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

Hello, and welcome to Peach Property Group AG HY 2026 Results Conference Call. [Operator Instructions]. I will now hand over to Gerald Klinck, CEO. Please go ahead.

So thank you, Vincent. So good morning, everybody. So welcome to our half year results call. We have on the agenda, 2 topics. First of all, we want to give you a heads up on what we told you on our last call, together with our Chairman for the midterm guidance and where we stand right now, that is the first part. And then afterwards, I will have a look on some KPIs on the Peach at a glance in Section 2. And then the remaining pieces, and you know there is a lot of slides and information for you delivered here for housekeeping purposes. You can have a look inside the details afterwards. So at the end, we can do a Q&A and hopefully, you have good questions, and hopefully, I have also better answers on that. Before we start to comments, as we all know, when I'm talking about 2028, obviously, these are forward-looking statements. And the second comment is thank you from my team again. Great job for the first half year operationally-wise, and also my colleagues here in the holding, the staff who put all these together. So thank you very much for that. So starting with the presentation. On Page 5, you see a lot of green bars here. That is our main challenges, which we had in the first half year and what we achieved here. The green will present here where we stand right now. The blue one is still a little way to go. But overall, green is here really, let's say, the major color and it gives you a little bit of a feeling where we stand in achieving our goals for 2028. So the first 2 things are on the operational side. As you remember, one of our big targets is the top line growth. We expect over 3 years' time for 2026 to 2028, something in the ballpark of around 14% growth compared to 2025. Here is the bar for the 2026 targets or ambitions which we had here. And on an annualized basis, we were almost done with our top line growth. We are good on track here. But for the second half of the year, we have to close a little bit here to achieve the 100% target here for 2026, but we are good on track here. Vacancy reduction also is the same. We come a little bit later to specific numbers, but vacancy is reducing, let's say, month by month, we are here on a very good track. Last time, we talked about our portfolio sale, which were notarized in December last year. It is one part of our portfolio strategy, which we execute here. The 2,000 units were an asset deal, which was not share deal. So share is even easier to close, here is asset by asset. So it is almost done in terms of net cash, which comes into our accounts. We are almost done as only one major location is not executed right now. That is due to some technical issues. I think we will do that or we have that here in the second half of the year. In terms of financing, as we all know, no maturities anymore to 2028. That is great. We repaid the convertible bond in the first half of the year. So on that, we achieved 100%, target is met. That is good. And on the remaining nonstrategic disposals, we are also good on track but there is still a little bit to go. We have roughly 3,700 based on end of June, which is left to sell. After the half year, we were able to notarize almost 700 further units. So 3,000 units are -- still left to get rid of it in this year and also until end of next year. So there's a little bit to go. But as you can see, 50% of the remaining pieces here are done. The Swiss functions totally moved from Switzerland to Cologne. That happened really on the last date of December last year. But you can assume you have to recruit also some people here in Cologne and also in Berlin. Then in Berlin, more or less a controlling team and Cologne is the accounting team to get them on board and to bring them into processes. This is totally done. And you see we delivered the half year results. We see new team that is also in a good shape. We had an agreement with a minority shareholder, and he is running roughly 20% or 20 SPVs as a RETT blocker, which we have here in place. We were able to arrange here, let's say, a shareholder agreement, which is normal and common to have these in place to have a smooth together with him, and we were able to find such kind of agreement. That is a little bit of housekeeping, but it's also necessary to get rid of some open issues here, and this is also done. The repayment of the convertible bond I just mentioned and also the Swiss properties are also more or less sold. We are 100% notarized on our development in on the Swiss Lake. We call it the Peninsula. It's a project name there, 100% notarized. Roughly 50% is change of ownership is done. So the remaining part will be -- occur in the second half of the year, latest in Q1 2027. So that's good. And then the remaining yielding assets, we found an agreement after the end of June. So it was in July and we are also in the process of handover and change of ownership here. So the Swiss properties are more or less done. Legally wise, it is technically wise, we are in the process to close that. So on Page 6, and maybe you remember our 4 cornerstones to give you the heads up for the achievements or the ambitions for 2028. And here, you see in these cornerstones and the challenges here, the highlights, which we had here in 2026. On the upper left-hand side, you see our net cold rent and the strategic portfolio increased by 3.2% on a euro per square meter. That is since the end of the year. So in 6 months, we were able to achieve here a 3.2% increase with which is in line with our expectation. The like-for-like rent growth, so the comparison between June 2025 and June '26 is in line also with our expectation of 5.1%. Remember, our ambitious is 6%. So there's a little bit way to go until the end of the year, but we are good on track there as well. Vacancy, it is also the comparison to the half year 2025. We came from 6.3% and we're able in 12 months' time to bring that down by a further 3%. That is really an amazing achievement and the letting team here and also our property management. We made a very good progress on bringing down the vacancy, especially here in the strategic portfolio. NOI margin on the strategic portfolio improved to 75%. That is not the ambitions which we have in 2028. So there, we are close to 80%. There's also still a little bit of way to go. And this is what we want to achieve with further cost reduction and rent increase. So that is also, I think, on a good track. As I mentioned before, the nonstrategic portfolio reduced to 3,000 units. The 3,000 units is really based on today's numbers. So not for the half year result, of course, we have notarized further 700 since the cutoff date here. Peninsula, I talked about. On the right-hand side, on the financial, some KPIs adjusted EBITDA is up by 25% and around EUR 30 million. FFO still stable. I think that is also good to mention. So if you remember, our guidance for 2026 is in the ballpark between EUR 17 million and EUR 19 million. So we -- if you make a simple approach here and annualize it, we are still on track here with the FFO. And compared to last year, we were able to stabilize that with lower portfolio and higher interest because now we see our interest is kicking in due to the new refinancing. So if you make the comparison between 2025 and have there the advantage of the lower coupons on previous years, we were able to balance that out with the operational improvement. Of course, what I mentioned before, the improvement is expected here, higher rents and lower vacancy. This is a clear and a clear target here for our teams in the Peach Points. So on the left-hand side on the bottom, LTV, and that is, I think, a very good signal here, dropped from almost 50% down to 45%. This is our target, which we also want to achieve on a resilient basis 2028 onwards. So 45% is mainly coming from a slightly increase of our valuation. That is not a big impact here, but the major impact is coming from our debt repayments, and I come to that later. Next major debt maturity will be in 2028. I think people who knows us here with us over a long time, they know that we were able to find solutions for our refinancing. So the next maturity is still in 2028, the EUR 60 million. You know we have the other bigger facility, which also -- is also maturing in that year, but we have their 2 years extension option. That is technically, legally-wise, we have that, but we are prepared to refinance also that facility in 2028. And hopefully, we have better impacts on coupons in 2028. Portfolio valuation confirmed and increased by almost 1%, which is also good. That is a good underlying for our CapEx measures. That means our CapEx is really bringing the values up in line with better rents and with lower vacancy. So our effect from valuation after CapEx is slightly EUR 4 million to EUR 5 million for the half year. So that gives us a good feeling that our CapEx is also in a good shape, and it's linked to value upside and it's not on an accounting stuff CapEx. But at the end, we have -- if we would not have, let's say, these positive impacts, it will be repairs and maintenance, as we all know. So we can see here really that the CapEx is in a good shape and brings us to higher values. So what do -- or where are the challenges, the key challenges for the remaining year here and for the next 2 years? The 6% like-for-like rental growth is our ambitious for this year. Followed by roughly 3.5% to 4% the year for 2027 and onwards. So as I mentioned before, we are, at the moment, annualized with 5.1%. So we are very close to our target here. We also want to reduce the vacancy further down to 2.8% by year-end, and we talk about here the strategic portfolio. This is still our key challenge and further deleveraging our company, and this is coming through our sales. And as we all know, our sales part, the nonstrategic, the rationale behind that is not only get rid of assets which have a CapEx backlog, for example. It also brings us the liquidity, which is needed for the CapEx spending for the next years for our strategic portfolio. And the third impact is the deleveraging impact to bring the company on a resilient basis in 2028. So on Page 7, I think we put this slide in, same like in the last presentation because I think it's a good overview where our target vision. And as I mentioned before, these are forward-looking statements, but we stick to our strategy on around 16,000 units focusing or more or less in North Rhine-Westphalia, net cold rent growth on an ongoing basis coming from turnovers and normal increases on the ballpark of or a little bit less than 4%. Vacancy below 3%. I think we are very close to these things. And with that, we are very comparable to our competitors for our colleagues in the other listed sector, that our strategic portfolio is really back on track and is comparable to others as well. LTV, as I mentioned, we achieved that target 45%. It's -- this is still our target for 2028 and onwards. And knowing that we are able to increase rents and bring down costs, our EBITDA will increase over the next years. And based on the debt which sits in the strategic, our EBITDA debt multiple is decreasing down to 12%. That's our clear target vision. NOI margin of a ballpark of 80% also comparable to the sector. EBITDA margin of 65%. That is a little bit behind our colleagues due to the impact of our, let's say, size of our assets here of our portfolio, we are not able to achieve the same cost efficiencies maybe like others. So there, we are a little bit behind markets. And FFO around EUR 30 million to EUR 32 million and how we come to that, I'll come a little bit later, but these are our target visions, and we do not change that. Next on the next page, Page 8, gives you a little bit more background. If you compare these file with the last one, we want to show what are our ambitions and what -- and where we are right now and where are we and where are we, tick the box and where are we going to achieve further improvement over the next over the next time. In terms of top line rent growth, I mentioned that, I think 2 times -- this is, I think, good on track on the operating cost effects. We were able to improve our rent collection processes. We achieved here 1.1% compared to 4.4% in 2025. That is a huge impact. To be fair, here is a one-off effect in which we do not count into FFO, that's roughly EUR 1 million. We want to be here fair. As you know, we have some of our one-offs for the restructuring and change of business model, which are, let's say, counted out of the FFO. Here, we have support positive impact, and we also put that into the one-offs to be here very fair to you that we do not, let's say, manage our portfolio with accounting stuff here. We are really in line with what we also structured in the FFO bridge. So the 1.1%, I think, is not a resilient thing, but we are on a very good track here. And my colleagues here and the department made a good job. On the other hand, the other costs down to NOI, we were able to reduce costs on repairs and maintenance and also in the other sections. There we are also good on track. If you count that together, we come up to EUR 5.4 million. We want to achieve overall EUR 6 million to EUR 7 million, so we are on a good track. Fair to say that is on an annualized basis, maybe we have also some other impacts in the second half of the year. But given on an annualized basis of more than EUR 5 million compared to our ambitions of EUR 6 million to 7 million, we are also here good on track. On the platform cost, I think I talked to the corporate function between Swiss and Cologne that is achieved, and we are further on track with cost savings and efficiency gains in the IT, accounting and tax systems. So on the platform, we are working on our efficiencies and we will see these impacts in our half year results and also in further years as well. And last but not least, but this is something for 2028 onwards. That is the impact of our interest. We said that it's maybe a small dissynergy because there are still some of our debt, which is not on market conditions. It's in the ballpark of EUR 100 million. There, we will see some dissynergies which were balanced out on the others where we have now the market coupons, which gives us, hopefully, a little bit more synergies in future times, like the other big facility which I mentioned before. So that is starting in 2027. It's too early to start that process with financing partners right now. So this is something for the 2027 targets and ambitions. On the next page, Page 9, gives you a little bit of color in terms of columns. Our view here is what we also presented to you in the last version. We have here the half year 2026 in total, and we carved that out the strategic portfolio, the impact on that. And if you annualize it, then you come to the big bar. And then there's still a way to go, the EUR 6 million from top line growth, the EUR 3 million from operating cost effects, the EUR 6 million for platform cost savings that we think that we can achieve, the EUR 61 million EBITDA in future time, less the interest and then you come down to the FFO, I would guess between EUR 30 million to EUR 32 million. Page 10 gives you the overview of our deleveraging highlights in H1, we were able to repay almost EUR 170 million. If you see on the left-hand side, so more or less EUR 1 billion, that includes the debt in our Swiss properties. So the development and also the yielding assets, there's also debt behind these assets. So we were able to amortize on the secured ones. It's a EUR 6 million. So amortization is not really a big number in our facilities anymore. Then the disposals mainly came from the 2,000 units, which we closed in the first half of the year. We have roughly EUR 60 million debt repayments which is in the same ballpark like the convertible, which we repaid. We use 1 tender offer and then at maturity, and then it was totally repaid in the first half year. And here, you can see the impact on the financing of the Switzerland portfolio. I mentioned before that almost 50% of the apartments were -- have a change of ownership. And with that, we have to repay the construction -- debt construction cost that side, so that gives us another EUR 50 million. So 3x EUR 50 million almost gives us here the new debt sitting in our accounts of EUR 850 million. Unfortunately, the average interest is a little bit increased. That is due to the lower coupons in the Switzerland and in the convertible. And for that reason, our average cost rose slightly up to a little bit more than 4%. The EUR 124 million, which is linked to our nonstrategics will hopefully then also repay if we are successful in selling these assets that we come to more or less EUR 700 million for the strategic portfolio in 2028. On the next page, Page 11, gives you the debt structure over the maturity profile. What I mentioned before, the 2028 column is the first one. It looks like a little wall, but given that we have the releases from sales, we dropped to EUR 370 million as we are able to finance that in pieces and tranches that is given in the contracts so that we think this EUR 370 million is a good achievable size in the debt market here in the lenders here in Germany. On the KPIs, I think everything is heading into the right direction. So that is also good. You see on our interest strategy 90% is almost fixed. We have 10% left for repaying our nonstrategic releases. This is more or less in line that were also in line with our interest management strategy in line with the portfolio strategy. Okay. Page 12 gives you then, let's say, a view on how does the leverage will look like in 2028? And you see that we come from a debt multiple of 20 on EBITDA to 15.5 for the half year result, which is very good. Comes from the Swiss debt and from the other nonstrategic assets, the 5x multiple and target is still 12x. I think 12x in these markets is a very good number and it gives us also a good feeling to be refinanceable in future times as well. So having said this, I jumped to the slide where you see our Peach at a glance. Maybe some comments to our numbers there. This is a -- you will be familiar with these numbers because we present it every time when we come to you. I think the major topic on the right-hand side is to mention that the nonstrategic now, the actual rent is reduced by almost 50% coming from EUR 24 million last year down to EUR 12 million right now. This is the remaining piece is to go. Actual rent, as I mentioned before, increased and the vacancy dramatically dropped. On the left-hand side, on the financials, the valuation, I think, is good to mention. We come from EUR 1,900 in the past and now with EUR 1,800. This is also good. And you see that the rent multiple is also decreasing, and that is due to a slightly impact of valuation uplift, but the major impact of rent increase so that we are here with a better yielding compared to end of the year. Unsecured debt, I think I mentioned that before, we do not have unsecured debt anymore. And that's also a good movement on that. LTV is down, as I mentioned before, I think these numbers are a good evidence that we are on track. Last page, Page 17 is a split between the strategic the nonstrategic. I think the main highlight here is that, obviously, the portfolio share of the strategic is increasing. You see that in the green bar here from 74% at the end of the year is now 80%. And hopefully, in 1.5 years' time, we can see almost 100%. Vacancy also down. And if you see here the ring, on the low part, North Rhine-Westphalia in our portfolio and the proportion of that is increasing. On the right-hand side, as I mentioned before, based on the half year results, we saw 3,700 units are left, 700 notarized, and we are here in the market day by day. So this number is also decreasing over time. So before I kick off the Q&A, one last comment to our tender offer of the hybrid, you saw that in the last talk. We closed that process this last week. We offered them 20% of the nominal amount, roughly CHF 10 million were in tender offer. 50% accepted from investors. We were able to save or to save accrued interest by almost CHF 1.1 million and for future times CHF 500,000 interest per year, which we can save. As we all know, that is not part of our FFO. It protects our NTA per share. And that from our side was, I think, a good offer to give bondholders the opportunity to sell it back to us, and we were able to achieve that. Having said this, I come now to the Q&A section, and I hand back to the operator.

[Operator Instructions]. I can see we have no questions at this time. I'll turn the call back over to Gerald.

So I think a lot of people are on the webcast and not on the phone line, so we do not receive some questions, that's totally fine. If you have any other questions afterwards, please let us know. Mail us to our IR accounts, and then we get -- we'll come back to you with our answers. So thank you very much to join this call, and hope to see you soon again. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.