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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, and welcome to the Conference Call Q1 Results 2022 of HAMBORNER AG. My name is Josh, and I will be 1 of the technical operators assisting with today's call. Please note that this conference is being recorded. [Operator Instructions] I'll now hand you over to your host, Niclas Karoff, CEO; and Hans Richard Schmitz, COO and CFO, to begin. Thank you.
Good morning, ladies and gentlemen. On behalf of my colleague, Hans Richard and Christoph from IR as usual, I would like to welcome you to our Q1 earnings call. Yes, Hans Richard and I will lead you through the results of the first quarter of this year, and also would be happy to discuss your questions later on. Okay, let's start with the key figures of Q1. Yes, despite various current economic challenges. I think we had a good start into 2022. Rental income of EUR 20.8 million, slightly below last year, mainly influenced by the substantial sales activities during 2021. FFO decreased to EUR 11 million, influenced by higher maintenance costs especially. Financing structure remains very solid with REIT equity ratio at 60.8% and LTV slightly lower compared with the year-end at 41.1%. EPRA NAV per share increased to EUR 12.23. And yes, as usual, Hans Richard will provide you with further details on financials during the presentation here. For that reason, I will leave it with that. Moving on to the portfolio key metrics of first quarter. Fair value, slightly up, reflecting our new asset in Freiburg as well as the sale of a High-Street asset. our most recent retail acquisition in Kempten, by the way, is not included in this overview here. From now on, we present our key portfolio data, not divided by asset class, but also by core and manage to core. The differences are quite visible concerning yield, WALT and vacancy, and you can find them here on the right-hand side of the slide. Overall, thanks to our successful letting activity, both WALT with 6.1 years and occupancy rate remains at a high level. On a like-for-like basis compared to last year. Total rent volume went up by 30 bps, driven by the office segment, whereas the rent development on the retail side has been influenced by the reletting of the Real areas. The same applies to vacancy rates -- vacancy rate and WALT, just for your information. In addition, so -- can we move on, I'm sorry, to Page 4, acquisitions quick overview. Yes, on this page, let me briefly introduce our most recent acquisition here for our core portfolio. The DIY Store is located in the city of Kempten in Baden-Wurttemberg. Kempten is characterized by highly attractive economic and demographic trends. Great -- good centrality rating and good future prospects. The property benefits from a good traffic location, yes, and additionally, distinct visibility and also extensive parking facilities. Main tenant based on a long-term lease is toom, a subsidiary of 1 of our top tenants, REWE Group. And the property is currently fully let with a WALT of around 11 years. The building is equipped with a modern pellet seating and large-scale photovoltaic system. And furthermore, the property has the potential for further extension here. The assets came in as -- in at a gross initial yield of 5.1%. So with that, let me move on to the overview concerning our portfolio rotation. Yes, we have updated this overview regarding our rotation since the start of our activities in 2020. And this now also includes the most recent acquisition in Kempten. Meanwhile, by volume, slightly less than 2/3 of the original sales proceeds have been reinvested. I think, it's around 3 -- 62% to 63%. Looking forward for the remainder of this year, we will concentrate our activities on finding attractive further assets for our core as well as our manage to core buckets.
Yes, and with these short comments, let me now hand over to Hans Richard.
Yes. Thank you very much, Niclas. Good morning, ladies and gentlemen, and also a warm welcome from my side. Let us now have a closer look at the operating and financial figures for the first quarter of this year. At first, let's have a look at our FFO development. With a total of EUR 20.8 million, income from rents and leases went slightly down compared to previous years, mainly related to the disposal of various retail assets during the last 12 months. The rent reductions of around EUR 2.2 million, partly offset by additional rental income from acquisitions of around EUR 0.8 million. Total maintenance expenses increased to around EUR 1.9 million year-on-year. The expenses related to regular minor ongoing maintenance and various smaller planned measures. On the 1 hand, the increase of nearly EUR 1 million due to previous year's COVID impact, where maintenance was significantly reduced. On the other hand, further measures original planned for Q4 2021 have been postponed to the beginning of this year, partly due to delays in the application of building permissions, for example, in our former Real locations in Celle and Giessen. In total, around 10% of the total Q1 maintenance costs are related to those 2 properties. For the rest of this year, we expect additional expenses of EUR 2.5 million to EUR 3 million for the former Real properties, depending on the time receiving the approval of outstanding building permissions and further progress regarding the reletting of remaining vacant spaces. As a result of higher maintenance, net rental income amounted to EUR 16.8 million, a decrease of 11% compared to 2021.
Administration expenses increased to EUR 0.6 million, essentially due to higher expenses for cash deposits. Personnel expenses remained nearly unchanged year-on-year. Lower interest costs resulted from scheduled repayments and expiries of loans during the last month. As a result of income and expenses, the FFO came in at EUR 11 million in the reporting period, a decrease of 13% year-on-year. The corresponding FFO per share amounts to EUR 0.14. Now let's have a short look at our NAV and NTA development. After the significant revaluation uplift at the end of last year, the consistently solid earnings situation had a further positive impact on our NAV. FFO contributed with around EUR 11 million to the NAV development and led to an increase of 1% compared to end of December. NAV per share amounted to EUR 12.23 by end of March. As in previous reporting periods, there is no material difference between NAV and NTA. Let me now continue with an update on our tenant structure. Compared to year-end 2021, there are no major changes in our top 10 tenant list. As a result of the transfer of the acquired retail assets in Freiburg in March, our DIY exposure increased by 140 bps to 10.4% and the tenants, the REWE and OBI switched places. Our retail properties currently contribute with around 57% to total annual rents, while the share of our office tenants is around 43%. All in all, our channel structure remains very solid and forms the basis for further reliable income in the remainder of the year. Now a few remarks on the current letting situation. Despite the ongoing challenging market conditions, we achieved initial letting successes during the first quarter, and were able to conclude leases for around 17,500 square meters, primarily related to contract extensions with existing tenants. The remaining leases outstanding for renewable in the course of this year only correspond to around 5% of our total annual rent. And we are confident to further benefit from the high level of satisfaction among our existing tenants. The weighted remaining term of our leases for the total portfolio is around 6 years. The WALT in the retail and office portfolios are still at a consistently high level at 6.9, respectively, 5.1 years. Now a few remarks on our financial situation. HAMBORNER's financial situation is continuing to remain very solid. The REIT equity ratio amounts to 60.8%, and is therefore well in excess of the 45% ratio required. The LTV at end of March was at 41.1%, and our EBITDA to interest coverage ratio still shows a solid value of 4.5. Compared to previous year, we successfully reduced average financing costs slightly to 1.6% with an average remaining term of our loans of 5 years.
Last month, we have finished our refinancing activities for the current year and signed follow-up agreements for all the loans scheduled for refinancing in 2022. The agreed financing terms are still attractive, with an average interest rate of 1.6% and an average maturity of 6.3 years, given the current interest environment, and favorable terms.
So far from my side, thank you for listening, and let me now hand over to Niclas for a short outlook.
Yes. Thank you, Hans Richard. I will keep it rather brief. Finally, short -- short overview on our outlook, despite the growing uncertainties in connection with the geopolitical and economic developments here. We stay with the guidance for our main KPI, rental income, FFO and NAV per share, as well as our midterm outlook. And as pointed out before, substantial influencing factors for our business performance here in 2022 will be the results of our acquisition activities.
Yes, with that, I will close our short overview. And now as a team, we are happy to take any potential questions from your side.
[Operator Instructions] The first question comes from Philipp Kaiser.
A solid start to the year. Just two questions. One, regarding the cash recycling. I mean, that's the focus for this year. Could you might shed some light on the acquisition pipeline, you currently have and also your view on the -- on market prices, so -- in regards to eventually rising interest rates and then share value adjustment of potential acquisitions? So is it a plan to acquire most of the envisaged investment volume in the second half? Actually you might see a decrease in prices or what's your view and could you shed some light on the acquisition pipeline? It would be the first question from my side.
Yes, Philipp, this is Niclas. I'm happy to answer your question concerning cash recycling. I think what you've seen in the past quarters, it's what we expect as well probably remainder of the year as of today. I mean, we think we have -- we are pretty happy with our existing pipeline at the moment. Never the line, the acquisition processes take a while. And on the other hand, market prices, yes, it's -- as of today, I wouldn't say that you see the change in the interest environment reflected fully in the investment market, at least what we see. I mean, obviously, we see just a small step short of the entire market, but that's our perception at the moment. However, we -- I think, moving forward because, obviously, we're in a pretty dynamic environment currently concerning interest rates, I think at some point in time, there should be a reflection also on the market side, yes. That's clear. But concerning cash recycling during the remainder of the year, as of today, I would rather expect that we go step by step in the further course of the year and then see that we find, not only identify, but also execute hopefully some good transactions, as we've done in the past.
Okay. So there are still lots of attractive assets on the market and nothing to worry about the cash recycling?
Let's put it this way. We have to be very selective for different reasons. One is that still -- as I pointed out, we are in an environment -- the market environment where the price expectations on the seller's side are still substantially high. On the other hand, I mean, based on our investment profile, we want to keep this approach of being very selective and rather wait a few weeks more and then be more comfortable to find really the right assets, instead of just speeding up for the sake of recycling the cash. I mean, for us, key is that we find good assets, which have a long-term strategic fit to our portfolio and where we really have a strong belief that also on the operational side, we will be able to deliver our goals here.
Okay. Okay. Perfect. That's very helpful. And my second question is regarding, I mean rising interest rate and refinancing, of course. Do you see some headwind on your operations from, yes, refinancing due to higher rates? So is there any risk you see from this point of time?
No. At the moment, no. I've told you that we have finished our refinancing for the year 2022, where we expect higher interest rates. This is for new assets, what we will acquire in the future. Here, you will see higher prices, yes. I think, in line with the normal development for the interest rates.
We currently have no questions coming through. [Operator Instructions] The next question comes from the line of Vance [indiscernible].
So I have only three questions for you today, if that's okay. First, could you provide a breakdown of the like-for-like financial growth and mostly relating to indexation? Second, what indexation levels are you expecting for the full year 2022? And third, could you please elaborate more on maintenance? So as I understand, the increased maintenance is a catch-up effect, but should we expect it to go down to normalized levels back pre-COVID, so 1.2% to 1.4%? Or should we expect it to stay elevated?
For the year 2022, you will see more maintenance. I have described this is coming mainly from the Real assets, where we have to do something for -- to split here the space. And I don't see this -- this will come sharply down in the following years. So we will have all the time, relative high maintenance costs in the future. The other two questions was regarding to the indexation. The like-for-like increase now in the actual -- on the first quarter, you can see it was mainly running on the office side with a plus of 2.7%. And on the retail side, we had a small minus of 1.4%. And then this results overall for the whole portfolio in the plus of 0.3%.
Okay. Lastly, what indexation levels are you predicting for the full year?
It very depends from the coming inflation rates. Here, we have to look month-to-month. And then we can see, if this happened, you know the specific parts we have for our indexation schemes. We have a lot of contracts, especially in the large scale retail, where you have to collect month by month. The inflation up to a 10% level and then you can turn the key.
There are no further questions, so I'll hand back to your host to conclude today's conference.
Yes. Then on behalf of my colleagues, thank you very much for your attention. And as usual, if you -- should you have any further questions after the call, please don't hesitate to get in touch with us and hopefully, we will be able to help you. And for now, thank you very much again, and have a good remaining week. Bye-bye.
Thank you very much from us too. Bye-bye.
Thank you for joining today's call. You may now disconnect. Hosts please stay on the line and await further instructions.