Q2 2026 Aroundtown SA Earnings Call

Operator: Ladies and gentlemen, welcome to the Aroundtown SA H1 2026 results conference call. I am Moritz, your conference call operator. I would like to remind you that all participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to the company. Please go ahead.

Speaker #1: Ladies and gentlemen, welcome to the Aroundtown SA H1 2026 results conference call. I'm Moritz, your Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and that the conference is being recorded.

Speaker #1: The presentation will be followed by a question-and-answer session. You can register for questions at any time by pressing star and 1 on your telephone.

Speaker #1: For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to the company.

Speaker #1: Please go ahead.

Speaker #2: Good morning, everybody. Thank you for joining us for Aroundtown's H1 2026 results call. You can view this presentation on Aroundtown's website, either on the Home section or under Financial Reports in the Investor Relations section.

[Company Representative] (Aroundtown): Good morning, everybody. Thank you for joining us for Aroundtown's H1 2026 results call. You can view this presentation on Aroundtown's website, either on the home section or under Financial Report of the Investor Relations section. With me today are CEO, Barak Bar-Hen, CFO, Jonas Tintelnot, Executive Director, Frank Roseen, Chief Capital Markets Officer, Timothy Wright, Chief Sustainability Officer, Limor Bermann, Deputy CEO, Kamaldeep Manaktala, and representatives from Grand City Properties are also present. For the duration of the call, all participants will be on listen-only mode. Following our presentation, you will have the opportunity to ask questions. With that, I would like to hand over to Barak and the rest of the team, who will guide you through the presentation of our results.

Speaker #2: With me today are CEO Barak Bar-Haim, CFO Jonas Tintelnoot, Executive Director Frank Rosin, Chief Capital Markets Officer Timothy Wright, Chief Sustainability Officer Limor Berman, Deputy CEO Kamal Deepman Akhtala, and representatives from Grand City Properties, who are also present.

Speaker #2: For the duration of the call, all participants will be in listen-only mode. Following our presentation, you will have the opportunity to ask questions. With that, I would like to hand over to Barack and the rest of the team, who will guide you through the presentation of our results.

Speaker #3: Good morning, and thank you for joining us for our H1 2026 results presentation. The macro and geopolitical backdrop has remained mixed throughout the first half, and the volatility has persisted over the past month.

Barak Bar-Hen: Good morning, and thank you for joining us for our H1 2026 results presentation. The macro and geopolitical backdrop has remained mixed throughout the first half, and the volatility has persisted over the past month. We did not experience any material impact on our operations from these external factors and come with good H1 2026 results, well on track to meet our 2026 guidance. Against that backdrop, our diversified portfolio continues to deliver. Residentials and hotel, which together are 53% of the portfolio, keep benefiting from strong market tailwinds paired with our ability to identify and extract upside potential, while the office segment remains relatively stable despite the lagging economic activity. Over the first half of the year, we executed several measures that continue to drive growth. We concluded the share-to-share exchange offer for GCP, and we continue to increase our exposure to the residential segment.

Speaker #3: We did not experience any material impact on our operations from these external factors, and come with good H1 2026 results, well on track to meet our 2026 guidance.

Speaker #3: Against that backdrop, our diversified portfolio continues to deliver. Residential and hotel, which together make up 53% of the portfolio, keep benefiting from strong market tailwinds paired with our ability to identify and extract upside potential, while the office segment remains relatively stable despite the lagging economic activity.

Speaker #3: Over the first half of the year, we executed several measures that continue to drive growth. We concluded the share-to-share exchange offer for GCP, and we continue to increase our exposure to the residential segment.

Speaker #3: We continue to execute our share buyback program, launched in January, taking advantage of the market volatility and repurchasing our own shares at a significant discount to NAV.

Barak Bar-Hen: We continue to execute our share buyback program launched in January, taking advantage of the market volatility and repurchasing our own shares at a significant discount to NAV. We closed disposals around book values, recycling that capital into accretive uses such as the share buyback. Having strengthened our balance sheets sufficiently, we resumed our dividend payment for 2025 after three years. Taken together, these actions support our earning both on an absolute and on per share basis, and position Aroundtown well. These efforts have resulted in a substantial and attractive EUR 340 million shareholder return so far in 2026. Despite the ongoing volatility, capital markets have remained open throughout, and after the reporting period, we continue to be active, issuing across multiple currencies and instruments, and further extending our maturity profile, and in parallel, have bought back shorter debt.

Speaker #3: We closed disposals around book values, recycling that capital into accretive uses such as the share buyback. And, having strengthened our balance sheet sufficiently, we resumed our dividend payment for 2025 after 3 years.

Speaker #3: Taken together, these actions support our earnings both on an absolute and on a per-share basis, and position Aroundtown well. These efforts have resulted in a substantial and attractive $340 million shareholder return so far in 2026.

Speaker #3: Despite ongoing volatility, capital markets have remained open throughout, and after the reporting period, we continue to be active issuing across multiple currencies and instruments and further extending our maturity profile, and in parallel have bought back shorter debt.

Speaker #3: This is a direct result of our proactive approach, refinancing our upcoming maturities early and maintaining a sufficient liquidity position, which together mean that market volatility is currently not impacting us immediately. We have sufficient liquidity to cover our maturities this year and next.

Barak Bar-Hen: This is a direct result of our proactive approach, refinancing our upcoming maturities early and maintaining a sufficient liquidity position, which together mean that market volatility is currently not impacting us immediately, with sufficient liquidity to cover our maturities this year and next. We continue to monitor developments closely, and we will keep taking advantage of windows of opportunity to further optimize our debt profile. With a strong operational base, confirmed guidance, and a solid liquidity position, we remain on track for the remainder of 2026. On slide 4, we present the financial highlights for the first half of 2026. Net rental income amounted to EUR 591 million, stable compared to H1 2025, despite the net disposal carried out over the last period, driven by solid like-for-like rental growth of 2.7%.

Speaker #3: We continue to monitor developments closely, and we will keep taking advantage of windows of opportunity to further optimize our debt profile. With a strong operational base, confirmed guidance, and a solid liquidity position, we remain on track for the remainder of 2026.

Speaker #3: On slide 4, we present the financial highlights for the first half of 2026. Net rental income amounted to $591 million, stable compared to H1 2025 despite the net disposals carried out over the last period, driven by solid like-for-like rental growth of 2.7%.

Speaker #3: Adjusted EBITDA amounted to $500 million compared to $501 million in H1 25, similar to the rent development and reflecting a stable cost base. FFO1 amounted to $144 million, 4% lower compared to $150 million in H1 25, and in line with our guidance, mainly as a result of higher financing expenses.

Barak Bar-Hen: Adjusted EBITDA amounted to EUR 500 million compared to EUR 501 million in H1 2025, similar to the rent development and reflecting a stable cost base. FFO 1 amounted to EUR 144 million, 4% lower compared to EUR 150 million in H1 2025, and in line with our guidance, and mainly as a result of higher financing expenses. In H1 2026, the full portfolio was externally revalued, resulting in stable valuation compared to December 2025. FFO per share came in at EUR 8, increasing 3% compared to EUR 7.8 of December 2025, supported by the share buyback, which was executed at a deep discount to NAV. We continue to make progress on obtaining green certificates, and now 76% of our commercial portfolio is green certified, with 81% of offices and 72% of our hotel assets holding green certificates.

Speaker #3: In H1 2026, the full portfolio was externally revalued, resulting in a stable valuation compared to December 2025. FRNTA per share came in at $8.00, increasing 3% compared to $7.80 in December 2025, supported by the share buyback, which was executed at a deep discount to NAV.

Speaker #3: We continue to make progress on obtaining green certificates, and now 76% of our commercial portfolio is green certified, with 81% of our offices and 72% of our hotel assets holding green certificates.

Speaker #3: We have also obtained our first premium outstanding score, the highest premium score. Liquidity remains high at $3.9 billion, in addition to over $1 billion of unused credit lines, while maintaining wide headroom for two covenants.

Barak Bar-Hen: We have also obtained our first premium outstanding score, the highest premium score. Liquidity remains high at EUR 3.9 billion, in addition to over EUR 1 billion of unused credit lines, while maintaining wide headroom of two covenants. We will discuss these items in more detail later in the presentation. Tim, please continue on the next slide.

Speaker #3: We will discuss these items in more detail later in the presentation. Tim, please continue with the next slide.

Speaker #4: Thank you, Milan. On slide 5, we present some of the main drivers supporting our FFO1 generation, which are expected to offset increasing finance expenses over the coming years.

Timothy Wright: Thank you, Mula. On slide 5, we present some of the main drivers supporting our FFO 1 generation, and which are expected to offset increasing finance expenses over the coming years. We expect to continue extracting solid top-line growth in our portfolio, mostly from reletting as well as indexation. Over the coming three to four years, we expect EUR 100 million of additional rental income based on a like-for-like growth of around 2% to 3%. Furthermore, the investments in our portfolio to conversions, redevelopments, and repositioning is expected to increase our rental income in an amount of EUR 55 million until 2030 from current projects, including ramp-ups from completed projects from previous periods. More details for this we will show you in the next slides. We further increased our FFO following the increase in our stake in GCP.

Speaker #4: We expect to continue extracting solid top-line growth in our portfolio, mostly from reletting as well as indexation. Over the coming three to four years, we expect around $100 million of additional rental income based on like-for-like growth of around 2 to 3%.

Speaker #4: Furthermore, the investments in our portfolio through conversions, redevelopment, and repositioning are expected to increase our rental income by $55 million until 2030 from current projects, including ramp-ups from completed projects from previous periods.

Speaker #4: We will show you more details on this in the next slides. We further increased our FFO following the increase in our stake in GCP.

Speaker #4: We increased our stake in an attractive 10% FFO yield, which will result in $10 million of additional FFO from 2027 onwards. Our higher contribution to the residential market in Germany and London has increased—a market which benefits from strong and structured fundamentals and from very defensive cash flows—which will strengthen our FFO generation going forward.

Timothy Wright: We increased our stake in an attractive 10% FFO yield, which will result in EUR 10 million additional FFO from 2027 onwards. Our higher contribution to the residential market in Germany and London has increased, a market which benefits from strong and structural fundamentals and from very defensive cash flows, which will strengthen our FFO generation going forward. Additionally, the share buyback is highly accretive on an FFO per share basis. We continue to execute the program initiated in January, utilizing disposal proceeds realized at around book values to buy our own shares at a significant discount to NAV. This delivers FFO 1 per share accretion, with the impact only partially realized this year and fully captured in 2027. These measures, once fully completed over the next few years, are expected to offset the increased interest expenses in the coming years, under the assumption that refinancing rates stay unchanged.

Speaker #4: Additionally, the share buyback is highly accretive on an FFO per share basis. We continue to execute the program initiated in January, utilizing disposal proceeds realized at around book values to buy our own shares at a significant discount to NAV.

Speaker #4: This delivers FFO1 per share accretion, with the impact only partially realized this year and fully captured in 2027. These measures, once fully completed over the next few years, are expected to offset the increased interest expenses in the coming years.

Speaker #4: Under the assumption that refinancing rates stay unchanged. Moving to slide 6, here we outline the progress achieved on creative capital allocation and capital recycling in the first half of the year.

Timothy Wright: Moving to slide 6. Here we outline the progress achieved on accretive capital allocation and capital recycling in H1. We closed in H1 disposals of EUR 350 million and signed around EUR 390 million year to date, executed around book values and at a rental multiple of 17x. The disposals were led by hotels alongside disposals of mainly development rights, offices, and condominiums. From a geographic perspective, disposals activity was mainly concentrated in non-core and other locations, Leipzig, Berlin, Wiesbaden, and Paris. In addition, we have EUR 400 million of investment properties classified as held for sale as of the reporting date. The proceeds are being recycled into accretive uses, such as for the previously mentioned share buyback program. We also acquired high-quality residential assets at an average yield of over 7%.

Speaker #4: We closed on H1 disposals of $350 million and signed around $390 million year to date. Transactions were executed around book values and at a rental multiple of hotels, alongside disposals of many development rights, offices, and condominiums.

Speaker #4: From a geographic perspective, disposals activity was mainly concentrated in non-core and other locations: Leipzig, Berlin, Wiesbaden, and Paris. In addition, we have $400 million of investment properties classified as held for sale as of the reporting date.

Speaker #4: The proceeds are being recycled into creative uses, such as the previously mentioned share buyback program. We also acquired high-quality residential assets at an average yield of over 7%.

Speaker #4: And we continue to execute creative capex measures in our portfolio, with office conversions into serviced apartments at a yield of around 14%, and hotel repositionings at a yield of around 13%.

Timothy Wright: We continue to execute accretive CapEx measures in our portfolio with office conversions into service apartments at a yield of around 14% and hotel repositionings at a yield of around 13%. Going forward, we expect to continue selling assets and reinvesting into opportunities at high yields, creating meaningful accretion while returning capital to shareholders. Frank, please continue.

Speaker #4: Going forward, we expect to continue selling assets and reinvesting into opportunities at high yields, creating meaningful accretion while returning capital to shareholders. Frank, please continue.

Speaker #2: Thank you, Tim. Slide 8 shows our balanced portfolio across various asset classes. Hotels make up 20%, residential 33%, office 34%, and logistics and retail property 7%.

Frank Roseen: Thank you, Tim. Slide 8 shows our balanced portfolio across various asset classes. Hotels make up 20%, residential 33%, office 34%, logistics and retail 6%, and finally, development invest property 7%. Through various measures that we present on the following slides, we have been actively reducing our office exposure in favor of asset classes with more stable long-term fundamentals. Our properties are concentrated in top European locations, with Germany, the Netherlands, and London representing 89% of the portfolio. Berlin is our largest city at 23%, followed by London at 9%, Munich at 7%, and Frankfurt finally at 6%. These markets offer strong long-term fundamentals and meaningful upside potential. For more details, please see the appendix. Continuing on slide 9, we provide an update on the main portfolio KPIs.

Speaker #2: Through various measures that we present on the following slides, we have been actively reducing our office exposure in favor of asset classes with more stable, long-term fundamentals.

Speaker #2: Our properties are concentrated in top European locations, with Germany, the Netherlands, and London representing 89% of the portfolio. Berlin is our largest city at 23%, followed by London at 9%, Munich at 7%, and Frankfurt, finally, at 6%.

Speaker #2: These markets offer strong long-term fundamentals and meaningful upside potential. For more details, please see the appendix. Continuing on slide 9, we provide an update on the main portfolio KPIs.

Speaker #2: As of June 2026, the portfolio value stands at $25.2 billion and generates $1.16 billion in annualized rental income, resulting in a rental yield of 5%.

Frank Roseen: As of June 2026, the portfolio value stands at EUR 25.2 billion and generates EUR 1.16 billion in analyzed rental income, resulting in a rental yield of 5%. We note that the yields are based on current contractor rents and do not include future agreed rent wrap-ups. This is mostly relevant in the hotel sector, where significant contractual rent increases for the recent hotel reopenings are yet to be included. Including these stabilized rents, the hotel portfolio yield is 5.7%. The office yield of 5% reflects the vacancy of the respective assets. The WALT remains solid at 7.3 years, supported by a balanced lease maturity profile that adds further downside protection. EPRA vacancy stands at 7.6%, stable compared to 7.6% in December 2025. In-place rent increased to EUR 11.8 per square meter. We note that the EPRA vacancy definition and applicable market standard does not include properties under major refurbishment or development.

Speaker #2: We note that the yields are based on current contractual rents and do not include future agreed rent wrap-ups. This is mostly relevant in the hotel sector, where significant contractual rent increases for the recent hotel reopenings are yet to be included.

Speaker #2: Including this stabilized rent, the hotel portfolio yield is 5.7%. The office yield of 5% reflects the vacancy of the respective assets. The WALB remains solid at 7.3 years, supported by a balanced lease maturity profile that adds further downside protection.

Speaker #2: The pre-vacancy rate stands at 7.6%, stable compared to 7.6% in December 2025. In-place rent increased to €11.8 per square meter. We note that the EPRA vacancy definition and applicable market standard do not include properties under major refurbishment or development.

Speaker #2: The development rights and investment properties account for 7% of our portfolio and include around 700,000 square meters of existing space, with about 90% vacancy.

Frank Roseen: The development rights and invest properties accounts for 7% of our portfolio and includes around 700,000 square meters of existing square meters, with about 90% vacancy. The embedded potential from these developments on the future rental income growth of the company will be extracted over the coming years, and we present further details of the development portfolio in the appendix. Slide 10 shows our operation performance reflected in continuous solid like-for-like rental growth across the portfolio, which once again demonstrates the benefits of our diversified portfolio. Total like-for-like rental growth was 2.7%, with the strongest contribution coming from Berlin, Rotterdam, and Utrecht. Residential assets, representing 33% of the portfolio, delivered a like-for-like rental growth of 3.5%, driven by construction supply-demand imbalances across our portfolio locations, low vacancy levels, and the reversion upside we continue to capture.

Speaker #2: The embedded potential from these developments on the future rental income growth of the company will be extracted over the coming years, and we present further details of the development portfolio in the appendix.

Speaker #2: Slide 10 shows our operational performance reflected in continuous, solid like-for-like rental growth across the portfolio, which once again demonstrates the benefits of our diversified portfolio.

Speaker #2: Total like-for-like rental growth was 2.7%, with a stronger contribution coming from Berlin, Rotterdam, and Utrecht. Residential assets represented 33% of the portfolio and delivered like-for-like rental growth of 3.5%, driven by constructional supply-demand imbalances across our portfolio locations.

Speaker #2: Low vacancy levels and the reversion upside we continue to capture. Hotels, which account for 20% of the portfolio, achieved like-for-like rental growth of 4.4%, driven by indexation and contractually agreed rent step-ups.

Frank Roseen: Hotels, which account for 20% of the portfolio, achieved a like-for-like rental growth of 4.4%, driven by indexation and contractually agreed rent step-ups, new hotel openings, and the repositioning measures completed in recent periods. These two asset classes make up 53% of the portfolio and continue to provide a strong foundation for rental growth in future. In offices, which make up 34% of the portfolio, we achieved a like-for-like rental growth of 0.9%, despite the mute in market activity, driven primarily by indexation, rent reversion, and offsetting a slight increase in vacancy. This has supported our gap to market rents, would give us a competitive advantage to retain and attract new tenants. Over the last 12 months, we renewed 160,000 square meters of leases at an average WALT of 5.1 years and signed new leases for 130,000 square meters at an average WALT of 7.8 years.

Speaker #2: New hotel openings and the repositioning measures completed in recent periods—these two asset classes make up 53% of the portfolio and continue to provide a strong foundation for rental growth.

Speaker #2: In offices, which make up 34% of the portfolio, we achieved a like-for-like rental growth of 0.9%, despite the muted market activity, driven primarily by indexation and rent reversion, and offsetting a slight increase in vacancy.

Speaker #2: This is supported by our gap to market rents, which gives us a competitive advantage to retain and attract new tenants. Over the last 12 months, we renewed 160,000 square meters of leases, at a weighted average duration of 5.1 years, and signed new leases for 130,000 square meters at a weighted average duration of 7.8 years.

Speaker #2: For the full year, we expect total portfolio like-for-like rental income growth in the range of 2% to 3%. On top of this organic growth, we have significant embedded upside to extract through development and conversions from the development/investment portfolio, which amounts to 7% of the portfolio, as well as targeted investment within the operational operating portfolio.

Frank Roseen: For the full year, we expect total portfolio like-for-like rental income growth in the rates of 2% to 3%. On top of this organic growth, we have significant embedded upside to extract through development and conversions from the develop and invest portfolio, which amounts to 7% of the portfolio, as well as targeted investment within the operating portfolio. These assets will drive strong organic growth and increase the overall portfolio asset quality. We are also progressing well with office conversion into service apartments, and we have recently delivered another project, this time in Dortmund, and have started the construction phase for a project in Berlin. We have also obtained the permit for a project next to Frankfurt Central Station. The Bauturbo regulation provides further momentum by streamlining change of use processes and shortening approval periods, and we have received good feedback from municipalities for around 120,000 square meters of offices.

Speaker #2: These assets will drive strong organic growth and increase the overall portfolio asset quality. We are also also progressing well with office conver office conversion into service apartments, and we have recently delivered another project, this time in Dortmund, and have started the construction phase for a project in Berlin.

Speaker #2: We have also obtained the permit for a project next to Frankfurt Central Station. The BauTurbo regulation provides further momentum by streamlining chains of use processes and shortening approval periods.

Speaker #2: And we have received good feedback from municipalities for around 120,000 square meters of offices. Our data center conversions in Berlin, Munich, and London are also progressing, with power and permit approvals expected this year.

Frank Roseen: Our data center conversions in Berlin, Munich, and London are also progressing, with power and permit approvals expected this year. We are also densifying and adding new space within existing properties, such as our property in Kassel, where we are building another pre-let logistics hall for one of our existing tenants on-site. Camille, please continue on the next slide.

Speaker #2: We are also intensifying and adding new space within existing properties, such as our property in Kassel, where we are building another pre-let logistics hall for one of our existing tenants on site.

Speaker #2: Committee, please continue on the next slide.

Speaker #1: Thank you, Frank. Slide 11 provides an overview of our rental upside from our main conversion and repositioning projects, which are in execution and which we expect to complete gradually over the next three years.

Kamaldeep Manaktala: Thank you, Frank. Slide 11 provides an overview of our rental upside from our main conversion and repositioning projects, which are in execution and which we expect to complete gradually over the next three years. The expected rental upside for these projects is EUR 55 million by 2030, which includes the step-up rent following the ramp-up phase of already completed projects. Starting with the office to service department conversions, these projects generally fall within the same zoning framework and require only a standard building permit, which is usually obtained within six to 12 months. We have several projects running in Berlin, Dortmund, Frankfurt, and Hanover. The rent achieved are similar or even higher compared to office rents, with longer lease terms of 15 to 20 years, which reduces vacancy, supports rental growth, and creates stable income streams.

Speaker #1: The expected rental upside for these projects is €55 million by 2030, which includes the step-up rent following the ramp-up phase of already completed projects.

Speaker #1: Starting with the office-to-service department conversions, these projects generally fall within the same zoning framework and require only a standard building permit, which is usually obtained within 6 to 12 months.

Speaker #1: We have several projects running in Berlin, Dortmund, Frankfurt, and Hanover. The rents achieved are similar to, or even higher than, office rents, with longer lease terms of 15 to 20 years. This reduces vacancy, supports rental growth, and creates stable income streams.

Speaker #1: We are in discussions with several different operators who are looking to expand and are interested in our portfolio. In the hotel portfolio, we are refurbishing the hotel in Hanover city center, opposite the historic New Town Hall.

Kamaldeep Manaktala: We are in discussions with several different operators who are looking to expand and are interested in our portfolio. In the hotel portfolio, we are refurbishing the hotel in Hanover City Center opposite the historic new town hall, which is expected to reopen in a few months. We have started works on the former InterContinental Hotel in Frankfurt and are renovating an additional 260 rooms at our Cardo Roma Hotel in Rome. In the Hotel Bristol in Berlin, we are nearly completed with the full modernization of the rooms and common areas, and in Paris, we are working on a phased modernization of the rooms. We also completed the comprehensive renovation of our hotel in Baden-Baden after several years and handed it over to the tenant, who opened the doors in July.

Speaker #1: which is expected to reopen in a few months. We have started works on the former Intercontinental Hotel in Frankfurt, and are renovating an additional 260 rooms at our Cardo Hotel in Rome.

Speaker #1: At the Hotel Bristol in Berlin, we are nearly completed with the full modernization of the rooms and common areas. In Paris, we are working on a phased modernization of the rooms.

Speaker #1: We also completed the comprehensive renovation of our hotel in Baden-Baden after several years, and handed it over to the tenant, who opened the doors in July.

Speaker #1: In addition, we are also working on several further hotels, executing smaller targeted modernization and refurbishment projects agreed with new and existing tenants. These projects have a remaining investment budget of around €225 million, which is to be invested gradually over the next years.

Kamaldeep Manaktala: In addition, we are also working on several further hotels, executing smaller targeted modernization and refurbishment projects agreed with new and existing tenants. These projects have a remaining investment budget of around EUR 225 million, which is to be invested gradually over the next years. The CapEx is mainly included in our expansion CapEx and is executed at an expected yield of around 12% on the total CapEx budgeted, resulting in an expected yield uplift of around EUR 55 million, including from ramp-ups of completed projects. As other projects have been completed in recent years, we do not plan a significant increase in the CapEx per year, although we do note that the investments can fluctuate from period to period, depending on project progress.

Speaker #1: The capex is mainly included in our expansion capex and is executed at an expected yield of around 12% on the total capex budgeted.

Speaker #1: Resulting in an expected yield uplift of around €55 million, including from ramp-ups of completed projects. As other projects have been completed in recent years, we do not plan a significant increase in the capex per year.

Speaker #1: Although we do note that the investments can fluctuate from period to period, depending on project progress. On slide 12, we walk through four properties that show our repositioning and conversion strategy in practice, where we have delivered very strong results, increasing significantly both the quality and the income generated from the properties.

Kamaldeep Manaktala: On slide 12, we walk through four properties that show our repositioning and conversion strategy in practice, where we have delivered very strong results, increasing significantly both the quality and the income generated from the properties. In Rotterdam, we took a single-tenant office building that was facing a soft office market and repositioned the 28,000 square meters into a mixed-use asset combining service departments, offices, and leisure. We have signed a 15-year lease with a tenant operating the service departments, which were delivered earlier this year. The refurbishment of the remaining spaces is progressing well, and the full asset is now 82% pre-let. Based on the current letting status and considering the full investment, the project is already yielding 16%, and we expect a yield of 19% on CapEx invested once the property is fully let.

Speaker #1: In Rotterdam, we took a single-tenant office building that was facing a soft office market and repositioned the 28,000 square meters into a mixed-use asset, combining serviced apartments, offices, and leisure.

Speaker #1: We have signed a 15-year lease with a tenant operating the service departments, which were delivered earlier this year. The refurbishment of the remaining spaces is progressing well, and the full asset is now 82% pre-let.

Speaker #1: Based on the current letting status and considering the full investment, the project is already yielding 16%, and we expect a yield of 19% on capex invested once the property is fully let.

Speaker #1: In Rome, we took over the former Sheraton Roma, which is the largest hotel in Rome's prime EUR business district, and carried out a comprehensive repositioning—upgrading the rooms to a modern standard, adding new food and beverage options, and improving the wellness offerings.

Kamaldeep Manaktala: In Rome, we took over the former Sheraton Rome Parco de' Medici, which is the largest hotel in Rome's prime EUR business district, and carried out a comprehensive repositioning, upgrading the rooms to a modern standard, adding new food and beverage, and improving the wellness offers. The property was launched under Managed Autograph Collection Hotels. It is now let on an 18-year lease at a stabilized yield on total CapEx of 11%. As shown on the previous slide, we are executing further works in this hotel, bringing additional rooms to be opened by 2027. In Dortmund, an underutilized office building next to the main station was converted into 52 service departments. The service departments are let on a 15-year lease at a yield of 10% on CapEx.

Speaker #1: The property was launched under managed Autograph Collection. It is now let on an 18-year lease at a stabilized yield on total capex of 11%.

Speaker #1: As shown on the previous slide, we are executing further works in this hotel, bringing additional rooms to be opened by 2027. In Dortmund, an underutilized office building next to the main station was converted into 52 serviced apartments.

Speaker #1: The service departments are let on a 15-year lease at a yield of 10% on capex. On the prime location of Ku'damm in Berlin, we modernized the Hotel Bristol, which had become outdated when we bought it.

Kamaldeep Manaktala: On the prime location of Kudamm in Berlin, we modernized the Hotel Bristol that had become outdated when we bought it, refurbishing all rooms and suites, both ballrooms, the restaurant, and 14 meeting rooms, and relaunched it as a luxury lifestyle hotel. It is now the first German hotel in IHG's Vignette Collection, BREEAM certified, and let on a lease with 21 years remaining. With the investment executed at a yield of 19% on CapEx on a stabilized level. Across these four assets, attractive returns on the CapEx invested and long-term leases give us strong visibility on the income these properties will generate going forward. These examples demonstrate the process of our value add strategy and how we can combine our in-house expertise across asset types with the quality of our locations to unlock embedded value and secure long-term stable income streams.

Speaker #1: Refurbishing all rooms and suites, both ballrooms, the restaurant, and 14 meeting rooms, and relaunched it as a luxury lifestyle hotel. It is now the first German hotel in IHG's Vignette Collection, BREEAM certified, and let on a lease with 21 years remaining, with the investment executed at a yield of 19% on capex on a stabilized level.

Speaker #1: Across these four assets, attractive returns on the capex invested and long-term leases give us strong visibility on the income these properties will generate going forward.

Speaker #1: These examples demonstrate the process of our value-add strategy, and how we can combine our in-house expertise across asset types with the quality of our locations to unlock embedded value and secure long-term, stable income streams.

Speaker #1: On slide 13, we present our hotel tenant base, updated for the disposal activity and the new leases signed. The group has been operating in the European hotel business for over two decades.

Kamaldeep Manaktala: On slide 13, we present our hotel tenant base, updated for the disposal activity and the new leases signed. The group has been operating in European hotel business for over two decades. Keeping and building up relationships is an integral part of our business culture, and over this period, we have developed good business relationships with a broad range of hotel operators. In recent periods, we signed several new leases, resulting in a further strengthening of the tenant mix. The broader operating environment remains supportive. Demand across Europe continues to be underpinned by a mix of business travel, public sector activity, events, culture and leisure, which enables our tenants to maintain healthy operations. Our priority is always to have long-term leases with experienced operators, in addition to our in-house capability to operate hotels on an interim basis.

Speaker #1: Keeping and building up relationships is an integral part of our business culture, and over this period, we have developed good business relationships with a broad range of hotel operators.

Speaker #1: In recent periods, we have signed several new leases, resulting in a further strengthening of the tenant mix. The broader operating environment remains supportive. Demand across Europe continues to be underpinned by a mix of business travel, public sector activity, events, culture, and leisure, which enables our tenants to maintain healthy operations.

Speaker #1: Our priority is always to have long-term leases with experienced operators, in addition to our in-house capability to operate hotels on an interim basis. This ability to replace tenants with limited impact on hotel operations and long-term value is a key competitive advantage and reduces dependency.

Kamaldeep Manaktala: This ability to replace tenants with limited impact on the hotel operations and a long-term value is a key competitive advantage and reduces dependency. More information on our hotel tenants and their background is available on our website. Turning to slide 14, we set out how the expropriation debate in Germany has developed and why we see the most recent steps as a positive for our residential portfolio. The starting point was a referendum initiative in September 2021, where the Deutsche Wohnen & Co. enteignen campaign secured support for socializing portfolios held by landlords with more than 3,000 units. Our assessment regarding the expropriation topic has always been consistent. Germany has a structural gap between housing supply and demand, and moving existing apartments from one owner to another does not close it.

Speaker #1: More information on our hotel tenants and their backgrounds is available on our website. Turning to slide 14, we set out how the expropriation debate in Germany has developed, and why we see the most recent steps as positive for our residential portfolio.

Speaker #1: The starting point was the referendum initiative in September 2021, where Deutsche Wohnen and Company entered in a campaign that secured support for socializing portfolios held by landlords with more than 3,000 units.

Speaker #1: Our assessment regarding the expropriation topic has always been consistent. Germany has a structural gap between housing supply and demand, and moving existing apartments from one owner to another does not close it.

Speaker #1: What closes the gap is building and converting more housing, which is why we regard regulations such as the BauTurbo, which we discussed earlier, as a measure that addresses the problem.

Kamaldeep Manaktala: What closes the gap is building and converting more housing, which is why we regard regulations such as the Bauturbo, which we discussed earlier, as a measure that addresses the problem. While socialization risks are lowering exactly the investment the market needs. The more recent development came in July. Following the Conference of Construction Ministers, the federal coalition committed to introducing nationwide legislation that would prevent individual states from using socialization laws to transfer privately owned rental housing into public ownership. The reasoning put forward by the construction ministers was that the threat of socialization itself holds back housing construction and weakens Germany as a place to invest, which is in line with our view.

Speaker #1: While socialization risks are lowering, exactly the investment in the market needs. The more recent development came in July, following the Conference of Construction Ministers. The federal coalition committed to introducing nationwide legislation that would prevent individual states from using socialization laws to transfer privately owned rental housing into public ownership.

Speaker #1: The reasoning put forward by the construction ministers was that the threat of socialization itself holds back housing construction and weakens Germany as a place to invest.

Speaker #1: Which is in line with our view. We note this is a coalition commitment and not enacted legislation, and we will follow the legislative process closely. But we welcome the aim to safeguard housing investment and establish clearer legal certainty, which also significantly lowers the perceived expropriation risk attached to Berlin residential and investment risk in German residential real estate as a whole.

Kamaldeep Manaktala: We note this is a coalition commitment and not enacted legislation, and we will follow the legislative process closely, but we welcome the aim to safeguard housing investment and establish clearer legal certainty, which also significantly lowers the perceived expropriation risk attached to Berlin residential and investment risk in German residential real estate as a whole. Limor, please continue on the next slide.

Speaker #1: Limor, please continue on the next slide.

Speaker #2: Turning to slide 15, we present a practical example of how we integrate sustainability investment into our refurbishment strategy, combining improved environmental performance with tangible financial value creation at a residential asset in a core lifecycle location.

Limor Bermann: Turning to slide 15, we present a practical example of how we integrate sustainability investment into our refurbishment strategy, combining improved environmental performance with tangible financial value creation at a residential asset in core Leipzig location. We combined the energy upgrade of the building with a planned major refurbishment. This allowed us to implement the sustainability measures in a high cost efficient way. The works included full reinstallation of the façade and the roof, new windows, floor heating, and air tightness improvement, alongside balcony extensions and the addition of a barrier-free lift. The total investment amounted to EUR 3.8 million net of subsidies, supported by a EUR 2 million KFW subsidy, and brought the building to a KFW 40 energy efficiency standard. The project delivered strong results on both sides. The EPC improved from F to A.

Speaker #2: We combined the energy upgrade of the building with a planned major refurbishment. This allowed us to implement the sustainability measures in a highly cost-efficient way. The works included full reinstallation of the facade and the roof, new windows, floor heating, and air tightness improvements, alongside balcony extensions and the addition of a barrier-free lift.

Speaker #2: The total investment amounted to €3.8 million, net of subsidies, supported by a €2 million KfW subsidy, and brought the building to a KfW 40 energy efficiency standard.

Speaker #2: The project delivered strong results on both sides. The EPC improved from F to A, final energy demand declined by more than 75%, and the primary energy demand by more than 85%.

Limor Bermann: Final energy demand declined by more than 75%, and the primary energy demand by more than 85%. At the same time, we created tangible value at the asset level, adding 26 residential units and over 2,100 square meter of lettable area. The improved quality and the positioning of the property also supported reletting at significantly higher rent. This is a clear example of our approach, using integrated CapEx to reduce energy consumption and operational costs, while at the same time improving the asset quality, increasing lettable area, and unlocking rental and long-term value upside. On slide 16, we outline our BREEAM strategy and highlight some further milestones achieved in our green certification program. We use the BREEAM methodology as a framework to create clear pathway for improvement of the sustainability of our portfolio. It allows us to implement targeted measures to improve the overall score of each property.

Speaker #2: At the same time, we created tangible value at the asset level, adding 26 residential units and over 2,100 square meters of lettable area. The improved quality and the positioning of the property also supported reletting at a significantly higher rent.

Speaker #2: This is a clear example of our approach, using integrated CAPEX to reduce energy consumption and operational costs, while at the same time improving the asset quality, increasing lettable area, and unlocking rental and long-term value upside.

Speaker #2: On slide 16, we outline our brand strategy and highlight some further milestones achieved in our green certification program. We used the BREE methodology as a framework to create a clear pathway for improvement of the sustainability of our portfolio.

Speaker #2: It allows us to implement targeted measures to improve the overall score of each property. The methodology is very transparent. This allows us to use it together with existing and prospective tenants to set clear targets, driving tenant satisfaction and retention.

Limor Bermann: The methodology is very transparent. This allows us to use it together with existing and prospective tenants to set clear targets, driving tenant satisfaction and retention. Our current goal is to fully certify our commercial portfolio, and we have made good progress so far. Currently, 76% is certified. We expect to certify the remaining assets over the coming few years. In the meantime, we have started recertifying some of the properties that received their initial certifications three years ago. Here, we are aiming to gradually improve the score and reach at least very good in the long term. On this slide, we also show the progress made in this regard. We see strong improvements in score for the vast majority of properties that have undergone recertification. We also highlighted some recent recertification achievements.

Speaker #2: Our current goal is to fully certify our commercial portfolio, and we have made good progress so far. Currently, 76% is certified. We expect to certify the remaining assets over the coming few years.

Speaker #2: In the meantime, we have started re-certifying some of the properties that received their initial certifications three years ago. Here, we are aiming to gradually improve the score and reach at least 'Very Good' in the long term.

Speaker #2: On this slide, we also show the progress made in this regard. We see strong improvements in score for the vast majority of properties that have undergone re-certification.

Speaker #2: We also highlighted some recent recertification achievements. Our Astropark office property in Frankfurt achieved the highest BREEAM score, 'Outstanding.' This is the first building in our portfolio to reach this level, and only the fourth building in all of Germany to do so.

Limor Bermann: Our Astropark office property in Frankfurt achieved the highest BREEAM score outstanding. This is the first building in our portfolio to reach this level, and only fourth building in all Germany to do so. It is also a first recertification in Germany ever to achieve this rating. In addition, we received BREEAM Excellent score for our office property in Berlin, close to Checkpoint Charlie, building further on the first Excellent certification in our portfolio in Neu-Isenburg, which we achieved earlier this year. In Leipzig, we achieved a BREEAM Very Good rating, reaching our minimum targeted level already in one cycle, and increasing significantly from a Pass score received on the initial certification of this property in 2023. Jonas, please continue on the next slide.

Speaker #2: It is also the first re-certification in Germany ever to achieve this rating. In addition, we received a BREEAM Excellent score for our office property in Berlin, close to Checkpoint Charlie, building further on the first Excellent certification in our portfolio in Neu-Isenburg, which we achieved earlier this year.

Speaker #2: In Leipzig, we achieved the BREEAM Very Good rating, reaching our minimum targeted level already in one cycle, and increasing significantly from the past score received on the initial certification of this property in 2023.

Speaker #2: Jonas, please continue on the next slide.

Speaker #3: Thanks, Limor. Moving on to slide 18, we present our financial results for the first half of 2026. Net rental income amounted to €591 million, stable compared to the first half of '25.

Jonas Tintelnot: Thanks, Limor. Moving on to slide 18. We present our financial results for the H1 2026. Net rental income amounted to EUR 591 million, stable compared to the H1 2025, with like-for-like rental growth of 2.7%, offsetting the reduction in rent from the disposals over the past periods. Finance expenses amounted to EUR 142 million, higher compared to the H1 2025, primarily reflecting the refinancing measures we carried out during 2025 and the H1 2026. As part of the H1 2026 report, we conducted a full revaluation of the portfolio for the certified independent third-party evaluators, recording stable valuations compared to the end of 2025, with slightly positive revaluations across the main segments: office, residential, and hotel. Overall, profit for the period amounted to EUR 218 million compared to EUR 578 million in the H1 2025.

Speaker #3: With like-for-like rental growth of 2.7%, offsetting the reduction in rent from net disposals over the past periods. Finance expenses amounted to €142 million, higher compared to the first half of '25, primarily reflecting the refinancing measures carried out during '25 and the first half of '26.

Speaker #3: As part of the H1 2026 report, we conducted a full revaluation of our portfolio with certified independent third-party evaluators. Recording stable valuations compared to the end of 2025, the slightly positive revaluations across the main segments are in office, residential, and hotel.

Speaker #3: Overall, profit for the period amounted to €218 million, compared to €578 million in the first half of '25. On a per share basis, net profit amounted to 8 cents.

Jonas Tintelnot: On a per share basis, net profit amounted to EUR 0.08. Moving on to slide 19. Adjusted EBITDA amounted to EUR 500 million in H1 2026 compared to EUR 501 million in H1 2025. The result was underpinned by solid operational performance offsetting the impact from net disposals over the period. FFO 1 amounted to EUR 144 million, 4% lower compared to EUR 150 million in H1 2025. The decline was primarily a result of higher financing expenses, partially offset by reduced contribution to minorities reflecting our increased holding in GCP, as well as lower perpetual note attribution following perpetual refinancing from last year. On a per share basis, FFO 1 amounted to EUR 0.13 compared to EUR 0.14 in H1 2025, supported by the share buyback executed in the period.

Speaker #3: Moving on to slide 19. Adjusted EBITDA amounted to €500 million in the first half of '26, compared to €501 million in the first half of '25.

Speaker #3: The result was underpinned by solid operational performance, offsetting the impact from net disposals over the period. FFO1 amounted to €144 million, 4% lower compared to €150 million in the first half of '25.

Speaker #3: The decline was primarily a result of higher financing expenses, partially offset by reduced contribution to minorities, reflecting our increased holding in GCP, as well as lower perpetual note attribution following perpetual financing from last year.

Speaker #3: On a per-share basis, FFO1 amounted to $0.13, compared to $0.14 in the first half of '25, supported by the share buyback executed in the period.

Speaker #3: The benefit from the lower minority contribution following the GCP transaction was offset by the higher effective number of shares outstanding on settlement, leaving the transaction broadly neutral on a per-share basis.

Jonas Tintelnot: The benefit from the lower minority contribution following the GCP transaction was offset by the higher effective number of shares outstanding on settlement, leaving the transaction broadly neutral on a per share basis. FFO 2, which includes the disposal gain over total costs, amounted to EUR 268 million, higher compared to EUR 200 million in H1 2025, reflecting the higher disposal margin in the current period. During H1 2026, we closed EUR 350 million of disposals, generating a gain of EUR 125 million over total costs. On slide 21, we highlight our EPRA NAV metrics. Our EPRA NAV KPIs were supported by the net profit recorded in the period and by the increase in equity attributable to owners arising from the higher holding rate in GCP.

Speaker #3: FFO2, which includes the disposal gain over total costs, amounted to €268 million, higher compared to €200 million in the first half of '25, reflecting the higher disposal margin in the current period.

Speaker #3: During the first half of '26, we closed €350 million of disposals, generating a gain of €125 million over total costs. On slide 21, we highlight our EPRA NAV metrics.

Speaker #3: Our EPRA NAV KPIs were supported by the net profit recorded in the period, and by the increase in equity attributed to owners arising from the high holding rate in GCP.

Speaker #3: These effects were partially offset by the share buyback program and by the recognition of the dividend, both of which reduced equity attributed to the owners.

Jonas Tintelnot: These effects were partially offset by the share buyback program and by the recognition of the dividend, both of which reduced equity attributable to the owners. On a per share basis, the metrics benefited further from the accretive impact of the buyback, executed at a significant discount to NAV, offset by the shares delivered in connection with the increased GCP stake. EPRA NRV amounted to EUR 9.6 per share as of June 2026, higher by 2% compared to EUR 9.4 per share at the end of 2025. EPRA NTA amounted to EUR 8 per share compared to EUR 7.8 per share as of December 2025, reflecting a 3% increase. EPRA NDV amounted to EUR 6.9 per share, higher by 5% compared to the EUR 6.6 per share at the end of 2025. On slide 22, we highlight the breadth of our capital market activities across currencies and instruments.

Speaker #3: On a per-share basis, the metrics benefited further from the accretive impact of the buyback executed at a significant discount to NAV, offset by the shares delivered in connection with the increased GCP stake.

Speaker #3: EPRA NRV amounted to €9.60 per share as of June 26, higher by 2% compared to €9.40 per share at the end of '25.

Speaker #3: EPRA NTA amounted to 8 euros per share compared to 7.8 euros per share as of December 25, reflecting a 3% increase. EPRA NDV amounted to 6.9 euros per share, higher by 5% compared to the 6.6 euros per share at the end of '25.

Speaker #3: On slide 22, we highlight the breadth of our capital markets activities across currencies and instruments. Within the period, we issued a 160 million Swiss franc seven-year bond, and two Australian dollar transactions of 300 million Australian dollars each, over five and ten years, all in January and hedged back to euro.

Jonas Tintelnot: Within the period, we issued 160 million Swiss francs seven-year bond and two Australian dollar transactions of AUD 300 million each over 10 and 15 years, all in January and hedged back to euro. On the perpetual side, we issued EUR 750 million at Aroundtown level in January and EUR 600 million at GCP level in April, refinancing the full perpetual note stack and using the proceeds to buy back notes with the 2026 call dates as well as high coupon instruments. Due to the timing impacts, part of this refinancing was completed in July after reporting period. Furthermore, after the reporting period, we issued approximately EUR 1 billion of secured senior notes. Sorry, apologies. Of senior unsecured notes. Our first euro benchmark of 2026, EUR 850 million 5-year bond at 3.625% coupon, alongside 180 million Swiss franc seven-year bond. Our third Swiss franc issuance in less than a year.

Speaker #3: On the perpetual side, we issued €750 million at the routine level in January, and €600 million at the GCP level in April, refinancing the full perpetual notes stack and using the proceeds to buy back notes with the 2026 call dates as well as high-coupon instruments.

Speaker #3: Due to the timing impacts, part of the refinancing was completed in July, after the reporting period. Furthermore, after the reporting period, we issued approximately €1 billion of secured senior notes.

Speaker #3: Sorry, apologies—senior unsecured notes. Our first euro benchmark of 2026: €850 million, five-year bond at a 3.625% coupon, alongside 180 million Swiss francs, seven-year bond.

Speaker #3: Our third Swiss franc issuance in less than a year. The euro benchmark was placed with the concurrent tender offer under which we bought back around €0.7 billion of bonds across years '28, '39, and '40.

Jonas Tintelnot: The euro benchmark was placed with a concurrent tender offer, under which we bought back around EUR 0.7 billion of bonds across years 2028, 2039, and 2040. In addition, approximately EUR 1.1 billion of CS '38 and GCP CSG were redeemed at maturity. Together, these measures reduced gross debt year to date and further extended our average debt maturity schedule. On slide 23, we present our pro forma debt maturity profile, which incorporates the recent issuances, buybacks, and redemptions across our debt stack. Following these moves, our maturity profile has been extended and our near-term maturities effectively. Our average debt maturity now stands at 3.9 years, expanding to 4.7 years when accounting for our liquidity position.

Speaker #3: In addition, approximately €1.1 billion of Series 38 in GCP Series G were redeemed at maturity. Together, these measures reduced gross debt year to date and further extended our average debt maturity schedule.

Speaker #3: On slide 23, we present our pro forma debt maturity profile, which incorporates the recent issuances, buybacks, and redemptions across our debt stack. Following these metrics, our maturity profile has been extended and our near-term maturities effectively regressed.

Speaker #3: Our average debt maturity now stands at 3.9 years, extended to 4.7 years when accounting for our liquidity position. We continue to maintain strong financial flexibility, supported by broad access to financing across capital markets, a solid BBB rating from S&P, a high level of unencumbered assets across diversified asset types and geographies, as well as established mortgage banking relationships.

Jonas Tintelnot: We continue to maintain strong financial flexibility supported by broad access to financing across capital markets, a solid BBB rating for S&P Global Ratings, a high level of unencumbered assets across diversified asset types and geographies, as well as established mortgage banking relationships. In addition, we have EUR 1 billion of undrawn revolving credit facilities. Our hedging ratio remains high at 95%, and our cost of debt stood at 2.4% as of 30 June. Following the refinancing after the reporting period, the cost of debt stood at 2.6%. We continue to maintain significant headroom to all our bond covenant thresholds. We present on this slide the coupon of the debt maturing each year. While current refinancing rates are higher than the debt which matures over the next year, from 2029, the cost of debt is similar to the current refinancing rates.

Speaker #3: In addition, we have €1 billion of undrawn revolving credit facilities. Our hedging ratio remains high at 95%, and our cost of debt is still at 2.4% as of June 30th.

Speaker #3: Following the refinancing after the reporting period, the cost of debt stood at 2.6%. We continue to maintain significant headroom to all our bond covenant thresholds.

Speaker #3: We present on this slide the coupon of the debt maturing each year. While current financing rates are higher than the debt which matures over next year, from 2029, the cost of debt is similar to the current refinancing rates.

Speaker #3: We generally take a proactive measure to refinance ahead of time, which front-loads the impact of the higher financing expenses, but smooths the impact of refinancing at higher rates over several periods.

Jonas Tintelnot: We generally take a proactive measure to refinance ahead of time, which front loads the impact of the higher financing expenses, but smoothens the impact of refinancing at higher rates over several periods. The rent increase measures, which we outlined earlier in the presentation, will catch up by the end of 2028 and will fully support earnings growth. On slide 24, we present an overview of our debt metrics and our solid financial profile. Our Loan to Value stood at 43%, compared to 41% at the end of 2025, and remains within our board of directors' guidance of 45%. The increase was mainly a result of the share buyback, as well as some investments, partially offset by the proceeds from disposals. We continue to maintain a substantial pool of unencumbered investment properties amounting to EUR 17 billion, or 69% of rental income, which supports our strong access to bank financing.

Speaker #3: The rent increase measures, which we outlined earlier in the presentation, will catch up by the end of '28 and will fully support earnings growth.

Speaker #3: On slide 24, we present an overview of our debt metrics and a solid financial profile. Our loan-to-value stood at 43%, compared to 41% at the end of Q2 ’25, and remains within our Board of Directors’ guidance of 45%.

Speaker #3: The increase was mainly a result of the share buyback, as well as from investments, partially offset by the proceeds from disposals. We continue to maintain a substantial pool of unencumbered investment properties amounting to €17 billion, or 69% of rental income, which supports our strong access to bank financing.

Speaker #3: Our ICR stood at 3.3 times, impacted by the higher financing expenses, and net debt to EBITDA at 11.3 times, impacted by the share buyback.

Jonas Tintelnot: Our ICR stood at 3.3 times, impacted by the higher financing expenses and Net Debt to EBITDA at 11.3 times, impacted by the share buyback. Together with the financing structure that remains well diversified across trade bonds, equity, perpetual notes, and bank debt, these metrics underline the conservative approach we continue to apply to our capital structure. On slide 25, we present the resumption of our dividend distribution. The dividend, approved during the period and paid on 6 July 2026, marked a resumption of dividend payments. Following the decision of the board of directors to suspend distributions from 2022 financial year in order to strengthen the company's financial position. As the company had successfully taken measures to strengthen its position, the decision was made to once again recommend the payment of a dividend to the AGM.

Speaker #3: Together with the financing structure that remains well-diversified across trade bonds, equity, perpetual notes, and bank debt, these metrics underline the conservative approach we continue to apply to our capital structure.

Speaker #3: On slide 25, we present the resumption of our dividend distribution. The dividend, approved during the period and paid on July 6, 2026, marked a resumption of dividend payments.

Speaker #3: Following the decision of the board of directors to suspend distributions from the 2022 financial year in order to strengthen the company's financial position, and as the company has successfully taken measures to strengthen its position, the decision was made once again to recommend a payment of a dividend to the AGM.

Speaker #3: Together with the €250 million share buyback program, this provides a €340 million allocation to shareholders in 2026. Going forward, our dividend payout policy is set at 50% of FFO1 per share.

Jonas Tintelnot: Together with the EUR 250 million share buyback program, this supplies a EUR 340 million allocation to shareholders in 2026. Going forward, our dividend payout policy is set at 50% of FFO1 per share. This is designed to balance an attractive shareholder return with conservative financial structure. On slide 27, we present our guidance for 2026. We guide for FFO1 in the range of EUR 275 million to EUR 305 million, translating into EUR 0.24 to EUR 0.27 per share, and a dividend per share of between EUR 0.12 and EUR 0.135, based on our payout policy and subject to AGM approval. The guidance is supported by the conservative rent increase assumptions, the contribution from acquisitions, and a lower minority contribution following our increased stake in GCP. It further benefits from cost efficiency measures, the net positive impact of the perpetual note transactions on our total coupon, and the share buyback.

Speaker #3: This is designed to balance an attractive shareholder return with a conservative financial structure. On slide 27, we present our guidance for 2026. We guide for FFO1 in the range of €275 to €305 million, translating into €0.24 to €0.27 per share, and a dividend per share of between €0.12 and €0.135, based on our payout policy and subject to AGM approval.

Speaker #3: The guidance is supported by the conservative rent increase assumptions, the contribution from acquisitions, and a low minority contribution following our increased stake in GCP.

Speaker #3: It further benefits from cost efficiency measures, the net positive impact of the perpetual note transactions on our total coupon, and the share buyback. These are offset by the full-year impact of disposals closed in '25.

Jonas Tintelnot: These are offset by the full year impact of disposals closed in 2025, the effect of disposals closed year to date in 2026 and expected from held for sale portfolio, as well as the impact of the proactive refinancing executed in recent months.

Speaker #3: The effect of disposals closed year-to-date in '26 and expected from the held-for-sale portfolio, as well as the impact of the proactive refinancing executed in recent months.

Speaker #1: This concludes our presentation. As always, you can find further material in our appendix. With that, we would like to start the Q&A. Before we invite your—excuse me.

[Company Representative] (Aroundtown): This concludes our presentation. As always, you can find further material in our appendix. With that, we would like to start the Q&A. Before we invite your direct telephone questions, we would like to answer questions that we have received by email prior to this call. For simplicity reasons, the team has taken liberty to group similar questions in order to answer as many questions as possible. Allow me now to read out these questions. Could you update us on your external growth strategy and where you currently see the most attractive opportunities?

Speaker #1: Before we invite your direct telephone questions, we would like to answer questions that we have received by email prior to this call. For simplicity, the team has taken the liberty to group similar questions in order to answer as many as possible.

Speaker #1: Allow me now to read out these questions. Could you update us on your external growth strategy, and where do you currently see the most attractive opportunities?

Speaker #2: Our approach remains centered on capital recycling and on extracting growth from our existing portfolio. In H1, we continued to sell assets around book values and redeployed the proceeds into several accretive opportunities, while keeping leverage stable.

Kamaldeep Manaktala: Our approach remains centered on capital recycling and on extracting growth from our existing portfolio. In H1, we continued to sell assets around book values and redeployed the proceeds into several accretive opportunities while keeping leverage stable. We assess the deployment of that capital holistically across acquisitions, accretive investments in our own portfolio, and other measures such as the share buyback. On external growth, we continue to scan the market actively. The recovery remains asymmetric, with smaller and more leveraged players continuing to face refinancing pressure. We believe this creates opportunities to acquire quality assets at high yields. Strategically, we intend to continue to increase our weighting towards the living segment, meaning residential, hospitality, and mixed use, while gradually reducing office exposure through disposals and conversions.

Speaker #2: We assess the deployment of that capital holistically across acquisitions, accretive investments in our own portfolio, and other measures such as the share buyback. On external growth, we continue to scan the market actively.

Speaker #2: The recovery remains asymmetric, with smaller and more leveraged players continuing to face refinancing pressure. We believe this creates opportunities to acquire quality assets at high yields.

Speaker #2: Strategically, we intend to continue to increase our weighting towards the living segment—meaning residential, hospitality, and mixed-use—while gradually reducing office exposure through disposals and conversions.

Speaker #2: We note that external growth remains opportunistic and disciplined, and we will transact on the back of low-yield disposals and where deals meet our acquisition criteria.

Kamaldeep Manaktala: We note that external growth remains opportunistic and disciplined, and we will transact on the back of low yield disposals and where deals meet our acquisition criteria. Balancing between acquisitions and other opportunities such as high yield CapEx investments, share buybacks, and debt repayments, supporting our balance sheet, FFO per share, and interest coverage metrics.

Speaker #2: Balancing between acquisitions and other opportunities, such as high-yield CapEx investments, share buybacks, and debt repayments, supports our balance sheet, FFO per share, and interest coverage metrics.

Speaker #1: Thank you, Kamandeep. Regarding office, how do you assess current listing conditions and valuation? What is your outlook going forward?

[Company Representative] (Aroundtown): Thank you, Kamaldeep. Regarding office, how do you assess current leasing conditions and valuation? What is your outlook going forward?

Speaker #2: Letting conditions remain broadly consistent with recent periods. Demand still needs to recover, largely reflecting the subdued economic activity in Germany. As mentioned, we let and prolonged 290,000 square meters in the last 12 months at €14.8 per square meter.

Jonas Tintelnot: Leasing conditions remain broadly consistent with recent periods. Demand still needs to recover, largely reflecting the subdued economic activity in Germany. As mentioned, we let and prolonged 290,000 square meters in the last 12 months at EUR 14.8 per square meter, which is similar to comparable periods. The current market situation puts pressure on occupancy level, however, limited. We see vacancy ratios increasing slowly in a pace of about 1% this year, which is very limited. As long as the current market environment remains, we expect this pressure to continue. We do record positive rental income like-for-like from offices, as the in-place rent increase more than offsets the occupancy pressure.

Speaker #2: Which is similar to comparable periods. The current market situation puts pressure on occupancy levels; however, it is limited. We see vacancy ratios increasing slowly at a pace of about 1% this year, which is very limited.

Speaker #2: As long as the current market environment remains, we expect this pressure to continue. We do record positive rental income like-for-like from offices, as the in-place rent increase more than offsets the occupancy pressure.

Speaker #2: Our activities to reduce office vacancy include reletting, conversion to residential via Bautobo, conversion to hospitality units, conversion to data centers, and disposals. We believe that these measures will keep occupancy levels stable around the current levels while increasing our rental income.

Barak Bar-Hen: Our activities to reduce office vacancy includes reletting, conversion to residential via Bauturbo, conversion to hospitality units, conversion to data centers, and disposals. We believe that these measures will keep occupancy levels stable around the current levels while increasing our rental income. As to the office property valuations in 2026, we continue to expect value to broadly remain on current levels as rental growth continues to offset the negative microeconomic volatility. With a reduction in the microeconomic volatility, we expect to see more positive impact of the rent growth fueling value growth.

Speaker #2: As to the office property valuations in 2026, we continue to expect values to broadly remain at current levels, as rental growth continues to offset the negative microeconomic volatility.

Speaker #2: With a reduction in microeconomic volatility, we expect to see a more positive impact from rent growth fueling value growth.

Speaker #1: Thank you, Barak. With your shares still trading at a significant discount to NAV, and the current program close to completion, would you consider increasing the size of your share buyback?

[Company Representative] (Aroundtown): Thank you, Barak. With your shares still trading at a significant discount to NAV and the current program close to completion, would you consider increasing the size of your share buyback?

Speaker #2: We are very pleased with how the program has been executed. Since launching it in January, we have repurchased shares at an average discount of around 67% to upper NTA per share as of December 25.

Jonas Tintelnot: We are very pleased with how the program has been executed. Since launching it in January, we have repurchased shares an average discount of around 67% to EPRA NDV per share as of December 2025. This has delivered meaningful accretion on both FFO1 and NAV per share, and together with a resumed dividend, reflects around EUR 350 million returned to shareholders in 2026. We believe this program was particularly accretive, as it utilized proceeds from disposals executed around book value to buy back shares at a steep discount to intrinsic value. We continue to view share buybacks as one of the instruments within the broader framework of capital allocation and capital recycling. We assess these options with the objective of deploying capital accretively while maintaining a strong and conservative balance sheet and interest coverage ratio.

Speaker #2: This has delivered meaningful accretion on both FFO1 and NAV per share, and together with the resumed dividend, reflects around €350 million returned to shareholders in 2026.

Speaker #2: We believe this program was particularly accretive, as it utilized proceeds from disposals executed around book value to buy back shares at its deep discount to intrinsic value.

Speaker #2: We continue to view share buybacks as one of the instruments within the broader framework of capital allocation and capital recycling. We assess these options with the objective of deploying capital accretively, while maintaining a strong and conservative balance sheet and interest coverage ratio.

Speaker #2: Therefore, share buybacks, similar to acquisitions, will be on the back of disposals, keeping our leverage and balance sheet in a strong position.

Jonas Tintelnot: Therefore, share buybacks similar to acquisitions will be on the back of disposals, keeping our leverage and balance sheet in a strong position.

Speaker #1: Thank you, Yonas. Following the successful completion of the share exchange offer, do you intend to continue building your stake in GCP?

[Company Representative] (Aroundtown): Thank you, Jonas. Following the successful completion of the share exchange offer, do you intend to continue building your stake in GCP?

Speaker #2: After the completion of the offer, we have selectively increased our holding to around 84% currently, up from 81.5% at the completion of the exchange offer.

Barak Bar-Hen: After the completion of the offer, we have selectively increased our holding to around 84% currently, up from 81.5% at the completion of the exchange offer. This increase was carried out through open market transactions on an opportunistic basis. We retain the option to continue increasing our stake opportunistically through open market transactions, but do not have a specific ownership target we wish to achieve at any price. In our view, GCP's FFO yield remains highly attractive, and increasing our exposure to the German and London residential market strengthens our earnings profile. As with other measures, we evaluate the metrics of each option on an ongoing basis to ensure capital is deployed to where it creates the highest value.

Speaker #2: This increase was carried out through open market transactions on an opportunistic basis. We retained the option to continue increasing our stake opportunistically through open market transactions, but do not have a specific ownership target we wish to achieve at any price.

Speaker #2: In our view, GCP's FFO yield remains highly attractive, and increasing our exposure to the German and London residential market strengthens our earnings profile. As with other measures, we evaluate the metrics of each option on an ongoing basis to ensure capital is deployed where it creates the highest value.

Speaker #1: Thank you, Timothy. Where can we expect to start seeing FFO1 per share growth?

[Company Representative] (Aroundtown): Thank you, Timothy. Where can we expect to start see FFO 1 per share growth?

Speaker #2: We put a lot of focus on FFO per share performance, and we are well positioned to meet the 2026 guidance. The FFO1 per share result comes after three years of declining FFO, during which we refinanced large portions of our debt, refinanced and reduced the perpetual notes balance, while executing disposals of mainly low-yield and development properties, increasing our share in GCP, and executing a highly accretive share buyback program, which will have a four-year impact next year.

Barak Bar-Hen: We put a lot of focus on FFO per share performance, and we are well positioned to meet the 2026 guidance. The FFO 1 per share result comes after three years of declining FFO, where we refinance large positions of our debt, refinance and reduce the perpetual notes balance while executing disposals of mainly low yield and development properties, increasing our share in GCP, and executing a highly accretive share buyback program, which will have a full year impact next year. For 2027 and 2028, we expect the pressure on FFO 1 to continue, given we have a number of cheaper legacy debt maturing in those two years, which we will balance between repaying from our cash balance and refinancing at comparatively higher rates, which we usually do proactively ahead of time. That mechanically will increase our gross finance expenses in 2027 and 2028.

Speaker #2: For 2027 and 2028, we expect the pressure on FFO1 to continue, given that we have a number of cheaper legacy debts maturing in those two years.

Speaker #2: We will balance between repaying from our cash balance and refinancing at comparatively higher rates, which we usually do proactively ahead of time. That, mechanically, will increase our gross finance expenses in 2027 and 2028.

Speaker #2: While we are executing many measures to increase rents, which we expect will offset those increases in the midterm, the short-term impact of the increased finance expenses could result in a soft, temporary decline in FFO.

Barak Bar-Hen: While we are executing many measures to increase rents, which we expect will offset those increases in the midterm, the short-term impact of the increased finance expenses could result in a soft temporary decline in FFO. This impact will also be softened in the FFO 1 per share due to our share buyback program, which will have a full year impact next year. We will provide the guidance for 2027 with the full year 2026 results as usual. However, in the midterm, our measures expect to contribute FFO growth drivers in the coming years as we outlined in the presentation. On the perpetual side, we have already refinanced all outstanding notes, but could do a similar recouping exercise as we did previously to reduce the ongoing cost of market volatility subsidies. We expect 2029 to be the inflection point.

Speaker #2: This impact will also be softened in the FFO per share due to our share buyback program, which will have a four-year impact next year.

Speaker #2: We will provide the guidance for 2027 with the full-year 2026 results, as usual. However, in the midterm, our measures are expected to contribute FFO growth drivers in the coming years, as we outlined in the presentation.

Speaker #2: On the perpetual side, we have already refinanced all outstanding notes, but could do a similar recouping exercise as we did previously to reduce the ongoing cost of market volatility subsidized.

Speaker #2: We expect 2029 to be the inflection point. From that year, the cost of debt maturing is in line with our marginal cost of debt, so the refinancing headwind will reduce massively, assuming rates do not change.

Barak Bar-Hen: From that year, the cost of debt maturing is in line with our marginal cost of debt. The refinancing headwind will reduce massively, assuming rates do not change. At that point, EBITDA growth flows through to FFO rather than being absorbed by rising interest costs. The EBITDA growth is therefore throughout like-for-like rent growth of 2% to 3% per year, additional rent from repositioning and conversions, and accretive capital recycling, where we redeploy disposal proceeds into value accretive opportunities. Those drivers are offsetting the 2027 to 2028 finance expenses over time. From 2029, they translate directly into FFO per share growth, and more than that if rates can come down.

Speaker #2: At that point, EBITDA growth flows through to FFO, rather than being absorbed by rising interest costs. And the EBITDA growth is therefore through like-for-like rent growth of 2% to 3% per year, additional rent from repositionings and conversions, and accretive capital recycling, where we redeploy disposal proceeds into value-accretive opportunities.

Speaker #2: Those drivers are offsetting the '27 to '28 finance expenses over time. And from '29, they translate directly into FFO per share growth—and more than that if rates can come down.

Speaker #1: Thank you. Those were the questions that we received prior to this call. We can now start the open session for your questions. We would appreciate it if you could ask all your questions at once, and we will answer them one by one.

[Company Representative] (Aroundtown): Thank you. Those were the questions that we received prior to this call. We can now start the open session for your questions. We would appreciate it if you could ask all your questions at once, and we will answer them one by one.

Operator: Ladies and gentlemen, we will now begin the question and answer session on phone. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from Ellis Acklin from First Berlin. Please go ahead.

Speaker #3: Ladies and gentlemen, we will now begin the question and answer session on the phone. Anyone who wishes to ask a question may press star and one on their touchtone telephone.

Speaker #3: You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star two.

Speaker #3: Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one (*) at this time. One moment for the first question, please.

Speaker #3: And the first question comes from Ellis Ackland from First Berlin. Please go ahead.

Speaker #2: Yes, good morning, everyone. Thanks for the detailed presentation and the chance to ask a couple of questions. You covered most of my topics already.

Ellis Acklin: Yes. Good morning, everyone. Thanks for the detailed presentation and the chance to ask a couple of questions. You covered most of my topics already. Two smaller questions that I do have open. First one, looking at the LTV now, which has crept up to about 43%. My question is, how much of the current balance sheet capacity do you realistically think you can deploy here? Should we expect future acquisitions to be funded mainly through just strictly through disposals and TAC as well? Or maybe will leverage be involved? Second question, more on the housekeeping side, if you could maybe just give us a current expectation for your financing expenses for 2026 and 2027, given the recent debt portfolio optimizations. That is it. Thank you.

Speaker #2: Two smaller questions that I do have open. First one, looking at the LTV now, which has crept up to about 43%. My question is, how much of the current balance sheet capacity do you realistically think you can deploy here, and should we expect future acquisitions to be funded mainly just strictly through disposals and TAC as well, or maybe with leverage being involved?

Speaker #2: And then, second question, more on the housekeeping side. If you could maybe just give us your current expectation for your financing expenses for 2026 and 2027, given the recent debt portfolio optimizations.

Speaker #2: That's it. Thank you.

Speaker #4: Hey, Ellis. Thank you very much for your questions. Yeah, so the LTV increased slightly, you're right. Obviously, the share buyback that we've done, acquisitions, investments, and so on.

Timothy Wright: Hey, Ellis. Thank you very much for your questions. So the LTV increased slightly, you are right. Obviously, the share buyback that we have done, acquisitions, investments, and so on. As we outlined several times, we see the disposal proceeds as the recycling measure to fund growth opportunities, which are acquisitions, but also conversion projects, and so on. So the selling of low-yielding investments into higher-yielding investments, that is where we see a leverage light measure to increase our earnings going forward. Jonas, you want to take that second one?

Speaker #4: Now, as we outlined several times, we see the disposal proceeds as the recycling measure to fund growth opportunities, which are our acquisitions, but also conversion projects and so on.

Speaker #4: So, the selling of low-yielding investments into higher-yielding investments—that's where we see a leverage-light measure to increase our earnings going forward. Jonas, you want to take that second one?

Speaker #2: In terms of the question of the financing expenses—yes, financings have increased. Now, if you look at it quarter-over-quarter, actually, in H1, it's about €72 million in Q2, compared to €70 million in the first quarter.

Jonas Tintelnot: In terms of the question of the finance expenses, yes, finance expenses have increased. If you look at the quarter actually, in H1 about EUR 72 million, Q2 it was compared to EUR 70 million in the first quarter. So it has modestly increased quarter by quarter. Going forward, you see that we did the EUR 815 million already to basically take away a lot of the refinancing pressure that we would otherwise have in the coming periods. This on a pro forma basis, increasing the cost of debt to about 2.6%. At which price, when we will see additional finance coming through, clearly also depending what happens with rates. We see a lot of volatility. But we will continue to update you over the periods.

Speaker #2: So yes, it has modestly increased quarter by quarter. Now, going forward, you see that we did the €850 million already to basically take away a lot of the refinancing pressure that we would otherwise have in the coming periods.

Speaker #2: This will basically increase the cost of debt to about 2.6%. Now, guys, when we see additional finance spends coming through, please also note that this depends on what happens with rates.

Speaker #2: We see a lot of volatility, but we'll continue to update you over the periods.

Operator: The next question comes from Jonathan Kownator from Goldman Sachs. Please go ahead.

Speaker #3: The next question comes from Jonathan Conator from GS. Please go ahead.

Speaker #4: Hey, good morning. Just a follow-up actually—on the capitalization, should we understand essentially that you expect to be net neutral in terms of acquisitions versus disposals, and that you're happy with the current level of leverage?

Jonathan Kownator: Hey, good morning. Just a follow-up actually on the capital allocation to really understand essentially that you are expect to be net neutral in terms of acquisitions versus disposals and that you are happy with current level of leverage. Thank you.

Speaker #4: Thank you.

Speaker #2: Hey, Jonathan. Look, we have our internal guidance, so we have headroom there. Clearly, we will utilize that headroom also, and it doesn't mean that necessarily we'll go up.

Timothy Wright: Hey, Jonathan. Look, we have our internal guidance, so we have headroom there. Clearly, we will utilize that headroom also. It doesn't mean that necessarily will go up. A lot of factors are playing into it, but we feel comfortable in the leverage that we are and utilizing those headrooms for the opportunities that are coming. Again, the opportunities depend on revaluations going forward, disposals, acquisition opportunities, which come first, and so on. We always try to keep some headroom. So up to 45% is there, but we clearly are also working on decreasing it. Okay. Thank you very much. Next question.

Speaker #2: A lot of factors are playing into it. But we feel comfortable with the leverage that we are at and utilizing that headroom for the opportunities that are coming.

Speaker #2: But again, the opportunities depend on revaluations going forward—disposals, acquisition opportunities, which come first, and so on. And we always try to keep some headroom.

Speaker #2: So up to 45% is there, but we clearly are also working on decreasing it. Okay, thank you very much. Next question.

Speaker #3: And the next question comes from Stefan Scharf from SRC Research. Please go ahead.

Operator: The next question comes from Stefan Scharff from SRC Research. Please go ahead.

Speaker #2: Yeah. Good morning, gentlemen. Stefan here from SRC Research. The first question is about your interest cover ratio. It was 4.2 last year in June and is now down a bit to 3.3 in the first half of '26.

Stefan Scharff: Yeah. Good morning, gentlemen. Stefan here from SRC Research. The first question is about your interest cover ratio. It was 4.2 last year in June, and is now down a bit to 3.3 in the H1 2026. What do you expect here for the year-end? The second question is about your expectation for about EUR 100 million additional income coming from like-for-like rental growth and indexation in the next three or four years. Can you give us here a split in, say, resi, office, and hotels? My next question is about the EUR 55 million annual rent extra coming from conversion projects. I think this is mainly vacant offices in Germany, as say in Frankfurt, Stuttgarter Straße or Bleichstraße. Perhaps you can give us here a bit more insight about the locations and from which cities, from which locations this EUR 55 million come from.

Speaker #2: What do you expect here for the year-end? The second question is about your expectation for approximately €100 million of additional income, such as coming from like-for-like rental growth and indexations, in the next three or four years.

Speaker #2: Can you give us here a split, say, really between office and hotels? My next question is about the €55 million annual rent extra coming from conversion projects.

Speaker #2: I think this is mainly vacant offices in Germany, as, say, in Frankfurt—Stuttgarter Straße or Bleichstraße. Perhaps you can give us here a bit more insight about the locations and from which cities, from which locations, this €55 million comes from.

Speaker #2: And my last question is about your general view on the German hotel investment market. Are there signs of an improving picture and improving sentiment continuing in the second half of the year?

Stefan Scharff: My last question is about how is your general view on the German hotel investment market? Are there signs of an improving picture, improving sentiment, to continue in the H2 of the year? How is the progress of refurbishment and concept for the former Frankfurt InterContinental Hotel? Thank you.

Speaker #2: And how is the progress of refurbishment and concept for the former Frankfurt InterConti Hotel? Thank you.

Speaker #4: Hey, Stefan. Thank you very much for the comprehensive questions. I hope I covered everything. Regarding the question on the interest cover ratio, we expect it to be over 3%.

Timothy Wright: Hey, Stefan. Thank you very much for the comprehensive questions. I hope I covered everything. Look, the question on the Interest Coverage Ratio, we expect to be over 3x for the year-end. The question on your like-for-like expectation going forward and the breakdown per asset class. We believe the majority will come from the residential and hotel portfolio, similarly as we have achieved in the recent periods. We do not factor in any potential economic improvement, which could clearly also be further supported by the government stimulus, which would then have a positive impact on the operational growth of our office portfolio. That is why we kept it on the 2% to 3% level that you have seen or that we achieved in the last years. Regarding the EUR 55 million in the development and conversions, we have a slide where we present those.

Speaker #4: Three times for the year-end. The question on your like-for-like expectation going forward and the breakdown per asset class—we believe the majority will come from the residential and hotel portfolio.

Speaker #4: I mean, similarly as we've achieved in the recent periods, we do not factor in any potential economic improvement, which could clearly also be further supported by the government stimulus.

Speaker #4: Which would then have a positive impact on the operational growth of our office portfolio. That's why we kept it at the 2% to 3% level that you have seen, or that we achieved in the last years.

Speaker #4: Regarding the $55 million in the development and conversions, we have a slide where we present those. I don't know if you've seen it, where we present the properties.

Timothy Wright: I do not know if you have seen it. We present the properties and the projects, which are the current projects. Clearly, we are working on some more projects, and these projects that we are working on, once they will start, and we have visibility on them, we will present them as well. So far, the ones we have in execution, we have presented to you on that slide. It is a mix of conversions from office to service apartments, as well as the repositioning and refurbishment of hotels. The hotels actually make up the majority of those current projects and have the highest upside also. We are working on further projects, as I said, and those will then increase also the net rental income in the coming periods, once we are starting executing those. Regarding the general view on the hotel investment market, we see the German hospitality market doing really well.

Speaker #4: And the projects—which are the current projects—clearly, we're working on some more projects. And these projects that we're working on, once they start and we have visibility on them, we will present them as well.

Speaker #4: But so far, the ones we have in execution we present to you on that slide. And it's a mix of conversions from office to serviced apartments, as well as repositioning and refurbishment of hotels.

Speaker #4: And the hotels actually make up the majority of those current projects and have the highest upside also. We're working on further projects, as I said, and those will then increase the rental income as well.

Speaker #4: In the coming periods, once we're starting to execute those. And regarding the general view on the hotel investment market, yeah, we see the German hospitality market doing really well.

Timothy Wright: Due to solid travel demand. Clearly, several years ago, it looked very different, and then there was a long recovery phase, but we see that now it is very solid. The investment market in general remains impacted by the volatile macro market environment, which impacts also this type of asset class. At the end, if you have strong demand factors, strong fundamentals, that is always supportive in, let us say, the interest of this type of asset class. Look, we had also several relettings, reopenings. We outlined that in our previous presentations also here. Also what is future to come. All this result in strong like-for-like performance going forward. Thank you very much. Next question.

Speaker #4: Due to solid travel demand—clearly, several years ago, it looked very different. And then there was a long recovery phase. But we see that now, it is very solid.

Speaker #4: The investment market in general remains impacted by the volatile market and macro market environment, which also impacts this type of asset class. But at the end, if you have strong demand factors and strong fundamentals, that is always supportive, let's say, in the interest of this type of asset class.

Speaker #4: And yeah, look, we also had several relettings and reopenings. We outlined that in our previous presentations—also here, also what's to come in the future. All these result in strong like-for-like performance going forward.

Speaker #4: Thank you very much. Next question.

Operator: The next question comes from Kai Klose from Berenberg. Please go ahead. Mr. Klose, your line is open now. We cannot hear you at the time.

Speaker #3: And the next question comes from Kai Kloser from Berenberg. Please go ahead. Mr. Kloser, your line is open now. We cannot hear you at this time.

Speaker #4: Maybe we take the next question, then?

Timothy Wright: Maybe we take the next question then?

Operator: Yes. Then please sign up for a question again, Mr. Klose. Thank you. Then the next question comes from Bart Gysens from Morgan Stanley. Please go ahead.

Speaker #3: Yes, and please sign up for questions again. Mr. Kloser, thank you. The next question comes from Bart Geisens at Morgan Stanley.

Speaker #3: Please go ahead.

Speaker #2: Yeah. Hi, good morning. I have two questions, please. On the revaluation: Aroundtown's saw a good revaluation on residential, but it looks like it was offset by a negative revaluation in, it looks like from slide 18, in developments.

Bart Gysens: Yeah. Hi, good morning. I have two questions, please. On the revaluation Aroundtown, so good revaluation on residential, but it looks like was offset by a negative revaluation in, looks like from slide 18, in developments. Did that revaluation relate to any specific assets? If so, could you provide color on that? Then I have a second question as well that I will ask afterwards, please.

Speaker #2: Was there a revaluation related to any specific assets? And if so, could you provide color on that? And then I have a second question as well that I will ask afterwards, please.

Jonas Tintelnot: Hi, thanks for your question. You are correct. We have seen very stable valuation outcomes for most of our segments. Especially in the development as an investment part, we see devaluations, which then lead to the overall result of 0.1% and we feel CapEx. In terms of within the development part, I think it was really affecting several of the assets in the whole category. I think it continues to be the cost inflation, which does impact the valuation here in this segment particularly.

Speaker #5: Hi. Thanks for your question. Correct. Between very stable valuation outcomes for most of our segments, especially in the development rather than investment part, we see devaluations, which then brings the overall result to 4.1%, 9%.

Speaker #5: And if we also include CapEx within the development part, I think it's really affecting several of the assets in the whole category.

Speaker #5: I think we continue to see cost inflation, which does impact the valuation seen in this segment particularly.

Speaker #4: No, the valuations are impacted by construction costs, which are very strongly tied to interest rates as well as future cash flows, right? It's different for standing assets, which are already generating and yielding.

Timothy Wright: No, the valuations are impacted by construction costs, which are very strongly tied to interest rates as well as future cash flows. It is different for standing assets which are generating and yielding already. The second question, Bart?

Speaker #4: The second question, Bart?

Speaker #2: And then you really, hopefully, guided on FFO trajectory, right? You said, okay, falling for 2027, 2029, and then inflection in 2029. That's really helpful.

Bart Gysens: Then you really helpfully guided on FFO trajectory, right? You say, okay, falling for 2027, 2029, and then inflection in 2029. That is really helpful. Can you also provide a similar comment on interest cover? We have seen a material slide in your interest cover. When and at what level do you think that could stabilize? Are we potentially going to see a level of interest cover that is getting more challenging from a credit rating perspective? Thank you.

Speaker #2: But can you also provide a similar comment on interest cover? I mean, we've seen a material slide in your interest cover. When and at what level do you think that could stabilize?

Speaker #2: And is there—are we potentially going to see a level of interest cover that is getting more challenging from a credit rating perspective? Thank you.

Speaker #5: Thanks also for the second question, Bart. So yes, of course, we see the 3.3 level. I think what's really important to highlight is that we come from a starting point with exceptionally high headroom to our bond covenants.

Jonas Tintelnot: Thanks also for the second question, Bart. Yes, of course, we see the ICR also now is at 3.3 level. I think what is really important to highlight is that we come from a starting point with exceptional high headroom to our bond covenants. Bond covenants is 1.8. So even at 3.3, we still have very good headroom, which gives us comfort. I think the other thing which clearly, which you are seeing in terms of our actions as well, that we very proactively refinance our debts, not just when they come due, but way ahead of time. That means, in a sense, we are front-loading into expenses, but thereby really reducing our exposure, we have to refinancing at any point in time.

Speaker #5: Bond covenants are at 1.8. So even at 3.3, we still have very good headroom, which gives us comfort. I think the other thing which clearly you're seeing, in terms of our actions as well, is that we are very proactively refinancing our debt—not just when they come due, but way ahead of time.

Speaker #5: That means, in a sense, we are front-loading into the expenses, but thereby really reducing the exposure we have to refinancing at any point in time.

Speaker #5: So yes, that means that we do see ICR coming down. But I think, again, it's very important to keep in mind that we come from a very, very high starting point—exceptional headroom—and now still have very good headroom.

Jonas Tintelnot: Yes, that means that we do see ICR coming down, but I think, again, it is very important to keep in mind that we come from a very, very high starting point with such a headroom, and now still have very good headroom. We also see that in the coming periods, we see that we expect for subject to changes in interest rates and when we actually decide to refinance, also to keep good headroom going forward. Thank you. Next question, please.

Speaker #5: And we also see that in the coming periods, we expect costs to be subject to changes in interest rates, and when we actually decide to refinance, also to keep good headroom going forward.

Speaker #5: Thank you. Next question, please.

Speaker #3: And the next question comes from Kai Kloser from Berenberg. Please go ahead.

Operator: The next question comes from Kai Klose from Berenberg. Please go ahead.

Kai Klose: Yes, good morning. I have got three quick questions. The first one is, why have the property operating expenses gone up by around 5% when rents were just pretty stable? Second question is on the increase in the other financial result, if there is anything else than financial hedges. Third one is on the increase in the cash expenses in the FFO calculation, the cash EBT was rather flat or even slightly lower. Thank you.

Speaker #2: Good morning. I've got three quick questions. The first one is, why have the property operating expenses gone up by around 5% when rents were just pretty stable?

Speaker #2: Second question is on the increase in the other financial result—if there's anything else besides financial hedges? And the third point is on the increase in the cash expenses in the FFO calculation.

Speaker #2: Whereas the cash EBT was rather flat, or even slightly lower. Thank you.

Speaker #5: I can just repeat the questions. It was unfortunately a bit too quick for me to follow. Please.

Jonas Tintelnot: Can you just repeat the questions? It was unfortunately a bit too quick for me to follow. Please.

Kai Klose: The first question, why have property operating expenses increased whereas rents were just flat? Second question is on what are the components of the other financial result, if not financial hedges? Second question, why we have higher cash tax expenses despite rather flat or slightly lower cash EBT. Thank you.

Speaker #2: The first question. Why have property operating expenses increased whereas rents were just flat? Second question is on what was the what are the components of the other financial result, if not financial hedges?

Speaker #2: And second question, why do we have higher cash tax expenses despite rather flat or slightly lower cash EBT? Thank you.

Speaker #5: Okay, that's very helpful, Kai, and we really appreciate you doing this slide and promotion—very helpful, thank you. So, look, in terms of your first question, yes, slightly higher in the operating expenses rather than the income side.

Jonas Tintelnot: Okay. That is very helpful, Kai, and really appreciate you doing this despite the installation. Very helpful. Thank you. Look, in terms of your first question, yes, slightly higher on the operating expenses rather than the income side of things really due to inflation. On the other financial results, you are right, the biggest component here is interest. There is also some other items clearly here in terms of penalties as well as impact, in this case, from positive point of view, on the buyback of the debt, which we brought back at a discount. To fair, sorry, last question here on terms of tax expenses, it is not always linear, and I expect us basically to line up over the rest of the year. Next question.

Speaker #5: I think it's really due to inflation. On the other financial results, you're right. The biggest component here is—there are also some other items, clearly, in terms of bank fees as well as, in this case, a positive impact.

Speaker #5: On the buyback of the debt, which we brought back at a discount—sorry, another question here in terms of tax expenses. It's not always linear, and I expect it will basically even out over the rest of the year.

Speaker #5: Next question.

Speaker #3: Then the next question comes from Adam Chapton from Green Street. Please go ahead, sir.

Operator: Then the next question comes from Adam Shapton from Green Street. Please go ahead, Mr. Shapton.

Adam Shapton: Good morning, team. Can you hear me?

Speaker #4: Good morning, team. Can you hear me? Hello? Thank you. Three quick ones from me. Can you disclose the average yield on the disposals signed so far this year?

Operator: Yes, we can hear you.

Adam Shapton: Hello. Thank you. Three quick ones from me. Can you disclose the average yield on the disposals signed so far this year? I do not see that in the disclosure. Secondly, what would you estimate the reversion to be in the office portfolio? You talk about a gap to market rents. You specify that for resi, but I wonder if you could put a number on that for office. Then a more general question, could you provide some commentary on regulatory developments in the service department and short leased space in Germany, how that affects your business, whether positively or negatively? So those are the three, please.

Speaker #4: I don't see that in the disclosure. Secondly, what would you estimate the reversion to be in the office portfolio? You talk about a gap to market rents.

Speaker #4: You specify that for resi, but I wonder if you could put a number on that for office. And then, a more general question: could you provide some commentary on regulatory developments in the serviced apartment and short-let space in Germany, how that affects your business, whether positively or negatively?

Speaker #4: So those are the three, please.

Jonas Tintelnot: Adam, thanks for the questions. In terms of the disposals, there is also average, I think, on some of the 17 times multiplier. In terms of question on the potential of reversion potential in the office segment, I think we are looking at 30%. I think very clearly, that we still see the market environment in the offices as difficult given the environment. So clearly will take time to get that. In terms of your third question, in terms of regulatory environment, I think overall-

Speaker #5: Adam, thanks for the questions. In terms of the disposals, there's also—which I think is in terms of a 17 times multiplier. Regarding the question on the potential of reversion in the office segment, I think we would look at 30%.

Speaker #5: I think very clearly that we still see the market environment in the offices as difficult, given the environment. So, clearly, it will take time to get that.

Speaker #5: And in terms of your third question, regarding the regulatory environment, I think overall...

Speaker #4: Yeah, maybe I'll jump in. Look, it's a pretty easy process for us to convert from one commercial asset to another commercial asset, which a serviced apartment is.

Timothy Wright: Yeah. Maybe I jump in. Look, it is a pretty easy process for us to convert from the commercial asset to another commercial asset, which service apartment is. That is our way to actually capture the demand for residential, which is basically the same user, right? Now, if the German government is in any way supportive or also putting hurdles in the way, in terms of service apartments and furniture and stuff like this, note it is a different concept. It is a hospitality concept. So currently there is nothing on the radar here. But let us say if there would, at the end, we can just transform it further into an actual residential, which would actually be the long-term goal anyway with these type of asset classes. But again, it is capturing the same demand. From a regulatory perspective, we are all fine. Thanks. Next question.

Speaker #4: That's our way to actually capture the demand for residential, which is basically the same user, right? Now, if the German government is in any way supportive, or also putting hurdles in the way in terms of serviced apartments and furnished and stuff like this, note that it's a different concept.

Speaker #4: It's a hospitality concept, so currently there's nothing on the radar here. But let's say, if there would be at the end, we can just transform it further into an actual residential, which would actually be the long-term goal anyway with these types of asset classes.

Speaker #4: But again, it's capturing the same demand. From a regular operatory perspective, we're all fine. Thanks. Next question.

Speaker #3: The next question comes from Pranava Boydapu from Barclays. Please go ahead.

Operator: Then the next question comes from Pranava Boddu from Barclays. Please go ahead.

Pranava Boddu: Hi. Thank you for taking my question. If you could give us a little bit more clarity in terms of your thought on the cost of debt and the ICR. I think you mentioned that on a pro forma basis, the cost of debt has already gone up to 2.6%. How do you see that evolving over, say, the next two years? Same for ICR, and also, are you using any sort of forward hedges? I think some of your competitors have been trying to manage the ACRs using some hedges. Is that a strategy that you have considered?

Speaker #6: Hi, thank you for taking my question. If you could give us a little bit more clarity in terms of your path on the cost of debt and the ICR. I think you mentioned that, on a pro forma basis, the cost of debt has already gone up to 2.6%.

Speaker #6: How do you see that evolving over, say, the next two years? Same for ICR. And also, are you using any sort of forward hedges?

Speaker #6: I think some of your competitors have been trying to manage the ICRs using some hedges. Is that a strategy that you have considered?

Speaker #4: Thank you very much for the question. Yeah, look, exactly. The cost of debt increased after the reporting period. Obviously, we issued another bond. We also repaid again—I think we outlined this before—and it's very clear to our market participants here that we are very proactive in the market.

Timothy Wright: Thank you very much for the question. Yeah, look, exactly the cost of debt increased after the reporting period. Obviously, we issued another bond. We also repaid. I think we outlined this before, and it is very clear to our market participants here that we are very proactive in the market. We do not necessarily go when we need to. We go when we see the market as favorable. Unfortunately, another war broke out just a few months ago. Luckily, right before that, we issued. What I want to say generally, it is very difficult, obviously, to assess where interest rates will go. It is clear that we will refinance debt with lower rates, with comparatively higher rates. The average coupon of the issues we did this year was around 3%. I do not know if the 3% will continue going. Obviously, mid swaps increased now. Where will mid swaps go again afterwards?

Speaker #4: We don't necessarily go when we need to; we go when we see the market as favorable. Unfortunately, another war broke out just a few months ago.

Speaker #4: Luckily, right before that, we were—we issued what I want to say generally is, it's very difficult, obviously, to assess where interest rates will go.

Speaker #4: It's clear that we will refinance debt with lower rates with comparatively higher rates. The average coupon of the issues we did this year was around 3%.

Speaker #4: I don't know if the 3% will continue going. Obviously, mid-swaps increased now. Where mid-swaps will go again afterwards is very hard to assess. But yeah, we definitely see an increasing impact here.

Timothy Wright: It is very hard to assess. But yeah, we definitely see an increasing impact here. But look, I think it is also very important, again, also in the question on ICR, we have a lot of cash on hand and also the disposal activities that we are doing. We said the cash on hand as well as disposal activities will also be utilized with the repayments. It is not one-to-one that we will need to refinance here, meaning we will really have flexibility on timing, on when we execute, and also what type of measures we do in parallel. For example, when we do certain tenders in parallel or we target certain either short-term or expensive, or let us say relatively more expensive coupons. So we can really utilize the timing that we have and the optionality we have to offset that impact on the ICR.

Speaker #4: But look, I think it's also very important, again, also in the question on ICR. We have a lot of cash on hand, and also the disposal activities that we're doing. We said the cash on hand, as well as disposal activities, will also be utilized for debt repayments.

Speaker #4: It's not one-to-one that we will need to refinance here. Meaning, we will really have flexibility on timing, on when we execute, and also what type of measures we do in parallel.

Speaker #4: For example, when we target certain when we do certain tenders in parallel, when we target certain either short-term or expensive or let's say relatively more expensive coupons.

Speaker #4: So we can really utilize the timing that we have and the optionality we have to offset that impact on the ICR. Very important to know is we have a lot of EBITDA growth factors coming in.

Timothy Wright: Very important to know is we have a lot of EBITDA growth factors coming in. Yeah, they will take time. They are not from one day to another. Some of the measures we have been taking already in previous years, which we are still benefiting from the ramp-up phases of the hotels, which we repositioned, reopened. Just a few weeks ago, we reopened another hotel, for example. So all these will flow into strong EBITDA growth over the period and will offset, and I think very clearly we outlined in the presentation, will offset the increase in the finance expenses. At the end, it is a whole question of when we are going to refinance and at what rates. But we have huge headroom. Again, I think that is very important to know. We have huge headroom to our covenants. We see clearly the ICR still going down further. That is part of it.

Speaker #4: Yeah, they will take time. They're not from one day to another. Some of the measures we've taken already in previous years, and we're still benefiting from the ramp-up phases of the hotels, which we repositioned and reopened just a few weeks ago.

Speaker #4: We reopened another hotel, for example. So all these will flow into strong EBITDA growth over the period. And we'll offset—and I think very clearly we outlined it here in the presentation.

Speaker #4: We'll offset the increase in the finance expenses. At the end, it's a whole question of when we're going to refinance and at what rates.

Speaker #4: But we have huge headroom. Again, I think that's very important to know. We have huge headroom to our covenants. We see clearly the ICR still going down further.

Speaker #4: That's part of it. That's what the whole industry is going through. But with the headroom that we have, and the flexibility we have, we will be able to manage it going forward.

Timothy Wright: That is the whole industry, what it is going through. But with that headroom that we have and the flexibility we have, we will be able to manage it going forward.

Speaker #5: In terms of your second question, regarding pre-hedges, yes, our treasury team does pre-hedging, and we've done so in recent periods as well.

Jonas Tintelnot: In terms of your second question in terms of the pre-hedges, yes, our treasury team does pre-hedging and has done so over recent periods as well. We basically try to pre-hedge the interest rate risk from the issuances that we have to refinance in the coming periods. Clearly, with hindsight, they always say that you did not do enough or you did too much. Difficult to gauge, but yes, clearly we do engage in pre-hedging. In terms of, I think the other factor here to consider is that for existing debt stack, we have a very high ratio of basically fixed or hedged coupons, which means that for existing debt stack, we have a very good hedge ratio already. Thank you for the question.

Speaker #5: So, we basically try to pre-hedge the interest rate risk from the issuance that we have to refinance in the coming periods. Clearly, with hindsight, I always say that you didn't do enough or you did too much.

Speaker #5: It's difficult to gauge, but yes, clearly we do engage in pre-hedging. In terms of—I think the other factor here to consider is that for existing debts, we have a very high ratio of basically fixed or hedged coupons, which means that for existing debts, we have a very good hedge ratio already.

Speaker #5: Thank you for the question.

Speaker #4: Okay. It seems that this was it. With that, we'd like to thank you all for participating in the call and for your valuable questions, both those raised before and during the call.

Timothy Wright: Okay. It seems that this was it. With that, we would like to thank you all that participated in the call and your valuable questions you raised before, but also during the call. All the best. Goodbye, and see you soon in the upcoming conferences. September is a very busy month, so we will see most of you again. Bye.

Speaker #4: All the best. Goodbye, and see you soon at the upcoming conferences. September is a very busy month, so we'll see most of you again then.

Jonas Tintelnot: Bye.

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