LEG Immobilien Stock

Good morning, everyone and welcome to our earnings call. As always, we have LEG's entire management team on the call. Our CEO, Lars von Lackum; our CFO, Kathrin Kohling; and our COO, Volker Wiegel. You will find the quarterly report as well as the presentation in the Investor Relations section of our website. Please note there's a legal disclaimer on Page 2 of the presentation. And with that, I would like to hand it over to you, Lars.

Thank you, Karin. Good morning, everyone, and thank you for joining our H1 analyst and investor call today. Let me walk you through the 6 highlights on this slide. LEG is delivering on every dimension which we set out at the beginning of this year. First, rent. Like-for-like rent growth came in at 3.7% for H1, squarely within our full year guidance corridor. I want to highlight one quality element here specifically. 50 basis points of that growth came from cost rent adjustments. Further rent increases in the second half will push this number into our target range of 3.8% to 4%.

Second, EPRA vacancy. At 2.3% on a like-for-like basis, vacancy declined by a further 20 basis points. This is a clear signal of underlying demand strength across our portfolio. It also tells you that supply remains the key issue in the market while meaningful new supply remains absent from the market. Third, adjusted EBITDA. Adjusted EBITDA grew by 2.3%, rising to EUR 368.1 million. This reflects the continued operational leverage of our platform, more revenue flowing through to earnings with cost discipline holding firm. With this, we are on track with our target of an EBITDA margin of around 78%

Fourth, AFFO. AFFO of EUR 110.5 million for H1 puts us fully on track for our full year guidance range of EUR 220 million to EUR 240 million. Guidance is confirmed across all line items. Fifth, valuation. Portfolio valuation came in at plus 0.7%, a result in line with our expectation of up to 1%. The market is moving carefully and constructively in the right direction. Sixth, LTV. LTV stands at 45.5%, effectively at our target level of approximately 45%.

Let me flag one item for transparency. We expect a temporary technical uptick in Q3, driven solely by the timing of our dividend payout. This is a known and mechanical effect, not a shift in trajectory. The underlying direction of travel on leverage remains unchanged, downward, disciplined and cash flow driven. This discipline is paying off, particularly in the current environment. Portfolio transactions in our current market are still at very low levels. Inflation concerns and rising interest rates amplified by geopolitical tensions have weighed heavily on investor sentiment.

Overall, times are challenging. Against this background, we are in a comfortable leverage position. Therefore, we remain fully committed to our disciplined disposal strategy, selling only when pricing adequately reflects the intrinsic value of our assets.

Let me now turn to Slide 6 and our capital allocation logic. The principle is simple. Every euro goes where it earns the most for shareholders. Today, that principle plays out in 2 phases. First, where we stand in H1 2026. Our LTV came down to 45.5% from 47.6% a year earlier. That is effectively at our target level of around 45%. Three levers got us there. Firstly, disposals of EUR 42 million, all at or above book value. Secondly, a valuation result of plus 0.7%, in line with our expectation of up to plus 1% for the half year. Thirdly, the take-up of the scrip dividend, which retains EUR 63 million of liquidity in the company.

Our ongoing AFFO-driven steering avoids any overspending and with that, any need to take on additional debt. So the deleveraging path is on track despite the market volatility we have all had to navigate this year. As soon as we have reached our LTV target, we see four potential options for capital allocation. You find these options on the right-hand side of the slide, and we will reassess capital allocation priorities on a regular basis against market conditions.

The first is organic growth, driven by modernization and by our Green Ventures. That is the lever closest to our core operating business. Next to that, we would look at acquisitions or inorganic add-ons, selective opportunistic entry points where the numbers work entered only once our balance sheet has the headroom fit. Then there is distribution to shareholders in addition to our existing dividend policy. And within this lever, our sustainable dividend policy carries priority. Share buybacks remain one additional option we keep available. With a substantial discount of the share price versus the NTA, this option forms a natural hurdle rate for alternative uses of capital within the firm.

Finally, further deleveraging beyond the circa 45% range, their target. Rating headroom and refinancing flexibility have value in their own right, especially in a market that remains volatile. So this option stays on the list for resilience and balance sheet flexibility, and that is exactly the discipline that got us there. The point I want you to take away is this. Capital gets deployed where it earns the most, and that assessment stays dynamic rather than fixed. The discipline behind it is constant. The same FFO base steering that got our LTV down to 45% will govern how we use the next euro from here. And that discipline is also exactly what carries into the overview of our H1 numbers on the next slide.

Let me now turn to the financial overview. The numbers on this slide confirm that we are fully on track for our 2026 guidance across every metric that matters. Starting with rent. Net cold rent stands at EUR 473.4 million, reflecting like-for-like growth of 3.7% in H1 and 3.4% on a reported basis due to effects from disposals. I will not repeat the details from the previous slide, but the key message is this. The rent trajectory is intact, predictable and structurally supported.

On the EBITDA margin, we came in at 77.8%, which is fully in line with our full year guidance. AFFO of EUR 110.5 million reflects a decline of 12.7% year-on-year for H1. I covered the bridge in Q1, CapEx phasing and cash interest step-up and H1 confirms that reach. What matters now is the forward picture. With H2 expected to be meaningfully stronger, we are fully comfortable reiterating our full year AFFO guidance of EUR 220 million to EUR 240. The split between H1 and H2 is intentional and anticipated. The key levers will be slightly lower investments as well as subsidies, which we expect to materialize in H2.

FFO I came in at EUR 230.5 million, down 4.4%. The same phasing logic applies. Our full year FFO I guidance of EUR 475 million to EUR 495 million remains intact and the H2 run rate implied by that range is clearly stronger than H1, which is exactly what we expect. On the key drivers, rent growth at 3.7% like-for-like and vacancy at 2.3% is the primary driver. The margin headwind from lower subsidies and higher investments is a pure phasing issue. The key takeaway from this slide is straightforward. H1 was solid. Guidance is confirmed and H2 will be stronger. Cash flow trajectory, margin recovery and rent growth, all point in the same direction. We enter the second half with full confidence in the full year numbers.

And with this, I hand it over to Volker for the operational highlights.

Thank you, Lars, and good morning, everyone. I will start with the rent development on Slide 8. On a like-for-like basis, the average rent per square meter in LEG's portfolio rose by 3.7% year-on-year to EUR 7.21. This means we are comfortably on track to deliver on our rental guidance for full year 2026. Looking at the free finance segment of our portfolio, we see a particularly good performance in the stable and high-growth markets with rent growth of 3.8% and 3.9%, respectively. This clearly underlines the operating strength and resilience of our portfolio. 2026 is a cost rent adjustment year where we can also increase rents of our subsidized units based on the CPI development. As a result, the rents in our subsidized portfolios were up 3.2% compared to the previous year.

Regarding the breakdown of drivers, rent tables and modernization reletting each contributed 1.6 percentage points, while cost rent adjustment added further 0.5 percentage points. As always, you can find an overview in the appendix, it is on Slide 26 of upcoming rent tables for top locations in our portfolio. And to give some color on most recent rent tables, the new table for Bielefeld in Westphalia implies an uplift of around 8% for a typical LEG apartment and the table for Gutersloh also in Westphalia of more than 7%. Finally, on vacancies. EPRA vacancy rate came further down by another 20 basis points to a low level of 2.3%, reflecting strong demand for our assets and our ability to quickly refurbish and relet vacant apartments.

Moving to investments on Slide 9. In the first half, adjusted investments amounted to EUR 202 million or EUR 18.19 per square meter. This is well in line with our full year target of more than EUR 35 per square meter. It is also a more even distribution than last year, which was characterized by the gradual integration of BCP. Hence, the 10% increase in investments in H1 2026 compared to the previous year. In the first 6 months, CapEx accounted for EUR 112.3 million or EUR 10.11 per square meter, while we had maintenance expenses of EUR 89.7 million or EUR 8.08 per square meter. The cap ratio of 56% was unchanged compared to the previous year.

Coming to Slide 10 and our value-add services. For LEG, these operations are both a strategic pillar and a growth driver. In the first half of 2026, the contribution to FFO I before consolidation was EUR 28 million. Please note that this number only relates to the services shown on the left-hand side of the slide, which include, amongst others, the management and steering of refurbishment projects, our technician and craftsman services and our energy and heating business. Our Green Ventures shown in the middle of the slide are not yet included in the FFO I number shown here, but they will become a meaningful growth contributor over the next few years. With these ventures, we also contribute to decarbonization, one of the main and most urgent tasks in our sector.

One of these ventures is termios, and I'm pleased to say that the Fraunhofer Institute scientifically confirmed the effectiveness of termiuos Pro, the AI-supported thermostat. So far, only the basic functions of termios Pro have been examined. These are precise temperature control and adaptive digital hydraulic balancing. The study confirms an average saving in energy consumption of 14%. This corresponds to an average annual savings of about EUR 170 for the tenant. And this only applies to the basic version of the thermostat with the rollout of additional functions, further savings can be expected.

Let's now turn to disposals on Slide 11. Year-to-date, we have completed or signed sales for more than 1,000 units with total proceeds of EUR 78 million. Of these, 237 units were transferred in Q2 for around EUR 24 million. The remaining 552 units with gross proceeds worth around EUR 36 million are due for closing in the second half of this year.

On Slide 35, we have gathered external research figures on the German transaction markets in the first half of 2026. The market is still characterized by a comparatively low number of large volume deals and scarcity of international capital. Against this background, our ability to offer smaller portfolios or even individual multifamily houses sized to match buyer appetite is a genuine structural advantage. We also stick to our disciplined approach. We sell only noncore assets and only at or above book value. Our total program still comprises up to 5,000 units. With this, I hand over to Kathrin.

Thank you, Volker, and good morning to everyone also from my side. Let us now look at Slide 12 and the outcome of our most recent portfolio revaluation. The starting point is the market itself. The fundamentals of the German residential sector remain healthy, and our own portfolio evidences that with a vacancy rate of 2.3% and like-for-like rent growth of 3.7%. The valuation result of plus 0.7% or EUR 135 million is the fourth consecutive positive revaluation and confirms that the recovery in German residential values remains intact. The pace is more moderate than in 2025, and that is what we told you to expect.

At the Q1 call, we guided to a flat to slightly positive result of up to plus 1% for H1. The outcome has come in within that range. The step down versus the plus 1.8% in H2 2025 is macro-driven, not portfolio-driven. Geopolitical tensions, higher inflation expectations and as a consequence, a higher interest rate environment. The operating parameters of the portfolio, such as rents and vacancy all moved in our favor over the period. Our average gross asset value per square meter now stands at EUR 1,735 up from EUR 1,710 at year-end 2025. The average gross yield amounts to 4.9%, ranging from 4.1% in our high-growth markets to 6.3% in our higher-yielding markets.

Further details about the valuation results and our portfolio values can be found in the appendix on Slides 23 and 24. On H2, we are confident in the resilience of our portfolio and in the structural strength of the German residential sector. What we will not do is anchor you to a valuation number 6 months out in a rate environment that is still moving. We will give you our indication for the H2 valuation with the 9-month figures as we always do.

Let's turn to Slide 13 and the AFFO bridge for the first half. AFFO came in at EUR 110.5 million against EUR 126.6 million in H1 2025. The main positive driver was higher net cold rents, which contributed EUR 15.6 million. Of that, EUR 18.1 million came from organic rent growth, partially offset by a negative impact of EUR 2.5 million from disposals. The operating and administrative result was EUR 5.3 million lower year-on-year, mainly reflecting higher personnel costs. The EBITDA margin of 77.8% we are reporting today fully absorbs that. Net cash interest increased by EUR 10.3 million due to increasing refinancing costs in combination with the lower interest income.

This is a gradual upward reset of our funding costs that we have been flagging as we refinance into current rates, and it is fully reflected in our full year guidance. Other effects amounted to minus EUR 2.8 million, driven almost entirely by our biomass plant. The result of our subsidiary declined mainly due to higher prices for wood needed for the generation of energy. Finally, investments. Higher maintenance and CapEx, net of subsidies reduced AFFO by EUR 13.4 million in the first half. Roughly EUR 3 million of that relates to the phasing of subsidies. By this point, last year, we had already recognized EUR 3.3 million. This year, we are only at EUR 0.5 million.

For the full year, we still expect to end up around EUR 10 million in subsidies with the bulk of it falling into the second half. Overall, the delta to last year is phasing, not earnings quality. We expect H2 to carry the subsidies and the lower investments in the portfolio. And that is why we confirm our full year AFFO guidance of EUR 220 million to EUR 240 million without qualification.

Let's turn to Slide 14 and our financing structure, starting with loan-to-value. We stand at 45.5%, down 210 basis points from 47.6% a year ago. That is very close to our target level of around 45%, a target we set out publicly and are now very close on delivering on and the composition matters. This came from both sides of the ratio. Property values rose on the back of the positive valuation result in our CapEx, while net debt came down. One word on the scrip dividend. Given the geopolitical and market volatility, take-up on the scrip was lower than last year at 28.6% of the dividend. It nonetheless allowed us to retain EUR 63.1 million of liquidity in the company and contributed around 30 basis points to our LTV.

And let me flag one mechanical point before you model the third quarter. The dividend was paid after the balance sheet date, so the cash outflow is not yet included in the 45.5%. LTV will therefore move back up temporarily in Q3. Our average interest cost now stands at 1.82%. While this represents a modest increase compared to prior periods, it remains at a very competitive level in today's market environment. The average debt maturity is comfortably at 5.7 years, and our interest coverage ratio stands at a solid 4.0x, comfortably above the level required by our bond covenants. We also have ample headroom on all other bond covenants. For those interested in more detail, we provided the full overview in the appendix.

Our liquidity position remains strong at more than EUR 450 million as of H1 2026. In the first 6 months, we closed EUR 450 million of financing. These refinancings were closed at an average maturity of 9.3 years and an average interest rate of 3.9%. This was complemented by our new syndicated revolving credit facility of EUR 750 million. It replaces our previous facilities in full and it runs on a 5 plus 1 plus 1 structure, a 5-year commitment with 2 1-year extension options against 3 plus 1 plus 1 before. That is a 2-year extension of our committed backup liquidity agreed with our core banks.

There are no 2026 maturities left, which need to be refinanced. The next upcoming maturities in Q1 2027 are already covered by our available liquidity. Overall, the 2027 maturities amount to roughly EUR 1.1 billion, of which EUR 500 million will mature at the end of November 2027. We will continue to take an opportunistic and disciplined approach here, depending on market conditions.

So in summary, we said we aim to bring LTV to around 45% and at 45.5%, we are within reach of that target. Q3 will show a temporary uptick due to the dividend payment, but we are confident of reaching the target level by the end of the year. Our 2026 maturities are closed out. The 2027 profile is well structured and already partially covered. Our backup liquidity now runs up to 7 years, and we hold more than EUR 450 million in cash. We will continue to refinance not under pressure, but on our own terms. And with that, I'll hand it back to Lars.

Thank you, Kathrin. Let me close with our 2026 guidance summarized on Slide 15, which I am happy to fully reconfirm today. We expect a further improvement in cash generation with AFFO between EUR 220 million and EUR 240 million, continued growth on top of a strong 2025. FFO I is expected at EUR 475 million to EUR 495 million, supported by an adjusted EBITDA margin of around 78%. Our operational drivers, rent growth and investments are likewise reconfirmed. We made good progress when it comes to LTV and feel confident to reach our LTV target level of around 45% by the end of the year. Please note the negative but purely technical effect of the dividend payment in Q3.

To sum it up, LEG remains on a clear and consistent path, generating reliable cash flow, maintaining financial discipline and building long-term value for shareholders and tenants alike. Cash flow remains king, and AFFO remains the right steering metric for this business. Our 2026 guidance reconfirms the strength and the resilience of our model, measured again in numbers rather than narrative. With that, we conclude the presentation and look forward to your questions.

[Operator Instructions] The first question comes from the line of Marios Pastou from Bernstein.

I've got 2 from my side. They are broadly related, so I'll ask them together. So just firstly, on disposals. I think earlier in the year, you mentioned discussions were progressing on a couple of portfolios that held back by the achievement of buyer financing. So can I check if any of those discussions have actually fallen away and if we should, therefore, anticipate progress through the second half, both in terms of portfolios and land sales? And then shifting on to capital allocation. So the options you have available and presented and considering where your shares are trading, is it fair to assume that if any larger disposal materializes from here that they will be considered and allocated towards a share buyback?

Thanks for your questions. So with regard to disposals and the portfolio transactions, which we are working on, unfortunately, the volatility, especially driven by the geopolitical tensions back and forth in the Middle East and then also their effect on interest rates was something which was really a big burden for transaction activity in the German market. So therefore, unfortunately, H1 2026 even looks a bit lighter than the transaction volume in 2025, and that unfortunately was also unfolding with regards to our sales activities. We did not see portfolio transactions not happening due to financings.

But what we have seen is that willing buyers have not been willing to notarize deals. So therefore, we are still in discussions also on bigger portfolios with interested buyers, but unfortunately, we have not been able to notarize those. We still expect that if the geopolitical tensions are hopefully coming to an end and we see a cease fire or even better peace agreement being in place that certainly then the stabilization will also translate into more visibility with regards to interest rates, and that will hopefully then also give rise to those deals really becoming notarized.

With regards to capital allocation, and you already pointed out the fact that, unfortunately, the share price is still very low compared to the NTA, it is a natural hurdle to be looked at with regards to capital allocations and buybacks. Please also take note that, firstly, and that was what we also try to get through to you is that we are working on getting our LTV to the target level of 45%. So on the other side, that is a natural limit to whatever we think with regards to disposals and the return of capital towards shareholders. And what we also wanted to get across is that highest priority is certainly also living up to our dividend policy. So yes, you're right. That is quite a high hurdle to be made. And therefore, if we have sufficient disposals being realized, and disposal proceeds that a share buyback will be definitely something which we need to consider.

The next question comes from the line of Andrew McCreath from Green Street.

Two questions from my side, please. Just firstly, following on from Marios' question, why continue with the dividend while you're still deleveraging? I mean that cash cost is a permanent headwind. If distributions are nonnegotiable, would you not be better served by a split between dividends and buybacks or just moving entirely to buybacks? That's the first question.

Thanks, Andrew. I waited for the second one. So therefore, apologies for the delay. So with regards to dividend, I think you've seen what happens to our share price in 2023 while we were deciding on not paying a dividend. We have a very strong investor base relying on a steady dividend to be paid. And that is something which we want to live up to. We have a dividend policy in place, and we were not willing to change that because we want to give and ensure the trust that we are living up to that dividend policy by paying that dividend also going forward.

So we are not splitting the dividend now between dividend and share buybacks or anything else. We live up to the existing dividend policy, which says 100% of the AFFO to be distributed. And if we have disposal proceeds, you just heard us, it might make sense to use those disposal proceeds for share buybacks, but always taking into consideration the LTV, which we are wanting to get to a level of 45%.

Okay. That's clear. And then my second question, just on modernization. Is the yield on cost that you're achieving, is it accretive to your implied yield rather than your book yield, given the market is pricing your portfolio well below NTA. I'd just be interested to know if this is accretive at the moment.

Yes. As you know, Andrew, what we are not doing anymore is that full modernization approach, because that gives you the 8% on the cost and the costs are not the 100% of the cost, but it is mostly between 60% to 80% of the costs which you are incurring in a modernization exercise. So that mostly translates into a static return of around 5%. If you compare that at the current cost of capital, I think it's easy cross read that this is something which you shouldn't do.

So therefore, what we have done is to take those financial means and investments and instead of going into full modernization, split them up more intelligently, I think Volker just gave you an example with regards to our Green Ventures and the thermostats, which from our perspective are coming with a higher margin, which are up and above the current cost of capital instead of sticking to the old world of doing full modernizations in our portfolio.

The next question comes from the line of Nicolas Vaysselier from BNP Paribas.

Hopefully, you can hear me. I just wanted to come back on the LTV. If I adjust for your dividend payment, I get to something close to 46.3%. Now I hear your confidence on reaching the 45% target. You have AFFO phasing in H2 that should accelerate. If I factor that in, I was wondering if reaching the target implies, a, that the buyer you have for the land plot, the development plot in the Dusseldorf region exercise this option. I think it has until September. And b, I was wondering what kind of asset revaluations you would be expecting then for H2 to reach that 45%? And my second question is on Green Ventures. In 2025 for the full year, you disclosed minus EUR 4.2 million negative contribution here. I was just wondering how it has evolved in H1? And how do you see 2027 and '28 unfolding on this item?

Yes. Thanks a lot for the question, Nicolas. So with regards to the LTV and what we have penciled in for H2. So on the one hand side, certainly, we are expecting that we are collecting some of the disposal proceeds and Volker has already lined out that with regards to the 552 units with gross proceeds of around EUR 36 million, those we are expecting for H2. Certainly, we also expect the land plot in Gerresheim to be transacted. So still the option is running, but we do not have any negative indication that Hines as the owner of that option is not making use of that until the end of September this year.

With regards to revaluation, I think Kathrin has been loud and clear on that one. So we just came out and you know that we try to guide the market as quickly as possible. But we now and today come out with that 0.7% of a valuation uplift for H1. Now giving you a number for H2, while we have all that volatility around the geopolitical development, interest rates, et cetera, in the market, that's impossible So therefore, we are just a few weeks into H2. We promised once again to bring and deliver a proper guidance for H2 with our Q3 numbers in November. But unfortunately, and as of today, it is impossible to state a number which makes sense.

And Secondly, with regards to Green Ventures, as you know, 2026 is the year of reaching breakeven. And certainly, Volker is very happy to be keen to give you some more details with regards to how we do that.

Yes, that's right. No, we guided for breakeven in 2026 on the Green Ventures. We are very well on track with those. bearing smaller investments like dekarbo and termios, and I pointed out to the Fraunhofer research piece, which shows the effectiveness of the thermostat system, and we are very comfortable to reach breakeven for these for the RENOWATE, which is more on the more heavy investment leaning side. And as Lars pointed out, the trend is not really shifting into these kind of modernization. It's more difficult to reach the breakeven there, but we are striving hard to reach an overall breakeven result.

And what was the contribution for Green Ventures in H1?

We are not giving that number. It's also at equity consolidated companies. So this line will -- you will see that at the end of the year with the final numbers.

Next question comes from the line of Veronique Meertens from Van Lanschot Kempen.

Perhaps first on the FFO guidance. Yes, you rightly point out that H2 is going to be a better half. However, could you give some more color on those different drivers? I appreciate EUR 10 million of subsidies and lower investments, but on your FFO, obviously, lower investment has less of an impact. So is it fair to say that you're going to reach more the lower end of the guidance for FFO? Or are we missing specific drivers for an acceleration in H2?

Yes. Thanks a lot for the question, Veronique. So with regards to the FFO I guidance, the same holds true as for the AFFO guidance. So if we would have assumed to reach only the lower end, we would have narrowed down that guidance range to the lower end, but we haven't done so. So therefore, we are fully in line with our expectation to reach something between EUR 475 million to EUR 495 million. And this is also holding true for the FFO I. You are rightly assuming that the lower investment with regards to FFO I has a lower impact compared to the AFFO because AFFO also includes the full CapEx. But as Kathrin has already stated, the subsidies of EUR 10 million alone, I think, show you of how much stronger H2 will be, and that is the main driver for the change certainly also with regards to H2.

Okay. But H1 is EUR 230 million. So if I would add EUR 10 million to that EUR 240 million and get to EUR 470 million. So that's still quite a big gap towards the midpoint of EUR 485 million, right?

It is. And therefore, you can once again be confident that due to other developments with regards to costs and others, we are confident to reach the EUR 475 million to EUR 495 million.

Okay. And then my second question comes back to probably a well awaited topic for a long time, your discipline around not selling below book values because you yourself highlight that there -- at the current levels, there's not really an investment market. There are inflation concerns, rising interest rates. So how comfortable are you with your own portfolio valuation and also the positive revaluation uplift that you just saw? And -- so what drives that discipline? And what does it bring you? Because you're currently trading at a 30% discount to GAV. So selling at a moderate discount would still be very accretive if you were to redeploy it at a share buyback, so -- and create shareholder value. So yes, curious to hear your view on that discipline.

Thanks also for that question. It's a very fair one, Veronique. So from our perspective, the values which we carry on our book are those values which are the right ones for the assets. Therefore, not selling at those book values would be just giving away shareholder value easily. So therefore, as we are not under pressure and we do not want to throw money out of the window. We want to stick to the disposal policy we have in place for the last years, which brought us now close to the LTV target level. And we do not see value into now selling below book value. If we would do so, please do not underestimate that certainly whatever you are disposing below the current book value would also have an effect on the full balance sheet. And therefore, that is something which you should take into consideration. We do not think that this is worthwhile doing, and therefore, we are not considering doing so going forward.

Okay. That's clear. And I appreciate the last point. But the question is, since that disciplined approach, there has been also an underperformance in LEG share price also versus your closest peers. So isn't then at some point a question if this is indeed the right track to create or to maintain shareholder value?

Yes. So unfortunately, I'm not responsible for the share price. What I can do is the best -- making the best use of the capital which shareholders are providing. We do not think to be well advised to once again, repeat that, sell below book value. And we are confident that at a certain point in time, market will get that message, and it will also be reflected in the share price.

Next question comes from the line of Thomas Rothaeusler from Deutsche Bank.

A couple of questions. The first one is on subsidies. I mean, you expect roughly EUR 10 million in the second half. Just wondering about the visibility here. Is it -- is this a given?

Yes. So happy to take your question, Thomas. So on subsidies, we expect [indiscernible] these are mostly things we have already applied for. Most of the times, we have already handed in the application. So we are in the midst of the process of being awarded the subsidies. It just takes time. Sometimes we still have to finish stuff in order to get the application process starting, but we have a very good visibility overall on this number.

The second question is on rental growth. I mean your run rate was 3.7% in the first half, which is close to the lower end of your guidance range. Just wondering if your upper end guidance range of 4% is still possible from current levels? And what would be the requirements actually?

Well, the upper end would require probably some uptick in the churn, which we also do not really see. So it's more unlikely to reach it, yes. But we haven't narrowed it down because it's steering and gearing the rent growth is quite complicated as it also depends on the rent table, on the dates of publications and on the churn, which also is very volatile sometimes and more comes down than goes up. So it's fair to say that it's not our basic assumption to reach the upper end.

So basically, you expect rather the lower end of the guidance range than the upper end?

Well, we are within this range, and I think we did narrow it for good reasons.

My last question is on regulation and specifically the planned ban of expropriations at federal state level. Just wondering, are you confident on the government to push that through? I mean -- or did you hear anything on the initiative recently?

That's an incredibly difficult question, Thomas. I think for reasons I've opted not to be in politics because to foresee what politics really does, it's quite difficult. So I think to hear loud and clearly from federal government that they are willing to take action with regards to Article 15 and prevent single states of making use of that Article 15 and expropriation in Germany without paying the full market value, I think that is a very good progress.

So from our perspective, as of today, we do not have any indication that this is not going to happen. I think federal politicians have understood how difficult it would be for them as well as the federal and single states to then secure refinancing of its debt at the same levels like as of today. So therefore, we are quite confident to see that law to be passed within the coming months. How quickly that goes there, we are getting different messages. So therefore, very difficult to tell you when that happens. But that it is going to happen, we are quite confident as of today.

Next question comes from the line of Paul May from Barclays.

A couple of questions from me. Just on the first one, and apologies to labor the point on the valuations and Veronique's question, but could you not simply write down your assets and then sell in line with book value in order to get the transaction volume and to manage your leverage that way, but maybe that's not a possibility from what you're saying. And then secondly, just wondered what level could you theoretically cut CapEx and maintenance to without either impacting portfolio quality, incurring a backlog of future CapEx requirements or negatively impacting your total like-for-like rental growth, which includes obviously the return on that investment?

Yes. So thanks for the question, Paul. And unfortunately, certainly, the answer with regards to Veronique's question is not different when you are asking it. So from our perspective, there is, from our perspective, no need to start disposing assets at lower prices compared to the current valuation. So we believe in the current valuation. We consider that to be the fair market value of those assets. Yes, it takes us more time to dispose at those levels. But if we look into the current setup of the company, from our perspective, no pressure to dispose at lower prices.

With regards to hypothetical discussions on where to cut CapEx investments or something, apologies, but I do not think that this is what we should do in that call. From our perspective, the current investment level is exactly the sweet spot currently to manage the portfolio. You can trust us that certainly, we always strive and we struggle with Volker on a regular basis to keep that investment level under control. So you can't see, but Kathrin is nodding. So therefore, this is what we currently discuss intensely. And we have reshifted investment levels over the last years quite dramatically.

So if you look back into 2019 to 2021, where we were of the belief that insulation of facades and full modernization is a valuable approach towards now replacing it with bright new ideas like the thermostats, doing more on the heat pumps, et cetera. I think that already shows you that we are not aware of that every euro which we are investing in the portfolio needs to come up with a decent return. And that is how we keep investments in the portfolio under control and ensure that we are realizing returns on those investments which are being needed.

Okay. So just to be clear, there wouldn't be any reduction in the CapEx in future years to try and bolster the AFFO. We should assume a similar-ish level moving forward. Is that fair?

So from today's perspective, what we need is more and smarter ideas to get CapEx down that there are being able -- that we are able to contribute to those smart ideas. I think Volker and the team has proved it that thermostat is incredibly cheap and delivers a 14% reduction in CO2. I think that's a huge, huge part of getting costs under control. And therefore, going forward, certainly, what we strive for is get CapEx down. So just lying back and saying, okay, there are no smart ideas out there that I think is not the approach of LEG. So we will definitely try to identify smartest ideas to get CapEx down going forward.

The next question comes from the line of Pierre-Emmanuel Clouard from Jefferies.

Actually, Lars, you could admit that you have at least an influence on the share price, even though you are not fully responsible of it. Then I have a quick follow-up on disposals. You mentioned ongoing discussions with potential buyers, but are these discussions limited to the 5,000 units currently included in the disposal program? Or are you also seeing interest for additional portfolios beyond these assets already earmarked for sale?

Yes. So on the 5,000 units, those are the ones we have identified currently, and those are the ones we have currently in the market. What we will do afterwards once we have sold those, I mean, that will be up for discussion once we reach that point and when we see how market conditions are looking at that point in time.

Okay. And for you, is it likely to execute on those 5,000 units by the end of this year or at least to have an agreement with potential buyers? Or is it out of reach?

Yes. So Pierre, I think H2 transaction volumes show of how difficult the market is. So it's not that we are not striving to sell single multifamily houses, do privatizations, slice and dice portfolios in the way of getting those into the market and get them sold. It is really the unwillingness of buyers even after they've invested into technical due diligence, commercial due diligence, but really sit down with us and do notarization of deals. So therefore, as of today, I would be surprised to see the EUR 5,000 being transacted until year-end. But it is not the case that there are not [indiscernible] portfolios currently in the pipeline and under negotiation. So just keep your fingers crossed for us. We are working hard and whatever can be sold, we will be happy to then disclose over the next months to the market.

Okay. And my second question is on the land option. Can you remind us the book value and the expected selling price of the land parcel on which Hines holds an option?

Yes. So unfortunately, Pierre, the NDA, which we have signed with Hines is very strict on the price. So therefore, we are not able to give you the price for the land plot, which we have agreed. A bit of indication you can get from the reclassification we've done with regards to the values with regards to the land plot, which we have just included in our accounts. But unfortunately, we are not able to give you more details on those values.

And this value included in the asset for sale line on your balance sheet or not?

Exactly. They are.

The next question comes from the line of Florent Laroche-Joubert from ODDO BHF.

So actually, I will have 2 follow-up questions on the LTV. So my first question, so we understand that you give a guidance for the LTV ratio at the end of the year. But if I understand correctly, so you are not able to give any indication on the valuation of the asset at the end of the year. So maybe just to understand, so how comfortable are you with this guidance of 45% with the range of valuation that you can expect for the end of the year? So that would be my first question. And my second question, which is also linked to LTV. So beyond 2026 and I assuming that you would reach your target of 45%. So how would it be important for you to target then LTV slightly lower 45% to make sure that you will not come back after that to a level higher of 45%.

Thanks, Florent. With regards to the LTV target level of 45%, with 45.5%, we consider ourselves to be quite close. As already stated in the call by Kathrin, by myself, please be aware of that uptick in Q3. So still not being willing to give you an indication with regards to the valuation for H2, we are still thinking that if we take into consideration disposal pipeline, et cetera, that we can reach the LTV target of 45% at year-end.

From our perspective, that is very good news. And what we do not want to do is now strive for a new LTV target level, something below that. We consider 45% to be a good level for our company and to steer that. Interest costs, which we can achieve with that from our perspective are at a good level. We are in sound territories with regards to our rating level. So therefore, while reaching that, this will give us then the room to also think about the different options, which we laid out with regards to the capital allocation policy. And therefore, from our perspective, no need to steer the business at a lower LTV level.

[Operator Instructions] The next question comes from the line of Marc Mozzi from Bank of America.

I just wanted to know what are the reasons why you do not release and report your NDV in your reporting?

You are asking if we are not...

What are the reasons or maybe I haven't been able to find it, but what are the reasons why we don't have the full disclosure in terms of EPRA net asset value? And as a consequence, the NDV is not reported, which is far more important for you guys with such a big amount of deferred tax liabilities than the NTA, which is creating a confusion around the discount to book value and around the implied discount to gross asset value, implied yield and so on.

We are reporting the EPRA NTA, which is from our perspective, the most important figure every quarter, and you will find the NDV in the full year figures.

Okay. But I was just wondering why Vonovia and you do not report that number on a quarterly basis, which is an important number, while everyone else does. But maybe there is some specific reason I'm not able to catch from outside.

Yes, I account for Vonovia, but we are offering you this number once a year.

On the guidance for the FFO for the year, sorry to come back on that one. But what has been the reason why you haven't been able to narrow that range at this stage of the year where you have visibility on the subsidized amount, EUR 10 million you said. You know the tables for your rental growth, which in theory should accelerate in H2. What has been the moving part, which hasn't been helping you to narrow the range?

Yes. So from our perspective, Marc, there is no need to narrow down the current range. From our perspective, there is the development in place, which we expected according to our plan. the forecasts are showing that we are on our path in the right direction. And from our perspective, therefore, we are happy reiterating that we will be able to deliver an FFO I in the range between EUR 475 million to EUR 495 million.

Unfortunately, also with regards to our business, there are moving pieces. And those moving pieces, one of them you mentioned already is the subsidized part, but there are also other pieces, and that includes certainly the contribution of our value-add businesses, but also others, which are contributing to some uncertainty with regards to the final numbers of the FFO I. And therefore, as of today, we are not able to narrow down that range, but we are confident to reach something within that range of EUR 475 million to EUR 495 million.

It's interesting that you mentioned narrowing down because I was thinking more about narrowing up, but that's interesting.

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

Thank you, Maura, and thank you all for your participation. And should you have further questions, the IR team is available. Please don't hesitate to contact us. And with that, we close the call. We wish you a pleasant day ahead, and say goodbye for now.

Ladies and gentlemen, welcome to the LEG Immobilien Q1 2026 Conference Call and Live Webcast. I'm Vicky, the Chorus Call operator.

[Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Mr. Frank Kopfinger, Head of Investor Relations. Please go ahead.

Thank you, Vicky, and good morning, everyone, from Dusseldorf. Welcome to our call for our Q1 2026 results, and thank you for your participation.

We have in the call, as always, our entire management team with our CEO, Lars von Lackum; our CFO, Kathrin Kohling; as well as our COO, Volker Wiegel.

You'll find the presentation document as well as the quarterly report and documents within the IR section of our homepage. Please note that there is also a disclaimer, which you'll find on Page 2 of our presentation.

And without further ado, I hand it over to you, Lars.

Thank you, Frank. Good morning, everyone, and thank you for joining our analyst and investor call today. Our message today is short and unambiguous. LEG is fully on track to deliver its 2026 targets. Rent growth, EBITDA margin, AFFO and LTV are all moving within or towards guidance, and they are doing so on the back of the same disciplined operating model you have come to expect from us.

Like-for-like rent growth came in at 3.7% on a clear path into our guidance corridor of 3.8% to 4%. The EBITDA margin expanded by 180 basis points to 77.4%, underlying the operational leverage of our platform. And AFFO, our core steering metric, came in at EUR 58.6 million, fully confirming our full year guidance range. As a brief crosscheck, operating cash flow developed in line with this picture, rising by 14.5% year-on-year.

Let me address the AFFO line directly because I expect questions on it. AFFO is slightly below last year, and the bridge is purely a timing and phasing effect. Two drivers: first, a deliberately more linear CapEx profile in 2026 versus a Q1 heavy ramp-up in 2025 on the back of the BCP integration. Second, a modest step-up in cash interest as new financings are written at current rates.

The investment spending is a phasing pattern, not a quality of earnings issue. Underlying cash generation, margin development and rent growth all confirm the trajectory, and we, therefore, reiterate the full year AFFO range without any reservation.

On valuation, we remain cautiously constructive for H1, a flat to slightly positive result of up to plus 1%. Momentum may soften somewhat as transaction volumes stay subdued and buyers remain on the sidelines, but we do not see a reversal of the trend.

LTV improved by 60 basis points to 46.2%, driven by disciplined cash generation and lower net debt. Our 45% target remains in reach. It has become more ambitious in the current environment. But the direction of travel is unchanged and the cash flow engine that gets us there is intact.

Let me now turn to Slide 6. Slide 6 captures in one picture where LEG continues to stand out in a sector where the quality of earnings is increasingly being questioned.

Five points. First, the market. We operate against the backdrop of geopolitical tension, capital market volatility and stagflation risk. Yet the structural driver of our business, the German housing shortage is not cyclical. Demand exceeds supply by a wide and widening margin. New construction continues to slow, household numbers continue to rise even as net immigration flattens.

LEG is positioned squarely in affordable housing in North Rhine-Westphalia, Germany's largest state by population and GDP. That is what underpins the durability of our cash flows.

Second, the balance sheet. And here, I want to be quantitative rather than narrative. Our 2026 maturities are fully covered on a pro forma basis. Liquidity stands at more than EUR 500 million. Our hedging ratio is around 98%. Our interest coverage ratio is at 4.2x, comfortably above covenant requirements and strong in sector context.

Average debt cost remains at 1.8%, a level few of you had in your forward models. The next sizable maturity is the EUR 500 million bond in November 2027, which gives us the option to refinance gradually rather than under pressure. This is what genuine financing resilience looks like measured in numbers, not objectives.

Third, cash discipline. AFFO remains our core steering metric. And as long as we steer the company on AFFO, you have the assurance that we will not relever. The underlying cash dynamics support this approach. Operating cash flow rose by 14.5% in the quarter, but it is AFFO with its full deduction of investments that anchors our capital allocation.

Every additional euro of spending is benchmarked against the strict hurdle-rate driven investment logic. That same discipline is what preserves the firepower for selective opportunities when they arise, as we did with BCP.

Fourth, strategic focus. We do what we are good at, managing value-creating assets in the affordable segment. We do not tie up capital in riskier, more capital-intensive businesses. Our disposal policy remains prudent, noncore only at or above book value. The proposed scrip dividend supports the same logic, proactively strengthening the balance sheet versus the full cash dividend.

Fifth, growth. As outlined at our full year call, we expect AFFO to grow by around 5% in the medium term. The drivers are tangible. Subsidized units coming off restriction in 2028 will add around 1 percentage point to rent growth.

Green Ventures target approximately EUR 20 million contribution by 2028 on an aggregated basis. Digitalization and AI initiatives will deliver some EUR 10 million of efficiency gains by 2030. Together, these more than offset the refinancing headwinds we will face as we adjust to current rate levels.

So if you take one message away from this chart, take this one. LEG's business model continues to perform exactly as designed, predictable like-for-like rent growth and expanding EBITDA margin, disciplined AFFO steering and a quantitatively robust balance sheet.

Our cash flow resilience is demonstrated by AFFO-based steering, fully covered financing and a stable vacancy rate. In our view, that is the right lens through which to assess quality in our sector today. Cash resilience and discipline, not adjustments.

It is a combination that remains rare in the current environment, and it positions us exceptionally well for the remainder of 2026 and beyond.

Let's move to Slide 7. After 3 months, we are well on track for our 2026 guidance and operational performance remains rock solid. Net cold rent grew by 3.3%, driven by strong like-for-like growth, partially offset by disposal effects.

The EBITDA margin improved by 180 basis points year-on-year to 77.4%. AFFO came in at EUR 58.6 million, slightly below last year. But as I just outlined, this reflects a different investment phasing, not a change in earnings quality.

We are bang in line with our guidance range. The same applies to FFO 1, which we know remains an important reference for many of you.

With this short overview I hand over to Volker for the operational highlights.

Thank you Lars, and good morning, everyone.

Let me start with the rent development on Slide 8. On a like-for-like basis, our average rent per square meter rose by 3.7% year-on-year, reaching EUR 7.15.

Free financed units continued to benefit from strong market momentum, achieving rental growth of 3.8%. By market segment, the range goes from a solid 3.5% in higher-yielding markets to 4% in stable markets. This clearly underlines our operating strength and the resilience of the portfolio.

2026 is a cost rent adjustment year. As a reminder, we can adjust the cost rent for subsidized units every 3 years based on CPI development. This adjustment took place in Q1 and translated into a 3.3% like-for-like increase across our subsidized portfolio of around 30,000 units.

On the breakdown of rental drivers, rent tables were the strongest contributor, accounting for 1.9 percentage points of the 3.7% like-for-like growth. Modernization and reletting added 1.3 percentage points and the cost rent adjustment contributed 0.5 percentage points across the total portfolio.

We continue to monitor new rent tables closely, and you will find our outlook on Slide 24 in the appendix. To give some color, the new table for Monchengladbach implies an uplift of around 6% for a typical LEG apartment. The table for Unna in Westphalia, an uplift of around 8%. All in all, we are well on track to deliver on our rental guidance for full year 2026.

Finally, on like-for-like vacancy, we kept the rate stable at the previous year's low level of 2.4%.

Moving to investments on Slide 9. In the first quarter, adjusted investments amounted to EUR 98 million or EUR 8.82 per square meter, roughly 1/4 of the full year volume, which we expect to come in at more than EUR 35 per square meter in line with guidance. Beyond the absolute level, we are deliberately steering towards a more evenly quarterly distribution in 2026.

Last year, this was only partially possible as BCP had not yet been fully integrated in Q1. As a result, our Q1 2026 investments came in 17% above the prior year quarter.

You will find an illustration of past quarterly investment patterns on the following slides. For 2026, please assume a markedly more even distribution across the year.

On the composition, in Q1 2026, CapEx accounted for EUR 52.8 million or EUR 4.75 per square meter, while maintenance came in at EUR 45.2 million or EUR 4.07 per square meter. Our cap rate rose by 1 percentage point to 54%.

Let's now turn to disposals on Slide 11. Year-to-date, we have completed or signed sales for around 1,000 units with total proceeds of EUR 74 million. Of these, around 250 units were transferred in Q1 for around EUR 18 million. The remaining around 750 units with gross proceeds of around EUR 56 million are due to be transferred from Q2 onwards.

Disposals were generally executed at or above book value, and this is a deliberate and important point. We sell only noncore and only at or above book. Disposals serve our LTV management, not our earnings. You will not find recurring sales contributions doing the heavy lifting in our P&L or in our cash generation. That is what makes our disposal contribution to LTV reduction credible and repeatable, rather than opportunistic.

Against the backdrop of a German residential transaction market characterized by fewer large volume deals and limited international investor activity. Additional context on Slide 33 in the appendix. We remain confident in delivering on our disposal program. Our flexibility to offer smaller portfolios or even individual multifamily houses tailored to buyer needs is a structural advantage in the current market.

The total disposal program still comprises up to 5,000 units, including approximately 1,400 units in Eastern Germany.

With this, I hand over to Kathrine.

Thank you, Volker, and a warm welcome from my side as well.

Let's turn to Slide 12 and the AFFO bridge for the first quarter. I will focus on the main movements.

Net cold rent increased by EUR 7.6 million. Rent growth contributed EUR 8.9 million, partly offset by a EUR 1.3 million disposal effect. Net cash interest rose by EUR 3.7 million. This reflects both lower interest income from our liquidity position as well as the gradual upward reset of refinancing costs.

The main reason for the slight year-on-year decline in AFFO was the higher level of investments, as Lars and Volker already explained. Importantly, this is a phasing effect, not a structural one. With AFFO of EUR 58.6 million, we are firmly on track for our full year guidance.

Slide 13 shows the key effects on our financing structure. And I want to spend a moment on this because this is where the resilience of LEG is most visible. Loan-to-value declined by 220 basis points versus Q1 2025, driven mainly by valuation effects and supplemented by disposals.

Versus year-end 2025, LTV came down by 60 basis points, supported by strong cash generation and positive CapEx effects. Net debt fell by almost EUR 100 million, supported by 2 complementary sources.

First, our recurring operating performance. It is reflected in disciplined AFFO steering and healthy operating cash flow.

Second, our disposal program. While large volume transactions have clearly slowed market-wide, our ability to place smaller portfolios and individual multifamily households gives us continued execution capability where others may struggle.

Over the medium term, this disposal stream is set to become a larger structural contributor to deleveraging, supported by a remaining pipeline of up to 5,000 units. Both levers work hand-in-hand, a recurring operating engine that funds the business and a targeted disposal program that takes leverage down structurally, even in a transaction market that is anything but easy.

The average interest cost stood at 1.8%, 25 basis points above Q1 2025 and 14 basis points above year-end 2025. The average maturity slightly increased to 5.8 years, supported by around EUR 350 million of refinancing closed in Q1 at an average maturity of 9.5 years and an average interest rate of 3.8%.

In 2026, debt of EUR 233 million will mature, almost entirely in Q2. With cash and cash equivalents of EUR 508 million at the end of Q1, our 2026 maturities are fully covered on a pro forma basis.

The next material maturity is a EUR 500 million bond in November 2027. Our interest coverage ratio stood at 4.2x, comfortably above the level required by our bond covenants. We also have ample headroom on all other bond covenants. The full overview is in the appendix for those interested.

As Lars mentioned, we will most likely again offer shareholders the option of a scrip dividend, assuming an acceptance rate broadly in line with last year's 38% and all else being equal, this would retain approximately EUR 85 million of liquidity within the company and have a positive LTV impact of around 40 basis points.

In an environment where the transaction markets remain difficult and rate movements can affect valuations, the scrip dividend is a deliberate balance sheet management tool.

In summary, the balance sheet is resilient. The maturity profile is well structured, and we operate from a strong financing position with ample flexibility going forward.

With that, back to Lars.

Thank you, Kathrin. Let me close with our 2026 guidance summarized on Slide 14, which I'm happy to fully reconfirm today.

We expect a further improvement in cash generation with AFFO between EUR 220 million and EUR 240 million, continued growth on top of a strong 2025. FFO I is expected at EUR 475 million to EUR 495 million, supported by an adjusted EBITDA margin of around 78%. Our operational drivers, rent growth and investment are likewise reconfirmed.

On valuation for H1, a flat to slightly positive result of up to plus 1% with momentum potentially softening as transaction volumes remain subdued. The one area where we acknowledge sensitivity is LTV.

Depending on the trajectory of inflation, interest rates and the transaction market, our 45% target may become more challenging, it needs precise timing. Let me therefore be precise on this point. Circa 45% remains our clear commitment, and we have the levers to get there in our own hand.

AFFO-based steering is disciplined disposal program and the scrip dividend as an additional balance sheet instrument. What we will not do is force the LTV down through value-destructive disposals or through actions that would compromise the long-term cash generation capacity of the business. Our deleveraging will be done on quality and on our own terms, not under pressure.

To sum it up, LEG remains on a clear and consistent path, generating reliable cash flow [technical difficulty] discipline and building long-term value for shareholders and tenants alike.

Cash flow remains king, and AFFO remains the right steering metric for our business. Our 2026 guidance reconfirms the strength and the resilience of our model, measured again in numbers rather than narrative.

With that, we conclude the presentation and look very much forward to your questions.

Thanks, Lars. And with this, we begin the Q&A session, and we hand it over to you, Vicky, to guide us through the Q&A.

[Operator Instructions] The first question is from Marios Pastou, Bernstein.

I've got 2 questions from my side. So firstly, of course, buyers are on the sidelines, but I'm interested to see how things are progressing with the various deals you've had in the discussion for a couple of quarters. Are you seeing any signs that those buyers are pulling away from any prior agreements being at your existing units or your land?

And then secondly, going back to your slide on the overall strategy, if those planned disposals are not possible and financing costs remain elevated, what changes?

Thanks for your 2 questions, and I try to give you an answer to those both. So with regards to the buyers' behavior since the start of the geopolitical tensions in the Middle East, we have not seen buyers moving out of [ end process], but certainly, those processes dragging on and on and on. So that is partly being driven by buyers' behavior, but also by the financing banks.

So what we can see is a big reluctance of financing banks to really come to term sheets or even financing agreements, which unfortunately is postponing deals substantially.

You made with your question, also reference with regards to the biggest transactions we've been able to agree this year. which is the Gerresheim plot in Dusseldorf. So Hines has that call option. They are in very constructive and good talks with the city of Dusseldorf. And we are still very confident that we are going to see Hines really making use of that call option. So therefore, no change at that end as of today.

With regards to our assumption, with regards to the disposal volume, and we try to give you at least an hindsight with regards to the H1 development of values. With regards to all those geopolitical volatility, the change to energy prices, interest rates, et cetera, that is very difficult to foresee how many of those disposals we will be able to do.

What we definitely expect that we are getting closer to our 45% LTV target. Will we be able to reach it, if we are not seeing a single transaction, I think that will be certainly an uphill battle, but it depends on the further development, certainly not only of the disposals, but also the valuation we are going to see with regards to our assets. And for H1, we are seeing a valuation increase of up to 1%.

Okay. So should we expect to see maybe some of those prior term disposal agreements closing in the first half? Or is there a kind of a longer road ahead to achieve that? And I suppose as a bit of a follow-up as well, if no disposals are possible at all, does anything in your strategy change to kind of get back to a period of growth?

Yes. So with regards to disposals activity, we have some of the disposals in our pipeline where we are now at a stage where buyers are just waiting for the reconfirmation by those financing banks that they will be there and that they are signing the financing contracts.

So if that is going to take place, we are expecting notarizations of deals within H1. But nowadays, it is very difficult to foresee, yes. So let's wait and see. Still, there are deals in the pipelines, and we have also some notarization dates already being fixed and penciled in our diaries. So hope and certainly keep our fingers crossed that those are taking place as foreseen.

The next question from Charles Boissier, UBS.

Two questions from my side. First, on what you just mentioned about the reluctance from banks, what are the funding conditions that are being offered currently in the market?

Yes. So what we can see is that German residential is still seen to be the sweet spot for financing banks. So it is not the case that if you are a willing buyer, you will not be able to see financing offerings. But what you can still see is that there is a huge interest in doing due diligence by financing banks to -- not seen degree of detail in the past. And those degree of detail includes valuators, not only 1 or 2, but a number of technical due diligence being done on assets, et cetera, which unfortunately is postponing processes. So therefore, there is enough financing capacity in the market, but to really get to a final contract that takes time.

Right. So does that mean that if they upon their own valuators, as you just mentioned, sometimes they come to the conclusion that the values should be lower on those portfolios than what you have in the book?

What normally happens, and Charles, is that those valuators come up with numbers with regards to the market value, but the market value is normally not the point, especially if you do an asset-backed financing as a reference point. But then there is a certain valuation point, which is below that market. And that valuation point is then the reference point for what they really are expecting as an LTV.

So finally, it ends up in a way that you are getting "60%" LTV, but this is for internal valuation purposes, a reference point, which is comparing to the market value normally a 40% leverage. But that hasn't changed over the last year.

So the leverage ratio has not changed because it is certainly driven by the fund brief law, so that adds back securities with which German banks are refinancing themselves, which is restricting them with regards to the volume of LTV they can offer within a financing contract.

Very interesting. And the second question from my side on the Mietspiegel. So if I look at Appendix 24 in your presentation, you note that all the 4 cities where the Mietspiegel was expected to be published year-to-date have seen delays. And you already had some delays last quarter, but now it includes some of your key markets like Bielefeld and Dusseldorf. So could you help us understand what's driving those delays, but also to what extent this might impact your ability to deliver on the 3.8% to 4% rental growth for this year?

Yes, Charles. So please, it is not to be understood that those cities do that on purpose. So it just takes time, and it is once again only an indication from our side to help you understand when we are expecting rent tables to be published.

Yes, there are certain obligations, but those cities sometimes just take longer to do the data collection, do the regression analysis, whatever. We certainly try to be as close as possible to the cities and to those rent table committees. But it is not to be understood that those cities are on purpose delaying the publication of new rent tables.

And it is not that these rent tables are not coming out eventually. For example, we had the -- we had for January, we expected the [ Mietspiegel ] rent table, and it just came out now, as Volker mentioned. So it's not that the rent tables are not coming out. It's just a delay of a few months sometimes.

The next question from Paul May, Barclays.

So I had a couple of questions. Just I recall at Q4, you mentioned that when you last budgeted on a longer-term basis that, that was around October last year, if I recall correctly. Just wondered if you've updated that post the sort of move in financing rates and if that's having any impact on your longer-term AFFO and FFO CAGR expectations?

And then second question, and apologies again if you comment on this, but I think you mentioned at the full year results that the Mietspiegel tables had peaked in terms of the level of growth and you expected lower growth moving forward. Just checking if that is still the assumption with where inflation is expected to go and how that's going to affect over your medium term rather than sort of the next 12 months of medium-term rental growth expectations?

Yes. Thanks a lot, Paul. And coming back to your first question, so we haven't rerun and redone our midterm planning. So we always do it in autumn. But certainly, you're right to refer to that. So certainly, the increase in interest rates are posing a headwind. I think Kathrin can give you more details at which rates we are currently refinancing so that you get a flavor of what we've been able to agree with banks on -- in the current market.

But certainly, we will need to take that into consideration going forward. With regards to the current indication we can give you, we are quite confident that we can stick to our midterm planning. But with that, perhaps quick to Kathrin and a few numbers with regards to our latest financing.

Yes. So Paul, we are really quite confident with this year's number still given that the impact is not as big as when we look at the numbers from last year and this year. So maybe it's around 30 bps or something. But it's not that we have to refinance a lot. So the impact is absolutely manageable from our side.

And what we have also seen is that spreads on the positive side are still quite tight. So when we did the planning originally, the spreads are actually even a little bit higher than they are now. So we are currently looking for a 10-year on the unsecured side and maybe at around 140, 150 basis points. So this is still on the super quite tight side.

And also on the secured side, we are currently looking at around 100 bps for 10 years. That's quite a good number. And so this is definitely helping us. As I said, we just financed the first EUR 347 million, the first EUR 350 million this year for 3.8%. So everything is on track.

And Paul, on your second question on the rent table development, might be misunderstanding that they decrease in growth. We just wanted to say that there's no accelerating in growth expected. So it's more plateau what we see. And if you look at the numbers I mentioned for Unna and I think it's a city, only very few of you are aware where it is, so 8% is quite decent growth. So we see that this continues to grow decently.

And of course, as you mentioned, if inflation kicks in again, this will be reflected in rent tables, but we don't really hope for inflation for other reasons.

Apologies I have one quick last one. Just on the valuation expectation over the first half, I think it's sort of up to 1%, I think, is the number in the statement. How much of the valuers reflected that move in rates year-to-date? Are they looking at it as a sort of slightly transitory movements and therefore, not much impact on yields? Or have they not yet properly reflected that and we could see an increase in the first half and possibly a decrease in the second half when they sort of reflect that? Just trying to get an understanding of how they're thinking about it.

Yes, Paul. As you know, so cutoff date is 31st of March, and it's always a bit backward looking. So is the full geopolitical conflict, the change in interest rates being fully baked in into the latest valuation, most probably not, yes. So there might be an additional impact with the H2 numbers.

As no one knows of how geopolitical development play out, how interest rates will develop over the coming months. I think it's too early to say. What we try to get across is at least what we've seen over the last 3 halves building up a very positive momentum with regards to valuation that has softened. So compared to last year, where we've seen increasing valuation uplift in H1, H2. Now in this first half year, that's coming down. So it will be somewhere between 0% to 1%.

From our perspective, it's too early to talk about H2 again and volatility is too high. There are market participants out there, which are giving full year guidance. We do not see ourselves in that position. So therefore, all we can share is what we currently see with our H1 numbers.

The next question from Veronique Meertens from Lanschot Kempen.

Two from my side. I believe you mentioned you are bang in line with your guidance. But when I look at your FFO I run rate, you're actually 3.5% below the low end and 5% from midpoint. So I was wondering what will be the driver in the rest of the year or where you think you can make up to still reach your target for the full year?

Yes. So happy to take your questions, Veronique. So we are still confident on the FFO I number, as we already said. I mean you have to take into consideration that seasonalities are at play here also from -- on the FFO side. So if you may have a look at last year's numbers, we were even a little bit lower on the FFO I side, and we ended quite comfortably at EUR 481 million FFO contribution at the end of the year. As we are not steering on the FFO, but on the AFFO for total numbers, we are not steering on in between numbers on FFO neither. So of course, there are things that take place in between.

So for example, the capitalization ratio, when you look at it currently, it's at 54%. If you look at [Technical difficulty]

Ladies and gentlemen, please hold the line. We lost connection. We will reconnect shortly. The line is connected.

This is Kathrin again. So something new every time. So glad to be back. I think I lost you all when I talked about the capitalization ratio as one effect that is still changing over the year and that will increase FFO I numbers. So we are currently looking at 54% capitalization ratio. Last year's total number was 57%. We still expect this to go up.

Okay. That's clear. And then maybe my last question is, it seems that you're a little bit less confident on reaching that 45% LTV target and you stick to your view that you're not selling below book value and offering scrip dividend. But has it also crossed mind to lower this dividend significantly or cut this dividend to reach that LTV target.

Thanks a lot, Veronique. Exactly that's the case. So I think it's not necessary to cut dividend or do anything else. What we do is, on purpose, offer the scrip dividend. And we think that is a measure which will help us to get closer to the LTV target. And it's not being taken off the table. Please also get that message clearly from us today.

And we only say it's more ambitious in an environment where you have the Head of the IEA saying that we are heading the biggest energy crisis in history. I think it would be premature to already now say we will, for sure, get to that 45%. And you've also heard about the very soft transaction market in Germany. So that certainly was expected to be different. Our hope beginning of March was that we are going to see an end to those geopolitical tensions in the Middle East much quicker. That unfortunately has not taken place.

So therefore, what we try to get across, Veronique, we will do whatever is being needed from our side to get us close to there. That will be the scrip dividend, that will be disposals at above book value. And certainly, we will look and face a situation in the current environment where most probably there will be a lighter development of valuations than initially expected at the beginning of the year.

So if you indeed mentioned that there is so much uncertainty, doesn't that even increase the push to lower your LTV? So why be so strict around that selling at book values, especially since we are not even certain where book values are going to go in the future?

Yes. So for us, Veronique, the book values are the best indicator for the current fair values because that is exactly what we are accounting for. So therefore, we do not see the need to now try to guess the next development of the book value, but that is the incentive for ourselves to be as disciplined as possible with regards to sales.

Therefore, what we will do is sell at or above book value, but not below that. And we think it has paid out over the last 2.5 years and will pay out for the next years.

The next question from Andres Toome, Green Street.

A couple of questions, please. Firstly, on balance sheet management. Since you are sitting on some cash that seems to be earmarked for debt repayment, I was just wondering if there is any potential for bond buybacks ahead of the term end, which potentially could be accretive way to address your upcoming maturities. I'm just wondering how the math stacks up there from your perspective.

Yes. So sure, we are always looking also at potential liability management that we could do. I mean it's part of our opportunistic refinancing. So far, we haven't identified any because you haven't seen us doing it. But it's not off the table. We just have to take into consideration what costs the new money and does it make sense from that perspective. So currently, we take the next EUR 233 million or EUR 232 million exactly in June to pay back another maturity that's coming.

Understood. And then secondly, just with the general cost of capital for your company becoming more expensive this year, just wondering, could you actually tilt to even higher disposal aims in aggregate, even though you sort of mentioned already that the pace of disposal at the moment is a bit slower?

Yes, Andres. So we would entertain whatever interest comes up in the market. Are we currently seeing investors being interested in really buying bigger? No, we don't.

So we try to give you a bit of a feeling for the development of the German transaction market and yourself, you are working for a house, which has all the market insights at hand.

So you know how transaction activity in the German market develops. Especially transactions above the EUR 100 million are very rarely to find. So the share of those has decreased from around 40% to 30% in the German market. So we currently do not foresee a market now opening up so quickly that you would really see bigger transactions taking place this year, also not including any bigger transactions from LEG side.

I guess related to that from the previous sort of analysts as well, in terms of the price point that you're aiming for and again, considering the fact that anything above, let's say, EUR 100 million is quite a bit more difficult. Is that just not the market price then from your perspective for these portfolios and assets? And wouldn't you just need to accept that to get your deleveraging targets done?

Yes. So as you've seen, there wasn't much of sales volume being included in our Q1 numbers. Still LTV came down now to 46.2%. So the difference between the 46% and the 45% is not huge. We still foresee an improvement going forward, not only because of the H1 revaluation, but also due to the disposals we have done so far.

So therefore, from our perspective, no need to really adjust our approach. From our perspective, we can stick and will stick to that book value as the best proxy for the fair values to be realized in the market. And this is what we will do also going forward. We will offer all the portfolios at book value and try to reach that reference point.

The next question from Thomas Rothaeusler, Deutsche Bank.

I've got one question on your non-rental business. I know you don't report on a quarterly basis, but maybe you could provide some update and what you expect for this year?

Well, that's unchanged from what we guided you for at the full year numbers. So this will grow basically in line with AFFO.

Would you say you see some headwinds given the current environment also for the non-rental business?

No, that's unchanged.

The next question is from Neeraj Kumar, Barclays.

Just trying to understand a bit more about your refinancing strategy going forward. Do you see the unsecured bond market more attractive than the bank debt given the enhanced due diligence process from the banks you mentioned earlier?

Also, do you plan to refinance a lot of debt ahead of your debt maturities given the current spread level seems to be unchanged with the recent volatility in the rates market? And what would be your preferred route for refinancing? Do you prefer to do through tap issuance of low coupon bonds to preserve your AFFO? Or are you happy to do a benchmark size bond issuance going forward?

Neeraj, happy to take your question. So on the refinancing part, we will just continue with what we have done also over the past years. We will just continue to be opportunistic here. We like to stand on all the legs we are standing on currently. So we like the secured bond market. We like the unsecured bond market. We like our convertible bonds. We like private placements. Did I miss something?

So this is also something where we will continue to play in. And depending on where we see the most opportunities coming up or rising, we will act. There is no immediate need to act, as you said, because we are covered for this year. But as we all know, next year's numbers are coming up. So we will try to be proactive, and we will try to be ahead of time, but we also have to take into consideration what it costs us. And so it needs to make sense overall. But we do not exclude any instruments, and we will just see the opportunities when they come.

Nice to hear that LEG's standing on all the legs. And any update on your Moody's rating given the recent weakness you're potentially kind of referring to on the LTV metric?

Yes. So we are still having a positive outlook for Moody's. We are still in constant talks with them. We haven't heard anything else, and we are still striving for the best.

The next question is from Jonathan Kownator, Goldman Sachs.

Three, if I may. The first one, can you help us understand what was the yield on the disposals that you closed and signed this year, please? Second, on the scrip dividend, keen to understand if you think you're going to continue going forward? Or is that for this year? And maybe third question, what is happening on the regulatory debate side? Obviously, you have an update in your presentation, but just keen to understand if you expect any significant positive or negative development for you on that front?

Yes. Thanks a lot for that set of questions. And if I miss anything, Jonathan, please come back. So first on the yield on disposals. So you might have seen that the number of transactions we've done has been very thin in Q1. And the breadth of those yields is enormous because on the one hand side, we certainly were able to sell single flats, which then sometimes come at yields of around 2%-2.5% up to something like 10% yields for a multifamily house with substantially additional maintenance and investment CapEx to be done. So that is the breadth of disposals we were able to do.

With regards to the scrip dividend, so we are offering this this year because EUR 80 million if we translate those 40% of payout, which most probably will once again be executed in shares and not in cash. That certainly is helped in the current situation where we see a thin transaction market and there is a bit of more uncertainty with regards to the future valuation developments.

So therefore, we consider the scrip dividend for this year to be helpful. Is that a decision to offer a scrip each and every year? No, it's not.

So we take the optionality and the freedom is always with the next dividend on which we are deciding. So therefore, please do not take that as a decision also for the coming years because certainly, at the current share price, the scrip dividend is something which will be dilutive and certainly is something which we have taken into consideration while deciding on it. But with regards to strengthening our balance sheet, we thought this to be the right measure at the current situation.

Finally, with regards to regulation, and you've seen that we've added 3 pages on regulation. So if you want to, I can certainly elaborate for the next hour about regulation in Germany. The most important point, I think, is, first of all, and although we are not active in Berlin and all the noise around the expropriation discussion, we do not foresee that this is constitutional possible. So therefore, I think that is the most important point from a German residential landlord and a public listed entity to be known to each and every investor. So we do not foresee this to be -- become law in Germany.

The second part is with regards to rent regulation. So you read about the rent regulation assets in Berlin with regards to capping index-linked, capping furnished apartments, et cetera, all of that without an impact on our rental growth. So we are not having many index rents. We do not do furnished apartments, et cetera. So yes, we see that there is additional regulation being put in place, but with no impact on our numbers.

The third point, which is of importance, is all around the CO2 reduction efforts of the European Union and on a federal level. You've seen that the Germans have decided to not come up with an obligation for each and every landlord to do additional investments into a CO2 reduction of its buildings. which certainly is a positive. And we also see that there is a better understanding for the needs of the industry, not only our industry, but also the energy industry and many other industries that we need to come up with ways to reduce CO2 with a lower cost.

And that is something which is now also being considered and baked into the new heating law, the [ GMG ], which we also explained, and that will certainly give us more freedom and will help to come up with more innovative and low-cost alternatives towards just replacing fossil by heat pumps, but it will also enable us to do by bivalent heating systems, so combining a heat pump and a fossil-based heating system. And from our perspective, that's also a very positive development for German residential landlords.

Okay. If I just can follow up on the yield on disposals, what would be the average yield of the units that you've disposed or agreed to sell?

I do not have that number with me, Jonathan, apologies.

On the price side, is it towards -- more towards the 10% or more towards the 2.5% just qualitatively will be enough.

So apologies. Frank will follow up on that one and that number. So apologies, I don't have it here.

[Operator Instructions] The next question is from Kai Klose, Berenberg

I got a quick question on Page 16 on the AFFO calculation. Just on the direction of travel for the nonpersonnel operating costs and nonrecurring special effects. In Q1 last year, they were pretty stable compared to Q1 '24. This time, it was a bit of a stronger change, higher change. Could you indicate maybe if there was anything special behind or some seasonal effect?

Yes. So Kai, you see here the first effect of our digitalization initiatives. You know when we were talking about how we want to reach EUR 10 million in AFFO by 2030 and where we are changing our entire CRM system and stuff like that. So you see the first effects here on that one. Part of that will also be -- so part of this will also then end up in the nonrecurring special effects and being taken out again, but that's the effect you see here.

Just to be clear, I see that in which of the 4 cost items or the 3 cost items, operating cost, special effects or admin?

You see it in the nonpersonnel operating costs, in the nonrecurring special effects costs. And what else did you ask, sorry?

In the admin or the administrative expenses recurring was just good?

Yes, actually a number that is lower than last year.

We have a follow-up question from Paul May, Barclays.

Sorry, I just had an incoming that I thought I'd ask as well. Just wondered on the accounting treatment of issuing a tap issuance at a lower par value or lower absolute value versus the coupon. How does that apply to FFO and AFFO? Because I understand under IFRS, the amortization would come into it. But am I right in saying that it's just the coupon payment, not the full yield that gets reflected in FFO and AFFO. Sorry, apologies, quite a specific one, but I just had that question.

No, happy to take your question. So the coupon that we're actually paying goes into net cash interest and both in the FFO and AFFO numbers. And the accretion that you were talking about ends up in P&L, but not in FFO.

That was the last question. I would like to turn the conference back over to Frank Kopfinger for any closing remarks.

Thank you, Vicky, and thanks for all your questions. And as always, should you have further questions, then please do not hesitate and contact us. Otherwise, please note that our next scheduled reporting event is on the 4th of August when we report our Q2 results.

And with this, we close the call, and we wish you all the best and hope to see you soon on one of the upcoming roadshows and conferences. Thank you, and goodbye, everybody.

Ladies and gentlemen, welcome to the LEG Immobilien Full Year 2025 Conference Call and Live Webcast. I am Valentina, 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 Frank Kopfinger, Head of Investor Relations. Please go ahead.

Thank you, Valentina, and good morning, everyone, from Dusseldorf. Welcome to our call for our full year 2025 results, and thank you for your participation. We have in the call our entire management team with our CEO, Lars von Lackum; our CFO, Kathrin Kohling; as well as our COO, Volker Wiegel. You'll find the presentation document as well as the annual report and documents within the IR section of our homepage. Please note that, there is also a disclaimer, which you'll find on Page 2 of our presentation.

And without further ado, I hand it over to you, Lars.

Thank you, Frank. Good morning, everyone, and thank you for joining our analyst and investor call today. I am very proud to share that 2025 has been an outstanding year for us. We have delivered AFFO of EUR 220.5 million, marking a 10% increase, the highest level in our company's history. This performance is a clear reflection of our disciplined execution, our strong portfolio and our willingness to capture opportunities, like we did with BCP.

Building on this success, we are proposing a dividend increase of 8% to EUR 2.92 per share. This reflects the full 100% payout of our AFFO, a strong signal of both cash generation as well as our financial health. We have also made solid progress on the balance sheet. Our loan-to-value ratio has improved to 46.8%, and we remain on track to reach 45% in 2026. This improvement was supported by a 3% positive valuation effect, which is backed by our own disposals and markets building higher confidence, although admittedly, markets remain at lower transaction volumes.

On the portfolio side, we have completed or agreed on the sale of 3,100 units in 2025. These disposals further optimize our balance sheet and the efficiency of our portfolio. We are well on track with further disposals in 2026. The planned sale of the Glasmacher development plot in Dusseldorf has made significant progress.

Renowned real estate developer, Hines signed a purchase option for the site with LEG just yesterday. We confirm our 2026 guidance with AFFO expected between EUR 220 million and EUR 240 million. We will grow cash generation also this year, while weathering higher interest costs as well as lower subsidies.

Looking further ahead, I am equally excited about our midterm growth outlook. From 2028 to 2030, we see strong potential driven by a substantial part of units running off subsidization in 2028 and by the creation of a new operating model based on comprehensive digitalization across our business. These initiatives will not only strengthen our competitive position, but at the same time, create long-term value for all stakeholders.

In summary, 2025 has been a year of achievement, strategic progress and measurable results. We have delivered growth, improved resilience and positioned ourselves for an even stronger future. Thank you to our teams for their dedication and to our investors for their trust. The foundation we have built today ensures that the years ahead will be just as successful.

Let's now turn to Slide 6 and the 2025 financial highlights, a year that truly embodies our theme of promised and delivered. We entered 2025 with a clear set of targets, and I am proud to say we did not just meet them, we partially exceeded them.

Starting with the net cold rent. We closed the year at EUR 919.9 million, representing a 7% increase year-over-year. This growth was supported by a healthy 3.5% like-for-like rent increase, but equally by the successful integration of BCP, which added 9,000 high-quality units to our portfolio. This integration was executed seamlessly and has already begun contributing to earnings as planned.

On operating profitability, our adjusted EBITDA margin came in at 78.1%, well above our planned level of 76% and even above our improved guided level of roughly 77%. Those 110 basis points of outperformance reflect both our tight cost discipline and our continued success in driving efficiencies across operations.

Moving to our earnings metrics. FFO I reached EUR 481.5 million, a 5.2% increase, lending right above the midpoint of our guidance range of EUR 470 million to EUR 490 million. Even more impressively, AFFO grew by a strong 10% to EUR 220.5 million, lending smoothly within our improved guidance range of EUR 215 million to EUR 225 million. This marks a record high for the company.

And speaking of returns, our dividend proposal of EUR 2.92 per share reflect a 100% payout ratio of AFFO. Year-on-year, this is an increase of 8% and ensures that our investors benefit directly from these strong results.

Let me now turn to one specific growth driver going forward, our subsidized units coming off restriction from 2028 onwards. Today, we have around 30,000 subsidized units that are still subject to rent regulation under the so-called cost rent regime. These units are currently rented out for about EUR 5.40 per square meter, which is significantly below market levels.

By comparison, the relevant market rent for a similar mix of units is roughly EUR 9 per square meter. This means there exists a rent gap of more than 60%. As these units get off restriction, we can start closing that gap in a controlled and sustainable way like we have done with smaller numbers of subsidized units over the past years.

In general, we will apply the 15% or 20% rent increase on all units getting off restriction depending on whether they are based in tense or non-tense markets. However, the cost rent adjustments executed in 2026 as well as the new lettings in 2026 and 2027 absorb parts of that maximum rent increase potential. As of today, we assume that this limits the rent increase potential to around 12% in 2028.

On the portfolio level, that alone translates into about 1 percentage point to our overall rental growth in 2028. And importantly, the effects do not stop there. We expect spillover effects into 2029 and beyond as further adjustments and relettings will deliver further rent growth. This will become a recurring and predictable growth driver for our residential portfolio as it will take quite some time until we can close the gap towards market rent level.

In short, as soon as these restrictions expire, we are going to not only unlock immediate rental uplift, but also secure a long-term structural growth contributor. That will support our earnings trajectory well beyond 2028 until the gap towards market level is fully closed.

Let me now turn to our second midterm growth driver that will become equally important to LEG's value creation going forward, our technology and digitalization agenda. Our industry environment has changed fundamentally. The regulatory framework in the German residential real estate sector is becoming even more restrictive, whether in terms of rent regulation, energy efficiency requirements or tenant protection. The traditional levers for operational optimization are reaching their limits. This makes it even more important to identify new sources of efficiency and value creation. And we are firmly convinced that technology and digitalization represent the most significant untapped lever available to us today.

We have made a very deliberate strategic choice in how we approach this. We are dedicated to building a completely new operating model by making the best use of technology and digitalization, not just implementing software, but truly embracing it and redefining the way we serve our tenants.

We manage our buildings, we steer our contractors. Rather than diverting resources to building proprietary software, we pursue a disciplined Buy & Partner strategy. And we have chosen 2 world-class partners to execute on this vision. The first one is ServiceNow. With ServiceNow, we are building an end-to-end system architecture that spans our entire operative value chain from customer service to technical operations to administrative processes. This gives us the flexibility to deploy AI at every touch point along that chain rather than in isolated pockets and thus enables us to drive automation to unprecedented levels. We are, to our knowledge, among the first residential real estate platforms globally to adopt ServiceNow as a core platform, and we see this as a genuine competitive advantage.

The second is SAP. We have made a consequent commitment to building on the most modern ERP system available in the market. In fact, we have been operating on the latest version of SAP since the end of 2024. This positions us ahead of many peers who are still facing complex migration journeys.

Together, SAP and ServiceNow form our central tech backbone, enabling not only system consolidation and process standardization, but critically the systematic scaling of AI across our operations and administration. Our technology investments are designed to drive AFFO and FFO I optimization along 3 core value drivers: efficiency, top line and investment management.

The first focus will be on efficiency, streamlining our customer-facing technical and administrative processes with best-in-class AI-powered solutions. Beyond that, we see meaningful opportunities to leverage technology for revenue growth and smarter capital allocation across our portfolio.

We are investing meaningfully in this transformation with the bulk of spending concentrated in the near-term implementation phase. This is a conscious front-loading of investment. From 2028, we expect these initiatives to turn cash flow positive, building to a contribution of more than EUR 10 million in AFFO from 2030.

In short, in an environment where traditional optimization levers are increasingly constrained, we are building the technological foundation that will make LEG a more efficient, more scalable and ultimately more profitable platform for the years to come.

And with this, I hand it over to Volker for some insights into the operations.

Thank you, Lars, and good morning to everyone from the shiny AI future back to 2025 and specifically to our rent development. As we mentioned earlier in the year, rent growth followed a different quarterly trajectory compared to last year. After 9 months, we were at 3.1%, but I'm very pleased to report that, as promised, we delivered fully on our guidance range of 3.4% to 3.6%. We closed the year right at the midpoint of 3.5% like-for-like in-place rent growth.

At year-end, the average in-place rent of our residential portfolio stood at EUR 7.04 per square meter on a like-for-like basis. This compares to EUR 6.81 in the previous year. The drivers behind this growth were well balanced. 2% came from rent table increases and another 1.5% from modernization and reletting activities.

Looking across our market segments, stable markets showed the highest momentum with 3.8% like-for-like rent growth, while higher-yielding markets grew by 3.1%. Our free financed units specifically saw rent increases of 4%, which reflects the underlying strong momentum in the market.

Specifically, we saw rent table publications in Hilden with 11%, Wilhelmshaven with 7% and Leverkusen with 5%. However, the growth momentum seems to have reached its maximum level, while years with higher rent growth are reflected in the published rent tables, lower growth rates will limit this development going forward.

As expected, there was no effect yet from the cost rent adjustment for the subsidized portfolio in 2025. Importantly, this growth came with an ultra-low vacancy. Our like-for-like EPRA vacancy rate remained at 2.3%, virtually unchanged versus last year, confirming the strong demand we continue to see across our markets.

Looking ahead, for the current fiscal year, our goal is to deliver 3.8% to 4% like-for-like rent growth as already indicated with our Q3 numbers. The cost rent adjustment should contribute around 40 to 50 basis points to that result.

Moving on to our investments in 2025 on Slide 10. Our guidance for the year was to invest more than EUR 35 per square meter, and I'm pleased to confirm that we exceeded that target coming in at EUR 36.11 per square meter. In absolute terms, we invested slightly more than EUR 400 million into our portfolio, an increase of 10% year-on-year. This increase to the prior year was largely driven by the integration of the BCP portfolio where we had to accelerate necessary investment measures.

Looking at the composition of investments in more detail. CapEx accounted for EUR 228 million or EUR 0.46 per square meter, while maintenance represented EUR 175 million or EUR 15.65 per square meter. Altogether, this brought the per square meter figure up by 6.2% versus last year. Our capitalization ratio remained broadly unchanged at 57%. With substantially lower new construction activity, recurring CapEx still increased by a moderate 2%, reaching EUR 261 million.

Overall, 2025 was another year of disciplined and targeted portfolio investment. We delivered above guidance, managed the BCP integration successfully and continued to invest responsibly in the quality and long-term value of our housing stock. For 2026, we are guiding for investments of more than EUR 35 per square meter, which remains similar to the investment level of 2025.

Let me now touch on one of our operational growth drivers, our value-add businesses. These operations are a key pillar of LEG's strategy and a reliable growth driver for the company. They allow us to generate additional earnings beyond pure rent growth, while at the same time, those improve service quality and efficiency for our tenants.

I'm very pleased to report that in 2025, we achieved strong FFO I growth of around 20% in this segment, increasing from EUR 50 million in 2024 to around EUR 60 million in 2025. While others in the market are still talking about the value-add additions, we are delivering real results.

The foundation of this success lies in our technician and craftsmen services, our project management and electrical service units and of course, our energy and heating business as well as the multimedia business. In particular, we are very optimistic about the continuing growth of our energy services, which benefit from the ongoing focus on energy efficiency and shift towards heat pumps as well as our small repairs and in-house maintenance business.

Beyond these established value-add services, we are also building momentum in our Green Ventures. These include new climate-focused services such as RENOWATE for serial refurbishment; termios, with smart thermostats for hydraulic optimization and dekarbo for the installation and maintenance of heat pumps.

It is important to note that the Green Ventures are not yet included in the financial numbers shown on this chart, but they will become a meaningful growth contributor over the next few years. Between 2024 and 2028, we strive to generate a cumulative contribution of around EUR 20 million from our Green Ventures.

To sum up, our value-add business combines stable cash flows, operational synergies and sustainability, while our Green Ventures offer the chance to participate in one of the fastest-growing segments in our market, decarbonization of real estate. They significantly enhance the resilience and profitability of LEG's business model and will continue to be a strong source of earnings growth forward.

Let's now take a look at our disposals in 2025 on Slide 12. In total, we completed or agreed on sales for around 3,100 units and a total of more than EUR 250 million. During the year, we sold 2,252 residential units for total proceeds of around EUR 190 million. After deducting financing redemption fees and taxes, net proceeds amounted to roughly EUR 100 million.

The transaction market remained subdued throughout the year. Overall, investment volumes in the German residential sector declined by about 4%. Even more telling, the share of large-scale transactions above EUR 100 million fell sharply from 63% in 2024, down to just 34% in 2025.

You find additional information for the transaction activity in the German market on Slide 29 in the appendix. Against this challenging backdrop and while maintaining our strict disposal discipline, we are very satisfied with the year's outcome. All in all, disposals were executed at or above book values, fully in line with our policy of value-preserving capital recycling.

The chart on the slide shows the units that have been transferred in 2025, but there's more to come. Year-to-date, we had already signed additional sales contracts for roughly 950 units, representing around EUR 70 million in proceeds. These transactions will transfer in the first half of 2026, and we already issued a press release about the majority of them in early January.

Within these transactions, we also made strong progress on the Glasmacher district development plot in Dusseldorf. This would certainly contribute to our deleveraging strategy. As already described by Lars, we were able to agree with Hines on an option to buy the plot. The next step will be an agreement between Hines and the city of Dusseldorf.

In case that works well, we expect to sign the deal by end of September, the latest. However, please be aware that the sales proceeds will follow the progress made in the building permission process. Moreover, we continue to advance our broader disposal program of up to 5,000 units, including around 1,400 units in Eastern Germany.

Overall, our selective approach, i.e., focusing on sales of smaller portfolios or even single multifamily houses in the current market environment clearly demonstrates our ability to deliver on disposals. We remain focused on execution, disciplined pricing and support to our balance sheet as well as improvement of the overall quality of our portfolio.

And with this, I hand it over to Kathrin.

Thanks, Volker, and good morning also from my side. Let us now look at Slide #13, which covers our most recent portfolio revaluation. The results clearly confirm that market conditions are stabilizing. They also reflect the upward trend seen in leading market indicators such as the VDP Property Index and the German Real Estate Index GREIX. While the VDP Index recorded an increase of around 5.3%, the GREIX showed an increase of 4.8% for 2025.

Against this backdrop, our portfolio valuation result in the second half of 2025 posted a 1.8% uplift, which was even stronger than the 1.2% increase we saw in the first half of the year. Altogether, for the full financial year 2025, we saw a valuation result of 3%, demonstrating clear upward momentum. Further details can be found in the appendix on Slide 30, where we show valuation changes by market segment.

Our gross yield now stands at 4.8%, which continues to offer a comfortable spread versus bond yields, an important buffer in a still cautious investment environment. On a net initial yield basis, excluding incidental acquisition costs, we stand at 4.3%. The average gross asset value per square meter amounts currently to EUR 1,710, ranging from about EUR 2,320 in high-growth markets to EUR 1,190 in higher-yielding markets.

Overall, the valuation result confirms that the correction phase of the past 2 years is behind us. We remain confident that this recovery path will continue into 2026, driven by renewed investor interest, more stable financing conditions and the intrinsic strength of the German residential sector. The trend has turned positive and the positive outlook is being supported by the view of major real estate experts such as CBRE, JLL as well as Moody's.

Let's turn to Slide #14 and take a closer look at the development of our AFFO in 2025. We ended the year with an AFFO of EUR 220.5 million, representing a 10% increase year-on-year or about EUR 20 million higher compared to the prior year's EUR 200.4 million. The main driver behind this growth was, as expected, higher net cold rent. Altogether, this contributed roughly EUR 60 million. From that, about EUR 28 million comes from organic rent growth and another EUR 49 million from the acquisition of BCP. These positive effects more than offset the EUR 17 million negative impact from disposals.

Net cash interest rose by EUR 12 million, driven by the increase in debt due to BCP and by higher refinancing costs. Still, I would like to highlight that we were able to keep our average interest cost at a very competitive 1.66%, which is an excellent outcome given the current interest rate environment.

In addition, our Green Ventures still in their early investment phase, had a temporary negative impact of EUR 4.2 million on AFFO in the reporting period. Maintenance and CapEx spending amounted to about EUR 13 million more after subsidies, reflecting the enlarged asset base.

To sum up, 2025 was another solid year of strong growth and recurring cash flows, underlining both the resilience of our operating platform and the profitability contribution from the BCP integration.

Finally, let's turn to Slide #15, which highlights LEG's financing structure and key figures, starting with our loan-to-value ratio. We closed 2025 at 46.8%, coming down by 110 basis points year-on-year. That puts us well on track to reach our target of 45% during 2026. This continued deleveraging is driven by our solid cash generation, disposal proceeds as well as valuation effects.

In addition to LTV, another key indicator, especially with regard to our bond covenants is the interest coverage ratio or ICR. Our ICR stands at a very strong 4.3x, and also all other bond covenants have ample headroom. For those interested in more detail, we've provided the full overview in the appendix.

Our average interest cost increased modestly by just 17 basis points to 1.66%, still a very low level in today's market environment. At the same time, the average debt maturity remains comfortable at 5.5 years. Our liquidity position remains very strong, with more than EUR 800 million available as of year-end 2025 and undrawn revolving credit facilities of EUR 750 million.

As already discussed in the last earnings call, all debt maturities for 2026 are covered. At the beginning of this year, we redeemed our EUR 500 million bond, and we are now evaluating refinancing options for the 2027 maturities, including the next bond, which comes due only in November 2027.

We'll continue to take an opportunistic and disciplined approach here, depending on market conditions. All in all, our balance sheet is resilient. Our maturity profile is well structured, and we are in a very strong financing position with ample flexibility going forward.

And with this, I'll hand it back to Lars.

Thanks, Kathrin. Let me conclude today's presentation, with a brief summary of our guidance for 2026, as shown on Slide 16. These targets were already introduced with our Q3 2025 results, and I'm happy to reconfirm today that our guidance remains fully in place.

For 2026, we expect a further improvement in our cash generation with AFFO between EUR 220 million and EUR 240 million. That represents continued growth on top of the strong performance we delivered in 2025. In line with that, our FFO I is expected to come in between EUR 475 million and EUR 495 million, supported by an adjusted EBITDA margin of around 78%.

On the operational side, we target like-for-like rent growth between 3.8% and 4%, driven by our solid rent dynamics, targeted modernizations and the cost rent adjustment for subsidized units. Our investment volume will again exceed EUR 35 per square meter, ensuring that we maintain the quality, energy efficiency and long-term attractiveness of our housing stock.

On the balance sheet, we remain fully committed to further deleveraging. With our LTV expected at around 45% by year-end 2026, we are well on track to achieve this. As announced, we plan to distribute 100% of AFFO to our shareholders, reflecting both our strong cash flow generation and our disciplined capital allocation approach. We will propose a dividend of EUR 2.92 either in cash or shares, the latter depending on the market environment.

Beyond the financials, we also continue to make measurable progress in sustainability. In 2026, we target a CO2 reduction of about 7,600 tonnes. And by 2029, we aim to lower our relative CO2 emission saving costs per ton by 20%.

To sum it up, LEG remains on a clear and consistent path, generating reliable cash flow, maintaining financial discipline and building long-term value for our shareholders and tenants alike. As we've said before, cash flow remains king and the best metric to steer our business. Our 2026 guidance once again underlines the strength and resilience of our business model.

And with this, I come to the end of our presentation, and we are now looking forward to answer your questions.

[Operator Instructions] The first question comes from Marios Pastou from Bernstein.

I've got 2 questions from my side. So firstly, on the 5,000 unit disposal pool. Can you provide an update here on the progress you're having with current discussions? I think on the last update call, you mentioned you were in exclusivity in East Germany. So any comments on the progress there would be helpful.

And then secondly, on the slide with the 16,000 units coming off restriction in 2028. Based on your prior experience when adjusting the rents, do you foresee any vacancy risk here, the uplift being 15% or 20% depending on the cap level seems like quite a step change in one go. So any comments there will be helpful.

Marios, thanks a lot for your questions. So with regards to the 5,000 units disposal portfolio we have on the market, around 1,400 units are in Eastern Germany. So for parts of it, we are in exclusivity. And unfortunately, still the transaction times are much longer than initially expected. This is partially due to the financing and the more stricter view of banks with regards to real estate. Those processes still take much longer than we had forecasted. So therefore, yes, there are still portfolios in exclusivity. And certainly, we hope that we can close those over the course of Q1 and Q2.

With regards to the remaining 5,000 units, we are selling those in smaller portfolios as well as single multifamily houses exactly as Volker has laid out during his presentation. So it is unfortunately not the case that we see bigger investors or transaction liquidity to have increased since the beginning of the year. So let's wait how the discussions at MIPIM next year -- next week will look like. It might certainly be that this brings additional liquidity to the market.

With regards to the subsidized units, which run off, you might have seen that most of those which are getting off restriction are those in the high-growth markets. So the non-tense markets account for around 2/3 of those units getting off restriction. So therefore, I have full confidence in Volker and his team that they will relet those very quickly and easily because the undersupply in those markets is quite strong.

And even to add up, we don't see the risk of higher -- significantly higher fluctuation. Of course, there will be some fluctuation, but not in a way that we will not be able to cover it. And on Slide 27 in the appendix, you see the spread to the market rent, and you see that it's hard to find a substitute which is at the previous cost.

The next question comes from Veronique Meertens from Van Lanschot Kempen.

A few from my side. So first, on the Dusseldorf land plot, could you please elaborate what you exactly meant with the time line you see for the sales proceeds of this disposal because I didn't fully understand it.

Veronique, thanks a lot for the question. So unfortunately, first of all, let me say that certainly, we have a U.S. investor on the other side. So confidentiality requirements are quite strict. I try to give you as much of an insight as possible as of today's stage. So we have signed a purchase option with Hines yesterday, and they can make use of that call option until the end of September.

If they are agreeing to that call option, we have a fully laid out contract with regards to the acquisition of the plots. So that contract will then be signed immediately and all those terms and conditions are pre-agreed, certainly including the price and the payment pattern. The payment pattern then foresees that a certain part of the sales proceeds will be paid by year-end, and the remaining payments will depend on the progress of the building permission process. And that is what I can disclose as of today.

Okay. That's clear. And then maybe that also rolls into my next question. So your LTV target is still 45%. It sounds that you're not probably get all the proceeds of this disposal in '26. So how strict is that target? How do you expect to get there as in what have you assumed in terms of disposals and value gains? And also, are you willing to sell at a discount if that means that that's what's necessary to meet that target?

Yes. So Veronique, as you know, we have currently 5,000 units in the market. We will strictly stick to the levels which we were sticking to for all the previous years, which means we are not willing to sell below book value. So that is what we have executed over the last -- much more difficult years, and we will also stick to that guidance for this year.

In order to arrive at those 45%, certainly a contribution comes from the sales proceeds, and we are also seeing a positive development in the market. Let's wait whether that is consistent over the year. Certainly, we now have a big war in the Middle East. If that tends to be longer than initially assumed, that certainly might have an impact.

As of today, and looking into whatever we heard at least, it might be not that, that war is extending for weeks. So therefore, if that's not going to happen, we are quite confident that we can reach our 45% target. And this is, as of today, what we are now striving for, and we are quite confident to reach that within 2026.

The next question comes from Andres Toome from Green Street.

You have a pretty clear focus on disposals for the next 12 months or so, it seems. But I was just wondering on the other side of it, if large disposals in the market today require "portfolio discounts", then is there a case where you can see actually accretive acquisition opportunities yourself to be a buyer, which would be financed through an equity raise? And I guess I'm particularly thinking about some of these news flows around open-ended funds for German residential that need to fulfill their redemption needs.

Yes, Andres. And thanks for your question. So with regards to our own acquisition activity, I think we have just acquired a big portfolio, BCP, 9,000 units, integrated that fully. Certainly, we are being offered bigger portfolios on a regular basis. I can tell you that we have not seen any of those willing sellers to give in on price. So therefore, there was nothing comparable with regards to any acquisition opportunity with regards to the quality and also the pricing of the BCP portfolio.

Looking at our share price, I think it would be very, very difficult to identify anything which in the current market would then really end up with an accretive value for our shareholders, making the next acquisition. So therefore, our focus currently is strictly on deleveraging, reaching that 45% target, getting sales executed.

That's clear. And then maybe related to this, maybe not in terms of pure straight equity raise, but are you perhaps seeing any options where the seller would accept LEG shares as a buying consideration? I think we've seen some of these examples in other geographies in Europe, but I wonder if there's any discussions around that in Germany.

So currently, we haven't had that discussion with any of the willing sellers.

Understood. And then my final question was just on the points you made around AI. And I think one of the points you highlighted was gaining also some revenue upside. I just wanted to understand how does that work in a regulated residential market? What are the levers you can pull beyond the regulatory constraints you already have in putting through in place rent increases?

Yes. As you know, Andres, the number of criteria with regards to the rent tables can be up to 100 for a single rent table. So the qualitative criteria, which you need to take into consideration is quite a long list. Certainly, being more precise on those different criteria can certainly give you additional upside to just mention one of the examples with -- which certainly gives you an additional rental potential to be realized if you are using more AI.

The next question comes from Thomas Neuhold from Kepler Cheuvreux.

I have 2. The first one is a follow-up on the Gerresheimer project. I understand you're bound by NDA. But I was wondering, would you be able to sell the land plot at or above book value? Can you comment on that?

Yes, so the book value is at around EUR 71 million, and we've been able to realize a substantial uplift on that if we get the sales contract signed end of September.

Good. The second question is on the regulatory environment. I was wondering, if there have been any recent important news on the planned change to the rent regulation. Did you hear anything important?

Yes. So if you look at the current discussion in Berlin, I think on a federal level, you might be aware that there are still discussions on how the regulation for refurbished apartments will look like, how index rents will be limited and also how those pure payments are being regulated. So those are the 3 big issues the Social Democrats are currently forcing through. And from our perspective, that is already a given and that's going to be agreed.

With regard to the city of Berlin, there's certainly a lot of discussion and let's wait of what's going to happen now. As you know, we do not own a single unit in Berlin. So we will be not affected by whatever is being decided or at least being discussed in the upcoming election in Berlin.

The next question comes from Kai Klose from Berenberg.

I've got 3 quick questions, if I may. The first one is on the -- actually, the first 2 are on the AFFO statement. Could you indicate or give more details on the increase for the nonrecurring special items from EUR 16 million to EUR 33.9 million and if there will be a similar level or similar increase in '26?

Second question is on the green investments, which -- investment income from Green Ventures, where you mentioned that this will leave the investment phase in '26. So can you read that there will be a positive contribution to the AFFO in 2026?

And the third question would be on maintenance. You mentioned there was an increase in '26 -- '25 because of the BCP portfolio. Has this been -- this increase only in '25? Or can we expect slightly higher levels because of ongoing work for BCP -- ex BCP assets in '26?

Thanks, Kai, for your questions. With regard to the first one on the nonrecurring special items, this was a special case this year because of BCP. Obviously, we had some integration costs that took place this year, and that's why this number was higher than in the previous year. As long as we don't buy another BCP this year, this should be lower next year.

On the second question on Green Ventures, yes, we expect a positive result will not be record high. And of course, there's more risk in these ventures as it's new, but we expect a positive result and yes, expect breakeven.

And to conclude the round here, so with regards to the maintenance expenditures we had in 2025, we do not expect an additional expenditure on the BCP portfolio within 2026.

The next question comes from Paul May from Barclays.

Three, if I may, probably doing one at a time might be easier. Just following on from the question earlier around acquisitions out of the open-ended funds. I appreciate you said they're not willing to move on price, but there comes a point where they don't have a choice. They do need to meet those redemptions. So I assume that opportunity may still come. You mentioned it wouldn't be accretive for investors if you fund it with equity. Just wondering how you're viewing that, whether you're viewing that on a cash flow basis or whether you're viewing that on a kind of balance sheet made up value basis. That would be great. And then we live it next to separately.

Yes, Paul, thanks for your question. So with regards to the acquisition opportunities out in the market, I think you rightly assume that certainly some of those open-ended funds will sell portfolios. What we still see in those discussions is that liquidity there does not seem to be so stretched that they are under pressure to do really fire sales. So therefore, currently, no indication for them really giving in on price.

Certainly, and you might have seen that, we had 2 funds which have also stopped accepting redemptions. You can close down on the fund for 3 years. So that once again also might be a prolonged period where you are not seeing those funds to really do for selling. So therefore, that is what we've currently seen in the market with regards to those funds currently offering portfolios in the market.

Secondly, with regards to how we view those acquisition opportunities, we certainly look at it from a cash flow basis, but also from an NTA perspective. And currently, we were not willing to really offer our shareholders any exposure towards those acquisitions. From our perspective, we are well advised to be strict on sales and do our deleveraging path in 2026, in order to arrive at that 45% LTV target.

Just sort of following on that, I guess, you mentioned the trend in the market, I think it was in Kathrin's commentary has turned positive. I mean, to some extent, the only thing that's positive is valuation prints. Transaction market is lower. Swap rates and bonds have moved higher now versus the average through 2025. So one might argue that the activity levels are lower and worse versus the valuation prints that have got better. Just wondering how you're reconciling those 2 things, which seem to be moving in opposite directions.

Yes. So happy to take your question. When you just look at what is happening in the market with the undersupply that we continue to see, we still expect that rent growth will be a key driver for property values also this year. And yes, it is -- it has been a low year in terms of transaction volumes last year. But when we look at what the big valuators are expecting for this year, they are expecting at least transaction volumes, which are a little bit higher than last year. So we've seen around EUR 9 billion last year. We'll probably see around EUR 10 billion this year. So there are some positive signs. I mean, given currently the Iranian conflict, things look quite different these days, but we have to see what will happen ultimately over the next weeks. If we were to come back to a rather normal environment, which we've had like a week ago, then I'm quite positive that we will see what I just said.

I think the brokers were quite positive on improving last year as well and ended up being slightly worse, but just be interested to see how that comes out. And then I think again for you, Kathrin, just another one. So over the next 6 years, I think it is roughly, you've got about EUR 1 billion of debt maturing. I think it's just over EUR 1 billion of debt per annum with an average cost of about 1.3% at the moment. Obviously, the cost of that will likely go up by somewhere around 220, 230 basis points, which I think implies a financial headwind to FFO of about 28% versus 2025 FFO and about 63% headwind to AFFO based on FY '25 AFFO.

I appreciate that we offset to some extent by rental growth. But just wondering your thoughts there, how you're going to manage that? And obviously, you mentioned disposals, but those in theory come at a higher EBIT yield than your financing costs. Otherwise, you're better off refinancing and holding on to those assets. So I just wonder how you're going to manage that sort of headwind to FFO and AFFO moving forwards over the next 6 years.

Yes. Thanks a lot for your question, Paul. With regards to our midterm planning, our assumption currently is that we can realize, on average, a 5% growth of our key KPI, AFFO over the coming years despite the headwind from interest rates, which you have just mentioned.

Certainly, exactly as you mentioned, we are expecting the core business to deliver strongly due to the undersupply in the market and the additional element, which we have disclosed hopefully, in a bit more detail as of today, the substantial number of subsidized units running out of those subsidization schemes and then being treated as free financed units.

Secondly, you've seen what happened to the value-added businesses. We are quite confident that we can grow those value-added businesses going forward. That was certainly a very strong year, EUR 50 million to EUR 60 million. So please do not extrapolate that going forward. But that's certainly a contribution we are going to see.

Green Ventures, you heard that. That was the last investment year. Last year, they are supposed to contribute substantially. Cumulatively, we strive for a profit of around EUR 20 million until 2028. That's an ambitious target. Certainly, as always, it's under risk if you are talking about start-ups, but the market certainly on the decarbonization side is huge.

And finally, we will strive for a new digital operating model, and that certainly will give rise for efficiency gains, lower investments and certainly and most importantly, also additional top line. So with those elements, we feel comfortable to say over the next years, despite the headwind from interest rates, we can increase AFFO per year at around 5%.

Cool. Perfect. And just to check, the marginal financing costs you're assuming in that 5%, just so you got a sense.

The marginal financing cost for a 10-year financing in the -- in the...

In your planning, you mentioned 5% per annum AFFO growth. So I just wondered, what is the assumed marginal financing cost?

Yes. So what we do is that we certainly use the interest rate curve as of the time where we are preparing and finally deciding the midterm planning, which was October last year. So certainly, if that is going to change, that will have an impact. But believe me, everyone here in the management team and the full team is fully dedicated to deliver those returns going forward.

Okay. So we're about sort of 15-ish basis points higher on that versus October last year.

The next question comes from Thomas Rothaeusler from Deutsche Bank.

A couple of questions, I think 2 or 3. The first one is on subsidized rents and the adjustment potential, more looking at the long-term upside. I mean, should we expect a structurally higher rental growth rate from '28 considering the higher reversion potential? I mean, you can almost double the rents over time, as you've shown. Maybe you could provide a rough idea about the long-term impact on rental growth.

You will have significant impact on the next 3 years starting 2028.

But I mean from there, like more the very long term, I mean, you can basically adjust by 12%, as I understand, in '28. But then from there, actually, there is much more adjustment potential, I think, given the low level where subsidized rents come from.

Yes, it's -- well, you see the spread to the market rent, and it will take time to adjust it until it's there. And market rent also develops. So this will -- there will be a significant gap that we need to close. And of course, we have the German rent regulation where we can adjust all 3 years then the rents. And we haven't simulated for the next 20 years, but it will have a structural impact over the next decade, I would say.

Okay. And then on value-add services, I mean, which contributed a record EUR 60 million in '25. Just wondering what to expect in the coming years?

Yes. So please do not expect that value-added services are now increasing on a regular basis by 20%. That would be highly unrealistic. So that we had -- that lower growth over the last 3 years was certainly very much driven by the energy crisis and the Ukraine war. So that was a strong impact on the Energy Services business. So from our perspective, for this year, assumes something in the growth range for the AFFO. So that will be growing pretty in line with AFFO for this year.

Okay. Last one, yes, on property values. I'm just wondering if you could -- if you already got any indication from your appraisers for the first half?

Yes, we just finished our last valuation. So as always, we will start with our new valuation with our cutoff date end of March. And then we'll have more insights once we meet again in May, and then we will give you an indication on H1 as we've always done.

The next question comes from Neeraj Kumar from Barclays.

I've seen a couple of questions on equity raise, so I'll probably not ask that. But on the other side, I would say that it's assuring that you see your values are strong and you don't look to sell below book values. But given your current share price, which seems to be pricing more than 50% discount to your NTA, do you see a potential in saying disposal of EUR 500 million assets of your least profitable assets at 10% discount to your book value and then using those proceeds to buy back shares? If yes, why you're not considering it? And if not, then how do you think about your share price here? Do you think it's fairly representing your property values? I'm just trying to understand if we should be believing your reported property values or your share price implied property values here.

Yes. Thanks a lot, Neeraj, for the question. So it's always difficult with hypothetical questions. So we have not thought about doing that, and we will not do that. So from our perspective and looking at the value increases, especially with those with the lowest yields, those have grown substantially in value over the last 2 years. So therefore, from our perspective, that's nothing which we would -- we would look at.

Okay. So if I understand correctly, like selling assets at 10% discount to book value is not accretive, if you were to use that to buy your shares at more than 50% discount to book value?

This is not what I said, Neeraj. I said that we are not thinking about doing so because from our perspective, the highest value creation on those assets is still to come due to the strong undersupply in the especially high-growth markets.

Got it. And last question. You seem to have been able to refinance your debt with good success with Baa2 rating. I was just trying to understand how critical the LTV target of 45% or a potential rating of Baa1 for you is? Or you think that is better in terms of running with high leverage and doing more share accretive stuff here?

Yes. So of course, as I've always said, the 45% LTV is definitely something that would help to get an upgrade from Moody's on our rating. Although, as you know, it's not the only thing -- the only KPI and the only qualitative factor they look at. So obviously, we would love to have a better rating, but is it essential? Like do we need it to refinance? No. We have refinanced also in the past years. We have refinanced at very attractive levels. So it is not an absolute need that we get this rating upgrade. But however, it's still something nice to have.

[Operator Instructions] The next question comes from Manuel Martin from ODDO BHF.

Two questions from my side, please. One follow-up question on the units getting off restriction in 2028. Having looked from a political perspective, have you heard anything from the political players in the locations where the units will come off restrictions, i.e., could there be some headwinds to be expected? Maybe you can elaborate a bit on that and thereafter, will be my second question.

Yes, Manuel, thanks a lot for the question. So we have not heard from any political resistance. If you look at the prices of those subsidized units, EUR 5.40 versus the market level EUR 9, that is the difference you're currently seeing in the market. We paid back the subsidized loans already in 2018. So there was a waiting period for another 10 years. So therefore, from our perspective, nothing to be expected on the political side, no political pushback also with regards to those units, which were getting off restriction over the past years. So also no political pushback to be expected from that bigger portfolio.

And maybe to add, we are in close contact with almost every mayor and every bigger location, and they understand what's going on and accept it.

Okay. Perfect. Second question about project development, you're not actively doing that. Do you think this could become an option again for LEG to restart project development? It might be a bit too early, but maybe you can say a word on that, please.

Yes. So very happy to do so, Manuel. We are still struggling to come up with a return worthwhile taking the additional risk on our balance sheet. It is still something which certainly we have explored with that big plot in Dusseldorf of 19 hectares. Finally, we were not making or coming up with a business plan, which will have at least brought about the return worthwhile spending additional money on that plot.

So therefore, from our perspective, no, the current regulation is still very strict. The Bau-Turbo, so that's speeding up of building permission processes, we have not seen that really kicking in. We still wait for that building type E, which is assumed to reduce some of the requirements with regards to the building type and the building qualities. Also, those reductions are still not being decided or not in a way currently being discussed politically, which would come then finally to lower construction costs. So therefore, from our perspective, no, we currently do not see any real benefit of that for us to reenter the development market. So that is the current status there.

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

Yes. Thank you, Valentina, and thanks for all your questions. And as always, should you have further questions, then please do not hesitate and contact us. Otherwise, please note that our next scheduled reporting event is on the 13th of May when we report our Q1 results.

And with this, we close the call, and we wish you all the best and hope to see you soon on one of our upcoming roadshows and conferences. Thank you, and goodbye, everybody.

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 LEG Immobilien Q3 2025 Conference Call and Live Webcast. I am Mathilde, 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 Mr. Frank Kopfinger, Head of Investor Relations. Please go ahead.

Thank you, Mathilde, and good morning, everyone, from Düsseldorf. Welcome to our call for our 9 months 2025 results call, and thank you for your participation. We have in the call our entire management team with our CEO, Lars von Lackum; our CFO, Kathrin Köhling; as well as our COO, Volker Wiegel.

You hopefully realized that we changed the format of the presentation slightly. You have now a more condensed section in the front part of the presentation, and you have all information as in the past in the appendix. You find the presentation document as well as the quarterly report and documents within the IR section of our homepage.

Please note that there is also a disclaimer, which you'll find on Page 2 of our presentation.

And without further ado, I hand it over to you, Lars.

Thank you, Frank, and welcome from my side as well. A brief overall comment and just repeating what Frank just said. All adjustments to our financial disclosure were made to present our financial updates in a sharper, more straightforward way and allow for a more focused discussion on the main levers of our business. You can still find all the details included in our financial disclosures so far in the new appendix of today's presentation.

With this, I turn to the highlights slide. The key highlights and messages are certainly the following. After the first 9 months, we are fully on track for our 2025 guidance, i.e., we aim for an AFFO growth of 10% this year. For 2026, we guide for an additional growth of 5% in AFFO. We stick to AFFO as our core KPI, i.e., cash generation remains our core principle in this environment. At the same time, we have included FFO I as part of our guidance for 2026.

We remain constructive on valuation and expect a positive valuation result of 1.5% to 2% for the second half of the year. Disposals remain one key lever to bring down our LTV to the target line of 45% in 2026. We have already sold more than 2,200 units for around EUR 100 million so far and remain very positive to see signings until year-end based on the current state of our sales pipeline.

The last highlight for this quarter is certainly Moody's. Moody's just recently confirmed our Baa2 rating and revised our rating outlook to positive. We regard this as a recognition of our efforts to protect our balance sheet via noncomplex measures and the cash-focused steering of our group.

Let me now move to Slide 6 and our financial highlights for the 9 months. We continue to show strong growth, which is driven by the seamless integration of the 9,000 units portfolio of BCP as well as by organic growth. Our net cold rent grew dynamically by 6.8% or EUR 44 million, respectively. Strong top line growth in combination with a tight cost control led to a strong EBITDA margin of 79.2% for the first 9 months. Based on that, we feel comfortable to reach the increased guidance for the EBITDA margin of 77%. The same holds for the AFFO, which we expect to come in between EUR 215 million and EUR 225 million. We are aware that the 3.1% like-for-like rental growth looks a bit lighter than our target range of 3.4% to 3.6%. However, we are very confident that we will reach the target range for the full year in Q4, and Volker will give you some more details on the reasons in a minute.

Let's move on to Slide 7. For some of you, it might be a bit of a déjà vu as we have shown the same slide in our H1 call. We are of the opinion that this simple chart reflects our core KPIs and the thinking behind it in the most transparent way. We continue to believe in cash, i.e., cash remains king in the current environment. Therefore, AFFO remains our core KPI. At the same time, we never stop prioritizing profitability. Therefore, we are including FFO I additionally in our guidance.

The impact of the drastically rising state budget deficits and rising debt ratios to interest rates is more than uncertain. The response of national banks to these fiscal situations is equally unknown. The few green shoots seen in transaction markets might continue to grow, but substantial risks remain. In this environment, we do not want to organically start to lever up by increasing investments. We have decided to remain in a fully self-financed position. We continue to spend more than EUR 35 per square meter. This is still one of the highest levels in LEG's history, excluding the peak years of 2020 to 2022. Therefore, we invest more than 40% of net rental income into our portfolio via maintenance or CapEx. We consider this to be significant, and those investments will support future rent growth.

All of this is fully self-financed, and we do not need to take up additional debt. It is the most rational strategy to maneuver in this environment. We expect to achieve a further growth in cash generation, especially the 10% AFFO growth in 2025, and we guide for another 5% growth in AFFO in 2026.

And with this, I hand it over to Volker for a detailed view on our operations.

Thank you, Lars, and good morning to everyone also from my side. On Slide 8, we provide more details on the rent growth per square meter realized in the first 9 months of the year. In-place rents per square meter increased on a like-for-like basis by 3.1% to EUR 6.99. The 3.1% can be broken down into 1.7% from rent payable increases, while modernization and reletting contributed 1.4%. The like-for-like rent growth was solely driven by the free financed units with an increase of 3.6%. At year-end, we will have achieved also here our target of more than 4%. The like-for-like vacancy rate according to EPRA definition, remained at a very low level of 2.5%.

In 2026, we will have an adjustment of the cost rent again and accordingly, rent growth will gain momentum. We expect also bigger locations to see rent table updates like Gelsenkirchen, Duisburg and Düsseldorf in Q1 or early Q2. You have the list, as always, in the appendix on Slide 25.

Let me now explain why we are so confident to reach our 2025 rental growth target of 3.4% to 3.6% despite having only reported a 3.1% increase as of Q3. Let's move to Slide 9. You can see the rent increases we put through in each quarter in 2024 and 2025. In Q1 2024, we put through strong rent increases. This was also a function of underlying rent table publications, reletting activity and modernization activity. After 3 quarters in 2024, we had implemented 87% of the rent increases realized until year-end. Contrary, in Q4 2024, the rent increase put through was rather low. This year, rent increases are split more evenly throughout the quarters. This is mostly due to the publication date of new rent tables. Given the previous year pattern, we will have a significantly stronger Q4 than last year, which will get us into the target range.

Slide 10 gives you more insight into our investments. Here, we are also fully on track for our per square meter goal of more than EUR 35. Our total investments into the portfolio increased by 10% in the first 9 months of the year. The absolute amount was roughly EUR 292 million, which corresponds to EUR 26.16 per square meter. This per square meter investments increased by 6%. The fact that the portfolio size increased with the full takeover of the BCP led to a higher increase in absolute numbers than on a per square meter basis.

The cap ratio remained unchanged. The recurring CapEx, which is relevant for the calculation of the AFFO increased by 7%. The decline in new construction investments is decisive for the lower growth rate in comparison to the overall investments and adjusted CapEx, respectively.

Let me briefly comment on disposal on the next slide. We are satisfied with the progress if we consider the transaction markets activity, especially for bigger portfolios and volumes remain soft. In total, we did already sell around 2,200 units for around EUR 190 million so far. All of them have been transacted at or above book value. We expect more to come in, in coming weeks and expect transaction activity at our end to ramp up towards year-end. Rest assured that once we sign bigger deals, we would inform you via a press release to keep you up to date.

And with that, I hand over to Kathrin.

Thank you, Volker, and good morning from my side as well. Let me walk you through our AFFO development on Slide 12. In the first 9 months, the AFFO increased by 19.3% to EUR 181.3 million. This was mainly driven by higher net cold rents, whereas around EUR 20 million were due to organic growth. The acquisition of BCP contributed another EUR 37 million, offsetting the impact from disposals, which was EUR 13 million. Furthermore, we saw positive contributions from our value-add business and remained very cost disciplined in both operations and administration, which had a positive overall effect of EUR 7.1 million year-on-year. While the average interest cost in our group remained low at 1.59%, net cash interest in absolute terms rose by EUR 5.9 million as total debt has increased due to the consolidation of BCP and of course, also due to the general rise in interest from new financings.

On the investments, the rise in spending is in line with our guidance. In terms of subsidies for the full year, we still expect to come out at the lower end of our original guidance range of EUR 20 million to EUR 25 million. In financial year 2026, subsidies should come down to around EUR 10 million, also due to the fact that there will be no more new construction activities. For more details, we provide an AFFO table in the appendix on Slide 16.

Coming to Slide 13 and LEG's financial key figures. Following the EUR 400 million redemption of our convertible, which was due on September 1, all our maturities for 2025 have been addressed. And the same applies to all of our debt maturing in 2026. This includes the EUR 500 million straight bond, which represents roughly half of next year's maturities. As of today, we have a pro forma cash position of cash, cash equivalents, signed financing agreements, including prolongations and disposal proceeds of well above EUR 1 billion. This brings us well into 2027 when our next bond matures in November 2027. As usual, we present a detailed maturity profile for the next 10 years on Slide 31.

At the reporting date and after the redemption of the EUR 400 million convertible bond, our liquidity position was EUR 448 million. Furthermore, we had and still have undrawn revolving credit facilities of EUR 750 million as well as an unused commercial paper program of EUR 600 million. Our average interest rate stood at 1.59%, nearly unchanged year-on-year with an average maturity of 5.6 years. The LTV stood at 48.3%, given that the dividend payout of around EUR 125 million took place in early July. Year-on-year, however, we stand at a minus 20 bps. We are now heading towards our LTV target of 45% set for next year. As usual, we provide important financing KPIs and bond covenants in the appendix on Slide 32.

Of course, the ICR is next to the LTV, a very important KPI for us. Our bond covenant ICR slightly increased quarter-on-quarter and now stands at a very strong 4.5x. And all the other bond covenants are also with ample headroom. Very recently, Moody's confirmed our Baa2 rating and revised the outlook from stable to positive.

And now I'd like to hand over to Lars for the guidance.

Thanks a lot, Kathrin. Let me now come to our guidance for 2026. We expect the AFFO to grow by 5% on the back of a rent growth of 3.8% to 4%. So rent growth is to increase by around 40 bps over 2025 and reflects the positive contribution from the cost rent adjustment for our subsidized units. We expect the EBITDA margin to improve towards peak levels of 78% again. We continue to invest significantly into our portfolio, i.e., more than EUR 35 per square meter, so quite in line with this year's investment. On LTV, we expect to reach our target of around 45% in 2026. This will be driven by a mix of further valuation effects as well as disposals. Certainly, faster disposals can shift the time line forward by when we achieve the 45%.

On this positive note, I come to the end of my presentation. We, as a team, are happy to answer your questions.

Thank you, Lars. And with this, we begin the Q&A session, and I hand it over to you, Mathilde, to guide us through the Q&A.

[Operator Instructions] The first question comes from the line of Marios Pastou from Bernstein.

So I've got two questions from my side. So firstly, given your renewed confidence in achieving planned disposals and expectations to reach your LTV target next year, what drove your decision to remain focused on AFFO as your key earnings KPI rather than revert back to FFO I? And then secondly, on a similar topic, if I look at 2026 guidance, I see AFFO is up 5%, but FFO is flat to 1%, even though your investment plans are stable year-on-year. So what is driving the difference between these 2 growth trajectories?

Marios, thanks a lot for your questions. So just to start off, so why have we decided to stick to AFFO instead of making FFO I again our core KPI? It is really the macro environment, especially the uncertainty around budget deficits from different states, including the German one. And I think we've seen during this year what the announcement of the new budgets being planned to be spent on infrastructure and defense did to the interest rate, especially long term. And those uncertainties are mainly the reason why we thought to be well advised to stick to our self-funded strategy. So we remain focused on AFFO and keep cash as our core metric going forward. So that is why we were sticking to AFFO, although we are expecting substantial additional disposals in Q4.

With regards to the difference FFO I to AFFO, happy to hand over to Kathrin.

Yes. So there is obviously a range that we are giving out for next year, and it's -- and the numbers on the FFO side are much bigger than on the AFFO side. So let's see how the ranges play out next year. And also please keep in mind that this year, we were still doing new developments on owned land, which ended up in the AFFO line and not in the FFO line. And as we are now done with our new developments, this will not take place next year.

Okay. Very clear. So there's no specific adjustment being made between the 2 numbers that is causing this difference?

No, we didn't change the KPI definition or anything else.

The next question comes from the line of John Vuong from Van Lanschot Kempen.

Just on the like-for-like rental growth guidance, it comes in higher next year, which I understand to be coming from the cost rent adjustment on subsidized apartments that happens every 3 years. Just try understanding the underlying trend of like-for-like, what's the impact of this adjustment to your like-for-like?

It's about 40 to 50 bps.

Okay. That's clear. And then just correct me if I'm wrong, but the 2026 AFFO and FFO guidance are excluding any disposals, while the LTV guidance is including disposals. What's the rationale for this?

As always, John, we will have not included any disposals because as long as we have not signed those, it would be just guessing. So therefore, from our perspective, it's not worthwhile now including disposals which have not been signed. Certainly, for 2025, also to be transparent, there will be no increase in really the transfer of ownership. So 2025 numbers will not be impacted by the additional sales expected for Q4 2025.

So the 45% LTV that you aim to achieve in 2026, that's excluding disposals?

No, it's including disposals, but those transfers of ownership signed in Q4 being transferred in 2026, certainly contributed to reduce LTV to 45%.

We now have a question from the line of Bart Gysens from Morgan Stanley.

Thank you for the very clear kind of expiry profile and cost of your debt. Can I just ask what is the cost of debt that you are assuming for 2026 in your guidance to get to this level of AFFO and FFO?

While -- I'm happy to take your question. While I don't know how markets are developing next year, I can for sure tell you about the financing that we just did. So the financings that we -- where we already got the money, you already have in the 1.59%. The financings that are still outstanding and will come mostly in Q4 this year and Q1 next year are around EUR 600 million, and they are refinanced by 3.8% to give you an idea around that. And for the remainder of the year, of course, we will continue our opportunistic refinancing approach. So there will be more financings to come, especially when we regard what 2027 has in the basket for us. So -- but this will be totally dependent on market developments.

But I assume that given you provide a guidance for '26, that implies a certain number that you've assumed what your debt will cost, right? And I appreciate that's a bit a range, but can you be explicit on what you think that number is to get to this range of FFO?

I already gave you the biggest part of it, the EUR 600 million. And for the remainder, we, of course, have forward curves behind that. But I hope you understand that I'm not giving out exact numbers on specific line items of our P&L.

[Operator Instructions] We now have a question from the line of Manuel Martin from ODDO BHF.

Two questions from my side. Let's do it maybe one by one. The first one is on the upcoming disposals. Could you give us maybe some color on what could we expect in terms of how many disposals, where they are located, which quality so that we have a bit of impression of what could come there? That would be the first question out of two.

Manuel, very happy to take that question. So certainly, we are currently in the midst of selling the plot in Gerresheim Düsseldorf, which we've bought from BCP. We made progress there. We have now a preferred bidder with whom we will approach the city of Düsseldorf. And that's certainly a substantial part of the disposals to be expected.

Secondly, with regards to the BCP portfolio in the Eastern part of Germany, we made substantial progress across all 3 cities. So Halle, Leipzig and Magdeburg, we are in exclusivity there with different bidders, and we are hopeful to also sell half of the portfolio within Q4. And then there are other portfolio disposals across the current earmarked 5,000 units portfolio, which we are currently marketing, that will also contribute. So overall, expectation is that we are going to sign around EUR 100 million to EUR 200 million of additional disposals in Q4 until the end of this year.

Okay. Okay. That's clear. Second and last question, the other side of the medal, in terms of possible acquisitions, do you see opportunities in the market? Or what's your feeling what could come in regard of acquisitions? And what would be possible for LEG given the high LTV? I could imagine that there might be also some constraints when it comes to acquisitions.

Definitely, especially as we strive firstly to get LTV down now to 45%. So that will only be a small portion. Currently, we are only looking into bolt-on acquisitions in different locations, but it is nothing bigger what we currently plan with regards to acquisitions. If there might be an outwhelming opportunity, and that definitely will then include also equity with our depressed share price that might be quite a stretch. So our focus is currently on getting disposals done and perhaps realize the one or the other bolt-on acquisition, but not on bigger acquisitions so far.

[Operator Instructions] The next question comes from the line of Kai Klose from Berenberg.

I've got one quick follow-up question. When you indicate the LTV to be at around 45% by the end of next year, could you indicate where you expect the ICR to land?

Kai, thanks for your question. We are not giving out a guidance for the ICR for next year, but we're looking at the 4.5 where we are currently standing at, it's super strong. It might decelerate a little bit, but we are well above any numbers that we should worry about. So that definitely will be a strong number next year as well for us.

Ladies and gentlemen, that was the last question. I would -- sorry to interrupt. We have a last minute registration coming from the line of Rob Jones from BNP Paribas.

Sorry, just two quick ones. Kathrin, just on the guidance, AFFO versus FFO. I appreciate that the FFO guidance range for '26 is wider. But why is it wider than the AFFO guidance? And then secondly, Lars, if I think about your assets that you've got marked for sale, I appreciate you're expected to make significant progress in Q4 this year with regards to some of those disposals. But if I take the 5,000 units and if you were able to sell them at your price expectations and let's imagine that asset values didn't move, can we get down to 45% LTV or if you've got either more stuff to add that needs to be sold to that disposal program? Or is it a case that if asset values are up a couple of percent next year, like they will be this year, then actually you get to 45% LTV anyway?

Thanks a lot for your questions, Rob. I'll start with the second question. So with regards to the current assets, it is really that we -- for the time being, we are sticking to those 5,000 units. But as we make transparent, we will do a full portfolio review over the coming 2 months. And then certainly, we will earmark most probably additional units for sale. How much that will be? Let's wait and see how that portfolio revision will look like. But it might be that we are then also being willing to offer additional units. For the time being, we are currently marketing those 5,000 units and expectation is that we make strong progress on those within the next 6 weeks.

With your first question on the wider guidance range on the FFO, this is, of course, due to the investments. And you know we are focusing on the AFFO. AFFO is also the basis for our dividend. So we really try to spend as much money as needed, but not spend more. And therefore, the capitalization ratio can vary a little bit between the years and depending on what we are exactly doing. So it's much harder to say where we will land up with the FFO when you're focusing on the AFFO. And therefore, we have the wider guidance range.

We now have a question from the line of Jonathan Kownator from Goldman Sachs.

Just following up on some of the nitty-gritty accounting. But just on subsidies, I understand that the amount you're guiding to EUR 10 million is going to be lower for 2026. You're also saying that you will have less work for your own balance sheet that you're doing. So how we expect the capitalization to evolve? And also, if you can give perhaps a bit more context on the subsidies, that would be helpful.

Yes. So to start off with the second part on the subsidies, Jonathan, with regards to subsidies, nothing here is being impacted by new developments. As you know, we are finalizing new developments. And for those, certainly subsidy values become due as soon as you finalize that construction. So that will be lower next year and will certainly be a headwind which we need to cope with. So for overall this year, that's something like EUR 20 million, and it will be substantially lower next year. And that's with regards to 2026, certainly something which we need to cope with if we look into the subsidies on the one hand side, but also interest rates because you heard it from Kathrin that with regards to the EUR 600 million, which we are now drawing, that now kicks in. That's 3.8% instead of the current average yield of 1.6%. And that's certainly something which also is a headwind. And that is the reason why in combination with the uncertainty around the capitalization rate, we've been opting for a wider range for the FFO I EUR 475 million to EUR 495 million.

And so just following up on that, your new development business, I think you've wind down essentially. So does that mean that the EUR 10 million in 2026, this is effectively the last year that you're getting these subsidies?

So for new developments, it's the last year that we are getting subsidies for new construction. But certainly, with regards to all the work we are doing on the energetic side with regards to, for example, changing heat systems, heating systems from fossil-based to renewables, that certainly will have a subsidy impact, and that's something which we are expecting for next year to come.

And so maybe let me rephrase. So for 2026, the EUR 10 million guidance you're giving, does that still include new development or then it's just about energetic modernization?

2026, no new developments. 2025 is last year of new developments, new developments with subsidies. Next year, no new developments anymore, Jonathan.

Okay. And so are we expecting also the own work capitalized to drop then in 2026?

I think you're making a reference to a line item, which is not being impacted by the new developments, but it's strongly impacted by our craftsman services units. So that is something which is not to be put in the same basket. Yes.

The next question comes from the line of Nico Hagemann from Deutsche Bank.

In regard of the current selling of the Glasmacherviertel in Düsseldorf, I ask you to give us some color on this in terms of the competition of this deal?

The competition is incredibly high. It took us 2 rounds to finally decide for one consortium. And with that, we are now approaching the city of Düsseldorf. So therefore, even if the city would not agree to the current consortium, which we do not have any indication as of today, meetings still need to take place, and there would be runners up also with competitive pricing. So therefore, we are confident to find a way to sell that plot over the coming weeks.

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

Thank you, and thanks for your questions. And as always, should you have further questions, then please do not hesitate and contact us. Otherwise, please note that our next scheduled reporting event is on the 5th of March next year when we report on our full year results.

And with this, we close the call, and we wish you all the best and hope to see you soon on one of our upcoming roadshows and conferences. Thank you, and goodbye, everybody.

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