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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.
Good morning, ladies and gentlemen. I would like to welcome you to our H1 earnings call. Also on behalf here of my colleagues, Hans Richard and Christoph from IR.Let me start our today's presentation here with a short overview on the highlights as well as the key results of the first half year. And afterwards, I will hand over to Hans Richard, who will guide you through further details concerning our operational business as well as the financial part.Okay, to the highlights. Despite the extensive challenges here related to the corona pandemic, we have been able to generate very satisfying H1 results. Here, in order to achieve these, 2 major aspects here have been very supportive during the last corona month. First, our portfolio structure here, including a large number of tenants in systemically relevant sectors, as well as, second, a very close and trustful dialogue with those tenants who have been hit by the shutdown, the shutdown phase and the pandemic situation, especially hard. As a result, we have been able to agree with many of them on an individual basis and are convinced that we are able to find a good balance between a pragmatic and precise support for the tenants as well a fair outcome in the interest here of HAMBORNER, to our company.Meanwhile, our cash collection rate is almost back to a normal level that we also regard as a confirmation for the excellent performance as we think here of our asset management team during the last couple of months. Later in the presentation, we will provide you here with further details concerning this topic. In June, we were able to take the remaining out of 3 new assets here onboard of HAMBORNER and as we think excellent additions to our existing core portfolio.Next to the operational business, we also use the, yes, the special corona situation here for an internal review of our corporate strategy. Yes, if you take into account the initial strategic situation from a property and capital market perspective, we are convinced that our company is in a very good position for an enhancement of its business model. The objective will be to broaden this model by using the existing strength of the platform, and on top of it, adding further potential for accretive growth. More details regarding here our refined strategy, I will provide in a separate update later during this call.Yes. Finally, we recently published a fresh forecast for 2020 and confirmation concerning the dividend for 2019 that has happened just last night. So I guess you have seen the notes here. And indeed, a lot of topics, which should be outlined here in more detail during the next minutes.However, before moving on to that, I would like to give you an overview regarding the major KPIs here for H1. Yes. As you can see in this overview, rental income year on year up, close to 4%, driven by recent additions to our portfolio. On a like for like basis, slightly down, mainly influenced here by lower retail rents, especially within the high street subsector. Operating results driven by revaluation effects here. I get back to this and we get back to this later on. FFO per share, slightly up. Vacancy remains, as you used it from the past, in a way here on a very low level. And LTV also slightly up, influenced by, yes, the mentioned revaluation, however, still as we think on a comfortable level.Yes. And with this short overview, let me hand over to Hans Richard. Your turn.
Yes. Thank you, Niclas. Good morning, ladies and gentlemen, and warm welcome from me as well.Let us now take a detailed look at the developments in the first half of the year. First, a brief overview of changes in our portfolio. Despite difficult overall conditions, 3 office assets in Neu-Isenburg, Bonn and Aachen were transferred to HAMBORNER's portfolio in the first half of the year. The total investment volume came to around EUR 80 million. The properties will contribute a total of EUR 4.2 million to annual rental income, an increase of annualized rental income to around EUR 89 million.We achieved 2 key successes in our letting activities in the second quarter for these assets. At the Aachen property, remaining vacancies of approximately 4,600 square meters released to AOK, an anchor tenant in the insurance sector with a good credit rating for 10 years. The property is now fully let with a WALT of 11.2 years. The final vacancies were also let on a long-term basis at the Bonn property with another sound tenant. The energy and property service provider Insta secured for the location. The WALT is now 11.8 years.We were also active in terms of sales and last week signed the contract to sell a high street property in Osnabrück at EUR 5.9 million. The sale price is about EUR 2.8 million more than the residual carrying amount at the end of June. The sale was therefore concluded under favorable conditions and represents another step in optimizing our portfolio. The transfer of possession is expected to take place no later than the beginning of the fourth quarter.Let us now take a closer look at the tenant structure. The property additions in the first half of the year resulted in a change to HAMBORNER's top 10 tenants list. Barmer, another insurance sector tenant with a good credit standing, moved up to seventh place on the list of tenants following the handover of the office property in Aachen at the start of June, pushing [ Food Discount ] already out of the top 10. EDEKA, Kaufland, REWE and Real are still leading our top 10 list. In total, food retailers currently account for around 1/3 of the company's total rental income. Other retail channels, such as drug stores, pharmacies or do it yourself stores, contribute around 12% of our rental income. Our office tenants, including medical care facilities, medical practices, educational institutions and public authorities, such as the federal unemployment agency, generate around 1/3 of total rental income. Our solid tenant structure and, in particular, the high share of companies providing essential services, the basis for our stable cash inflows, even in these economically difficult times.The next slide gives an overview of our letting situation. The weighted remaining term of our leases for the portfolio as a whole is currently around 6.4 years. While average terms in retail are virtually unchanged at 7.5 years, office lease terms have risen to about 5.1 years on average in the last few weeks. This chiefly reflects letting successes in the second quarter. At an average of 8.4 years, terms for large scale retail yields remained consistently high. The lease expiry schedule shows that the share of leases expiring remains well balanced throughout the next years. As at the end of June, the remaining share of expiring rental agreements in 2020 accounted for 0.9% of total leases. We have already renewed further expiring leases during this month. And so the share is currently less than 0.5%. The renewals and new rentals still pending in 2020 essentially relate to office leases that expire at the end of the year.Let's move on to the current rental situation at HAMBORNER. Despite the far recent restructures on public life and the associated impact on individual HAMBORNER tenants, incoming rent payments has seen surprisingly good performance in the last few months. The rent collection rate fell to just under 90% in April as a result of the lockdown before picking up substantially in the following month up to July, and actual is 97.7%, close to the pre-crisis figure. Most of the payments not made related to retail channels, cheaply fashion tenants and catering tenants that were affected but officially ordered closure of shops or cope with temporary revenue losses. Our office tenants, on the other hand, almost entirely honored their payment obligations. As the percentage of the company's total rent, just 0.2% to a maximum of 0.4% of payments were not made in the period from April to July.HAMBORNER is currently in close contact with the tenants concerned to discuss outstanding rental payments for the period from April to July 2020 and is working hard to develop individual solutions. Mutual agreements have already been reached with many tenants. In this context, temporary rent reductions of just approximately EUR 0.5 million have been granted so far. This represents just 0.6% of annualized rental income. Furthermore, we agreed rent deferrals in an amount of EUR 0.3 million, which corresponds to a share of 0.4% of total annual rents.Leases with these tenants were extended in many cases during the negotiations. The average term of the agreements, impression was extended by about 19 months. In particular, rental agreements with retail tenants affected by the pandemic were extended significantly. The additional rental volume created by all these renewals totaled EUR 7 million. The stability of HAMBORNER's tenant structure is also reflected in the low number of tenant insolvencies. To date, only 2 smaller retail tenants have filed for insolvency. The annual rental volume, associated with this comes to around EUR 130,000, representing 0.15% of annualized total leases. These current figures clearly illustrate that HAMBORNER has a very sound portfolio that has proven relatively resilient even in times of crisis.The next chart include a few details on our half year figures. As already mentioned by Niclas, we generated income from rents and leases of EUR 43.9 million in the first half of the year, an increase of 3.7%, which was mainly due to the property transfers at the beginning of this year. For the same reason, income from incidental costs charged to our tenants was 5.5% higher and came in at around EUR 7 million. Current operating expenses rose slightly compared to the previous year's figures, first quarter, to EUR 9.6 million, an increase of 6%. Net rental income amounted to EUR 38.6 million plus of 4.1% compared to the previous year.Administrative expenses decreased by around 9%, mainly due to the postponement of our AGM, which was originally scheduled for May. Personnel expenses also increased by around 9% to EUR 2.6 million as a result of the changes in the management team. Accordingly, our operating cost ratio rose slightly to 7.3%, compared to 7.2% in the previous year. Other operating income amounted to EUR 1 million. The rise in income essentially related to contractually agreed compensation payments due to delays in transferring ownership of the office property developments in Aachen and Bonn. Other operating expenses were around EUR 1.7 million in the first half of 2020. The item includes corona related write downs on trade receivables of EUR 1 million and is, therefore, significantly higher compared to the previous year. As a result of income and expenses, the FFO came in at EUR 27 million in the reporting period. The corresponding FFO per share amounts to EUR 0.34. All in all, a slight increase of 1.5% year-on-year. And let me point out that we made no corona related FFO adjustments.Moving to the next slide, we'll give you further information on the NAV development. In light of the impact of the coronavirus pandemic, we decided to have our external expert JLL carry out an additional valuation of our portfolio at the end of June. This resulted in a 3.3% decrease in the market value of the like-for-like portfolio in comparison to the end of 2019. The devaluations essentially related to High Street properties that were hit particularly hard by the coronavirus pandemic. This is offset by the acquisition of office properties in Neu-Isenburg, Bonn and Aachen in the first half of 2020, taking it into account in reverse, long term assets rose by 2.8%. Short term assets increased by 6.5% due to higher liquidity and receivables. Long term liabilities were to EUR 671 million in the first half of the year as a result of additional loans taken out as part of the acquisitions. Overall, NAV saw a slight 2.8% decline as against the end of 2019. NAV per share at the end of June came to EUR 11.27.Now a short look at the balance sheet. As already explained, both the long-term assets and receivables at the end of June have increased. We were also able to increase liquidity holdings considerably to EUR 28.6 million by way of refinancing and cash inflows from operating activities. Currently, the company also had further credit facilities of around EUR 50 million that can be accessed at short notice. HAMBORNER's liquidity situation remains compatible. This is also true of the company's financial position. HAMBORNER's equity situation remains solid. The REIT equity ratio of 54.7% is well in excess of the 45% required under the German REIT Act. The LTV at the end of June was 43.1%. We again managed to reduce average financing costs slightly to 1.93%, with average remaining term of our loans decrease in original to 5.2 years.Having already concluded our following up financing for 2020 ahead of schedule, we increasingly turned our focus in the last few weeks to refinancing deal in 2021. In the meantime, we have concluded all planned refinancing activities for 2020 and '22 -- '21. At 1.8% and 1.1%, respectively, future weighted average interest rates are considerably lower than the expiring financing agreements. Hence, HAMBORNER will benefit from the lower rates in the coming years.My colleague, Niclas, will now give an outlook for the fiscal year 2020 and will present the key aspects of our future growth strategy. Thank you for listening, and let me now hand over to Niclas. The floor is yours.
Yes. Thanks, Hans Richard. Yes, let's go on with the guidance and outlook here.As in the meantime, we have a much better visibility on the operational and other effects concerning the corona crisis. Yes, because of that reason, we recently published an updated forecast here for the current year.Rental income should come in slightly higher than last year. FFO will be expected to virtually match here our high level of last year in a range between EUR 52 million and EUR 54 million. Furthermore, yes, based on market value effect here, we anticipate a limited decline in NAV.As a consequence, and yes, especially in -- also in light of the good H1 results here and the improved visibility, we, together here with the Supervisory Board, we decided yesterday to stand by our original dividend proposal to distribute a dividend for 2019 of EUR 0.47 per share. Yes, and we also see this as a signal to our shareholders concerning HAMBORNER's reliable acting. And yes, this irrespective of, obviously, very challenging market environment.The AGM is now scheduled for the 8th of October. However, contrary to our original plans, yes, and in view here of the official restrictions, which are still in place, obviously, it will be held in a virtual format.Looking forward to the next month, we will spend, yes, much further efforts on the closed tenant management as we have done here in recent months. And obviously, on the execution here of our updated strategy, yes, and for this topic, I will provide you now with more details.So let's go on to the strategy update. Let's start with the portfolio strategy of HAMBORNER here moving forward. Yes, major element that will remain unchanged, our 2-pillar asset strategy, which means that we keep being invested in 2 asset classes here. However, what we intend to change is the following year. Based, yes, on a very stable core portfolio, as you know, which we definitely further want to increase in both asset classes, we intend to broaden our investment profile here by a couple of measures. Number one, we want to add properties with greater asset management costs, yes, following, you can call the managed core approach. And these tasks can be, for instance, larger letting requirement, refurbishment needs or also repositioning needs here. Yes, and based on the in-house asset management and the market expertise, we expect that these investments will generate additional attractive returns on a recurring base. In order, yes, to retain the definitely stable character of the total portfolio, we set for now a target range of 10% to 20% for these kind of properties here, which I just described.Yes, and second, on the retail side, we will concentrate even more on properties with a strong food profile. Obviously, a sub asset class, which has performed very well, not only during corona crisis, but especially during the last couple of months here. And as an additional consequence, HAMBORNER will gradually sell its High Street Retail assets. I mean as Richard described to you before that we sold an asset just a couple of days ago, and then we continue to do so in a disciplined manner here.Yes, with this, let me move on to the next slide, which provides you a better overview of where we come from and where we intend to go. Yes, in addition to what I just outlined here on the acquisition side, we intend to unlock further value potential within our existing portfolio here, for instance, by selective development measures. Yes, and this also obviously to create additional value here. And on the development side, one example would be creating additional rental space out of our existing portfolio.From a greater perspective, HAMBORNER will move from a buy-and-hold to an active buy-hold-and-sell strategy, which will include a continuous streamlining of the portfolio. But I just described this will happen here definitely under consideration of clear performance metrics and as well a regularly redefined sustainability strategy. Yes, based on this investment approach, and apart from the growth aspect, we expect a greater flexibility concerning potential market changes, which should, yes, also, in a way, serve as an additional protection regarding the overall quality and value of our portfolio.On the next slide, providing you with more information on our regional focus. Yes, that is -- yes, in steps here of a selection of cities, as you've seen it in the past, defined by category size or other characteristics, HAMBORNER will concentrate here -- its regional focus here on relevant metropolitan regions in the future here. Those areas, including several key cities here, they contribute for the most part of the total national GDP, which you can see on the left side. And within these metropolitan regions, superior macroeconomic metrics, for instance, public and private infrastructure, and other factors can frequently be found here. And as of today, already 70% of our assets anyhow reside in these regions.So concerning office investments, we intend to concentrate on established office locations in key cities within these metropolitan regions with reference to mainly food anchored retail. Based on our profile here, the focus remains on strong micro locations. However, these micro locations obviously can be found in key cities as well as in prospering regional spots, yes. So all in all, this regional focus, this revised -- slightly revised regional focus will provide more flexibility regarding the intended further growth here.Moving on to financing. Yes, with reference to financing and the further growth of the portfolio, we will evaluate here the options to diversify our funding sources by adding public debt to our balance sheet. In addition to that here, we intend to further optimize our current financing. Some points you can see mentioned here on the stage already. Yes, in any case, we are committed to continuing a very disciplined financing approach, fully in line here with our overall balance sheet strategy. And this includes -- this also includes maintaining a solid equity base here with reference to the REIT legislation here for obvious reasons, yes.So last but not least, quick update on dividend strategy. Yes, going forward, we intend to take a slightly broader view here regarding the deduction of the yearly dividend recommendation. And as a result of this, yes, we will build a link to the relevant total return as well as the respective strategic situation and the market environment in which HAMBORNER is placed here. Yes, and depending on the individual situation of the company, this can add an additional contribution to further valuable growth, yes. And in the same strategic context, we contemplate to offer the scrip dividend in the future, which would further strengthen here the internal financing of the company. In any case, yes, we are clearly committed to providing here our shareholders with a reliable and attractive dividend also in the future as they are used to it from the past.So this as an update on strategy. And with this, I would give back to our conference lady if we -- to see what kind of questions we get from your side. Thank you very much for your attention.
We'll now take our first question from Dennis De Jong from Kempen.
Yes. I think it's, yes, fairly solid set of results. Especially on the strategy update, there are some interesting things going on. I remember from last conference call, if I'm not mistaken, that you still intend to keep a 33% office exposure and 66% retail exposure. Now with the 3 offices coming to your portfolio, the value reduction of retail and the plan to sell high street retail, is there a change going on here? Or is the intention still to keep these exposure levels?
Yes, maybe I can -- this is Niclas. And thanks for the question, Dennis. Yes, with reference to the individual exposure in the asset classes, we -- as in the past, we don't see any targets ranges here that we need to achieve. Reason for this being as before that we want to keep the flexibility concerning the further growth path. And as we could see in the past as well, it strongly depends on the individual market environment. And there are phases where you get more interesting office opportunities and then later on -- a bit later on more retail. And in the longer run, typically, it balances out. So the divest decision -- divestment decision for high street retail has nothing to do with kind of balancing thought behind it, yes, so that we want to decrease retail and increase office to a certain extent. I hope this is an explanation, which helps you.
Yes, clear. It's more that selling the high street is -- yes, inevitably leads to less retail exposure. And as you said, yes, in the long term, it does -- well, yes, primarily being the 33%, 66%. But yes, it's fair to say that this is not really the target that is set. So this might change, correct?
Yes, absolutely. That's right. So it can be that the proceeds from the sale here of these -- from these assets -- from the high street assets will be invested mainly in office or in retail. We don't know yet. It depends on what we get in front of us.
Okay, clear. Now as a follow-up of reinvesting the divestments, you say you're comfortable with your leverage. I understand that, but yes, I was actually wondering if you are slowly looking to delever. So I mean, there's no pressing matter to address it right now, I think, but I can imagine that in the future, you would like to have a lower LTV. Well, yes, if we look at the scrip dividend, this would obviously help as well. Yes, and also -- so the buy, hold, sell could contribute to, yes, some delevering strategy there. Now I don't think there has to be like a very significant delevering. But are you looking to delever a bit? And if so, what range would you like to have your LTV yet?
Yes. I mean, it obviously depends on the market situation. I mean, clearly, we -- as I stated, we intend to be disciplined here on the LTV side for obvious reasons, especially in market situations like at the moment, where you rather see pressure on the -- on certain values. Yes, that's clear. And if you look where HAMBORNER from the -- comes from the past concerning LTV levels, I think you have a pretty good -- you can make a pretty good guess on where we are heading to, yes. So slight delevering here from current level. It's definitely something, but it all had to be viewed within the bigger picture, obviously, what kind of product, debt equity, at which costs. And for that reason, at the moment, I wouldn't give a precise range, yes. But historically, HAMBORNER has played it pretty defensively, and I think this is how we want to move forward as well.
Okay, clear. Now regarding the scrip dividend, you say this is something you contemplate. Is that something you contemplate for this year already? Or should I look thereafter?
This is something which we want to make up our mind here shortly. So we will use now the upcoming weeks here to get a better understanding about investors' feedback on this. And this is one reason why, obviously, why we handle this like we do at the moment, that we announced that we have this plan here, which gives us the flexibility for an open conversation with our investors, and then we want to make up our mind shortly. So it could be that it's -- that's going to happen already here in autumn of this year. And yes, we will see within the next weeks.
We'll now take our next question from [ Monica Laycam ] from [ IEZ ].
Yes. I've got 2 questions for the selling side. You mentioned the sale in Osnabrück. I would like to know which kind of buyer is one -- someone who likes to buy high street textile retail property in the moment? So who are the kind of investors that you have to sell your high street retail property to?And also, you mentioned that metropolitan areas where you want to stay invested, and there are 22 properties that are currently outside of these metropolitan focus areas. So can we expect that you're going to dispose of 22 of your properties in the next time? That was my question.
Yes. Thank you, and good morning again to you, Monica. So answering your questions concerning the buyer for us Osnabrück, the buyer comes from a -- had a family office background here. And this is one, definitely in this in this phase, we are in the moment in the market, the market situation, market environment, definitely is one group of investors which we feel remains to have a substantial appetite for high street retail for various reasons, yes, very individual reasons. So we get a pretty good feedback from this site.In addition to that, we see smaller funds being interested in these areas, also private individuals. If you consider the fact that some of our assets are definitely below EUR 10 million, this is also the size range where noninstitutional investors are interesting. So it's an interesting mixture you see at the moment for these kind of assets. And typically, investors, which have had this, have -- seem to have a very long-term view also on these topics here, yes, which I discussed at the moment.Concerning the other assets, which are outside currently of the metropolitan area within the portfolio of HAMBORNER, the answer is no, not necessarily concerning our sales program. At the moment, we concentrate for the time being on high street retail assets and, in maybe a selective number of cases, on smaller individual assets. But that's what we are looking for, yes. So it's not a big sales program apart from what I just outlined here just -- which would be driven by this regional aspect.
We'll now take our next question from Georg Kanders from Bankhaus Lampe.
I have also a question regarding the regional focus. [ A lot of ] focus are now, I think, also attractive cities like Aachen, where you have already 2 properties, or Dresden and/or Freiberg, isn't it? So if you would get attractive opportunities, would you then not consider to grab them?
Yes. You make it pretty difficult for us because you just mentioned a couple of locations that definitely are interesting, obviously, not only because we are invested in those, but also because our -- we strongly believe in the potential of these locations. Look, this is our investment strategy where we try to gain some flexibility, yes. And these are the regions we want to focus to. I don't want to rule out that in the future, we would invest also in 1 or 2 spots outside of these regions, but we want to remain a clear focus concerning our overall portfolio strategy, yes. This could mean that there are locations, which, for other reasons, are not investable for us, yes, because we don't want to jeopardize our overall strategy, but that's the balance we have to find, yes.And just maybe let me add this comment, and I know -- if you are from Germany, you know anyhow. But I mean, that's the good thing about Germany because you can diversify your strategy pretty well. You have so many interesting spots to invest to, also especially on the city side. But we try to give a good guidance here concerning what we're heading to, yes, concerning our future regional investment profile, yes.
Okay. So probably one that's an attractive opportunity and one that's a strategic focus and one that's outside, then you have a clear preference.
Yes, exactly. And then we have to play the cards internally, and then we have to see what we -- what's more important for us. Yes, that's clear. But I mean, just to make this clear, we'll concentrate on these regions, yes. And if we find other spots outside of these regions, the investment story must be very clear and easy to understand. Otherwise, we won't do it, yes.
Okay. Then another question, do you have already kind of acquisition pipeline now? Or it is now -- are you now waiting to get proceeds from sale of [indiscernible]?
No. We -- clearly, we do both things at the same time, yes. We are in the middle or we just started preparations here for the sales here, activities to increase the sales activity and the turnover in the portfolio. And then at the same time, we have as well things we are contemplating at the moment on the acquisition side. Yes, clearly both.
We will now take our next caller, [ George Wallard ] from [indiscernible].
I was stumbling over the line in your profit-loss statement, which said that maintenance decreased by 5%. And I would like to know if you can elaborate on that a bit further. And especially, if you could tell us something about the environmental footprint of your properties. I guess, the environmental aspect is going to get more important in the future. So the follow-up question would be, how much of your maintenance budget is dedicated to environmental improvement of your properties?
Yes. Hans Richard, do you want to paint a little bit about our maintenance budget here about the numbers?
Yes. Yes, of course. About the maintenance numbers, you saw that actually big part there are costs for changes of the tenants, so that we have some refurbishment to do it. We have now new tenants. There, we have not so much money in the first half year, what you have need for this. And again, where we don't know exactly what will be the liquidity situation during the lockdown period, we have shift some measures in the next year. So that's the reason for the lower numbers here.And I think for the environmental, Niclas can give you an answer.
Yes. So just that I get a better understanding of what you're heading to, you try to understand what kind of -- what part of our budget is reserved for environmental-related matters within our CapEx and technical exposure, yes?
Yes, exactly.
Our maintenance budget?
Housing and real estate is one of the major contributors to climate change-related issues. And I guess, the regulation is going to get more strict in the future. And so the question really is, yes, what do you do about heating and isolation and all that -- these things?
Yes. But perhaps I can describe this a little bit. We don't have a specific budget for this, and I think it's simple. But if we have any refurbishment to do, then we see that we built in the newest technology. So for example, for heating, for isolation of the roofs, for changing windows and so on. But there's, at the moment, no specific money what we have reserved for these things.
We have another question in the queue. [Operator Instructions] Our next question comes from Thomas Martin from HSBC.
It's Thomas Martin, HSBC. Just a few questions on your new strategy. Obviously, you've become a bit more total return-driven. Here, my question would be, do you have a concrete target total return for the group? And on your Manage-to-Core assets and, let's say, refurbishment, value-enhancing investments, do you have for this also a concrete target yield on cost in mind? That would be interesting for me to know.
Yes. I mean, I can't give you at this stage at the moment here defined target returns. Reason for this is because, as I outlined before, we will now make this dependent on what kind of targets we see outside and as well within our portfolio. However, I can assure you that we definitely will have -- and that's a point of which we have put on the presentation as well, that we will very carefully look at what we are doing here is accretive. And on the value-add side, I would expect it to be highly accretive, definitely, what we're doing. So we will run every investment measure here through a detailed investment schedule process.And definitely, I mean, our key drivers here are our FFO, our capital costs that we have. And I would expect typically for value-add-driven projects to have a substantially higher return for this, let's say, within the spread, maybe give you a range of the 150 to 300 basis points. Yes, that's what I would expect, depending, obviously, on the individual risk profile, yes, that you have. And that's why I'm a bit shy of just giving you a precise number because it obviously is a difference if we buy, for instance, a property with a 20% vacancy, which can be reduced to 5% within a year; or if we have a property, which has to be fully refurbished with substantial financial management and time exposure here. And -- but give you a kind of range here, hopefully.
Okay. And then maybe a follow-up question. I mean, you have a target structure now, 10%, 20% Manage-to-Core assets in both segments. But obviously, I think you have already screened your portfolio in detail. And can you quantify already the portion of your existing portfolio? Where do you see potential for value-enhancing investments? Do you have already a concrete percentage?
Yes, yes. Not a percentage because these are the individual measures, and we have to be fair. We have to be -- we have to define, really, in what order and with, based on our resources, how many we can do at the same time, so that works out here for a kind of forecast, yes. But to give you an example, the property we just took on board here in Bonn has a substantial reserve, this facility there, to create additional office space, a couple of thousand square meters. So just to give you an example here, yes.In the past, HAMBORNER would have automatically more or less done this together with a project development partner and would have most probably then taken onboard as they have done in the past also with this property, newly constructed property once it's done. In the future, this would be an opportunity for us to create value by ourselves here out of our own resources to take the additional return here on our P&L, yes, just to give you an example.In other properties, we have some larger retail assets. For instance, we have the options to remodel internally the room structure within these properties substantially and to reposition these assets as well. And so all these assets are -- have a very different investment history and investment potential. And therefore, we are -- at the moment, we are on our way to underline this with the financial KPIs here.
And then maybe one last -- another one last question. Regarding time line, I mean, you just mentioned you have no concrete, I think, acquisition pipeline. But within the existing portfolio, obviously, some potential. Any time line you can share with us when you plan to start your first value-accretive or value-enhancing investments [indiscernible]?
I can tell you that we are, right at the moment, looking at those kind of assets. So we are the middle of, yes, acquisition search here for these assets. So it's not that we want to wait a couple of months for this. As soon as we think we found the right asset, we're going to start right away, yes. But we definitely will also increase the internal resources here with HAMBORNER in the upcoming months to be able to work on these projects. And therefore, you can say it's a parallel track, yes. We want to onboard these kind of assets as soon as possible. And parallel to it, we upgrade here our internal resources concerning this profile.
We'll now take next question again from Thomas from Jefferies.
Just a follow-up on the Manage-to-Core product you plan. Actually, what kind of investment or what kind of costs can we expect, for example, this year? And is this already considered in your updated FFO guidance?
Yes, Thomas. Additional costs for this are not included on our cost side. I mean the reason is simple because, first of all, we need to find an asset or 2 or 3 assets which we can work on, if we are talking about the acquisition side, yes. Within our portfolio, our own portfolio, I think it's fair to assume that we will take the next couple of months for internal preparation and don't start before beginning of next year so that there will be no other costs apart from what we already calculated will come to HAMBORNER. So for that reason, it made for us no sense here to put in kind of cost budget until end of the year as long as we don't know what kind of assets, at which size and based on which timetable we want to work on.
Okay. But what are the key capacities, actually, you need to build up from here?
It's quite simple. It's quite simple. I mean, as you can imagine, during the last couple of months on the corona side, our asset management was pretty much under stress, as the tenants were, and spend a lot of time, much more time than normal on coordinating everything here internally. And for that reason, as we expect this to continue for a while, our internal resources are at the moment a bit more stretched than you would normally expect. So as soon as this slows down, we can move resources on the other side. And also, I mean, you know that HAMBORNER didn't have a development history in the past. And for that reason, we are upgrading as well our team here with, for instance, development expertise from outside. So we are currently hiring the relevant people here.
So I see, overall, you would expect that to be rather cost-efficient new approach?
Yes. I mean, as you know, you never get it all balanced to the same time, yes. But what we are talking about here, we're talking about 2, 3, 4 people that we are hiring here in the next phase. And at the same time, we are identifying and preparing and onboarding first assets. And I mean, I'll give you an example, it can be an asset where we can work on the right way within the next couple of months. It could be as well in assets where, whatever, the asset is just fully let for another 1 or 2 years, and we have sufficient time to prepare ourselves for the substantial measures we have been done afterwards. So therefore, it all depends on the asset itself if you have it in front of you.
Okay. Maybe one question on property valuation. You did an update as of H1, which brought a negative and actually marks down. And as I understand it correctly, it's mainly driven by high street retail. Could you provide a bit more color on this valuation update? For example, how was the performance per segment? Let's take high street retail and let's take the other retail and maybe office, just to get a rough idea how values developed in each segment.
You mean on the operating side, or on the valuation side? Sorry.
No, on the valuation side.
Yes. Okay. So I think -- I mean, on the office side, the outcome has been slightly positive, I mean, just a notch, yes, for our existing office portfolio, which has various individual reasons in some office assets, yes, where -- but we are talking about a slight upside here that we have -- that we could see.Then on the retail side, I think you have to differentiate between the high street retail and the large-scale retail. And we have taken down values for a smaller number of large-scale retail assets because we want to be -- we are rather -- yes, follow cautious paths here concerning specific topics. For instance, you know that we have a couple of Real areas here or -- as a major tenant in our portfolio, where we -- after the sale now which has happened, we have some unclarity at the moment about how it's going to proceed in the future.And on the high street retail side, I mean, for obvious reasons, as you can see in the market, yes. I mean, they have suffered tremendously next to restaurants, from -- in their payment facilities and hotels. They have suffered a lot from the lockdown. And anyhow, this industry is currently under substantial pressure in various ways. And for that reason, the largest impact here comes definitely from the high street side.
And what was the magnitude of the markdown in high street retail, just roughly? Was it minus 5%, minus 10%? Or...
No, we have taken it down, minus 15%.
And how is the rent development in high street retail, roughly like-for-like, yes? Or negative is this currently?
Well, you have seen in the figures like-for-like that we have a small [ development ], and that indeed is coming from the high street in here from the rents, especially fashion and other parts, other brands, but especially fashion.
And what's the magnitude roughly, what would you say, in the high street retail rent decline?
We don't have any segment reports, so I don't have the figure, the exact figure here for this. I'm sorry.
But roughly, can you provide a rough figure? Is it like -- is it more than minus 5%? Or...
No, it's less than 5% for overall. Otherwise, you wouldn't have this like-for-like of minus 0.3%. So that you have 1%, 2% perhaps for the -- only on the high street sector.
Okay. Maybe a very last question on your liquidity. Maybe you can provide a rough outlook considering that you paid a full dividend in the second half.
I'm sorry, Thomas. I didn't get the question.
Yes, maybe if you can provide a rough liquidity picture or outlook from here considering that you paid dividend in the second half.
Yes. Okay. I mean, I think we have published here our liquidity as of end of June. Meanwhile, we have onboarded additional liquidity in the past couple of weeks, and this amounts up to the volume that you see here moving forward, yes. And then if you deduct liquidity and take a normal operational business, without any substantial ups and downs, you can see that we are moving forward on a, as we think, very solid liquidity level. And this doesn't take into account any kind of additional sales at the moment here, sales proceeds from high street, yes. So this is based on where we stand at the moment, so concerning that we haven't sold yet, yes.
We'll take our next question from Simon Stippig from Warburg Research.
I actually have 2 questions, and the first one is in regard to the portfolio development. And you acquired and onboarded those 3 assets in Neu-Isenburg, Bonn and Aachen. And I wonder what the vacancy was Q1 '20 over Q2 '20. Could you just give me an indication of that?
You know that we have acquired this asset with rental guarantees. So there was no change.
Okay. Great. So there are no lettings or any new lettings with regard to office and rental levels that you could give an indication on?
I've given you the figures that now at the moment -- or now it's fully let Aachen and Bonn. And we have some rental guarantees in Neu-Isenburg, where we are working on this.
Okay. Great. And those would be -- I mean, even in the part of rental levels, is it being let in the last months at the levels you saw before, even though it has no direct impact on your rental guarantee? Do you have any insight into that?
Yes. It's, in both cases, a little bit better than the rest of guarantees was.
Okay. Great. And then to the second part of the portfolio development question, you had this asset disposal in Osnabrück. And I just wonder if you had a revaluation also downwards of your hidden reserves on those assets. We see you have a very nice profit on book value. Just wonder in regard on the hidden reserves issue, if you had a little bit higher hidden reserves earmarked to that property.
Sorry, I was on mute. The -- from 30 -- end of last year, our market value for this property was worth EUR 6 million.
Okay. Great. And then my -- yes, that's perfect. And just one last question. I wonder about your -- I mean, I definitely like the strategy update, and I think it's a great idea on the scrip dividend and to give investors this option. I just wonder in regard to capital allocation right now, don't you think that [ diverse ] would be the better way to go just in regard to your discount as well as your FFO yield on your current share price, and then you would actually pay a dividend with a very nice dividend yield and in regard to your yields on the acquisitions you undertook? I just wonder in regard to capital allocation, if there wouldn't be a better way actually to right now allocate capital, especially also, as you indicated, 100 to 300 basis points of spread to your current yields on the portfolio as the opportunity in Manage-to-Core strategy update.
Just that I get your question right, do you mean by -- instead of offering a scrip dividend, to use the existing facility frame to do further investments? Or -- I'm sorry.
For example, and just in regard -- I mean, you would issue shares at a discount -- at a huge discount to NAV. So in regard to NAV, that will be dilutive. So I just wonder if it wouldn't be [ diverse ], would be my -- would make maybe more sense. Or do you actually delay the scrip dividend until next year, and your discount to NAV [ would disclose ] maybe?
Yes. But you see -- I mean, first of all, scrip dividend based on its structure, it's offered. I mean, it's upon the decision of the shareholder if they want to use this opportunity, yes. I mean, that's -- I mean, obviously, for technical reasons. So it's in the hands of the shareholders. It's not in our hands once we offer it.And secondly, I think, I mean, it depends on how you look at it, yes. Scrip dividend offers, I think, additional options for shareholders, which is very beneficial to them, yes, and that they can make up their mind individually if they want to use it or not. And for us, as a company, it offers the option for additional -- to strengthen the internal financing, yes. Yes, you are talking about the current share price level, yes. But to be fair, I mean, if you look at the amount of the dividend compared to the total market value or if you compare it to a large capital increase, and then depending on the acceptance level of a scrip dividend, of course, I mean, in a greater context, we are not talking about a huge impact here on the value, yes.
Okay. Let's go -- maybe let's go one step back then in regard to capital allocation. And to be more concrete, when you agree that it's more sensible and more efficient in capital allocation to purchase back shares.
Yes. This could be as well an option. I'm with you. However, from a internal financing perspective, at the moment, in this market environment, we rather intend to keep our liquidity here together and to be -- and if we see investment opportunities, then follow these investment opportunities.I mean, HAMBORNER hasn't done any share buybacks in the past. And to be honest, to communicate an updated strategy and then starting as a first initial step using the remaining liquidity to buy back shares, I don't think that this would be a very trustful signal to the market, yes.
It appears there are no questions left in the queue at this time. Sir, there are no questions.
Okay. So if there are no further questions, then let's say, thank you very much for your attention, for participation and questions. And if we can give you any further insight, please just get in touch with us, yes. Thank you very much.
Thank you very much from my side, too.