Deutsche Konsum Real Estate AG Stock

Ladies and gentlemen, welcome to the Q3 2025/2026 financial results conference call. I am Shari, the Chorus Call operator.

[Operator Instructions]

The conference is being recorded.

[Operator Instructions]

The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Daniel Lohken. Please go ahead.

Thank you, operator. Well, good morning, everyone, and thank you for joining us today. My name is Daniel Lohken and I took over as CEO of Deutsche Konsum on 1st of July this year. Joining me today in Potsdam is our CIO, Lars Wittan, who will guide you through our results in a few moments. However, before we get to the numbers, please allow me to briefly introduce myself. While this is my first earnings call as Deutsche Konsum's CEO, the company is, in fact, familiar to me from my time as Chairman of the Supervisory Board.

So when I stepped into this role, I already had a solid understanding of our business, our portfolio, our financing structure, and the restructuring process.

Let me briefly touch on my professional background. I'm qualified as a lawyer in both Germany and New Zealand. And over the past 20 years, I have worked across real estate, finance, law, and capital markets. Before joining Deutsche Konsum, I served on the management board of Hahn Group and Corestate Capital Group.

Going back a little further, I held senior positions at Vonovia and IKB Deutsche Industriebank following my time at Clifford Chance, where I advised on infrastructure and real estate finance transactions.

Throughout my career, I have worked in situations that require financial discipline, access to capital, and close engagement with shareholders, investors, lenders, and other stakeholders. Obviously, all this is directly relevant to where Deutsche Konsum stands today. Looking ahead, our priorities are clear. We are focused on executing our restructuring plan, strengthening our balance sheet, improving our financing profile, and actively managing our portfolio.

At the same time, we are committed to transparent communication, predictable execution, and delivering on the commitments we made. We know that trust is not rebuilt in a single quarter. It is earned through consistent execution quarter after quarter. That is what you should expect from us. With that, let me hand over to Lars, who will take you through our results.

Thank you, Daniel. And I would also like to extend a warm welcome to all participants in today's earnings call covering the first 9 months of the fiscal year. Let's start on Page 4. In year-on-year comparison, rental income has declined by EUR 4.7 million, primarily due to asset sales. Net operating income has declined only slightly by EUR 0.6 million. As in previous quarters, interest expense declined significantly, falling by approximately EUR 8 million to EUR 10.7 million. Funds from operations amounted to EUR 14.5 million, representing an increase of EUR 4.6 million compared with the prior year period. FFO per share is EUR 0.18, reflecting a 24% decrease due to the higher number of shares outstanding following the capital increase.

On the disposal side, the transfer of the 8 properties sold has been completed in May as announced during our previous earnings call. Overall, market conditions for property transactions remain challenging. Investor sentiment is still cautious, while the supply of assets available for sale remains elevated. At the same time, financing conditions have become more restrictive for prospective buyers, further dampening transaction activity. Nevertheless, we remain confident that we will complete the disposals required to stay on track with our restructuring plan.

As many of you will recall, as of January 1, 2026, DKR had an unsecured overdue interest receivable from Obotritia Capital amounting to EUR 16 million. During our last earnings call, we informed you that we had entered into a binding term sheet with Obotritia regarding the restructuring of debt receivable. This transaction has now been successfully completed. In July 2026, Obotritia has issued secured interest-bearing bonds with a nominal value corresponding to the receivable, which were subscribed by DKR. As a result, Deutsche Konsum has replaced an unsecured receivable with a secured bond instrument, therefore, improving its creditor position.

As expected, our key financial metrics changed following the debt-to-equity swap. Our LTV ratio improved to 41%, while our interest coverage ratio increased accordingly. At the same time, EPRA NTA per share declined to EUR 3.64, reflecting the increase in the number of outstanding shares. On Page 5, there are no major updates regarding the implementation of our restructuring plan.

During the last quarter, we successfully completed the capital increase. As already discussed, the execution of the planned property disposals remains the key priority.

Please turn to Slide 8. Our portfolio currently comprises 140 properties with a total lettable area of approximately 884,000 square meters. Based on the updated property valuations, the portfolio multiple stands at 11.8x, while the average property value amounts to EUR 807 per square meter. Regarding the vacancy rate, we already explained during our previous earnings call that it was affected by Hammer insolvency as well as the departure of a tenant occupying a large retail unit.

Please turn to Slide 10. The tenant mix remains broadly unchanged compared with our previous reporting, and there are no material developments to highlight in the reporting period. One point worth mentioning is that 86% of our leases are CPI-linked, providing a high degree of protection against inflation and supporting the resilience of our rental income.

Finally, please turn to Slide 12. This slide provides an overview of our current financing structure and debt maturity profile. As you can see, the majority of our financial liabilities mature in 2027, reflecting the agreements reached with our lenders as part of the restructuring process. The significant reduction of financial liabilities and changes of other debt-related KPIs are primarily attributable to the debt-to-equity swap, under which approximately EUR 120 million of debt was converted into equity. That concludes our presentation. Thank you very much for your attention. Operator, we are now open to take questions.

[Operator Instructions]

There are no questions at the moment. Ladies and gentlemen, as there are no questions. I will now turn the conference back over to you for closing remarks.

Thank you, operator. Let's just wait for 1 more minute in case there are any questions.

[Operator Instructions]

So, thanks to all of you. It was a pleasure speaking to you. Have a good day, and speak to you soon. Goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the H1 2025-2026 Financial Results Conference Call. I am Sandra, the Chorus Call operator. The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Kyrill Turchaninov, CFO. Please go ahead, sir.

Thank you. Hello, and welcome, everybody, to Deutsche Konsum Real Estate AG earnings call -- analyst call for the first 6 months of the financial year '25-'26.

We will start the presentation on Page 4, where we have highlights for the first half of the financial year. So we have a year-on-year comparison on the rental income, which decreased as expected, predominantly or mostly due to the asset sales. FFO year-on-year went up by EUR 5 million or so. And of course, there are many moving parts behind FFO. Rental income is down due to sales, the property operating expenses as well. However, the major moving part or the major effect comes from the interest expense, which is about EUR 5 million lower than in the first 6 months of the prior financial year.

Last time, we reported that last time was in February, we had our last earnings call, we reported that the contract for the sale of 8 assets was signed in December. And in April this year, it was closed. The cash we received was EUR 10.2 million. However, EUR 24.5 million of the total sales proceeds was used to pay down debt, which was secured by those assets.

As we also mentioned last time, Obotritia did not pay back the loan of EUR 16 million, which was, of course, on the balance sheet fully provided for and exclusively accumulated interest. We looked at various options for how to proceed with this, and we have also consulted our legal advisers. And under the circumstances, we decided that the best possible scenario is to enter into a term sheet, a binding term sheet with Obotritia, which effectively replaces the existing unsecured noninterest-bearing EUR 16 million of receivables with an instrument, which is a debt instrument, interest-bearing and secured. We are in discussions right now to finalize the contract, but the term sheet with main heads of terms was already agreed and signed with Obotritia.

The KPIs after debt-to-equity swap are as expected. Last time, we said that pro forma loan-to-value is going to be around 41%. And indeed, after the successful execution of capital increase and debt-to-equity swap, LTV is 41.1%. Other KPIs were also affected as expected by such debt-to-equity swap. The average weighted debt costs are higher than in the first quarter of the financial year, and those were 2.92% at that time. The effect is again due to debt-to-equity swap. We do not have the debt, which was used for debt-to-equity swap anymore on the balance sheet, and it was noninterest-bearing in the in the first quarter of the year.

Let us turn to Page 5, where we have some highlights or some information on the restructuring plan. As we already said on a few occasions, the Extraordinary General Meeting on the 4th of December approved the capital increase and the debt-to-equity swap, which was formally in effect with the registration on the 13th of February this year. The new shares in amount of EUR 59.6 million approximately were issued, which also included 166,000 shares for cash contribution and the entire share capital increased as shown.

Also, as expected and communicated, the voting rights of the shareholders that holds more than 5% of the shares are VBL with 60.5%, of Obotritia or Mr. Rolf Elgeti with 11.8%, and the free float of about 27.7%. Even though the debt-to-equity swap was, of course, a major part of the restructuring plan, we still have to continue with our sales to stay on plan and obviously to reduce debt from the beginning of the restructuring and the beginning of restructuring was that Q2 of the last financial year, so from January to March '25. And since then, about EUR 78 million of sales volume was executed.

The market remains difficult. There are obviously known geopolitical macroeconomic factors. So both sides, the investor side and also the financing side are affected by this development.

We can now turn to our portfolio details, which are on Page 8. At the end of the 6 months, well, on the 31/03/26, we have 148 assets, 3 assets closed in the 6 months. Well, the sale, which I mentioned earlier of 8 assets closed in April, so that was after the balance sheet date. The developments on the KPIs for the properties are as expected with one notable exception, and that is the decrease in annualized rent as well as the increase in the vacancy rate.

Now the 2 major events happened. One of a large tenants that we have did not renew a lease in one particular property for a substantial amount of square meters. And unfortunately, earlier in the financial year, one tenant declared bankruptcy, and therefore, we also have vacancy due to that as well as the reduced annualized rent. There are some offsetting leases. In the 6 months, we signed a total of 15 commercial leases, which excludes the small leases for the very small actually some apartments. However, those are and are not enough to offset the loss due to the vacancy.

We can now turn to Page 10, where we show our tenant structure, which did not show significant changes or developments other than those expected from the asset sales. One of the major items here is the CPI-linked rent. So we are still into 84%. So a substantial part of our commercial leases are linked to CPI, which especially is valuable and provides obviously stability in the current inflationary environment.

We also have details on Page 13 on our financing. We show here a maturity profile. And as last time or in last presentations, a bulk of this happens in '27. That is certainly due to our restructuring and various agreements which we have entered with the creditors. The maturities are in September '27. And until then, there are no maturities. The small amount of about EUR 100,000 shown for '26 is not actually a maturity due. It is a repayment of some loans -- minor loans with normal amortization, but for completeness purposes, it is shown.

And in terms of the financial KPIs, that's where we now, in the balance sheet and the P&L, obviously, see the effect of the debt-to-equity swap. So the reduction of total financial debt by about EUR 132 million is certainly predominantly driven by EUR 119 million or about EUR 119 million of the debt-to-equity swap. Now obviously, there has been other normal amortizations as well as amortization due to asset sales. The total cost of debt, as I mentioned on the first slide or,, actually on Page 4 is up, but that is because of the effect from those financial instruments, which were noninterest-bearing in Q1 and now are converted into equity.

Overall, the effect of the debt-to-equity swap and the asset sales restructuring plan as expected. There are challenges in executing the restructuring plans on the sales side due to many factors. However, we are on track and are optimistic. With that, we will be concluding the presentation part, and we'll open the call for questions. Operator?

[Operator Instructions] It seems that there are no questions. Back over to you for any closing remarks.

Well, maybe we just give a few seconds more for people to have a chance to ask questions.

Yes, sure.

Right. Well, I suppose there are no questions at this time. Thank you very much, everybody, for listening to our call and until next time. Operator, we can now close the call.

Thank you, sir. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Q1 2025 -2026 Financial Results Conference Call. I'm Lorenzo, the Chorus Call operator. The conference is being recorded.

[Operator Instructions]

The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Kyrill Turchaninov, CFO. You will now be joined into the conference.

Hello, and welcome to the Deutsche Real Estate First Quarter Financial Year '25-'26 Financial Presentation. My name is Kyrill Turchaninov. I'm the CFO of Deutsche Consumer Real Estate, and Mr. Lars Wittan is also sitting right next to me. We will be presenting today's results, today's numbers.

We can start by taking a look at Page 4, where we have the highlights. It is a bit more compact than we usually do. We have last time presented our numbers just under 2 months ago. So some things will be repeated because the events took place already in Q1, and we talked about those a little bit last time in December. But anyway, the Q1, we have the rental income, which decreased by EUR 800,000 to EUR 16.9 million, about 4.4% down versus the same quarter of the prior financial year. So we are doing year-over-year comparison here, and that went pretty much as expected because of the asset sales.

FFO went up by about 57%. So it seems to be somewhat significant number. The primary driver for this is the lower interest expense. We will expand on this and provide some more details once we talk about financials on the financial slide. We have sold 8 properties and sold in this particular case means that we have signed the SPA, the sales purchase agreement in December for those 8 properties with a purchase price of EUR 34.7 million. Two sales were actually closed in Q1, and they had some impact on our property metrics. We will also touch upon those later on. Obotritia sale did not repay the outstanding receivable of EUR 16 million. We have reported this and obviously shown this throughout the year and the due date was end of December. We are currently in discussions with Obotritia. We have consulted our legal advisers. We are working together with Obotritia to find the best possible solution and the best possible outcome.

Now obviously, we did not give up on collecting the EUR 60 million and would like to find a really acceptable solution for us as well with Obotritia. Loan-to-value was slightly reduced to 56.4% compared to the prior quarter, which was, of course, September '25. What is not shown and what we do not have yet obviously reflected on the balance sheet is the results of the debt-to-equity swap. I will say a few more words about this on the next page. However, with all things being equal, if we take a look at the so-called pro forma, balance sheet as of 31/12, we are looking at LTV with obviously calculated effect of the debt-to-equity swap of about 41%. Average weighted debt cost was substantially lower at almost 3% this time. And again, we will provide more details once we look at the page on the financing.

So now we can take a look at the next page, which is Page 5, where we provide a bit more details on the restructuring plan and obviously, the important event of debt-to-equity swap. Now to recap the main points of the Extraordinary General Meeting, which took place on the 4th of December. The mixed cash and contribution in kind capital increase was approved. The subscription rights, well, obviously, with subscription rights and the share price or issue price of EUR 2 per share. We already expanded on the positive effect of such a measure. So obviously, improved ratios, improved KPIs. We will also have a substantial number of assets released as a security, an important step and a major part of our restructuring plan. There were a few other items approved or actually on the agenda for the Extraordinary General Meeting. One of those was the change of the company name from Deutsche Konsum REIT to Deutsche Konsum Real Estate. That took effect upon the registration in the company register on the 27th of January.

Now no legal challenges were logged to the commercial register. So we made an application to the commercial register for the capital increase. That capital increase will result in a total of about 59.4 million of new shares, new bearer shares. And the effect or the effective moment of this will be once the company register does make that entry in the company register. About 166,000 new shares were exercised against the cash contribution. And well, we, as of now, don't know who actually exercised that. Now again, net asset value pro forma, all things being equal, taken into consideration the capital increase would be around EUR 4 per share. As I mentioned before, the capital increase is not yet reflected in the balance sheet, and obviously not yet reflected in the list of the shareholders and their holdings. Once it is reflected, once the shares are issued and are exchanged in the debt-to-equity swap transaction, preliminary, we expect Faber to hold about 6.5% of the shares of Deutsche Konsum Real estate. Now we can take a look at the property or actually at the portfolio details on Page 8. As I mentioned previously, 2 assets, 2 properties were closed. So the total number we have as of the end of December is 149. That had effect certainly on our total fair value, which includes both properties held for investment as well as held for sale. And there was some minor CapEx, which also obviously impacted that number.

There is a development in the vacancy rate, which went down from the 14.2% to 13.6%. And the primary driver for this is the closing of a sale of one of those assets which was closed in Q1, had a substantial vacancy. It was a former [Real] supermarket and had about 11,500 vacant space. So that obviously had an impact on our total vacancy. Other key property metrics, which we list below here in the table in terms of rent contribution from noncyclical tenants, in terms of the CPI-linked contracts remain unchanged versus the prior quarter. Now we can take a look at the financing details. And we show here on Page 11, the maturity profile of our liabilities. And as before, due to the restructuring and the agreements we have entered into with various lenders, there are no maturities coming up in the financial year '25, '26. And the substantial number of maturities in '27 is expected, well, is actually planned so in the restructuring opinion.

The total debt cost of 2.92% is substantially lower than the one in the prior quarter. The main impact -- the primary impact for this is that the instruments, the financial instruments, the convertible bonds as well as corporate bonds, bear no interest as of the 1st of October until capital increase or debt-to-equity swap is implemented. Therefore, they obviously heavily impact the interest percent, the average interest percent as they are substantial in volume, and they bear no interest. Once debt-to-equity swap is implemented, they will obviously no longer be counted as our financial liabilities. So we expect that the average weighted debt cost will go up after -- well, truly mathematically after the capital increase is implemented.

To recap, the main events, obviously, was the extraordinary general meeting, the implementation of the capital increase, which is ongoing right now and as the application was made to the company register court in the City of Rostock, there were no legal objections. We expect this to happen within the next few weeks. Obviously, we cannot control how fast this entry is made. We are done with our presentation part, and I would like to open the call for questions now, please, operator.

[Operator Instructions]

There are no questions from the phone for now.

Well, if there are no questions at this time, we should...

One question, sir. So the first question comes from the line of Andreas Plasier from Warburg Research.

I have questions regarding your interest rate costs. You mentioned that we will see an increase after the capital increase. What level should we expect for the average interest rate cost in the next quarter?

Right. Well, there are obviously a few moving parts. As we close the sales and we sell the assets, obviously, we have to pay down the underlying real estate loans. So that needs to be figured in. The effect will come, as I mentioned, from reduction of liabilities with 0 interest-bearing. I don't have the exact number for you, but Andreas, I can get back to you once we do the pro forma calculation.

The next question comes from the line of [ Andreas Tillack ] from Alpha.

On the -- will you -- I think I've seen that you have quite a bit of cash -- increased your cash position. Will you be using the cash coming in from the sales and your current cash position to prepay existing loans? Or how is it agreed upon? Basically, part of the mortgage or the assets?

Sure. Right. Now when we sell assets, which are secured by real estate debt, well, always, assets are secured, they are security for the loans by lending banks. First and foremost, we have to make repayments to those banks to release the security. So part of these sales proceeds or the sales proceeds obviously goes there. As the loans are very different, the banks are very different and the security is very different. It depends on a very specific case. There is no special formula.

However, that cash which is accumulated, which we are going to continue to accumulate as per our restructuring plan is going to be used to repay the notes, the promissory notes, which we have outstanding and due to our agreements with the lenders maturing at the end of September '27. So the restructuring plan, the restructuring opinion foresees that we will accumulate cash and repay those unsecured lenders in one shot. Now whether the cash will accumulate faster as it is expected in the restructuring plan, and we might enter into discussions with the lenders to repay that earlier remains to be seen. What is, of course, terribly important to keep in mind is that, we treat lenders equally. So there is no preference to one lender versus the other lender to other lenders. This is an underlying principle of the restructuring plan, which is, well, very fundamental.

So we cannot make a preference and repay one lender with this accumulated cash and not the other. There needs to be a certain arrangement. There needs to be a certain agreement with all the lenders so that we don't endanger the restructuring opinion.

And how have the banks reacted to your restructuring? Are they willing to extend some loans because of the very low LTV right now, so you can basically reduce your debt program a little bit?

Well, we reported this, I think, in some call or in some presentation reports in the past. The agreement which we reached with all the lenders during the course of summer last year was necessary for FTI-Andersch to issue the restructuring opinion. That restructuring opinion foresees a certain plan of paying down the lenders. Now it does not foresee that the lenders will extend loans beyond the already agreed date of 30 '09 '27. So all those maturities, which were in place for the next -- well, what's now 1.5 years, they remain the same. We cannot deviate from the restructuring plan without agreement for the lenders.

But are you receiving some signals from banks or others that they are happy with the development with your -- that essentially you're also selling some not so great assets that they might be willing to say, well, an LTV of, say, 40% or 30% is fine with us. We will just extend some existing or issue some new bank loans?

Well, one has to take a look at the facts. First of all, as of now, we do not receive any negative feedback from the banks, which we considered as somewhat positive. But the capital increase has not been formally implemented. The debt to equity swap did not formally take place. So it doesn't make any sense to go and talk to the banks or ask for tentative opinions until this is actually formally done.

Okay. Understood. But you're planning to speak with the banks and ask them whether they would be willing to accept a certain level of LTV at your company?

What we are planning is to make absolutely sure that all the formal steps of the debt-to-equity swap has taken place. That is the plan. What is going to happen also as envisaged and actually agreed in the restructuring opinion is that we will continue to provide reports to the banks on our financials. So let's see what the banks say once we provide our next financials reflecting such an LTV.

We have a follow-up question from the line of Andreas Plasier from Warburg Research.

Yes. Two follow-ups. Firstly, you have a write-down of EUR 2.5 million in the first quarter. What was the reason for the write-down? And the second one is you are very active in selling properties. Are your prices in the negotiation, do you have some positive news? Are the prices realistic? Or should we expect here some further valuation changes in the coming quarters?

Understood. First part of your question, write-down is actually formally in accounting terms called bad debt accrual or bad debt provision, which we regularly make on outstanding receivables to tenants because of the aging principles. So 100%, 360 days; 75%, 300 days; and so on. So since the outstanding receivables were substantial at this stage, we have made such a provision. In addition, unfortunately, one of the tenants, and that's Hammer Fachmarkte in German, declared bankruptcy. And we did have an outstanding receivables, well, actually a substantial one against the supermarket. And as a rule, once that happens, we 100% bad debt accrual. So that takes care of the first part of your question. And in terms of the second part, I'm sorry. Can you please recap what it is, what it was?

Yes. What's your view on the prices on your...

Yes, got it. Thank you. Now obviously, it is known that we are selling assets in the market. So we received quite a substantial number of rather unrealistic offers to acquire our assets. We are working with our new property asset and transaction manager, GPAP, to actually shift through those things, but also proactively approach specific players in the market who might be interested.

Yes, there will be sales below the current market value, which is to be expected and, by the way, also reflected in the restructuring plan. What we have seen, however, in really practical terms, it is very asset specific. So individual assets can have, well, quite actually almost book value sale. So we have seen an asset where the value of the asset was, let's say, EUR 9 million, and we sold it for slightly more than EUR 9 million. However, on the other hand, we also see cases where assets in the portfolio do have some discount. And that discount can be between 5%, 10% and maybe more. We don't know that yet. That depends.

So in that respect, yes, we are actively marketing certain assets with the help of external professionals. And in that case, sometimes sales prices are lower than the existing book value. As to the valuation of the portfolio, last year, we actually had 2. One happened for our third quarter close, which was 30/06/25 and the second one, which happened to the 30/09. Both were done as usual by CBRE, and they resulted in a total devaluation of roughly EUR 70 million for the financial -- for the prior financial year, which we obviously reported as well. I cannot possibly forecast what the valuation of the portfolio will look like at the 30/09/26.

The next question comes from the line of [ Orlu Praise ] from OK Consult.

Thanks a lot for being able to ask a question, or rather 2 actually. First, have I understood your latest press releases correctly that VBL took all the shares they had to according to the agreement, not as many as they could have gotten because it's now 60 million instead of 75 million shares that are being placed altogether?

And secondly, the funds from operation reported for the quarter refer to the old number of shares. So basically, you have to divided by 2 per share due to the dilution for the future now?

Well, actually, Faber L was never expected to take 75 million shares. It was a total amount of shares authorized. However, Faber L is converting its debt instruments, which are the registered bond, bonds in the full amount. So those borrowings, which we had from Faber Land obviously carried them will fully take place -- will fully be converted into equity. And this is the EUR 59-something million, which we just -- which I presented was on the second page, I think. So in that respect, everything went exactly as planned. What we didn't know, obviously, at the time of the offer is how much will be exercised against cash contribution. How much of the rights will be exercised. And we didn't know. It could have been 10,000, it would have been 1 million.

So there was a room in terms of the number of shares authorized to accommodate potential exercise of cash rights. 166,000 or about were exercised. So obviously, that is not such a huge number, and that allowed the debt holders to fully convert.

In terms of FFO per share, I understand your question. Well, yes, it will be obviously reflected using the new number of shares once they are actually issued. And as I mentioned before, that didn't happen yet as the formalities need to happen and the commercial register needs to make a entry. And then we will exchange that instruments for the shares. And then we will obviously have the new shares and the new FFO numbers.

A follow-up, if I may. Do you have some rough ballpark figure or maybe a range for the net asset value per share after the dilution and after the write-downs, which are visible on the sales, not the pipeline, but the existing sales?

I'm not sure what you mean by the write-down. We just with Andreas asked about that, that was a bad debt accrual. But if you're asking about the pro forma, meaning if we take the balance sheet as of 31/12 and just adjust it for the implementation of the capital increase, the net asset value per share would be in theory for euros.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kyrill Turchaninov for any closing remarks.

Well, I would like to thank everyone for your time and attention during our call and the insightful questions, which we hope we pretty much answered to your satisfaction. And I do remember there's one follow-up. Once again, thank you, and that concludes the call. Goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your line. Goodbye.

Ladies and gentlemen, welcome to the Full Year 2024-2025 Financial Results Conference Call. I am Sandra, the Chorus Call operator. The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Kyrill Turchaninov, CFO. Please go ahead, sir.

You Hello, everybody, and we will be starting our presentation with the highlights of the '24-'25 financial year. We will go over quickly over the entire year on the events which happened since we presented our 9 months results in August because there obviously have been some important development.

We can now turn to Page 4, where we have a short summary of the main points of the financial year. The results we are comparing year-on-year. So the financial year '24-'25 versus the financial year '23- '24. Rental income decreased to EUR 70 million, predominantly, mostly due to the asset sales, which we have done during the financial year. FFO, a major indicator and KPI for us decreased by about EUR 15.6 million to EUR 12.3 million, which is a substantial decrease.

However, this decrease is mainly driven by the sale of assets. So net result impact on FFO is EUR 8.5 million as well as other major variance versus the last year is a so-called net interest. That net interest has obviously interest expense, as well as interest income. So the net amount effect in the FFO was EUR 4.6 million. However, in stand-alone Q3 of the financial year, our FFO was EUR 1.9 million. And in the last quarter, Q4, which ended obviously September 30, our FFO was EUR 2.4 million.

During the year, we have reduced debt by about EUR 78 million, corresponding to roughly 14% year-on-year. And that was driven by a number of things. We sold properties with a total volume of EUR 34 million. And the major impact came from conversion of EUR 37 million of convertible bonds, which happened mostly earlier in the financial year.

As we have already reported previously, especially with more detail in our report for 9 months, which we did in August, the company is in restructuring projects. We will have a special slide for this, so I will go in more details later. However, the restructuring, obviously, costs and we had legal and consulting costs, which are direct restructuring costs of EUR 3 million. We also had additional costs, which were charged to the company by the lenders is customarily in such restructuring process when we are asking lenders to restructure the loans. Obviously, they incur some costs, and they charge us specific fees. Those amounted to roughly EUR 5.5 million.

An important event which took place in the first quarter of the year, in the financial year, was a repayment by Obotritia, of its entire principal debt amount of EUR 38 million. There is an outstanding receivable of about EUR 60 million, still due from Obotritia. It is we provided for, which means we have booked a provision -- a financial provision against this debt. And it is supposed to be repaid by the end of December this year.

Loan-to-value is almost unchanged compared to the prior year. We have, again, not met the REIT equity ratio requirement of 45%. And again, I will say a few words about this later on in the presentation. A big impact to our financial results came from a valuation impairment of a revaluation adjustment of almost EUR 70 million. We did report, about a substantial devaluation of our portfolio. We do an annual valuation by an external appraisal.

This year, we actually did two valuations. One was the major one on indiscernible] , which resulted in about EUR 47 million of devaluation. And we also made an update for the -- at the end of the year on 30 June, which added another about EUR 22 million. So that obviously had significant impact on our financial results. The cost of debt is expectedly higher at roughly 4.5%.

We have decided to give a range in terms of the guidance for rental income for the next financial year. And that would be between EUR 58 million and EUR 63 million. We are not providing any FFO guidance due to restructuring process. And as we mentioned on a few occasions, a major element of the restructuring process, obviously, in addition to the debt-to-equity swap, is going to be a sale of assets since we do not know exactly which assets at what period of time will dispose of the FFO guidance at this time is very difficult.

The focus will remain on finalization of restructuring plan in the sense that we will be implementing and already finished and agreed with the lenders, restructuring opinion, and obviously improving the portfolio performance.

We can now turn to the next page, which is Page 5. Where we recap mostly what we did already in the last time we presented the results. Well, the need for restructuring, the need for the engagement of FTI-Andersch as a restructuring expert. The need for the preparation of the restructuring opinion was predominantly driven by 2 factors. One is the sheer volume of maturities historically aggregated on that the volume of maturities in '25 was originally very substantial, over EUR 200 million. And once we entered the discussions with the lenders to restructure those obligations, it was clear that they require a formal restructuring process, which includes the preparation of the restructuring opinion.

We, as I mentioned, engaged FTI-Andersch to the do that, and the final version was completed as well as presented to the lenders, completed on the 1st of September and communicated to the lenders shortly after that. What helped us on the way and what supported us is the [indiscernible] Financing, which we agreed earlier in the year, with the amount of up to EUR 80 million at 5.5% interest. We have also entered into a restructuring agreement with VBL, and we concluded an investment agreement with holders of their convertible bonds. So the entire amount of those instruments of up to EUR 120 million, we'll be taking part in the debt-to-equity swap.

Now that signaled and that obviously was implemented, that is a very serious support for our company. It will improve always the KPIs as that will be converted to equity in LTV, and capital ratios will certainly change. Now that debt carried a substantial interest for the most part of this year, which will obviously help us as that will reduce our interest expense.

The assets, which are used as a security for those loans, for those instruments will be freed up and will become available again to the company. The message to other lenders was very positive. And the original restructuring opinion restructuring plan envisaged a substantially higher sales volume in order to cover our obligations. Now we are talking about up to EUR 300 million to be sold by the end or latest by the end of September '27.

The lenders went along and then supporting the restructuring opinion and they did this with extension of the maturities for their claims or we have entered into comparable arrangements with the lenders. The debt-to-equity swap was approved by a majority vote, well, 99-point-something percent vote by the Extraordinary General Meeting, and I will say a few words about this later.

Now during the restructuring period, and that was also requested by the lenders that FTI-Andersch stays on board and then supports us in terms of reporting the progress and basically confirming to the lenders that the company is staying on the restructuring plan. So this is a crucial element, which will be doing regularly with bank reporting over the next 2 years.

We can now move on to Page 6, where we put some details together about the Extraordinary General Meeting that took place on the 4th of December. By the way, a few items on the agenda for that meeting and the most important one is obviously the debt-to-equity swap. We have some details in terms of known number, the exact number of liabilities to be used is about EUR 180 million. And there are subscription rights. And obviously, there will be increase in the share capital accordingly to up to EUR 125 million.

As I mentioned, once executed, the KPIs of the company will be substantially improved. However, some recorded objections to the agenda items at the meeting might lead to legal challenges and effect further schedule. However, the majority, as I mentioned, already more than 99% of the present votes improved the measures. The fact that the company did not meet the requirements of the REIT Law for the 3rd time in the year, and that is the statutory equity ratio of 45%, basically means that the company is going to lose or actually has already lost as of the 1st of October, the tax exemption. We expect that is going to happen. And -- by the way, as also in the past, we have prepared our financial statements as if we are fully taxed. So there is not going to be any adverse tax impact because of the loss of the tax exemption. And we prepared for that, that has also reflected full taxation going forward in the restructuring plan. We are expected to change the name of the company, to the Deutsche Konsum Real State AG.

Now we can skip a couple of slides and move forward to the portfolio details, which we have on Page 9. We have disposed of a number of properties, while 16 actually. With the total square meters of 36,000 square meters. Now the volume of sales was EUR 34 million and obviously, that had an impact on our total fair value, while the biggest impact, as I already mentioned, on the total fair value was the devaluation result of almost EUR 70 million.

Now in terms of vacancy rate, it is slightly higher than the prior year. However, there is some development on the vacancy rate, which is, well, a little bit of good news. We had -- last time we reported in August, our vacancy rate was 14.9%, and it is now 14.2%. Now the difference is obviously not that much. However, the entire reduction of vacancies due to basically a few things. We have leased up number of vacant spaces of about 5,7000 square meters. But also the assets which we were selling were not 100% leased. So a small number of about 1,200 square meters of vacancy was in those assets which we disposed during the year. That is reflected in a total annualized portfolio rent which is [indiscernible] .

So there are a few moving parts behind that number and the variance to prior year. So obviously, sales impacted that, and the assets we sold had annualized rent of about EUR 2.7 million and there were some other movements in the of vacancy periods where obviously we had a higher rents.

Now we can begin -- skip a couple of slides and move to Page 11, where we present the tenant structure of the portfolio. It didn't change in terms of the percentage of rent contribution from cyclical and noncyclical tenants versus last time. So all those noncyclical tenants are stable versus last quarter and they contribute EUR 44 million of annualized rents. Those rents, which we have -- the 85% of rents are linked to the CPI, so that pretty much stayed the same versus last quarter or maybe slightly higher. And then almost half of rental contracts are over 5 years long.

So that gives us certain security or certain assurances in terms of the rent flows in the near future. We should now move from to financing, which is Page 14, where we present the maturity profile of our financial obligations by financial year. So in the graphical representation, we can see that in '25-'26 financial year, there are no maturities, which is obviously, the result of the finalization of the restructuring opinion and restructuring plan, where all the maturities were moved to September '27. And that means, obviously, that in the year '26-'27, we have a substantial number of maturities coming up for repayment.

One note here is that, that number, which we show and obviously split by the annuity loans, amortizing loans and promissory notes and corporate bonds. That number in '26-'27 does not include EUR 180 million of obligations taken part in the debt-to-equity swap. It is assumed that debt-to-equity swap will take place. However, those instruments are formally prolonged to at least September '27.

The total financial debt, which we show here, which is EUR 471 million does include those financial instruments. As expected, total cost of debt is higher than in the prior year. LTV, I mentioned before, it's almost flat and the interest coverage ratio last year at the end of the financial year '24, with a rather high number, predominantly was impacted by overtreat development, which obviously are not present in this financial year.

Now overall, perhaps to recap and close the presentation part and to open for questions. There Important thing is for the company is that we have successfully concluded the restructuring opinion that all the lenders agreed to support the restructuring measures. Now we have to obviously execute on the restructuring plan by obviously asset sales and also improving the key numbers on the property side. There are some small steps already made on the vacancy and the management and the vacancy improvement and the management will continue in this direction.

We will now open for questions.

[Operator Instructions]

So far, there are no questions -- sorry to interrupt, we have now registration from [indiscernible] from [indiscernible].

I understood that on the general meeting, there was some kind of statement by the VBL about how many shares they wish to acquire? Is it as many as they are obliged to by their own statement? Or is it as many as they can? From my point of view, the difference is about 15 million shares. Can you say anything about that?

Yes. Now the entire number of shares, which we currently have is round number, 50, 351,000. Now the company's share capital can be increased by up to EUR 75.5 million additionally to a total of 125.8 million shares. It is expected that [indiscernible] , well, actually, it is agreed that [indiscernible] Will use its entire receivables against us, against the [indiscernible] , even debt-to-equity swap. So in that case, they will obviously receive shares equal to EUR 86 million, times the number of times the EUR 2. So divided by EUR 2, obviously.

So 43 million shares basically?

Well, the entire number of shares, let me backtrack on this. The entire number of liabilities from our side or receivables from the lender side is EUR 118 million. Of that, EUR 108 million is -- about EUR 108 million is [indiscernible] . Now if we divide EUR 108 million by 2, we have 54 million shares.

So that means all that they are obliged not all they can because the rights to receive shares will not be traded. So basically, there will be no dilution for shareowners that don't execute their right to receive shares and VBL is not executing their right to take these shares as well.

Well, there will be dilution because we will issue shares but only for ...

But I mean the additional -- basically, they are taking these 54 million that they have basically already subscribed, but no additional ones on top, which they could take these shares as well.

They are not expected to be taking any shares on top of what we just mentioned.

I mean honestly, with the shares trading weigh a lot below the capital increase price, I suppose the free float is not going to take many apparently. So basically, the debt-to-equity swap is the dilution period?

Yes. Well, I cannot possibly comment on how the shares will be trading. However, you're correct, there will be dilution once the debt-to-equity swap executes.

Okay. And regarding the costs I had assumed that because of the restructuring, they are mainly your advisers. You mentioned EUR 5.5 million of costs incurred by the lenders, is that penalty fees or their advisers or what is that? I mean in relation to the debt, EUR 5.5 million is not a cappuccino actually.

Well, yes, we have restructured, as we mentioned, a bit more than [ 200 ]. The lenders were very different. We had and still have obviously that secured bonds, while the secured corporate loans, those held by [indiscernible] , obviously, we have convertible bots. We have unsecured promissory notes. We certainly have the amortizing loans and maturity loans. The fees were a few categories, the big feeds, which varied by lender, those, we unfortunately had to agree to reimburse.

The fees were also for restructuring the capital -- the loan itself. So there is customarily, unfortunately, also fees which the banks charge and are sometimes a substantial number because of the well perceived, I would say, damage due to the delay of repayment. And all of that amounted to that number. We do provide more a bit more details in our notes to the financial statements, which we have published earlier today.

Okay. So is that passed pain? Or do you expect further similar costs for '26 in addition to the cost of the capital increase?

No. This is pretty much in terms of restructuring itself. This is it with production of the restructuring opinion, the so-called IDW 6. The FTI-Andersch is completed the bulk of the work. However, as I mentioned previously, the majority of lenders required reporting a regular monthly and quarterly reporting than unfortunately not by us, but by restructuring expert, FTI-Andersch. So FTI-Andersch Ds will stay on board obviously much more reduced capacity, and we'll provide the reports to the banks as stipulated in all those extension and restructuring agreements we have entered into the banks.

That's helpful. Can you give any ballpark figure, how high these recurring costs will be? Will that be kind of a 7-digit figure or a high 6-digit figure annually for the coming like 3 years? Or what kind of dimension can I expect from that?

Well, sure is what we expect until and including September '27. Monthly reporting is going to be done, as I mentioned, by FTI-Andersch as well as a quarterly report. Now quarterly reporting, certainly, we do quarterly reporting ourselves. So that is not terribly time consuming on the side of FTE. The monthly reporting is a little bit different. However, and this is just an estimate based on what we already did in October, for example, between EUR 25,000 and EUR 30,000 per month.

So like EUR 300,000 a year?

Roughly, something like that. Perhaps.

Okay. So then the large number of [indiscernible].

The next question comes from Vincent [indiscernible] from DPAM.

I would like to know if you are invested in the company you are managing, do you have shares in the company?

I personally do not have shares in Deutsche Konsum REIT.

Okay. Second question goes about corporate governance. Could you explain if Rolf Elgeti is still in the Board or not? And his position and his influence?

Of course. On the 1st of April, this year, Annual General Meeting took place. Mr. Elgeti did not provide his candidature for the nomination to the Supervisory Board. Therefore, he was not anymore elected to the Supervisory Board, instead -- and well, did not elect -- he was not elected to the Supervisory Board. Instead 2 other people were elected to the Supervisory Board in the past. As to the Rolf Elgeti, he does not have any official position. Obviously, he is not a member of the Supervisory Board. He is not a member of the Management Board since quite a long time.

There is no operational or any other control or relationship between the company and Mr. Rolf Elgeti with one exception. Well, actually, with two exceptions, if I may. But one is the big one. And this is the EUR 16 million of accumulated interest, which we still have as a receivable against Obotritia, I mentioned this earlier in the presentation. And the second, which we obviously disclosed in our financial statements is a very small business, which we have with one of the companies in Obotritia structure in terms of leasing rooftop pace for the photovoltaic arrangements, which is a really small amount EUR 2,000 to EUR 3,000 a year. These are the only relations we have.

Okay. Last question goes about valuation. When do you see you are going to find the trough, the bottom of the valuation of the portfolio by appraisers?

Our variation of our assets is done by CBRE. Now obviously, they're using a discounted cash flow methodology. There is a discount rate, there are market comparables. There are a number of factors which go into valuation of real estate assets. Greatly depends on how the interest rates develop in the future. So in terms of our specific portfolio, because I cannot possibly speculate on the market developments in 6 months. In terms of our specific portfolio, the measures we are taking, and that is investing in improving the value of the assets, sometimes investing is necessary to just keep the value of the assets at the current level, but also working methodically carefully, painfully with -- also with our new properties and asset manager in GPEP in terms of reducing the vacancy and increasing weighted average lease terms. All that should have a positive effect on the valuation of portfolio. I cannot possibly say where is the bottom.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kyrill Turchaninov for any closing remarks.

Thank you. Well, as I mentioned, this was a challenging financial year, and we, as a management of the company are grateful and thankful for the support we have been receiving from the shareholders and obviously the lenders who have supported the restructuring plan. And we do have quite some work ahead of us. We hope for your continued support, and I thank you for your attention during this call. We will close the call. Thank you.

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