Dear ladies and gentlemen, welcome to the conference call of alstria office REIT-AG regarding the results Q3 2022. At our customer's 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 difficulties hearing the conference, please press star 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 to alstria third quarter presentation. Welcome from Claudia Hamburg today. I'm here with Hans Liebermann, who is the Head of Investor Relations, and without undue delay, going through the disclaimer on the forward-looking statement and the duty to update, and moving then into the presentation. I guess I would like to start the highlights by making different points. First of all, on the operating side, where our business has developed over the last nine months, pretty much in line with our expectations, both in terms of revenue and in terms of FFO. We think we're gonna be in line with the overall guidance that we have provided the market with. The leasing market has been doing relatively nicely over the year with lease-up 22% year-on-year. Arguably, this is starting from a low base given that last year was impacted by COVID. Arguably as well, a lot of the lease-up happened in the first half of the year, so there has been a bit of a slowdown, and we can go back into that in a minute. But the overall message here is that the letting market so far is doing relatively well in the underlying markets and clearly not suffering as much as the investment market is. The other second item that is worth mentioning, which took place in the first nine months of the year is obviously the balancing of the capital structure of the company that we have started following the transaction with Brookfield. We did pay a special dividend as planned of EUR 750 million, which is EUR 4.21 per share. Thereof returning the capital to our shareholders. We have funded that capital return through new mortgage loan of EUR 760 million. I think it's worthwhile mentioning that the company was able to secure those loans over the first half of 2022 and the second and the third quarter as well. which I believe is an interesting and remarkable achievement considering the market situation right now. Which also speaks for the quality of the underlying assets and the underlying cash flow. The rating of alstria was confirmed by S&P at investment grade level with stable outlook by S&P in September 2022. Which basically again highlights the strength of our balance sheet and the underlying portfolio of assets that we own. Moving on briefly to the portfolio update. There is nothing much to report on that front. Transaction markets are pretty much subdued right now in Germany. We have been doing a few transactions at the beginning of the year and have actually agreed on the sale of one asset in Stuttgart in the course of the last quarter at actually a premium to the end book value, which also shows that there is a bit of activity. It's fair to say that the overall investment market has been stalling since the end of the first quarter and the start of the war in Ukraine. Clearly the change in interest rate environment is taking its toll on the liquidity in the underlying market, so that basically has led us to slow down our transaction activities. Therefore, our portfolio has remained pretty much stable over the reporting period. If I go back. I've been a bit too fast here. If I go back on the letting market which itself has remained relatively strong. We have signed 32,700 square meters of new leases with an average lease length of almost seven years, and an average rent of EUR 14 per square meter, slightly short of that. We have extended 43,600 square meters of tenants who are remaining in the portfolio with an average lease length of five years. The total value of those leases, both the extension and the lease-up, accrue for around EUR 77 million in total. The average rent on the portfolio, the average rent per square meter, which is one of the KPIs that we're tracking, have increased from EUR 13.30 to EUR 14. Which is a combination of the lease-up that we're making, which usually yield a higher rent than the average of the portfolio. Also, an impact of the strong inflation, which is reflected in our leases, through indexation, of the rental income. If I move now, to the balance sheet, to spend a bit of time on that. The G-REIT equity ratio have gone down, as a result of the dividend payment that we have made. Investment property are flat, roundabout flat, which is to be expected. There was no revaluation in the Q3 and the actual market revaluation is gonna take place for the Q4 number, the full year number. Equity is down again, similar to the G-REIT equity ratio, reflecting the dividend payment that the company have made. The debt is up which is the counterpart or the other side of the same coin. Given that we have funded the dividend through issuance of new debt, as you would expect, the overall indebtedness gone up, which basically translates into a net LTV moving from 28.8% up to 43%. The G-REIT equity ratio and the EPRA NTA have moved in the same direction, again, reflecting the capital repayment to our shareholders. If we look now to some of the PNL positions, as I've mentioned before, we expect our FFO to be in line with the guidance, so we are pretty much in line with plan. Although the combination, the construction of the FFO itself has changed slightly. Our rental income is pretty much in line with what it was last year, slightly up. Our SG&A is up year-over-year, so we spend more on SG&A, which is essentially linked to some of the impact from the Brookfield transaction. A number of the costs that we have in the SG&A are transitory and are not necessarily gonna be recurring. Although there's clearly pressure right now on wages, which is something we are currently considering and looking at. All in all, from a guidance perspective, both on revenue and FFO, we expect to come out in line with what we have guided the market for. It is really the tradition at alstria since 2010, so now for the twelfth year in a row, that we publish our ESG report together with our third quarter numbers, and this year is no exception. We have put on our website the new ESG report of alstria, and I would like to spend a bit of time walking you through the main items that you can read in the report. It's a very extensive document that the team has put together, and I would strongly encourage you if you have the time to go through it, and we will obviously be very happy to answer any question you might have. As you know, we have been focusing very early on the issue of embedded carbon emissions in real estate, which is now, I think, at the forefront of any conversation you can have about ESG and real estate. It's a topic we've been looking into for a number of years. We are, as you would expect, reporting that our processes and our refurbishment that we do tend to save around 69% of the carbon compared to a new construction, which we think is the right approach. What you can also see on this slide is that both from GHG emissions, so from a CO2 emission and from an energy consumption alstria portfolio rank pretty favorably compared to the rest of the market. That's not necessarily linked to the fact that we have invested a lot in the portfolio, it has more to do with the fact that most of the assets that we have are low tech and therefore they tend to use much less energy than equivalent building, which would use a lot of technology for limited real-life results. One item we have been focused on and I think is gonna be one of the main drivers for reporting on ESG in real estate in the future is the work that has been done by CRREM, which is becoming the standard in terms of looking at how a portfolio is aligned with the Paris Agreement path. We have been involved with CRREM since the beginning, and we have been reporting on CRREM and using CRREM as a tool to benchmark our portfolio since inception of the tool. We are publishing this time for the first time, this year for the first time, where the different assets are standing in relation to CRREM. As you can see, there is obviously a substantial benefit into having non-fossil fuel heating and energy in the building, which lead to most of the asset that have those kind of non-fossil fuel heating to be substantially below where CRREM is today, whereby the assets which are using fossil fuel for some of them are off path and we're working on bringing them back to the path. The other thing we've been very vocal about and I'm glad actually that this is becoming a more relevant topic, including for tenants, is the difference between a new construction and refurbished buildings. I hope by now, you know, everybody is aware of the tagline of our sustainability report, which is that the only sustainable building that we have is the one that was not built. We're showing here, and then we spend a lot of time trying to put those numbers together, but we're showing here the consequence of working into refurbished buildings versus, for every employee basically, versus working into a new building. If you work in a new building and you want to achieve the savings that you hope to achieve compared to a refurbished building, you probably need to forgo your car for 15 years, or your flight for 30 years, or you can potentially go on a diet for 30 years, on a vegan diet for 30 years. There is a material negative impact on carbon emissions from new construction, and I'm actually very happy that this debate is currently taking place, and I'm very hopeful that as we go forward, there are gonna be more and more evidence supporting the idea of refurbishing being superior to new builds, which is something we've been arguing since the inception of the company. That's it for today's presentation, and we are happy to take any questions if you have. Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial zero one on your telephone keypad to enter the queue. Once your name has been announced, you can ask the question. If you find your question is answered before it is your turn to speak, you can dial zero two to cancel your question. Once again, that is zero one on your telephone keypad to enter the queue. Once again, if you would like to register for a question today, that is zero one on your telephone keypad. Our first question comes from the line of Thomas Rothäusler from Deutsche Bank. Please go ahead. Your line is now open. Hi, Olivier. It's Thomas from Deutsche Bank. Just wondering if you could give us a kind of update on German office investment markets and also rental markets. Just a rough view from your side would be very helpful. Yeah, of course. Hi, Thomas. Thank you for the questions. As I mentioned in the presentation, the rental market itself is still relatively dynamic considering everything else. We're still seeing activities in the leasing market. I mean, rents are still going up in the major city in which we're investing. There is still demand. I think that's mainly driven by the fact that, you know, tenants are looking into moving into buildings with higher specs and higher quality, which is driving this demand. What I think is fair to say is a lot of the demand that we have seen was in the beginning of the year. If I compare the first half of the year with today, there is a bit of a slowdown, which I think has to do with the overall economic situation. Still, the letting market is doing relatively okay. The investment market itself is, I mean, for all practical purposes frozen. There is little to no activity, and there is a huge spread between the bid and ask. I also don't think that this is gonna come as a surprise. It has to do a lot with the change in the interest rate environment. There are a lot of question marks about pricing of real estate and how it needs to be approached. I think there is a need for the market to kind of figure it out. There's gonna be a number of trial and error. The consequence of that is the investment volume have went down quite dramatically. The little activity we see right now is on, you know, small side assets, so anything below EUR 30-EUR 40 million. The large assets which are north of EUR 100-EUR 150 million, they're just barely trading. The only asset we're seeing trading are things which were already agreed in the past and just like continuing on their path for closing. I don't expect that the investment market is gonna restart between year-end. I would not expect anything material to take place before, at the earliest, early next year. What do you expect with regards to cap rates? Well, look, I think it's a billion euro question essentially. We are seeing two conflicting or two effects which are opposing each other. On one hand, in-place rent on the asset is going up quite dramatically as an effect of indexation. We have leases that we are indexing twice this year, I mean, simply because CPI is going up so rapidly, so basically rent is increasing. On the other hand, you have yield extending, but so far I think the view from the valuer and from the market has been that those two effects are kind of balancing out each other. I mean, I was reading a number of research that came out this morning, which is hinting toward like 30-50 basis points yield extension. I think if you cap this yield extension, obviously depending on your starting point, but if you cap this yield extension on 10%-15% increase in rents, you would have values slightly down to kind of flattish. I think this is a view the market is taking today from a valuation perspective. In the transaction world, we're not seeing a lot of trade happening, so it's also very hard for the valuer, to be fair with them, to come up with a view. I mean, they are a bit backward looking, but to come up with a view as long as you don't see trades happening. We're not seeing trades that would demonstrate a yield shift in cap. We're not seeing trades essentially. From a valuation perspective, I think the overall view is increase in income is gonna lead to higher yield with property values, you know, slightly down, you know, 2%-4%, but roundabout flat. Maybe last one on financing. Actually, what we hear is there's a lot of refocusing, you know, from unsecured to secured lending. I think you were also active in the secured lending space. What's the appetite currently from mortgage banks on maybe various products, especially German office? And what are the terms? Yeah. We've done EUR 750 million of financing in the mortgage market. Actually, the entire financing that we've done was in the mortgage market. There's one thing which is pretty clear is that the term are substantially more attractive than anything you can find in the unsecured market. Our bonds are currently trading somewhere around 7%-8%. We're financing ourselves in the mortgage market all in, including hedging somewhere around 3.5%-4%. It's like substantially cheaper. I think the appetite is obviously depending on the nature of the asset that you offer and the quality of the asset that you offer. Our experience is, you know, banks are looking to have debt yields, which is basically the relation between the amount of debt and the rent, which is coming out of the portfolio, which is around 7%, 6.5%-7%, which is higher than what it used to be in the past, which show also a bit of cautiousness. If you have portfolio that would fit those kind of yields and with a good operator, I think you would find debt available, and you will probably find it also next year. The challenge from my perspective is that, you know, every one of us, including alstria, we moved into the unsecured market when it was substantially cheaper. I think it's gonna be hard to refinance the entire unsecured market within the secured market. There is just not enough depth in the secured market to basically absorb, like, I would say per borrower, more than EUR 2.5 billion or EUR 3 billion of debt in the secured market is gonna be difficult simply because you will hit the limit within the banks or the limit of exposure that every single banks can have to a single borrower. I guess the secured market is a good market, but the bigger you are, the more likely you are to hit limit in terms of what you can do in that market. I don't know if it makes sense what I'm saying. Yeah, I guess it makes sense. Thank you, Olivier. You're welcome, Thomas. Thank you. Once again, as a reminder, it is zero one on your telephone keypad to register for any questions. As there are no more telephone questions registered, I hand back to our speaker. Well, thank you very much, and thank you for your interest in alstria. Again, I encourage you to visit our website, to take a look at the sustainability report. I think it's an interesting read. If you're interested in the topic, we will reconvene then, for the full year report, around the end of February. I'm looking forward, to speaking to you there. Between now and then, please do well. Thank you very much. Bye-bye. This now concludes our conference. Thank you all for attending. You may now disconnect.