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Hello, everyone, and thank you for joining us today on our earnings call for the presentation of our results for the first quarter of '21. On the CORESTATE Investor Relations website, you can find our earnings press release, the report and the corresponding slide deck. As usual, I'd like to direct your attention to the forward-looking statement and disclaimer wording on Page 2 of our presentation. This safe harbor language applies to the presentation and all comments we'll be making today. I would also like to mention that everything is being recorded. You can replay the call and view the transcript on our Investor Relations website after the call. On the call with me are our CEO, Rene Parmantier and our CFO, Lars Schnidrig. We will guide you through the presentation, followed by the usual Q&A session. The timeframe for today's call is about 30 minutes. Now it's my pleasure to turn the call over to Rene. Rene, the floor is yours.
Many thanks, Kai, and a warm welcome from my side. Speaking about the highlights of Q1 2021, of course, brings us once again to COVID-19. The third wave of the pandemic still impacts the real estate investment markets and leads to delayed recovery that even intensify the usual seasonality in our business. Nevertheless, we have a lot of reasons to be optimistic. For example, we managed to keep the acquisition fees in our real estate equity segment stable. We have a well-filled deal pipelines in both segments, equity and debt. This will lead to significant upswing in our activities in the course of the year. Long-term positive market drivers such as urbanization, demographic changes and the interest rate environment remain in place. Particular good news is our real estate debt segment enjoyed a good start into the year. COVID-19, however, led in one opportunistic fund consisting of commercial assets to negative revaluation effects. This impacted our P&L. We used again, and I cannot stress this enough, temporarily our balance sheet for highly profitable bridge lending for financing real estate developments. This is, on the one side, highly attractive from an EBITDA perspective but absorbs, on the other side, parts of our cash pile at the end of Q1. That's the reason why we, with an unchanged focus on deleveraging and reducing our debt, will significantly decrease this lending until the end of Q2. And our aim to significantly reduce net debt during 2021 is unchanged, and we are on a good path to deliver on this. Let me get on to the acquisition of AFS. In brief, everything in time and on schedule. Closing is just a matter of days as we already received in May the regulatory approvals in Germany and Luxembourg. Then the real work will start. We will entirely integrate the new operations to fully utilize the synergy effects. Just one fact here, around 80% of AFS clients are new to the company, so plenty of room for growth and cross-selling here. We evaluated our setup and identified several areas for revenue and cost synergies. This led to an enhanced corporate setup with a centralized portfolio management face to the customer, a bundling of our sales forces with a clear focus on investors and a full range of new products like the very successful city quarter fund or the whole loan fund. All in all, we have done nothing short of a full reshaping of our operations into a manager of the entire real estate value chain. And I can tell you from numerous talks to clients, they welcome this. Please flip to Page 4. You know this chart from our previous calls. It shows the development of our assets under management, especially for our core business, real estate AUMs. We realized about 1% net organic increase in our real estate AUMs after revaluation effects. So once again, growth in a difficult market and planned decrease of our noncore non-real estate AUMs of around EUR 100 million. Let's take a deeper look into the segments we are operating in and compare them to the end of last year. This already mirrors our strategic reshuffling and the success of our new products. Residential and city quarters up, logistics and others up, office down, micro-living and retail merely stable. All in all, we have around 50% of our real estate AUMs in equity, roughly 1/4 in real estate debt and the last quarter in third-party property management. So a very healthy diversification, in my eyes. And as mentioned before, we have another record sourcing pipeline and real estate debt of around EUR 500 million, representing a project volume of more than EUR 2 billion. In real estate equity, we are in advanced contractual negotiation status for around EUR 1.5 billion, of which around 2/3 in LOI stage, 1/3 in exclusivity. So very promising new business ahead. Please flip to Page 5. You see in this chart our HFS fund status as of end of Q1. The focus is unchanged as risk management remains the crucial success factor in this business. Around 70% of our financing go to the top 7 cities in Germany, and around 70% is for residential or city quarter projects. The total commitment fund volume is around EUR 1.3 billion, so merely unchanged. The number of finance projects stood at 48, and the average mezzanine financing size was around EUR 27 million. That's a bit higher than in the past, reflecting usual fluctuations and our approach during the crisis by focusing more on bigger developments like city quarters or superior conversion projects in A locations. Let me give you some insights on our mezzanine business into HFS operations in Q1, and please flip to Page 6. As you all know, in mezzanine financing, everything comes down to risk steering and project selection. In other words, where to give the money to and closely monitor the usage of the money. This is, in times of crisis, even more important. And that's why we focused on residential or city quarter developments in Germany's top 7 cities. At the end of Q1, 28 different borrowers received mezzanine capital from us. And as you can see on the right side of this slide, the top 5 clients all focus on resi in the big cities, and none has a share of more than 18% of the fund's capital. So in times of crisis, we focus our counterparty relations to selected well-established players with proven track record and long-standing relations. Currently, the average loan duration is around 18 months. And we are working consistently towards reducing this, also for the sake of higher profitability. It's on the menu in the upcoming months in our real estate debt business. The market is providing significant tailwinds as traditional banks restrict their credit lending while the market is eagerly asking for these financing solutions. Megatrends like demographic changes, urbanization and increasing working flexibility are playing out in our favor. And that's where we come in as the leading powerhouse with a scalable product platform and a clear focus. We already are the clear market leader in mezzanine lending, but we will further strengthen this position by the issuing of new products, for example, the whole loan. That has gotten a remarkable number of precommitments during the initial marketing phase. Last but not least, our real estate debt business is very sustainable and profitable. Nevertheless, we still have untapped synergy affect our client relations, and the early involvement in developments create for our real estate equity business. Here, we expect annual synergies of around EUR 10 million until the end of 2024. With this, I would like to hand over to our CFO, Lars. So please flip to Page 7, and Lars, the floor is yours.
Many thanks, Rene, and also a very warm welcome to all of you from my side. Before we dive a bit deeper into our figures for the first quarter, please let me explain our new segmentation. We wanted to highlight the enhancement and increased significance of the real estate debt business. So we split up our previous segment real estate investment management into 2 new segments. Real estate equity, comprising acquisition and sales fees as well as asset and property management fees; and real estate debt with the lines underwriting and structuring fees, real estate debt asset management and coupon participation fees and income from bridge loans. All other income lines previously in warehousing and in alignment capital are now condensed in other segments.Let us start with real estate equity. You all know the typical seasonality of our business, or in other words, we operate in a back-ended loaded market. COVID-19, especially the third wave, even strengthens us. Nevertheless, we managed to keep acquisition-related fees at EUR 2 million and asset and property management fees in core and core+ stable compared to last year's pre-lockdown first quarter. Underwriting and structural fees are showing EUR 4 million and clearly reflecting the high turnover of the fund in the beginning of 2021. Driven by the pandemic, the coupon participation fee was reduced from EUR 11 million to EUR 8 million by higher risk provisioning and a minor impairment in one project. We spoke about this before. The temporary peak in bridge lending led to significantly higher income from bridge loans, up from EUR 2 million to EUR 6 million. Our other segments were hit by around EUR 5 million of negative valuation effects driven by the publicly endorsed measures to contain the second and, soon after, the third pandemic wave especially the nationwide shutdown in Germany and co-investments in opportunistic retail assets in one fund. Adjusted income from other segments went down from EUR 6 million to minus EUR 3 million. All in all, we delivered aggregate revenues and gains of EUR 37 million, down from EUR 52 million. And with this, we are well within our own budget and run rate to reach our full year guidance. Now please turn to Page 8. Let me speak about our cost structure. Basically, we realized several negative factors for our expenses as a temporary cost for our new strategic setup for the improvement of our product range and the bundling of sales. But these things will pay off well in the upcoming months. So the money is very well spent. The OpEx ratio in the first quarter comes down to the inelasticity of our fixed cost base, and we feel this, especially in times of somehow reduced deal appetite from clients. As you can see, our OpEx were kept merely stable with around EUR 22 million in real estate equity, EUR 2.6 million in real estate debt and nearly EUR 3 million in the other segment. Other income went down due to lower reversals of provisions from EUR 2.4 million in the last year's comparable quarter to below EUR 1 million in Q1 2021. Our G&A expenses ended up at around EUR 12 million, up from EUR 7 million in Q1 2020, reflecting HR and M&A-related one-offs. We aim to reach the G&A of between EUR 30 million and EUR 40 million by year-end. All in all, our adjusted EBITDA stood at nearly EUR 1 million. Our D&A was remarkably lower at around EUR 5 million. And for the first time, this figure is without any depreciation and capitalized asset management contracts from the HFS acquisition. Our net profit stood at minus EUR 14.5 million. And adjusted by expenses from the AFS acquisition, D&A and DTAs, our adjusted net profit at around minus EUR 9 million. Let me underline again, these figures are not good, but they are broadly in line with our budget and phasing throughout the year. So we stick clearly to our full year guidance. And Rene will give you some more background on this later on. Now please turn to Page 9. Reducing our debt and, as a consequence, reaching a much better leverage ratio remains absolutely crucial for us. Therefore, let me speak a bit more about the key balance sheet figures and ratios. By the end of March, we showed total financial debt adjusted by around EUR 27 million of rental and leasing liabilities of EUR 612 million. The biggest parts are 2 main financing instruments. The senior bond was EUR 297 million, and the convertible bond was EUR 195 million. Our bank and other debt of around EUR 120 million included EUR 55 million of warehousing debt in our lease and premise. At the end of the first quarter, we had more than EUR 60 million of cash, leading to a net debt figure of EUR 549 million. The cash pipe was impacted by HR-related and minor other one-off costs, higher but as I said before, very profitable bridge lending, some expenses for the new corporate setup and sales structure and last but not least, as we are prepared -- as we prepare the company for the next growth lever once the pandemic impacts are waning. Our net debt reduction plan includes the repayment of this bridge in the current Q2 but also placements from our balance sheet, to be more precise, from inventories, associates and joint ventures out of the financial instrument till the end of more than EUR 80 million. We are on track to deliver on this and further amount of more than EUR 60 million of co-investments will be turned into cash in the next year, so in 2022. And let me confirm once again our ambition to bring our financial leverage below 3 into our midterm target range of 2 to 3x. With this, I would like to hand back to you, Rene, and please flip to Page 10. Thank you.
Thank you very much, Lars. Let me finally give you some backgrounds on our road to guidance and the components of our financial outlook. We operate in a structural growth market. We expect a gradually decreasing COVID-19 impact and then a marked market upswing. We are well-positioned to benefit from catch-up effects. We are seeing the first positive impacts from our advanced product range, especially in real estate debt from our newly shaped sales team. We expect the closing of AFS anytime soon. And this alone will deliver around EUR 16 million of revenues EUR 10 million of EBITDA and EUR 7 million of net profit for the year running. So we expect merits in our new P&L segmentation to realize between EUR 20 million and EUR 35 million acquisition and sales fees and equity, between EUR 30 million and EUR 40 million of underwriting and structuring fees and debt and between EUR 80 million and EUR 90 million of asset management fees in each of these 2 segments, including property management fees and equity and coupon participation fees and debt. The income from other segments will be between EUR 5 million and EUR 20 million. On this basis, we once again confirm our financial outlook for the full year 2021 with aggregated revenues and gains of between EUR 235 million and EUR 260 million, EBITDA of between EUR 19 million and EUR 115 million and adjusted net profit of between EUR 50 million and EUR 75 million. In a nutshell, the market and its drivers are working massively in our favor, and we will benefit from this in the upcoming months. With this, we will return to decent growth and profitability and make CORESTATE an attractive investment for shareholders again. With this, I would like to hand back to the operator. We are now happy to answer all your questions.
[Operator Instructions] The first question is from Kai Klose from Berenberg.
I've got a couple of questions, if I may. The first one, you mentioned at the beginning of the call that the acquisition fees remained stable. Could you indicate what was the underlying acquisition volume?
Kai, it's Kai here. We had on the real estate equity around EUR 200 million of assets, new assets. And on the real estate debt side, it's around EUR 400 million.
Okay. So this is a combined number. I'm just looking into Page 7 of the interim report where we have the acquisition fees only showing in the equity business. So this EUR 2 million refers to the EUR 200 million acquisition volume for equity?
That's right, exactly.
And then the second question on Page 7, also report. Could you indicate why the asset management fees in the real equity segment went down relatively significantly while the underlying AUMs remain stable, relatively stable?
Yes. Of course, the main driver is a decrease in our development fees of around EUR 2 million, EUR 2.5 million compared to last year where we have reversed these big micro-living projects with one key client. And the remainder, around EUR 1.5 million, is linked to asset management fees and an opportunistic product, which has a performance link on these asset management fees.
So what would you then define as a kind of recurring asset management fee from the Q1 -- of the Q1 numbers?
Yes. We will definitely see here an uplift in the performance of the asset management fee. And of course, take these public restrictions into account, Q1 will definitely be the worst in terms of the season for the year.
So of the EUR 8.8 million, so could you indicate what -- how much of that was recurring?
Recurring in terms of -- in '21, everything, of course. And -- but we will see there an upside on asset management fees for the year, so definitely a much higher level. Take only our revenue split on where we want to achieve around EUR 80 million to EUR 90 million for the entire year in this line item.
And the last question on my side would be on the coupon participation fee. You mentioned that because of risk provisioning and impairments, the amount of your income was much lower. Could you elaborate a bit more on where that came from? What was the reason for these 2 projects, which you mentioned [indiscernible] ?
It was only -- it's, again, Kai. It was only one project where we have seen an impairment on the project value and achieved only a lower rate of repayment on this project level. And we are talking here about a mid-single-digit million amount. And this is the reason why also -- coming from EUR 12 million, EUR 13 million as a run rate for our coupon participation fee we have seen only EUR 8 million in the first quarter.
Next question is from Manuel Martin from ODDO.
Two questions from my side, if I may. The first question is on the expenses, on the general expenses. It seems that the cost structure went up in G&A. Is this only related to one-offs? And just maybe if you could bring some more color to these one-offs? As far as I understood, your -- you think you might have EUR 30 million to EUR 40 million cost by the year-end in G&A. Maybe you can elaborate a bit on that because that seems to be higher than last year? That would be the first question, please.
So we're very -- great answer. We have around EUR 6 million one-off in the G&A and there are EUR 3 million related to HR-related expenses. And approximately EUR 3 million, EUR 2.7 million are related to M&A transaction costs.
It's Kai. If you make your back on the envelope math and guide this -- or adjust it and then guide it to the year-end, we are talking about EUR 25 million, maybe up to EUR 30 million of total G&A for '21.
Okay. Just for the -- has anything changed in the structure? I mean HR related, is it making -- well, having less staff or having more staff or -- how can I read that?
Obviously, it's a one-off for the termination of a contract or contracts with our people. So yes, it's a one-off. And it's -- if you look on the numbers of people which we have had in our company between year-end 2020 and the first quarter, you see a clear decrease of staff in our company.
Okay. I understand. My second question would be on real estate debt in the guidance. On Page 10, the revenue split that we see here for real estate debt, the outlook, does it consist of HFS entirely, what we see here in real estate debt? Or how much AFS is inside these figures?
Yes. AFS is included here on a pro rata temporary basis. And the numbers you can see on the same page on the fourth bullet, on the upper side of the slide. We have had there roughly EUR 60 million revenues from AFS. And this is predominantly included in the underwriting and structuring fees of this EUR 30 million to EUR 40 million. And the remainder, of course, is the underwriting fee of HFS for newly subscribed loans or bonds to -- out of the fund.
And this hasn't changed since the communication of the acquisition. We always said it's on a pro rata 6-month basis.
Okay. I see. I see. So in the underwriting structure fees of EUR 30 million to EUR 40 million, there is the pro rata temporary share of the HFS fees inside?
Correct.
Yes.
Next question is from the line of Till Heimlich from Pictet.
I was wondering if you could provide sort of a cash bridge to the 2022 maturity. When you think about today's cash holdings, the disposal proceeds you said would come in by Q2 and then also in the next year, that gets you to maybe EUR 200 million or so. Do you have a contingency or some sort of buffer for that if something wouldn't materialize? And what do you think is the free cash flow you can generate from your EBITDA that you're guiding for?
So what we said in the past, you can see also on Page 9 in the presentation. So to get to the EUR 200 million to pay back the convertibles, the first bridge item is EUR 180 million in short-term bridge loans, which will be repaid over the year. But of course, it makes no sense to let them, so to say, bear negative interest on savings accounts. Therefore, we lend them based on unbelievable over demand in the mezzanine business and obviously received there 18% to 28%. So however, this is going to be planned and is reserved for the repayment of the convertible. And then the second, as always said, is that we are planning in the second half of this year around midpoint EUR 100 million placements from different sources, from our inventories, from our associated JVs and the financial instruments. So this will happen this year. So this gives you another EUR 100 million. On midpoint, we said EUR 80 million to EUR 120 million. So these are the first EUR 200 million. And then thirdly, even next year -- and this is a normal course of business, when you look at our co-investments that we every year place some of these around 30 investments to other clients. So -- and this will deliver another, we assume, EUR 60 million. So when you ask about buffer, we don't need large working capital amount. So therefore, if you take the first 2 items, you have the EUR 200 million plus our cash even -- which we show in the first quarter of EUR 63 million, you have then EUR 260 million, obviously. And if you would need additional buffer, which we currently don't see, then we have our places on the co-investments in the next year plus, obviously, free cash flow production that will happen this year and that will happen next year. So overall, we use the cash currently very efficiently, and I think much on the very high economic base by bridge lending. Although it contradicts the -- at the reporting day, a lower leverage, that's correct. However, we want also obviously to earn money with this. And we are very well-placed and prepared to deliver the EUR 200 million but even more as I just indicated. So that's the plan going forward.
Okay. So you are very confident about your ability to reduce net debt already for Q2 given that we're more than halfway through that quarter now?
Yes.
Absolutely.
Again, maybe to give you some more flavor, if you would want. The short-term bridge lending, this is really short-term money, just to give you the mechanism. Unfortunately, our fund is so over-demanded, which is obviously positive. But that means when further developers ask for money, we are able to use our liquidity, in particular, the EUR 180 million to provide them with loans.And -- but of course, it's short term. So that means, once it's, again, liquidity in the fund, then we flip this short-term bridge as either in the fund as purely -- or it's simply paid back. And when I'm saying short term, I'm talking about weeks, I'm talking about months but definitely not about years. So we have this line item fully under control. And we can steer it, I wouldn't say on a day-to-day basis but at least on a weekly basis. And this is what we are doing.
Next question is from [ Stefan Chapo ] from ZKB Asset Management.
It's a follow-up to what you just sort of elaborating on. So if this short-term lending business is so attractive and there's so much demand for it, and you see, you're saying -- I think you said close to 20%, interesting, you can generate on this. What is the longer-term plan then to continue to be involved in this type of business? It seems to be extremely attractive since you're -- the money that you're currently employing there will be needed to pay down to converge next year. What's the longer-term plan?
So longer-term plan hasn't changed. We want to use this fund to reduce the net debt by paying back the convertible. So that's the first thing. Second thing is -- and that is a strategic element, which has been executed in the beginning of the year with the AFS acquisition. We will, and we are in the middle of doing so, further enhance our equity raising on the HFS -- AFS side. So what does it mean? We have currently, as stated in the past, by the way, a pipeline of around EUR 400 million. So we have asked from developers to provide them loans around EUR 400 million. But the fund -- so our more than EUR 1 billion is currently fully employed as it was always in the past. So the solution to your question and also for us is very comfortable. Once we have increased our equity raising efforts, so that means simply gathering more equity, that's why we have -- there was one reason why we have acquired AFS. Please keep in mind, around 80% of AFS clients are completely new to HFS. So there's a large -- there's no overlap basically or a very small one. So to answer again your question, we will reduce our short-term bridge lending because we will increase our fund's equity money. And there, by the way, we get, more or less, same rate, say, around 17%, 18% interest paid.
Okay. Excellent. And then a final question. I think you were referring to the recovery. And I think you used the word catch-up effects. Can you elaborate a bit on what that is and how you see that playing out?
Yes. Of course, what we have mentioned before, we were struggling in the first quarter still for the entire real estate investment management market in restrictions and lockdowns. And of course, you will see a much more booming market. And this is not only in the real estate investment management, this is for the entire economy in the second half of the year. And of course, people who are a little bit more reluctant on were reluctant in the first quarter to spend money and to invest in projects have to fulfill their own budgets in the second half [indiscernible] . We are still in a lower for longer interest environment even if you would see a small hike on the inflation side in the last couple of weeks. But the baby boomers are still out there. And they spend every single month and year money to the pension schemes. And this money has to get invested. And we, of course, are a natural partner on the real estate side to do this for these insurers and pensioners.
And never forget also historically, the first quarter is always the relative seen weakest quarter. Why is this the case? Because everybody is closing year's year-end in the real estate business. So that means in the first quarter, you start negotiating structuring, buying the assets that you're going to be placed in the second half of the year. So therefore, the double seasonality is now the first quarter as usual. Although I have to point out that we haven't seen this, obviously, in the debt business because anticyclical. COVID rather helps it because banks tend to lend less. But on the real estate equity side, we will see then, obviously, also with the -- as you know, we have also broken now the third wave in COVID. So all of this will help then to generate, obviously, catch-up effects, we call it, yes. But it is -- from our point of view, it's in our budget. It's in our phasing. We are always budgeting. The first quarter is the weakest. And then you have the catch-up effects, which we don't call internally catch-up effects because this is normal course of business, that you're going to place the assets that you have acquired in the first and second quarter, which you place them in the third and fourth quarter.
There are no further questions at this time, and I would like to turn back to Dr. Kai Gregor Klinger for closing comments. Please go ahead.
Thank you so much for listening. We appreciate your interest and your questions. We will be on the road, unfortunately, on the online in the upcoming weeks. Do not hesitate to contact us for any further questions you may have. And please be reminded that our half year figures are out on August 11, and our AGM will be held on June 28. We look forward to speaking to you. So stay healthy, and goodbye.