Ladies and gentlemen, thank you for standing by, and welcome to the alstria office REIT-AG results Q3 2023 call. 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 via the telephone lines, and I will now hand you over to Olivier Elamine, who will start today's conference. Please go ahead. Thank you very much, and thank you everybody for joining us for the Q3 result presentation from alstria. My name is Olivier Elamine from lovely Hamburg this afternoon, and I'm here with Ralf Dibbern, which is heading alstria's investor relations. Before we move in, a short reminder of the disclaimer, as regarding the forward-looking statement and the duty to update, and without undue delay, going into the quarter results. The operating business of alstria has developed according to our plans with revenue slightly up year-on-year at 3.7%. FFO is down as you would expect, giving the increase in the leverage that we have in the company and the increase therefore of the interest. Operating business is performing well with our overall leasing activity pretty much in line with what it was last year. I will comment a bit more on that later on in the presentation, but we had slightly less leases, which were compensated by more retention and lease extension from existing tenants. The balance sheet has developed again, as expected, and that's obviously prior to the special dividend that we have suggested to the AGM, which we will hold on the first of December. As always for those calls on the third quarter, we have published this morning our ESG report, which I encourage you to have a look at, and I will be commenting on that as well in a minute. If we look back at the portfolio, the slide, if you're following alstria, you know pretty well, there have not been massive changes in the overall portfolio of the companies. The investment market being pretty slow right now, we have not been extremely active on that front. The overall value of the portfolio has remained roundabout stable for the third quarter, but that's relative stability is actually driven by two conflicting elements. One of them is the decrease in the value of the portfolio by around EUR 91 million, EUR 92 million, which was compensated by CapEx spent on the portfolio, which basically gives this apparent stability, which translates still in the P&L in a loss at the end of the quarter. From a rental perspective and a vacancy rate, we remain pretty much stable, and the same is true then for the valuation yield. Letting volume, as we discussed before, we had 16,000 sq m of new leases, around 60,000 of renewal. The average rent on the portfolios have continued to go up slightly, compared to where it was at the end of last year. What we're seeing right now on the letting market is still an active market, and we're still seeing some rental growth happening whenever we are leasing space. However, and this was a comment that we've made already, the two previous quarters this year, there is a lack of substantial large leases currently in the marketplace, and most of the leases we're working on are smaller leases. And what I mean by smaller leases is leases which are usually smaller than 2,000 sq m. So the large leases of 5,000 plus are becoming extremely rare right now in the marketplace. Our leasing pipeline is probably just as big as what it was last year, but the number of leases we're working on is three or four times bigger, which reflects the reduction in size of the leases. And I'm sure we will have the opportunity to discuss that further if you're interested in the Q&A. If we move to the balance sheet, investment property, we've discussed that a second ago, remained relatively stable, which is reflecting the net impact of some devaluation and the CapEx that was spent for like the sake of clarity. We did not have an external valuation in the Q3, so which this will only come with our annual result presentation, and we haven't started that process yet. Before you ask, equity is slightly down as a result of this devaluation, and our net financial debt is pretty much in line with what it was before. Net LTV at 44.5%, reflecting the change in cash and the stability of the amount of debt and the EPRA NTA, as we discussed before, very much stable at EUR 14.50. Pro forma from the dividend that we suggest, we thought we could give you a snapshot. So the pro forma analysis that you're having here is only compounding the effect of the dividend payment, which is in actual fact translate into reduced cash of EUR 250 million and reduced equity of round about the same amount. The dividend we're suggesting is around EUR 1.41 per share. That would increase our net LTV closer to our overall guidance and target, which is at 50%. It would reduce our geared equity ratio, but keep it comfortable above the minimum required of 45%, and it will obviously reduce the EPRA NTA by the amount of dividend that we're paying out. Dividend never made anybody richer. It's just a reduced kind of NAV and translate that into cash for the shareholders. If we look at the P&L, we have a slightly higher rental income than last year for the same period, which is reflecting the operational performance of the company, which, as we've discussed before, is still relatively strong. Putting aside the investment market on the leasing side, we still had a strong performance. This is also obviously relating to the impact of the strong indexation that we have on our leases. Most of our leases being related to CPI. Funds from operations are down 21%, which reflects essentially the increase in leverage and therefore the additional interest rate cost, which are impacting the FFO. SG&A are down year-over-year, and if you remember, we've been discussing that over the last few quarters. This is essentially reflecting the fact that in 2022 there was a number of extraordinary elements in there, which were related to the transaction with Brookfield, and those elements have been now washed out, and that's explained mainly the reduction in SG&A that we are seeing year-over-year. If we move into the FFO bridge, and just to see how the operational performance of the company has developed. Again, it shouldn't come as a surprise. The biggest impact that we have in the FFO bridge is related to the financial results, which is EUR 16.7 million down. On the other operating results, this is related to a number of tenant compensation that we have captured in the year 2022, which we did not have this time around because less tenant has been leaving the portfolio. But the main material impact here is really related to the financing cost and the higher LTV and more expensive debt, which is negatively impacting overall FFO. Moving on, on the debt side, on the net financial debt, we have been successfully refinancing our debt exposure for 2023. We have a little bit of further debt exposure in 2024 coming due, which is a maturity we're currently working on, which are two mortgage loans on our portfolios, and the next bond maturity that we have is gonna come in 2025. Our average debt maturity is currently 3.5 years. And obviously, our average cost of debt is crawling up and will be crawling up as we move forward, given that the 2025 and 2026 bonds are yielding substantially below where the marginal cost of debt of the company is today. Again, looking at the financial debt slide, pro forma of the dividend. Here, the main impact is essentially the change in the valuation in the cash position of the company, and the fact that we have been drawing down on a EUR 100 million credit line that we have secured recently from one of our banking partners. You can see the impact pro forma of those elements on the slide on the overall debt capacity with the extra debt coming up and maturing in 2028, and the average debt maturity extending slightly because of that impact. Moving away for a few minutes from the numbers and the KPI and the finance, and looking a bit more into our ESG report and what we've been doing over the years. As you know, we have been extremely focused as a company, almost since inception, on the issue of embodied carbon, and we are actually glad that more and more in the industry are getting aware of the issue of embodied carbon and the way it needs to be addressed. The way we are looking at it as a company is, the best approach for the embodied carbon is to basically not to get involved into new construction as much as possible, and remain as much as possible within the refurbishment business, which is exactly the—what we're doing as a company. The purpose of the slide that you have here, which might be a bit obscure, is. That's one of the main theme of our ESG report, is the real estate industry is spending an enormous amount of time and energy trying to measure exactly and precisely how much embodied carbon goes into into new construction and/or in construction in general. And a lot of arguing that as long as we have not measured it properly, we can't really play and kind of reduce it. Our view is slightly different. We know that there is a lot of embodied carbon within construction. There is no point to knowing exactly how much that is and we should be working on reducing it as much as we can. And we actually think that regulation is gonna force us to go there no matter what we do as an industry. So we are happy that we have been taking the route we're taking, and we believe that the business that we're having, which is to continue refurbishing and retrofitting existing assets, is probably gonna lead to a substantial better result than the one where you are building up new building on greenfield development. If we look at the average results that we have generated over 2022 with respect to our sustainability on the operational carbon this time, we have been reducing our energies across the portfolio by around 26% year-on-year. And this is not simply as an effect of our greatness. I think we should not confuse a bit of luck here with how good a manager we are. It has a lot to do with the fact that there was a milder winter. Some of it has to do with the work that we have been doing on the portfolio. But we end up the year with an average of 101 kWh per sq m per year. And to put that into perspective, the overall EU target is for the net zero targets across the EU is at 85, so we're still like 15 kWh per sq m per year higher than the average, but we're pretty close. And the average that you have across the EU, depending on the sources that you're using, is closer to 150, 160 kW. So we're doing kind of substantially better than the average across the European Union. We have been working, as we discussed, a lot on retrofitting assets. An average project takes around 35 months. We usually spend 315 kg CO₂ per sq m of build, but we also reuse 68% of the materials that we have on site. And we usually save on average substantially north of 30%, which is the EU taxonomy target, from primary energy, with an average across our project at around 47% of primary energy reduced from start to finish. If we look at very simple KPIs, and again, this is really a very small snapshot of our ESG performance. I would encourage you to look at the report itself. We're showing on this slide the distribution of our energy across the portfolio, with obviously the aim to reduce as much as possible fossil fuel heating, which is an ongoing process, and relying more on electricity and district heating, which are the two fuels that are likely to decarbonize first and faster. And we're also showing the split between GHG emission. As you can see, the lion's share of the emission is still coming from the tenants and the tenant operation within the portfolio, which is obviously outside of our control, but it's still happening within our realm. So that's gonna be it for me on the ESG, and again, I encourage you to look at our website and we would be happy to answer any question you would have on that front, either in that call or take them offline. If we go back to the underlying business, our outlook is not fundamentally different from what we have discussed. In the half year, we still see that the leasing markets are active, and we expect them to remain active, with the caveat that this is happening essentially on smaller area size. In that, in that segment, we do see some rental growth happening, where tenants are looking to a better quality space and are less concerned about the price they're paying, but are more concerned about the ability of the asset and the space to deliver the kind of added value they're looking for, for their office. On the investment market, we still expect to have no to limited activity in the end in 2023. I think it's pretty much too early to say whether 2024 is gonna kickstart again, but there is still a massive gap between where bid and ask spread are. And I think anybody which is currently in the market and selling an asset is considered as being distressed. Therefore, you're seeing a substantial reduction in overall volume in the investment market, which I think might last probably for the first six months of 2024, at least. We are, as a company, focusing on continuing working on our portfolio and our reversion pipeline, which offer still substantial opportunities, and we're pushing on with our plans. We think that there is currently room to continue to deliver modern prime space to office tenants, which are gonna be looking for it as they are reshuffling through their office portfolio. So we're still very much comfortable within the underlying business plan, and approach of the company is being true to both its market and its portfolio. We're looking forward to continuous on our project in that realm. So that's it on my side for the Q3. I will be happy to take any question you might have as part of the Q&A. Thank you very much. Thank you. If you would like to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. That's star one one, if you would now like to ask a question. Our first question today comes from Michael Chakardjian from BNP Paribas. Your line is open. Please ask your question. Thank you for the call. I had a few questions. So you had EUR 170 million of encumbered assets during the quarter. Was this used to raise the EUR 100 million in bank debt you showed that matures in 2028? And if so, can you tell us the terms on it, and the implied LTV, which I believe would be 60%. The second question is, in your 1H results, you noted that there were significant legal transactions executed with respect to related parties during the reporting period. Was this also the case in the current quarter? And third question is, can you provide an update on the Brookfield's Top co loan that is maturing in a few months? Have you been kept in the loop and on the discussions, are you preparing already to, you know, to upstream any more dividends in case? Has there been any discussions on that? That's it for me for now. Thanks. Yeah. So, to take, well, first of all, thank you very much for the question, and to take them one by one. The EUR 170 million of encumbered asset, it is actually the loan that we have taken. It's a five-year loan with, as you rightly mentioned, a 60% current LTV. Our loan are usually covenant-lite, in the sense that we don't have any default covenant in our mortgage loans, but they come with cash trap covenants. If there is a default, so if there is a breach of the covenant, so we don't have any default covenant, and I think that's important to bear in mind. All those loans are on the balance sheet of the company, so there are recourse to the entire balance sheet of the company as well. As you rightly mentioned, it's a five-year loan. The spread over Euribor is around 150 basis points for that specific loan. On the related party transaction that you mentioned, this is related to the fact that our shareholder has been active into the marketplace in buying some of our bonds, which basically trigger a related party transaction, simply because they are our shareholder and they become our creditor as well. And they, they've been doing that, I mean, over the last few quarter and trying to take advantage of the weakness in the underlying bond market. And that's basically what explained that. I don't have real visibility in, I mean, beyond what is currently in our numbers, how much of that is happening because we're just being informed essentially at the end of the quarter, about the amount of related party transaction impact. Were there any happening during this quarter? I think there were. Yes, that's what you- Okay. That's what you see in our report. So the number have increased compared to last quarter. With respect to the Top co loan, I mean, we're not in the loop because this is for us equity essentially. So we don't have substantial visibility on that. We know that our conversation happening, but we're not involved in any of those conversations. And I mean, from a company perspective, that loan is, I mean, have non-recourse to any of our assets. So from our perspective, it's literally equity, so we look at it as much. And then am I right to assume then if Brookfield wanted to have more cash upstream, they would need, there would need to be a process which you'd need to be in the loop on, and then you know you would need to do some governance to approve it before you could just say, like, "Hey, please send up some more, some more dividends? Yeah. So the dividend that we're paying out today, I think, shouldn't come as a surprise, or we're suggesting to pay out today, shouldn't come as a surprise. Essentially- Yep. When we announce the transaction with Brookfield, and as part of the transaction, we already discussed and already disclosed to the market that we would be re-leveraging the company, and as part of that process, we would be issuing around EUR 850 million of new mortgage debt, which we did, and selling around EUR 150 million of assets, which we did, and we would pay the proceeds of those two transactions. I understand. But I'm really, I'm asking about if they wanted to do any additional dividends above the EUR 250 million, that there would be a process they would have to follow, and they can't just, just to ask you for, for more now, and you would, you know, you would need more heads-up than just, say, like, a month, essentially. Yeah. So I mean, alstria is still an independent company, so my job is to take care of the corporate well-being of the company. So my objective is not to pay a dividend. My objective is to make sure that the company operate properly and follow proper governance rules. So we would not be paying a dividend if we don't have the means to do it, and yes, they cannot just come and take the money- Got it. - out of the bank account, if that's what your question is. It need to follow the proper- And can I squeeze one more question in? Can you give us some CapEx guidance for the next year or two, and what you believe are, could be maintenance levels of CapEx? So basically, I'm just trying to see is, do we expect CapEx to go down? What's your committed development CapEx like for the next year or two, and what's would your maintenance be if you wanted to actually, you know, reduce your CapEx spending? So, essentially, we have been spending around EUR 150 million on an annual basis on capital expenditure, which is like, that encompasses almost everything, so maintenance and investment in the portfolio. And we basically work on relatively small projects that are committed one after the other. So, our total commitment is usually not as big as that. With our current plan. And the way we've been funding for those CapEx, and that's unrelated to Brookfield or not Brookfield. The way we've been funding through those CapEx over the years has been through property disposals, where we basically recycle the cash of the disposals into CapEx. So we still have cash on balance, which would allow us to go for another probably 12 months of CapEx, so for next year's. If there is no activity in the investment market, and if we're not able to dispose of assets, then we will need to kind of slow down on our CapEx activity, but that's not the case as we speak from today's perspective. So we're very much dependent, and the speed at which we can deploy CapEx is very much dependent on our ability to actually to the investment market to restart and our ability to sell within the market. Your yield on cost on your development, could you remind us what it is again? Yeah, it's around 6-6.5%. Would it not be more efficient to use that capital to buy back bonds or to? Well, there is clearly an argument about that, and there's a discussion about whether or not we should be buying back bonds. But at the end of the day, we're still a real estate company, so that. And capital allocation is something you need to look at quite carefully. 6.5% is a yield on cost, but it's not necessarily the total returns because we would expect that. You're gonna have some yield compression, so our total return and then levered return would be closer to 8%-9% on those assets. And levered, so return on equity is probably kind of double- digits, whereby the, depending on which one you're looking at, the return is probably slightly short of that. But it's clearly, I mean, it's clearly a question that we need to ask ourselves. Okay, thank you. Appreciate that. I'll get back in the queue. Thank you. Our next question comes from the line of Kai Klose from Berenberg. Your line is open. Please ask your question. Good morning, or good afternoon. Two quick questions. The first one, could you indicate what is the current amount of amortization in the alstria is paying or has to pay for the outstanding mortgage loans? And how has this maybe changed in new loans being raised from a bank's perspective, if they're asking more annual amortizations? The answer is zero, and we never paid less than zero. Okay, good. Thank you. You're welcome, Kai. Thank you. The next question comes from the line of Toby Hanson from Boundary Creek. Your line is open. Please ask your question. Hi there. I wondered if you could give a figure for what the rental reversion is in the current portfolio. Well, that's a tricky question, because it really depend on what you call rent reversion. So, the average rent that we're currently getting on alstria's portfolio is around EUR 14 per sq m, EUR 199 million contractual rent. And I think if you believe what the external valuer is saying, the argument is that, you know, fully let, so assuming everything is let everywhere, but with the current shape and form of the portfolio, your ERV would be closer to somewhere around EUR 240 million. Which would give you like a 20% reversion in the portfolio. In reality, we usually never re-let the building in the shape and form into which it is today. Because our business plan is to invest CapEx in the building and to move the kind of EUR 14 per sq m that we have on average, somewhere around between EUR 25 and EUR 30, which is more where the prime market rent is gonna be in the different market in which we evolved. And that's usually what we have been doing over time. So we tend to invest somewhere around EUR 1,500- EUR 2,500 per sq m of CapEx, and move the rent from 14 to almost kind of double it or try to get to a level where we would double the rent. And this is the kind of business plan that we usually run on our assets. So, I don't know if I'm answering your question, but what I'm saying is, if you look at- Yeah, that's helpful. The reversion that we're showing, assume that you keep the asset as they are, which we usually don't. Got it. No, no, that's helpful, nonetheless. And then you mentioned that you were in talks or, and there was progress on the June and August bank term maturities for next year. Can you give us a guide on when this process might be finished? I mean, it seems like if I just look at the LTV levels at which you've gotten recent bank debt, then, you know, it doesn't sound like the banks are are being, you know, any more kind of cautious around exposure to you or, or being more cautious on the LTV levels. I mean, some of those loans have extension option, which are in our hands. So basically we would just need to send a notification that we would like to extend. And that's on one of those loans. The other ones, we're currently in discussion with the banks to extend the maturity. But you need to bear in mind that this is a loan where we actually increased the volume with the same bank a few months ago. And we have not increased the maturity at that time because we also signed another loan with the same banks, and then we're gonna reuse the documentation. So I think those conversations are doing well. We don't have really an LTV issue right now, uh, with, with the banks, and, and I don't expect that we have the one, uh, simply because those two loans were valued by the banks, uh, less than twelve months ago. Uh, and, and the banks are, are still comfortable with that. With, with respect to the exact timing, uh, you know, the sooner, the better. Uh, but, uh, in today's market, basically, I mean, if you look at the priority of the banks and where they're putting their efforts, uh, I'm afraid we're not, uh, on the top of the list of the things they're concerned about. So, um, so, so this basically, we are- we, we tend to fall behind the queue, uh, on when they have time to, uh, to basically gather for us, because there's still like eight months on, on both those loans. What we're also trying to do, or starting to do and what we'll start to do in early 2024, is to start working on the bond maturing in 2025, and, and then, prepare for the refinancing of that, also most probably in the mortgage market, looking at how the bond market is today. So I, I don't know whether that answers the question. Yeah, that's very helpful. Yeah, let's hope you stay off the interest list for the banks. Thank you. A reminder that if you would like to ask a question, please press star one one on your telephone keypad. At this time, there appear to be no further questions. Well, then, thank you very much for your interest in the company. As usual, if you have follow-up questions or if you want to take some of the conversation more privately, please feel free to reach out either to Ralf or myself. We'll be more than happy to accommodate your questions. And we'll be also looking forward to have our first presentation and discussion around the full year results of the company sometime in early 2024. Thank you very much for your interest. Have a nice afternoon. Bye-bye. Thank you. That does conclude our conference call today. Thank you all for your participation. You may now disconnect.