Dear ladies and gentlemen, welcome to the conference call of alstria office REIT-AG regarding the results H1 2022. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulty seeing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Olivier Elamine, who will start today's conference. Please go ahead. Thank you very much, and welcome everybody to sunny Hamburg this afternoon. I'm Olivier Elamine, Chief Executive of alstria. I'm here in a room with Alexander Dexne, which is alstria CFO, and Ralf and Julius, which you know well from the IR, to run you through the first half of 2022 financial results of alstria. Before we move on, just a short reminder on the disclaimer with respect to forward-looking statement and duty to update. Then without any due delay, moving into the call. I mean, obviously, there have been a lot of volatility in the underlying market over the first half of 2022. There have been improvement on the COVID front, I think across the German market, but obviously, this was taken over by a number of other macro events, which have created substantial volatility. Having said that, as you would expect from a real estate company like alstria, short-term volatility had little impact on our short-term results. Therefore, we are showing revenues and FFO, which are pretty much in line with what we have targeted, and also showing a substantial recovery in the leasing market, compared to where we were last year at the same moment in time, obviously linked to the improvement of the COVID situation. I'm not gonna comment so much on the balance sheet at this stage. The number at the end of half year does not necessarily reflect where we're gonna be at the end of the year. I'll go into the detail on the balance sheet in a minute. If we look at the portfolio itself, there is nothing really material, no material change to the portfolio over the first half year of 2022. We still have a portfolio of around EUR 4.8 billion, which is represented by usually mid-sized assets. The average size of asset is around 13,000 sq m, with an average value of EUR 43 million, and we're still spread across five different geographies across Germany, where we operate local offices. Letting market has been gradually improving in the first half of the year, although the volatility I was mentioning make it a bit less visible. We have less visibility on how things are gonna develop in the near future. Nevertheless, we did have a substantially improved letting result compared to the half year last year, where we secure around EUR 65.6 million of income for the future with a total leasing volume of 55,400 square meter. That include both new leases and lease renewal. The average rent per square meter have increased to around EUR 13.90 per square meter on the overall portfolio. Most of the sales on the transactions that we have done happened in the first quarter. Since then, the investment market has been slowing down quite drastically. We are still working on a small number of transactions. However, given the volatility that we're seeing in the market today, both on the acquisition and the disposal side, I think most of the market is taking a breath and just holding up a bit to see how things will develop. The volatility in the financial market and interest rate is clearly having a toll, not necessarily so far on the value of the asset, but clearly on the volume of the transaction and the willingness of people to actually transact. If we go and move a bit to the balance sheet, we have little movement on the balance sheet side, which essentially is reflecting the investment that we've made in the portfolio on the investment property side, as well as the FFO or the net income generated by the company on the equity side. Our net financial debt has reduced slightly, but this is again not necessarily significant or reflecting the direction or the sense of direction we're moving into, but more as a preparation for a releveraging exercise we're doing. We did restructure a bit our loan portfolio in the first half of the six months of the year, which resulted in a slightly lower net financial debt for the first half. Again, that's not necessarily a driver for the future. Rental income is slightly up, around 1.5%. That's driven by both indexation on leases. We have some of the higher CPI kicking in in some of our leases. Also triggered by some of the leases that we signed during COVID that have started, as well as some acquisition we've done, which are kicking in. Our Fund From Operations is in line with our guidance, at around EUR 60 million per- f or the first six months, which is pretty much in line with the increase. The increase is pretty much in line with the gross rental income. The SG&A are up quite substantially, but this is again linked to the transaction with Brookfield and a number of share-based compensation which actually vested in that period and that trigger a kind of a substantial increase which is more a one-off than a repeating exercise. Again, not spending too much time on that slide, given that it is the thing we are working the most right now, which is on releveraging the balance sheet, but just providing a picture of where we're starting from with a net LTV of 27.6%, cost of debt on average of 1.4%, an average debt maturity of 3.5 years, 3.4 years. In total, the company currently carry EUR 1.6 billion of debt, and we have free cash of EUR 330 million at the end of the half year 2022. As we have announced in mid-April, we are in the process of levering up the balance sheet. Our target and our restated financial policy is to basically bring the LTV at the group level at around 50% in line with the BBB- investment grade requirement. At least our understanding of the investment grade requirement. Our intention is to return capital to our shareholders in an amount of up to EUR 1 billion, which is funded through both debt proceeds and releveraging as well as some asset disposal. We are also considering the debt that sit at our main shareholder level on a look-through basis and trying to, like, keep the net LTV below 55% on a consolidated basis if you also consider the look-through from a shareholder perspective. We are funding the increase of debt and I'll come back to that in a minute with a reduced dividend, like recurring dividend, beyond the special dividend that we intend to pay. We have reduced the recurring dividend. For example, this year we only paid around EUR 7 million of recurring dividend to the minimum required by the REIT. We will be, and clearly as soon as the markets recover, we will be accelerating the rotation of the mature assets, and we intend to use the sale proceeds to defend the investment-grade rating profile, reinvest in the business as long as there are reinvestment opportunities, and optimize the capital structure if both, I mean, the first two options have been already dealt with. We have been using already our access to secured market. Essentially, we have raised around EUR 550 million of new debt, EUR 537 million euro of new mortgage debt, at an average rate of 3.2%, with an average maturity of 5.1 years, in an extremely volatile environment, which I believe provide a good overview of the ability of the company to finance itself. By doing that, we're basically increasing the net LTV of the company to slightly short of 38%, and increases slightly the average debt maturity, given that the new debt that we're taking on board have a 5.1-year maturity versus 3.8 on the overall portfolio. The intention is to use the proceeds of this new debt to pay a special dividend. We have called for a general meeting on the 31st of August, so in a bit shorter than a month, now 22 days from today. We will propose at that shareholder meeting to distribute EUR 550 million, which is essentially the proceeds of that debt financing, which we're running up with some cash on balance, with the intention to repay up to EUR 1 billion to the shareholder finance, again, through asset recycling and increase of leverage. From a cash flow perspective, I think it's important to note that we are financing the- I mean, we're basically swapping the dividend for increased financial cost. We are basically reducing the dividend and using the amount of cash available to us to fund for the increased interest burden that we're having from the new debt we're taking on board. Essentially, the way we're looking at it is, from a company perspective, we're just swapping debt capital for equity capital and making sure that from a cash flow perspective, it does not impact the operating cash flow of the company. If you look into the numbers, what that means, we used to pay around EUR 94 million of dividend. The average minimum guaranteed dividend we would have to pay over the years, and that number obviously change on a yearly basis, it depends on our German GAAP net income. On average, over the last 10 years was around EUR 40 million. We have EUR 54 million that we could use to basically finance new debt or pay for the financial cost of new debt. We could use also to shield increased costs of existing debt. If anything is left, we could then reinvest into the core business and accelerate the refurbishment process that we run on our assets. As I've mentioned before, there is in the investment market right now substantial volatility, which is linked to all the uncertainty that we have from a macro perspective, which offer little opportunity to deploy capital in a accretive manner at this stage. I think it's fair to say that there have been a substantial reduction in the overall transaction volume. I think quarter-on-quarter investment market have reduced by around 50% in Germany according to Jones Lang LaSalle. This is like a substantial slowdown in the investment market. I think the main element of reformation that we're bringing today is the EUR 550 million extraordinary dividend that we propose to our general meeting on the 31st of August. We are in the process of having further conversations with both on the transaction side and on the funding side to basically fund the remaining with obviously no certainty that those discussions will lead to a result, but this is clearly as the aim we're working at. That is gonna conclude the presentation on my end for today. I would be obviously looking forward to any question you might have. Ladies and gentlemen, if you have a question for our speaker, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero and two to cancel your question. If you're using speaker equipment today, please lift your hand up before making your selection. One moment please for the first question. The first question is from Nirav from Barclays. Your line is now open. Hello. Thank you for taking my question. Can you please provide more guidance on how do you plan to raise additional EUR 300 million required for the dividend payment of EUR 1 billion? Is it gonna be secured or unsecured? Well, we are looking at different option today. We're looking at both the secured and unsecured market. It's clear. I think it's clear from you know, the like the cost of debt we're reaching in the secured market where we're funding ourselves on a five-year basis at 3.2%, that it is much more attractive market from a funding perspective, from a funding cost perspective. Our bond on similar maturity are probably trading at a wider 200 basis points. There seems to be like a material arbitrage that is to be done today between secured and unsecured. The way we're doing it is essentially by re-leveraging existing assets that are in our secured pool. We're not necessarily increasing the amount of assets which are secured. We're just putting more debt on the existing assets which are secured. That's not true for the EUR 500 million I've mentioned before, but a substantial part of the deal we're working on right now is basically not necessarily increasing the number of secured assets which are in the pool of secured assets, sorry, just increasing the leverage on the assets which are already in that pool. Got it. Thank you. Just to follow up on that, i s it similar for the EUR 300 million debt maturing in 2023? Are you thinking on the same lines for that as well? I think, I mean, 2023 is still nine months down the road. If I look back what happened over the last nine months, you know, you could be on a different planet as far as I'm concerned in 2023. Yeah. It's really something we're working on and we're working on different alternatives. We are currently covered for the 2023 financing, with, as I mentioned before, we have EUR 300 million of cash on our balance sheet. We have a EUR 200 million revolving credit facility which we could draw down on. Basically, the financing in 2023 is covered. You know, we would be looking at the most attractive kind of financing available at that moment in time. Yeah. But i t's a bit early now to make a judgment call on what would happen in April 2023. Got it. Probably the last question from my side is, given you talked about it, investment market, if the valuations were to start dropping, are you planning to take cut on your planned dividend to maintain the IG rating? How are you thinking about that? I mean, as we mentioned before, you know, the IG rating is something we're really trying to look after. At this stage, when we looked at the EUR 500 million financing that we've done, part of the assets were actually refinanced, were revalued. You have two competing effects which are taking place right now in the market. One of them is yields widening. I think that goes without saying. But on the other hand, you know, you have CPI running through rents and increasing revenue. Those two competing effects at this stage are still kind of compensating each other and values remain relatively stable. If values were to drop substantially, which I don't foresee at this stage, I mean, again, I don't have a crystal ball, but as of today, it's not- w e're not necessarily seeing that. The plan has always been to kind of reduce leverage through the sale of some of the mature assets we're keeping on the balance sheet as more like a public listed company, which we would then accelerate the recycling. I mean, now that we're more in private hands, essentially. Got it. Thank you. Thank you very much. Does that make sense? Does that answer the question? Yeah. I think it answers the question. Thank you very much. The next question is from Kai Klose of Berenberg. Your line is now open. Yes, hello. Good afternoon. I've got two questions for me. The first one, could you indicate the increase in the vacancy rate by 100 basis points in the first half? How much was that from the sale of properties? The second question, you indicated that the SG&A costs were impacted by some one-offs. Could you indicate what we can expect for the second half in terms of normalized cost levels and maybe potential additional one-offs? Yeah. Hi, Kai. Sorry, I didn't get your first question about the tail you were mentioning. I'm sorry. I was talking about the vacancy, which is now at 7.9% after 6.9% by the end of 2021. How much was this increase coming from the sale of rented properties? I think none of. I mean, a bit is coming from the sale because you're obviously selling fully let asset, but most of that is simply because we are at the start of a new refurbishment pipeline. We are actually vacating some of the assets that we intend to move into refurbishment in the next six months or year or so. That's basically triggered the increase in the vacancy rate that you're mentioning here. There is a small effect from sales, but that's pretty minor. On the recurring SG&A, and I'm looking at Ralf when I'm speaking. Off the top of my head, I would think there's probably around EUR 2.5 million -EUR 3 million in there, which is non-recurring. You would have that in the appendix of the presentation- s orry, it's EUR 3.9 million. The recurring number would be around EUR 10.5 million -EUR 11 million. Many, many thanks. The next question is from Manuel Martin, Oddo BHF. Your line is now open. Yes. Thank you for taking my questions, gentlemen. I've two questions actually. The first one is on the FFO. For the time being, you have achieved something like almost EUR 60 million in the first half year. Actually, you seem to be on the runway to exceed your guidance. Is there anything which might come in the second quarter- s orry, in the second half of the year? Yeah. We have all the financing costs of the new debt we're putting in place, which are gonna kick in. That basically is gonna reduce our FFO. I mean, for the last part of the year. You know, the EUR 106 million we're guiding for is obviously also gonna be lower next year simply because then we're gonna have the cost of debt for the full year. In the same way I was mentioning, you know, we're swapping dividend for financial costs. Obviously, the dividend is not part of the FFO, the financial costs are part of the FFO. You're gonna see a reduction in FFO going forward, which is mainly reflecting the increase of leverage. Okay. Understood. Second question. It's about heating costs, gas prices, et cetera. I mean, also your tenants, they might have heating in your building. How are you going to manage maybe a tough winter if the heating bills will probably go up. I mean, have you discussed with your tenants scenarios or what could be expected there? Well, I think we. You know, we're in a commercial business, so I guess that heating costs and electricity costs are relevant, but they're clearly less relevant than they might be in a resi business, where you start to touch into the ability of tenant to cover the amount. Typically, Siemens I think is not gonna die if their heating bills increase by 10%. They're just gonna be fine. In the commercial business, I think from our perspective, the issue is not so much about cost because we just pass it on to tenant and tenant are just gonna pay them. The same is true with indexation for that matter. We just pass on indexation and tenant pay it on. What they do is they're gonna increase the cost of their own product, which then is gonna hit you as a consumer, or as a resi owner, of the resi tenant. It's not so much about heating costs. What we're working on right now, and there is clearly a conversation about reducing temperature within the building over the winter, in order to basically reduce consumption, but this is not so much about cost than it is about availability. Within the portfolio, we have around 40 buildings which are heated partially or totally with gas. Most of the other are heated with district heating or electricity. It's only a fraction of the portfolio, which is concerned, but here is clearly a conversation and a discussion internally and with some of the tenants. We're preparing about- y ou know, you're probably gonna be more cautious and reduce overall temperature in the offices comes the winter. This is more to reduce overall consumption across Germany. I think the government is likely to ask that there is a limited temperature in the building. It's not so much a cost question than it is an operating question and managing our operation properly to make sure that we don't spend more energy than we actually need. Okay. Very clear. Thank you. So far, we have no further questions. As a short reminder, if you would like to ask a question, please press zero and one on your telephone keypad. There are no further questions. I hand back to you, Olivier, for some closing remarks. Thank you very much. Thank you everybody for your continuous interest in the company. It's very much appreciated. We're obviously available if you have any follow-up questions. We would be more than happy to take them offline. Otherwise, I wish you all a very good afternoon, and looking forward to speaking with you the next time around. Thank you. Bye-bye. Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.