Dear ladies and gentlemen, welcome to the conference call of alstria office REIT-AG regarding the results H1 2023. At our customer's request, this conference will be recorded. As a reminder, all participants will be in the listen only mode. After the presentation, there will be an opportunity to ask questions via the telephone line. I now hand you over to Olivier Elamine, who will start today's conference. Please go ahead. Thank you very much, welcome to alstria's half year result presentation. My name is Olivier Elamine. I'm the Chief Executive of alstria. I'm here today with Ralf Dibbern, which is heading our Investor Relations. Welcome from cloudy Hamburg today. Before we start, usual heads up on the disclaimer and the cautionary note regarding forward-looking statements and the duty to update. Without any delays, let's go into the presentation. I think the first half of 2023 has been developing from an operational perspective, pretty much in accordance with our expectation, where we have had a lot of activity on the financing side, with a bond and part of the Schuldschein that we had, which came due, and we moved all that financing to the more secured side of life. I'll come back and develop on that in a bit of moment. Leasing activities has been in line with last year, with more extension and a bit less new leases. We'll develop on that in a few moments as well. Here the main message is the letting activity in our market is still pretty much strong, and this is the kind of blue sky. In the overall situation, the investment market itself remained completely subdued. We have sold once more property in Eschborn over the period. We don't expect it actually to recover before at the earliest in 2024. From a balance sheet perspective, our NTA is pretty much stable if you consider the dividend payment and our net LTV is also pretty much where it used to be. The portfolio itself, I think I don't need to spend too much time on that. You're pretty familiar with it. If you've been following us, for a while, the total value of the portfolio has been stable over the year at EUR 4.7 billion. There was some kind of write down, which was partially compensated by some of the CapEx we've made in the portfolio. We still have an extremely reasonable capital value at 3,364 per sq m. Contractual rent is at EUR 198 million and a weighted average lease lengths of 5.5 years, a bit short of that. Letting, as I've discussed before, and as you know, letting market in Germany is, is still a dynamic market. We are discussing leases, and then we are signing leases, which is reflecting in the number, where we're slightly ahead of where we were last year. Average rent per square meter has continues to go slightly up. Overall, I think what is happening on the letting market right now is that we're seeing the total number of leases and the total of volume we're discussing pretty much in line, which was the, they used to be. Our leasing pipeline is just as big this year than it was last year. The main difference is that lease tend to be a bit smaller. We're seeing companies looking at rather smaller space than bigger space. We're also seeing some of the largest company not interacting so much in the leasing space. We believe this is due to partially the fact that some of the company are still trying to figure out how to organize themselves on the office side, and partly as well linked to the new work from home practices and, and new work practices, which is changing a bit the requirement for office space. As a company, we feel pretty comfortable. As you know, our assets are relatively small. So the fact that the average size of the leases is reducing is not really impacting us so much, and, and we're equipped to, to do so. What we're seeing as well is that most of the tenants are looking for space, which can deliver some kind of added value in terms of culture and communication, et cetera, which is what the company is striving to do within its refurbishment program. We also feel very comfortable with that trend and our ability to benefit from it going forward. If we look briefly on the financials, the usual balance sheet position we're looking for, as you know, investment property, pretty much stable, equity stable as well. The little change that you have here reflects the dividend payment that was made by the company, and our net financial position is stable as well. We had a lot of activities, on the financing, and I'll come back to that in a minute. Overall, the, the KPIs here from a balance sheet, remain pretty much in line, with what they were at the end of, 2022. If we look at the P&L, we have a slight increase, in, in revenue, which is, reflecting, the, new leases that we signed in the course of, of last year and then which are started to start now, and, and picking up, reflecting as well some of the indexation, that we are capturing and on the other hand, some of the lease termination and assets we're preparing, for the next, refurbishment cycle. Fund from operation, I'll, I'll develop that in, in a second, but it's essentially impacted by the higher leverage that the company have. If you remember, we did pay out, last year, EUR 750 million special dividend, which was funded with debt. which obviously increase the overall leverage, and, and that has the lion's share of the impact on the funds from operations. SG&A is substantially lower. We were expecting that, and we have discussed that in, in previous calls and on year-end presentation. The number in 2022, were impacted by a number of effects which were related to the transaction of Brookfield. Those effects fairing down, we are reverting back to a more normalized, SG&A number. So the reduction here, was expected, and, and we've been discussing that in the past. If we look into how the FFO have moved over the year, on the year-on-year basis, as you can see, there is some effect from lease up and from indexation, but the lion's share is coming from the financial results. We did have last year in the other operating results some positive impact on the FFO, which was linked to termination fees that some of the tenants have paid, which we're not renewing this year. But here again, I think the lion's share is linked to the way the leverage of the company is going up. And in addition, the cost of debt per itself is going up, which lead me to looking ahead, taking a deeper look at our financial structures. Our net financial debt is pretty much stable year-on-year. We did refinance all our maturity in 2023. We still have around EUR 200 million to refinance in 2024, which we're currently working on. Our average debt maturity is very much stable. What have changed is that since we refinanced the bond, we basically switched the last bond that matured in March. In April, sorry, with mortgage debt. We have moved closer to secured or increased our secured indebtedness versus capital market debt. We are currently still in discussion with lenders on more secured debt. I, I must say, that the price at which we are able to access secured lending today, which is somewhere between 120 to 170, 180 basis point, depending on the risk profile of the assets, is substantially lower than how bonds are trading, whether alstria's bond or, or other bonds, on the public equity market. From a company perspective, it's absolutely no-brainer right now, that the mortgage secured market is substantially more attractive than anything we can find in the, in the debt capital market. To wrap it up, just a bit of the outlook. As, as you know, letting market active and supportive with tenant demand still strong, switching a bit and focusing rather on, on smaller area. We're still very comfortable with the level of activity and the level of rent that we are achieving in the letting market, and that's clearly is a bright spot in our business right now. Investment market activity is, is, I mean, low, kind of an understatement of what it is. It's extremely limited, and we don't expect it to recover before early 2024 at the earliest. 2023 for us is, is clearly a year where very little is going to happen on the investment market. As a company, we still have a substantial refurbishment pipeline we're working on, and we, we're still transitioning assets to meet our tenant needs, to meet the new ESG standards that are required by our tenants and the city in which we operate. We're still looking to, to continue investing in that part of the business, which has been for us, our bread and butter for the last 15 years, and hopefully will continue to be for the next 15 years. Having said that, I'd like now to hand over back to the operator and go through any question you may have. Thank you. Now we will begin our question- and- answer session. If you have a question for our speakers, please dial star one 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 star one one again to cancel your question. If you're using speaker equipment today, please lift your handset before making your selection. One moment please, for the first question. The first question is coming from Chris Roberts at BNP Paribas. Yeah. Hi, good afternoon. Thanks very much. A couple of things from me, I suppose. First thing is, as I'm sure you're aware, S&P has highlighted that there is a loan at the Holdco above alstria, which comes due early next year. Is there anything you can tell us about how that may be tackled or any conversations with your shareholders around that? That's the first question. The second question would be, how should we be thinking about your dividend ambitions, given the environment we're in now? I think in the past, you had suggested that, or the company had suggested rather, that they would like to pay out about EUR 1 billion, and so far I think it's EUR 750 million that's been completed. Is that, is that plan still the plan, or has that been put on ice? Very lastly, if you could just remind us of your rating ambitions, please. That would be super helpful. Yeah. On, on the first question, I mean, I know there is a whole loan, and I know it needs to be refinanced. I'm also aware that there are conversations ongoing right now between our shareholder and the, and the lenders of them to actually implement the refinancing of the loan. From, from a company perspective, however, I think this loan, I mean, when, when, when we look at it, it's equity. There is no recourse to the company assets, there, there is no cross collateralization or anything which basically would impact us. Any negative impact on that loan would have limited impact on the company per se. We're not part of that conversation, so we're not part of the discussion with the lender. The best we do is organize some property tour here and there to basically explain the business of the company and, and show them some, some of the assets, but that's about it. With respect to the dividend payment, I think our position is still what we have discussed in the year-end presentation, and I think last quarter. The plan is still to pay out around EUR 250 million of additional dividends to the shareholder to go back to this EUR 1 billion. The timing of that payment is still open. It basically depends on the ability of the company to generate liquidity, first of all, for its own business, and then the extra liquidity that would be needed to disburse those additional EUR 250 million. If we were to actually change that plan, we would need to disclose it as an ad hoc, because this is a material information. I, I think my, my best guidance here is as long as you don't see anything coming out of us saying that we decided not to pay it out, I think it's reasonable to assume that this will come. It can come either as a dividend or, or a share buyback, or, or a mix of both. For the time being, it's, it's still part of the plan, still part of our budget. What I don't know if, is when this is gonna happen. That's really depending on the liquidity position of the company and our ability to generate the extra cash above and beyond what we need to actually run the business. The last point, I think the last part of your question was about the rating. In principle, I mean, we have a good relationship with S&P. We're very happy to see them. We're also very happy to be investment grade and remain investment grade. Having said that, I think there are also a number of external factor that are not necessarily, I mean, linked to what the company is doing and how the company is doing. Which are more some macroeconomic factors, some kind of also sentiment around office globally, which I don't think necessarily should reflect negatively on the business we have here. Still, which might impact the rating of the company and the way S&P is going to be looking at us. We cannot kind of. We would not do crazy things just for the sake of retaining the investment grade rating. We, we've always run our business in a way we thought was appropriate. As, as we discussed and as we highlight, our target is to have an LTV, which is going to be around 50%, which is where the dividend payment would get us essentially. Which we believe is consistent with the triple B minus investment grade. From, from there on, you know, if, if that doesn't work, then, I think we, we could also live with that. Our, our target is not to be downgraded, but our target is also not to remain investment grade, no matter what the costs are. Again, here, if you look at this from a company perspective, as I've tried to explain during the call, the difference in price between where mortgage debt is and where, corporate, real estate debt is on a public market, is so substantial, that, that there is, to a certain extent, little benefit or little interest for a company like us, in remaining, invested, in the, in the public bond market. At least as long as the, the, the market have not kind of come back to its mind and, and adjusted pricing to be more in line with where the average corporate triple B investment grade rating are. What I'm trying to say here is there seems to be in the, in the public debt market, a difference between real estate debt and, and the rest of the, of the corporate market debt, where real estate debts tend to trade at a substantial spread. That make it completely unattractive for us to, to be out there. We still have time between now and when our bonds are gonna come to maturity. I still feel that the public debt market has a lot of benefits, in terms of flexibility and, and attractiveness, et cetera. Today, the cost disadvantage that it has make it a clearly no-go area. Let's see how things are gonna develop between now and 2025. If they stay where they are, we're very likely to switch to secure financing across the board. Okay. That's a very clear and thorough answer, so thank you very much. As a reminder, if you have a question for our speaker, please press star one now to enter the queue. The next question is coming from Kai Klose at Berenberg. Yes, hello. Good afternoon. Just one question, if I may, on the refurbishment pipeline. Could you indicate if any of the underlying parameters from your side have changed, either in terms of letting expectations as either or, or, or in terms of completion schedule, as well as in terms of construction costs or the material costs? I got some indications how and if, and to which extent there has been some adjustments. Hi, Kai. Yeah, well, thank you for the question and keeping being interested in us. On the, on the development side, what we're seeing right now is construction costs tend to stabilize at the level where they are, so we're not seeing them increasing anymore. If we look at our overall project, we have seen across the years, a cost increase somewhere between 10% and 15%, which was essentially cost increase in the year 2021 and 2022. This year this have clearly stopped. We have been able to recoup most of that cost increase through higher rent that we are achieving on the lease up of those assets. Overall, our economics on those have remained pretty much stable. We're not seeing a material delay, at least nothing which would be unexpected in a business like ours, which is usually you have one or two, three months delay, like a quarter delay on delivery of building, which is... I don't think it's something very unexpected. We're not seeing a material delay on, on that front either. What is a bit more concerning, but this is more like from a global economy perspective, we're seeing more bankruptcy on the supplier side, and, and on the construction side. We're seeing also a bit more bankruptcy, but which is not related to us, and some of the developer. Again, this morning, there was some developer in Düsseldorf fighting for bankruptcy. On the other side, we think that this kind of distressed, if it and when it happened in the market, is, is gonna create more opportunity for us to, to deploy capital. So we look at it rather positively. Overall, I think the, the metrics that we have on, on our construction pipeline and restoration pipeline has remained pretty stable. Understood. Many thanks. The next question is coming from Silvia Duranti at Goldman Sachs. Hi, good afternoon. A question from my side. I understand the portfolio remained quite stable on the market value from, from last year, you haven't conducted an external evaluation semi-annually. May I ask why this was the case, what are your expectations for the investment property values, and the yield expansion? Thank you. We haven't changed our policy in that respect, so we've never conducted half year evaluation in the past, so there was no fundamental reason why we would change that right now. There is little evidence and, and market transaction evidence right now in the market, and the little transaction that we've seen seems to be very supportive of the value of the portfolio. We have in Hamburg, the city of Hamburg itself has acquired building, which was very comparable to us at prices which are 15%-20% higher than our, our carrying values. So, so we, we do have a number of, of market evidence here, which, which support the view that the value is, is relatively stable, although those are, are fairly limited. We would be running an external evaluation at the end of the year. It's, it's probably very, very early to be able to say, how things are gonna develop and whether or not there are gonna be more transaction evidence that would, I mean, show where the market is settling. As, as we've discussed previously, we don't expect to see a lot of market activities. There is little, being either put on the market or, and even less, which actually trade. But we feel when we look at those transactions that, our... the value, our carrying value are, are still substantially, below the asking price that we're seeing for, for markets. I'm pretty comfortable with, with where the, the valuations stand right now. We've never played in the past, the game of massively increasing the value of the portfolio, and I think now is the time where we're a bit benefiting from that compared to others. Okay. Very, very clear answer. Thank you very much. If may, I may follow up on this. Are you looking to dispose more assets, if, of course, the market opens up, mindful of your comments before to keep, to, let's say, offset the potential yield expansion that you might have, or in terms of the leveraging plan, or you're happy with the current leverage at company level? Thanks. We're, we're planning disposal, but actually not so much because we're worried about the leverage, but mainly because those are assets where the work is done. And one of the premises of the transaction with Brookfield was that it would increase our ability to recycle capital and increase the pace at which we go through the refurbishment portfolio. Which we have not done so far, or at least only to a limited extent. I mean, obviously linked to the market situation. Clearly, if there were opportunity to dispose some of the assets that we have repositioned, we would be pursuing them, and we would be pursuing them aggressively because we wanted to accelerate the pace at which we, we are recycling capital, which in the current market situation is, is, is almost, I mean, not feasible. Essentially, there is no liquidity, which would allow us to do that. We've, we've been selling some assets here and there, but those are mainly on, on smaller volumes. Ideally, our plan would be to sell around EUR 150 million-EUR 200 million per year, which we have not been able to do so far. Okay. Very clear. Thank you very much. There are no further questions at the moment. For closing remarks, I give back to the speaker. Well, thank you very much for your interest in the company, and looking forward to speaking to you for the Q3 result presentation. If you have any follow-up questions, by all means, feel free to reach out ir@alstria.de, or you can reach out directly to Ralf or myself. We'll be happy to take it from there. Thank you very much, and enjoy the rest of the summer, and speak to you then in November. Bye-bye. This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.