the decarbonization path here for Peach has some to do in the future. But at the moment, we feel good on that, but we have to focus on ESG and CapEx to spend in there, which also gives us not only a decarbonization but also gives us yielding on that. We are focusing on that strategy to come up later in the year with formal detail here on that. But at the moment, we feel good. We are a little bit ahead of our targets, which we set up in 2021 with the 27 compared to 30, which is good, but there's still a way to go. On the left-hand side, you see the structure of our portfolio. I think hopefully, we can achieve that a little bit better to move more to the left side of that graph here. But if I compare that with the German average, we have slide in the same picture like Germany. So yes, we have to do something, but we are not feeling that we are so under pressure, which may be one or the other from outside sales that Peach has to invest so much or so many CapEx in our assets. So we are more or less in line with our peers. In terms of tenant satisfaction, we are still on a high level. We're proud of that. Also our teams on the -- with the Peach Points, which is a decentralized structure, making good job on this and brings -- keeps tenant satisfaction on a high level. Having said this, coming to guidance and for the year 2025, like-for-like rental growth should be higher than 4%, which is, I think, achievable. It is ambitious, but it's achievable. In terms of FFO, it's an EUR 18 million to EUR 20 million of FFO. I think that number maybe -- can change a little bit if we -- because as we all know, there's a remaining part of financing is coming -- is in front of us. And interest rates or interest expenses is one of the key drivers also in FFO. So it can change maybe here a little bit, but I think that range of EUR 18 million to EUR 20 million, still a little bit of a higher number with a less -- smaller portfolio I think, should be achievable. In terms of LTV midterm targets, I think we should position Peach lower than 45%. Better for me is more or less the EBITDA debt multiple, which I mentioned before, we should achieve multiples more on the basis of 13x, 14x, which brings us closer to the secured market. In terms of vacancy on rent in midterm section is the 3%. I think that is a clear target for us. So that's what we pointed out here. And if you look on the vacancy and the strategic portfolio, and knowing that we want to sell nonstrategic, it is, I think, not unrealistic to point out here this vacancy on rent and midterm targets. What are our key milestones for 2025? The first ones are still focusing on the balance sheet. So there are still some remaining piece of debt in the bond, and we have to execute the term sheet here with LBBW there's a clear focus on that. And we're also focusing in 2025 to consider solutions for the convertible bond, which is the last unsecured piece in the balance sheet in 2026. And with the balance sheet, the second big part is our operational performance. I mentioned that so many times here in the presentation, focus on operational performance and increase efficiency on the platform. And with that, we need the money to spend CapEx, and therefore, we have to execute our sales strategy and get rid of all our strategics. And we started it here in this year. And we think that we can also talk about some success in shorter future times on more sales on the nonstrategics. With all of that, I hope that these success will be reflected in the share price. At the moment, share price is moving in the wrong direction. We have a high dilution to NTA. And I hope that we can be successful, the same than last year. And this will be reflected in the share price this year. So with that, I'm done with my presentation. We have some other slides here in the back to show where, let's say, numbers are in details. We put in here, all this time, comments. This is something for homework and for services for you. But if -- I'm happy to answer all your questions. So if you have any, let me know. Thank you.

[Operator Instructions] Our first question comes from the line of Thomas Neuhold with Kepler Cheuvreux.

I have several ones. So I'd suggest to take them one by one. The first one is a top-down question on the potential impact on the huge physical packages Germany wants to spend over the next couple of years on the resi sector and of [indiscernible] and particularly what expectation is for the impact on interest rates, this package can have? And if you also see the risk of higher cost inflation, because a lot of the CapEx are planned to go in the infrastructure. And obviously, there's a lack of skilled people there so I was wondering what you thoughts are.

So Thomas, thanks for the question. I don't know if I really catch everything what you're asking here. But I think it was a question of what will be the impact on these big debt or things what comes from the political side. So from my point of view, and this is what we saw in the past, the interest rate went up because if people come to markets and ask for new debt, these are the states and the price for this product is going up and that was the interest. So I think it's 50 bps over two weeks' time, and you saw also the impacts on the share prices. We are impacted as the others as well. I think -- I hope a little bit that this is, let's say, a kind of a -- how can I say that? That we come back to a normal level again so that we have maybe, let's say, a little bit of a recovering of the interest rates. But we all know that the resi sector is very linked to the coupons to the interest rates. And you see the impact, does it impact us in our operational business? I don't think so. In terms of CapEx, if you are asking for, let's say, infrastructure measurements that could be the case that our construction costs are also increasing. But we are not in the business of building new assets. So it's not really an impact so deeply with us. But if we are going into our tenant improvements, maybe that was also slightly impact also in line with inflation. So interest, yes, but we are, let's say, as you'll see our smooth portfolio profile. We will have maybe an impact on the unsecured on the secured one, the EUR 200 million, which is still, I think, in the ballpark of below 5. And we have that impact on the remaining piece of the bond which is more or less, if I count everything together, roughly 1/4 of our debt, which has, at the moment, an impact on actual interest and that brings the average of interest slightly above the levels which we have at the moment.

The next question is on your noncore portfolio. Can you give us an update where you spend on potential new disposals? And can you also comment on if the recent tightening interest rates had any impact on demand and pricing of potential [ exposures ]?

Yes, it's a good question. So with the buyer of the bigger portfolio last year, we are in contract to clean up some assets which are in the surrounding of that location that is close to Helmstedt, that is close to Kaiserslautern. So that is roughly a number of something between 300 and 600 units. We are close to them because we learned a lot of our negotiation last year. We can copy a little bit our contracts and hopefully have here a quick success in cleaning up the portfolio. This is one piece. The second thing is we set up here a new team because sales team was not really set up for such kind of a huge release of assets of the company. So we are preparing ourselves regarding data room and so on. We are, at the moment, with the first investors in contact with smaller packages. You can't expect something that we sell 1,000 units in one piece. It is more a piece-by-piece sale with sizes of, I would say, 50 to 100 units each. So it is, let's say, a little bit of a smaller sales process, which takes us a little bit longer. I think, 1 to 3 years to release all of our assets here. And so we do not feel really under pressure. But on the other hand, we also know that we also want to get the releases to finance our CapEx measurements over time.

The next question is on the portfolio valuation. Firstly, can you remind us, please, what the [indiscernible] through write-down or revaluation was for the current portfolio and your portfolio yield in terms of EPRA net initial yield is still relatively low at 3.7%. You said you do not expect what pressure on valuations. I was wondering if you can elaborate a little bit in detail why you're confident that there is no pressure on absolute portfolio values? And just a follow-up on that. Is it possible that relations is stable and if you see a further yield expansion this year depending on how interest rates were going forward?

So look, let's say, if there's really an external market impact, which impacts all of us here and the peers, and it could be the case that further devaluation can take place in future times. But I think then we have to look on external impacts, which we are not aware of at the moment. So this is something, I think, I feel comfortable to compare us also with the peers. If you look on, let's say, also on the euro per square meter number, it's a very low number. If you see that we are, let's say, behind the peers regarding our average rent per square meter. This is also not as big as in others. So there is not so really a big risk that we are not able to place our assets rightly in the market. And having said this, based on target rent. We are at multiple of 16. And let's say, together with the TI and with focus on operational performance, I think we can close this gap not shortly, but in the next 1 to 2 years to be on a level then on the multiple of 16, and I feel comfortable with that.

And on the [ peak-to-through ] revaluation...

On the what, sorry..

The [ peak-to-through ] revaluation losses you experienced from H1 2022 to end of 2024 if you have the figure on top of your mind. By how much rent revaluations are in the portfolio?

I'm not sure if I really capture your question. It was a percentage of 2% compared end of last year to end of 2024.

And if you look at the peak valuation in H1 2022, how much did valuations decline compared to that level, if you have the figure?

To be honest, I do not have that in front of me, but if you want -- we can follow-up maybe.

Yes, sure. And the next question is on your profitability. I mean, your EBIT margin was 50%, you're targeting 60%. The EPRA cost ratio was at 54%, almost which seems quite high. Obviously, you said you plan to increase rent significantly and bring down costs going forward. I was wondering if you can provide more details on firstly by how much you plan to cut costs in '25 and in the midterm? And potentially also, when do you expect to reach the 60% in '25?

So maybe a couple of comments on that. First is in terms of EBITDA margin and running a platform like Peach, if you're on a listed sector, we -- our portfolio is too small, that's one thing. So because the platform cost us, let's say, compared to other platforms may be more or less the same, but we do not have the scaling impacts like the others. This is one thing, if you compare us. Secondly, our income stream compared to others is also a little bit too small. Our average rent of EUR 640, there is still some headroom also compared to others, it's too low. So we have to increase our rents, that is one thing. And secondly, we have to look on our cost efficiencies. And this is a clear focus on 2025 onwards to bring costs down to increased rents that will help us on the margin. And then there is a negative impact on -- if you're only looking on margins, if you get rid of your nonstrategic, you also get rid of [indiscernible] and that is cutting into the same impact what we mentioned before, which is positive. That's a negative impact. So let's say if we are talking about -- we do not talk about growth at this stage. But we have to talk about growth, if we want to increase significantly our EBITDA margin. And that is linked to a scaling impact and that is linked to size. And what we can do as a management, as a company here is to focus what is in our hands to increase the rent levels and to bring costs down as low as we can. But I expect without growth that we are more or less stable on this market. As I mentioned before, positive impacts, bring ramps up and costs down, but also get rid of nonstrategic where we also lose top line.

And in terms of timing, probably if you want to comment by when do you think the 60% EBITDA target margin is achievable, if everything else works well?

It's a midterm guidance in line with also the other midterm guidance, which we have in the deck here, I would say something in the ballpark of 3 to 4 years.

And my last question is on your guidance. I was just wondering this EUR 18 million to EUR 20 million FFO guidance, which amount of disposals you have included here, am I correct if we use the current number of shares outstanding, that translated roughly EUR 0.79 to EUR 0.80 per share basis, this FFO guidance of EUR 18 million to EUR 20 million?

So look, we have this joint venture, which I mentioned before with GTC, where we passed on 30 people where we can get rid of, let's say, some fixed costs at day 1. That's one thing. We also support them with other services on the holding side. So with accounting, with rent collection and so on, therefore, we have some income fees for 2025 to maintain still the 5 units, which are went out. That's an income stream for 2025, which has not really impacted that you lose top line and do not lose costs. So that is one thing, which drive FFO in 2025. The other thing is that we modeled budgeted 25% of our sales, nonstrategic for the half year. So you only have a half year impact on losing rents on that. And with that, we come to the assumption that the guidance of EUR 18 million to EUR 20 million is comfortable for you and also for us.

And on a per share basis, is the figure correct, I gave you? The EUR 0.79 to EUR 0.80?

[indiscernible] the shares that we have at the moment. Obviously, let's say, we have to consider if equity is needed or not. At the moment, I think we buy our own but if, let's say, shareholders treat is different, then obviously, the size of shares can change. But at the moment, I think we can do it by our own.

Your next question comes from the line of [ Eden Walton ] with Columbia [indiscernible].

Can you hear me?

Yes.

Perfect. I have two questions. Some of them just follow-up on what Thomas has asked. I'll just start with the first related to costs and expenses. Obviously, the EPRA cost ratio is quite high in excess of 50%, when I dig down. I look at the management remuneration this year roughly represents 20% of FFO. Now I appreciate this restricted stock units in there. So if I exclude down closer to 15% kind of ballpark. How should I think about that going forward in terms of modeling? And how should I think about those restricted stock units as well as our model in 2025? That's the first.

Yes. I think if you're looking on our -- what we're losing on our target rents, right, then it's almost in the ballpark of 20% because there is a, let's say, the vacancy based on rents in the ballpark of 10% and then we also lost a lot of money due to collection risk and that the ancillary costs are not paid by the tenant. I think a big part of that is going away because it is linked to the past to 2023. I think we had in 2024 is similar, but not as high as compared to 2023 regarding ancillary cost and rent collection and also the reduction of vacancy, as I mentioned before, should give us a better outcome here for this cost ratio. In terms of repairs and maintenance, I think we are on a -- from my point of view, on a high level, do I see here really some savings that will be hard because 50% of our repairs and maintenance is linked to a service provider where we do not have really an impact right now on this? So the other things are smaller damages, which we can take care of. So it will be hard really to decrease the repairs and maintenance. In terms of the other costs of share-based remuneration that is more or less also linked to my contract, this one-off effect. Because you have to show these numbers more or less in one year, but it is more linked to three years. We do not have that next year, yes. So in terms of further personnel costs and other cost efficiencies, what I mentioned before, so really here savings in salary, maybe the one or the other because we are streamlined on that, but costs for third parties for external ones for, let's say, for IT and so on. I think there is a little bit of headroom where we can be successful in reducing as well on. But for me, it's a little bit too early to give you here a clear guidance because the focus was in 2024 to 100% to the balance sheet and repair it. And in 2025, we are looking on all these costs, and I totally understand your question, but it's a more general answer here to your question and not a specific one. But we will take that up in our next call, definitely.

So in some way, kind of flattish remuneration costs, FFO as you've guided, obviously, on a per share basis to Thomas' question, it implies that it's down. I appreciate there's no guidance. That's helpful. And the second follows up on another question, Thomas had, just relating to net initial yield and your 3.7%. If I look at that disclosure, it's very helpful. But if I look at that disclosure, does annualized expenses from lettings that roughly equated to over EUR 25 million. So i.e., it implies that you have an NOI margin of 75%, if I look at your annualized rents on the same table. I'm just wondering...

For the NOI margin, it's a good assumption. Yes.

Okay. And I'm just wondering, is that lower? Obviously, it's far lower than all of your peers, but that's due to the outsourcing? And can that be improved or not in the near term?

Yes, a little bit to the outsourcing because if you look at the facility management, that gives us obviously a little bit of, let's say, in earnings out of it. So this is linked to that. We are in source more or less 100% regarding our property management and asset management. We have only some of -- some letting stuff or some of property management in areas like [indiscernible], where third parties are helping us. But the insourcing proportion is very, very high in us.

Your next question comes from the line of Philipp Kaiser with Warburg Research.

Yes. Just a couple of -- mainly with regards to your majority profile and the financing. Could you give us brief indication on the interest expenses on the time signed term sheet with LBBW for the EUR 120 million secured loan?

I would say it is -- you can assume it's less than 5%. It's higher than 4% [indiscernible] average, something like that. it's a little bit [indiscernible] if you are swapping it, if we go into a hedging, right, we do not know exactly today what will be the quotes on the hedging will look like. But something in that part is I think it's good to make an assumption on that.

And with regards to the secured debt which you intend to prolong any increase in interest costs expecting from that side?

Yes, of course, it is. I think the average interest is even lower than the new terms. I think the old ones are close to 3 the new ones are close to that what we discussed with LBBW because it's the same product more or less.

Okay, perfect. And you already mentioned that part of the EUR 120 million is free liquidity to partially refinance the bond, then roughly EUR 90 million are less. What's your plan for the rest of the bond? Could you already comment on that, at least a kind of an idea what is possible?

I think we have a couple of instruments, right, to do that. I would say it is unlikely that we have another secured facility because now we are -- with our unencumbered assets with our encumbered assets, we are more or less done with the capacity on that. So it should be something in the unsecured facility, it is a facility which is not so high, it is something between 80 to 100. We have to be careful how do we treat the convertible bond. So maybe it is even a little bit higher to be safe on that, to be honest. I do not understand where the share price is at the moment because we made a lot of success last year. We gave so much transparency. We have a clear path for the future. So it is, from my point of view, I do not understand why the share price is so low and the conversion price also convertible is in the ballpark of CHF 10.30, which is more or less 50% discount to today's NTA. So why shouldn't it be trade there. So it's a little bit of -- we have to consider that. We have a bit of time to look at what markets we're doing, how others will treat us. It is not so -- it is longer than 12 months, but we should take care about that. And then we have to look if we also be prepared for an unsecured financing of that convertible bond as well. So having said this, we are talking about 100, a little bit more to refinance the upcoming remaining facilities which is compared as 2024, a smaller number, a smaller challenge. And I feel not comfortable, but I feel it is feasible to do it in market and that we can be successful on that remaining piece as well.

So if I understood that right, if everything goes quite planned, there's no need for liquidity generation by the sale of nonstrategic assets, so the pressure remains quite low?

Correct. So on the strategic ones, as we did a little bit, let's say, in the past with the 5,000 units. That was key for us. So the cash on our hands to get rid of EUR 180 million of secured debt, but it was in line with our strategy. Today is selling more out of the strategics and we talked before about our margins and so on, that hurts us. And the good news is we do not have to do that. We have to execute our own strategics to get to really concentrate our plain vanilla portfolio. So be efficient on the property management of that portfolio and to achieve the cash on our hands, which we need to refinance it into CapEx. But no other bigger sales out of our strategics.

The next one is on the already repaid EUR 180 million. Could you indicate the expected interest savings due to this repayment for the current fiscal year?

I'm not clear on your question. So you noted it [ 3, 8 ] coupon on the bond. If I can repay it, is more or less the same coupon with a new debt facility and secured. There's no impact on that number, on that piece, it's more or less the same. The other thing is 100 -- to use the promissory notes are going away, more or less with equity and net sales proceeds. That was a coupon of a little bit more than [ 3, 5 ] something like that, [ 3, 5 to 4 ], something like that. And the repayment of the bond, as I mentioned before, was the [ 4, 3, 8 ] coupon. So this is what we are losing there.

So just to get an idea of the FFO bridge from last year to this year with roughly EUR 23 million less on rental income and generating the at least same amount of FFO trying to understand the bridge. So can you briefly?

It's a good question. We come up with such kind of [indiscernible] not only in EBITDA also in time of FFO next time. Good idea.

Yes. Okay. Perfect. So [indiscernible] the year then cost efficiency and lower vacancy rate? Or what's the main driver?

Yes. Of course, as I mentioned before, we have some one-offs in the operational expenses in the others, which we do not see in 2025. That will be one event. The other thing is the increase of the ongoing rental increased by roughly 4%, as I mentioned, as a guidance, due to normal rental upside from last BBB plus the vacancy reduction. That gives us headroom on the income streams. Together, we see saved interest. On the other hand, gives you, let's say, more or less the same outcome in FFO but I see your question. It's a good question, and we bring that transparency in the [indiscernible] next time.

So -- but yes, decreasing costs and decrease in vacancy rate should offset the EUR 23 million in your view?

Yes.

And the last one, maybe, then I go back in the queue. You mentioned the income fee from the joint venture. Could you give us gross ballpark on the dimension?

Yes, the dimension is a little bit higher than the personnel costs we saved. So a ballpark of [ 2 ].

Your next question comes from the line of Peter Yu with Wellington Management Group.

Can you hear me?

I hear you, Peter.

It was good to see some of you on the LBBW facility. I don't know if you can give any color now on sort of how you're thinking about timing of dealing with the bonds versus the converts -- the bonds are pretty -- clearly coming up to maturity sooner. And maybe there's an argument that came with it that could help the share price, which could then help [indiscernible] just trying to think about how you guys are thinking about how you want to sequence that?

So at the moment, we learned that it takes -- everything takes a little bit longer in these days, if you negotiate with bank. So best expectation from my side that we are in May that we are done with all the stuff that we have so maybe a drawdown there and then we can use it. To be honest, I do not fear from the [indiscernible] side so much under pressure because coupon is more or less the same like in the bond. But I would say something in May could be achievable, best guess from today's perspective. If we can do that by our own, we would be quicker. But obviously, sometimes, we have to deal with third parties, and they have also some other stuff to do. So it takes us a little bit of time, but end of May should be a good guidance there.

So that's end of May for that extra EUR 90 million. And then you probably got -- you have another EUR 80 million left on the bond to think about dealing between May and November. What sort of levers do you have to sort of work on that at this point, and you mentioned that more secured seems to be difficult at this point [indiscernible].

To be honest, the best what I can say there is that we are paying back at maturity because if I'm talking to people who deliver unsecured facilities, is even higher than the outset -- the outstanding coupon, which I have under the board. So that's from, let's say, a little bit from liability management and looking on our interest makes a lot of sense to do with them at maturity, that's the best I have at the moment. If I can do that maybe a little bit earlier, also helps the bond investors maybe I would do, but it's a little bit, let's say, I can't give you a better number like the main guidance for the secured part here. I would say, to be on the safe side, I would say, a maturity for the remaining piece.

And if you were looking to do a new facility to take out the rest of the bonds in November, I guess, you would probably look at potentially doing it together with the converts, if your shares still trading at similar sort of levels and converts haven't converted.

Yes. This is -- I think there is some positive and negative impacts or reasons to do that earlier or maybe later. This is what we are considering right now. And I think it also has an impact, how does share price will develop over time. But we are, let's say, not yet the cowboys. We want to be totally financed, we do not want to have here unsolved issues in our balance sheet, looking for 12 months into the future. So we will take care of that issue. But I do not have really a clear answer to that at the moment, Peter.

And we currently have no questions at this time. I would like to turn the call back to Gerald Klinck for closing remarks.

Thank you for your questions. Unfortunately, I was not able to find the specific answer to all of your details here. but we will take care of that due to time, especially the FFO bridge was a good [indiscernible]. Thank you for your time and for your patience and hope to see and hear you back in near future. Bye-bye.

Thank you. And ladies and gentlemen, this concludes our presentation. Thank you all for attending. You may now disconnect.