Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 6.3% year-on-year, indicating strong operational performance.
- Substantial number of new leases signed, totaling around 32,000 square meters, reflecting robust leasing activity.
- EPRA NTA stands at EUR9.45 per share, showing stability in asset valuation.
- Net LTV slightly decreased to 57.6% from 58.3% at year-end 2023, indicating improved leverage.
- SG&A expenses reduced by 10.5% to EUR9.2 million, reflecting cost-saving measures.
Negative Points
- FFO decreased by 13% to EUR41.5 million, primarily due to increased financing costs.
- Current vacancy rate stands at 7.9%, which may indicate challenges in tenant retention or acquisition.
- G-REIT equity ratio is still below the required 45%, posing a risk to REIT status.
- Cost of debt increased by 0.3%, reflecting higher interest expenses in the current environment.
- Uncertainty around maintaining REIT status due to free float requirement not being met, which could lead to additional tax liabilities.
Q & A Highlights
Q: I see that your RCF was downsized from EUR200 million to EUR150 million. Can you explain why?
A: One of the banks involved in the RCF decided not to extend. - Olivier Elamine, CEO
Q: Can you tell me how much of your pool is unencumbered?
A: The difference between what we reported at year-end and this year should be around EUR160 million, which is a new mortgage loan that we've put in place. - Olivier Elamine, CEO
Q: How much of your unrestricted cash would you be willing to use to buy back bonds?
A: We are prepared to use at least the entire RCF volume to buy back bonds if they come available. - Olivier Elamine, CEO
Q: What are your refinancing plans for the bond maturing in 13 months?
A: We plan to raise debt in the mortgage market to refinance our bonds. - Olivier Elamine, CEO
Q: How do you envision your ICR given the current interest rate environment?
A: Our marginal cost of debt is 4.2% to 4.3%, and the yield on the assets is closer to 5%. We are planning with the higher interest cost of debt. - Olivier Elamine, CEO
Q: How much extra tax liabilities would be added to your balance sheet if you lose REIT status?
A: Assuming a full tax rate of around 32% in Germany, it would be around EUR370 million. - Olivier Elamine, CEO
Q: Can you clarify the discrepancy in Brookfield's bond holdings reported in your H1 report?
A: The first version of the report had a typo. The number has not changed compared to December 2023. - Olivier Elamine, CEO
Q: Would you consider issuing in the unsecured bond market?
A: We would consider it if the yield were to tighten dramatically, but currently, the mortgage market is substantially cheaper. - Olivier Elamine, CEO
Q: Would you consider buying bonds from Brookfield?
A: We wouldn't buy any bond from Brookfield outside of a structured auction. - Olivier Elamine, CEO
Q: What is your plan for liquidity if you use much of your RCF to buy back bonds?
A: We intend to refinance the bonds with mortgage debt and use the RCF to bridge the period between now and the drawdown on the next tranche of mortgage loans. - Olivier Elamine, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
