[Audio Gap] Yes. Thank you, and a very good morning to everybody.

Thanks for joining us for Aroundtown's First Half 2022 Results Call. You should have received our corporate news and can view today's presentation on Aroundtown's website, either on the Home section or under Financial Reports of the Investor Relations section.

As said, I am Katrin Petersen, Aroundtown's Group Head of Communications. And with me today are CEO, Barak Bar-Hen; CFO, Eyal Ben David;, Chief Capital Markets Officer, Oschrie Massatschi; Executive Director, Frank Roseen; Investor Relations, Timothy Wright; and representatives from Grand City Properties.

[Operator Instructions] Following our presentation, you will have the opportunity to ask questions. And please feel free to send us your questions via e-mail also during the presentation.

The e-mail address for this is in [email protected]. Once again, it's [email protected] to send your questions.

Now I would like to pass you over to Oschrie, who will guide you through the presentation of our results. Thank you.

Thanks a lot, Katrin, and also a very good morning from my side, everyone, and welcome to Aroundtown's First Half 2022 Earnings Call. During the first half of this year, we looked at how the macroeconomic situation unfolded around the globe.

From stagflation to supply chain disruptions and interest hikes, whilst always seen in the rear view, a European war that lasts already longer than most were expecting. From the market perspective, the first half of the year was challenging with nominal debt yields continuing to increase across the board and we placed much finesse navigating through these times.

So far, the market conditions did not significantly impact our operations and the positive impact of our continuous disposal activities and liability management from recent years are reflected in our results, leading to a strong liquidity position and no pressure to raise debt at unfavorable terms as I will elaborate soon in more detail. Although our operational performance continued to improve, we remain concerned about the coming periods as the strong volatility in the market could mean that we are sliding into recession and an extended war, which could lead to reduced rental demand and further refinancing challenges.

On Slide 4, we provide again a summary of our financial highlights achieved in Q2 this year as we continue to make every effort to stabilize and improve the fundamentals of our company. The net rental income increased year-over-year by 34% to EUR 613 million.

We continue to prioritize a strong level of cash and liquid assets to ensure an uninterrupted operational performance. Hence, the liquidity position end of Q2 amounted again to EUR 2.2 billion as in the previous quarter, which reflects about 15% of our debt level.

This level is already after the repayment of EUR 770 million of short-term debt during the first half this year. As usual, later, we will discuss each of these numbers in more detail.

Moving to Slide 5, you see an overview of our disposals during the first half of this year. As of June, EUR 625 million of disposals have been closed.

And after June, we closed further EUR 410 million of disposals. As of today, signed and not closed disposals amount to EUR 220 million, which we expect to be closed during the coming months.

From the deals closed in the first half, we achieved 7% margin over book value and 39% margin over cost value. The average disposal rent multiple of all closed transactions came in at 26x.

Berlin was our single largest city for disposals, accounting for 67% of all closed disposals in the first half of the year, followed by Hamburg with 13% and the remaining 20% of disposals were spread across different secondary and noncore cities. The segment split of disposals was very diverse across different asset classes, with offices making up 36%, hotels 27%, development 18%, retail 15% and the remaining 4%.

As a result of the volatile market environment and challenging financing options for buyers, the disposal activity became more challenging in recent months as many potential buyers held back their acquisition activity. Although at a slower pace, we continue to execute the ongoing buyback program until end of this year.

Approximately 70% has been already executed as of last week. Let's move to the operational results, starting from Slide 7.

Having further increased our position in Grand City to 58% as of June, the contribution of its quality residential assets located in strong metropolitan locations of Germany, plus London continues to have not only stabilizing but growing impact on the overall stability and diversification of the group's portfolio. Following our most recent asset rotation at the end of Q2, our portfolio diversification looks as follows: 44% in offices, 31% in residential, 17% in hotels and together making 92% of the portfolio and the remaining 8% in logistics and retail.

With 92% in value, our portfolio maintained its focus on the European key markets across top tier cities of Germany, Netherlands and London. As presented on Slide 8, we illustrate our commercial tenant diversity with around 3,500 different commercial tenants from various industries and limited exposure to any single tenant with our 10 largest tenants account for less than 20% of the group's rental income.

An additional 66,000 units are incorporated from Grand City. Aroundtown's group portfolio platform at the end of Q2 '22, including the consolidation of Grand City Properties amounted to EUR 29.6 billion, and close to EUR 1.2 billion net rental income run rate.

The longwall remained stable at 7.5 years for the group. Quarter-over-quarter, we maintained a stable rental yield of 4.3% whilst the vacancy rate of the group continued to improve by 20 basis points to 7.7%.

Going forward, we remain cautious and assume that it will be challenging to realize rent increases. Given the macro and geopolitical environment, we expect to face over the next periods.

As the impact of the sharp increase in inflation has become a main topic in all our daily decisions, Slide 9 provides you the operational growth potential we have as a defense against operational cost inflation. We continue to be very disciplined with our new CapEx and development expenses and maintain a strong level of liquidity whilst focusing on essential investments.

In fact, we aim to dispose more development rights going forward. On the other hand, we see several top line growth drivers from inflation.

Our commercial rental contracts are partially CPI-linked or have step-ups, and we expect about EUR 20 million rent growth on an annualized level this year. Our cost of debt is not expected to grow significantly in the short term due to not material maturities.

Hence, we expect that a part of the indexation proceeds will flow to our FFO. The German residential segment is characterized by steady rent increases without major fluctuations due to its regulated nature and achieved 3% like-for-like rent increases in June this year.

Note that around 20% of Grand City Properties portfolio is located in London, where rents are not regulated with usually shorter-term leases which enables us to capture the inflation impact faster. We expect our rent collection from hotel operators to recover further over the coming quarters and to be in line with our guidance.

I will, of course, elaborate further on the hotel collection later in the presentation. The bottom of the slide, you can see an overview of the well-distributed commercial lease expiry profile with no single year being exposed significantly more than the average of the next decade, providing us with a steady reletting job over the next years to come.

On Slide 10, we breakdown our office assets, representing the largest share of our group portfolio with a steady 44%. we continue to hold our largest sub-portfolio in offices in key cities such as Berlin, Frankfurt, Munich and Amsterdam, which alone make up 60% of our office portfolio value.

Additional key locations of Germany and the Netherlands, such as North Rhine-Westphalia, Rotterdam, Hamburg, Dresden or Stuttgart remain strategic investment locations. With a balanced average lease term of 4.3 years and no significant dependency on any single tenant or location, we continue to maintain a well-diversified and robust tenant structure.

We continue to anticipate a slowdown in new speculative development projects as well as an increased level of conversion activities of office space for alternative uses in the market over the next periods. Mainly for secondary office space versus prime space where demand has been resilient after the pandemic, which in turn will translate to a positive impact on office like-for-like lettings.

Our vacancy remained stable at 10.7% and we record 2.7% like-for-like rental growth as of June 2022. Our strategic long-term investment in the residential sector through Grand City is reflected on Slide 11.

At the end of Q2, the effective holding rate in Grand City stood at 58%, excluding shares Grand City holds in treasury, representing the group's second largest segment, with 31% of the portfolio value after offices. After the scrip dividend from Grand City, our effective holding rate is currently 60%.

Last quarter, we continued to increase our diversification to strong residential assets significantly below book value. The contribution of Grand City's quality residential assets located in strong metropolitan locations of Germany, plus London continues to have not only stabilizing but growing impact on the over stability and diversification of the group's portfolio.

With 78% value exposure in North Rhine-Westphalia, Berlin, Dresden, Leipzig, London as organic growth drivers, Grand City is complementary to Aroundtown's top-tier investment locations and further add to the asset class diversification and balances the portfolio between asset classes with different fundamental drivers. The London portfolio counts 4,500 units, including premarketed units in the pre-let stage.

The vacancy in this location has dropped from over 10% a few years ago to around 5% today. Additional key cities include Munich, Hamburg and Frankfurt.

Grand City recorded a like-for-like rental growth in June of 3%, of which 0.8% derived from occupancy increase and 2.2% from in-place rent growth. We closely monitor our deal elevated debt yields together with a high cost inflation, combined with the fact that many residential rental agreements in Germany are not linked to CPI, puts pressure on all German residential equities, which has increased the discount to the NTA.

In contrast, the housing shortage and pressure on rent levels remain, and we continue to see demand for condominiums, which keeps high capital values for German residential assets. We use this opportunity to continue increasing our position in Grand City at a high discount to its NTA.

Frank, please continue.

Thank you, Oschrie. On Slide 12, we present our hotel portfolio accounting to 17% in value of overall investment portfolio.

Geographically, we maintain our investment focus in top-tier cities across European countries like Germany, the Netherlands, Belgium, the U.K., France and others. Some of these locations have been well known for decades for their high proportion of domestic travel demand.

We aim to ensure a strong geographic diversification across multiple operators hotel types. Our hotel portfolio remained stable with 15 years WALT and 86% in-value in the 4-star category that reflects the sweet spot between the leisure and the business travel segments.

Please, let's move to Slide 13. The recovery of our hotel segment is in line with our expectations so far.

After a collection rate of 45% in the first quarter due to existing travel restriction across Europe, the second quarter saw a significant improvement to 70%. Therefore, our expectation for the full year of debt collection rate remains 60% to 70% for 2022.

Although we expect a strong summer booking period, we are aware of the significant negative impact on our external operators profitability due to the ongoing cost inflation and difficult to find qualified staff. As for the second half of 2022, we expect a collection rate of 70% to 80%.

Looking at the July collection rate of 80%, we are on track to achieving our full year expectation. Assuming, of course, that the sector will not be controlled with additional lockdowns in winter and that the impact of the war in Ukraine will remain limited.

On Slide 14, we summarize our remaining logistics and retail portfolios. Both asset types remain not good for us, and we aim to only hold onto the most assertive assets as well to intensify development rights for further value uplift while recycling the capital of mature noncore properties.

Our remaining position of these 2 asset types did not change quarter-over-quarter and stood at 2% in logistics and 6% in retail at the end of Q2 2022. Their WALTs remained stable at 5.1 years and 4.3 years, respectively.

The retail portfolio is with over 40% exposed to Central goods operations and over 1/4 of the retail portfolios part of the asset types such as ground floor retail, service areas and so on. The top investment location for both asset classes remain the lead with over 40% of the asset's value in each segment.

But as you can see from the pie chart, we maintained a well geographic diversification across top German cities in both segments. Barak, please continue.

Thanks, Frank. We present on Slide 15, the composition of our development and building rights portfolio, which accounted for 5% of the total assets at the end of H1 this year.

Therefore, it remains not material on a group level, but provides an additional value creation driver. Our strategy remains to identify additional value on plots of existing assets we already own by obtaining sellable building permits or conversion rights as well as selective construction initiatives ourselves where we see attractive upside at low risk from high pre-let ratios.

It is worth noting that we do not have any big running projects, and we are, therefore, not materially exposed to increasing material prices and wage inflation. New projects will be checked individually based on the updated pricing levels.

Given the shortage in land and new supply across many prime locations, and increased asset values, the development portfolio still implies upside potential despite increasing material and labor costs. Last year, and year-to-date, we signed around EUR 0.5 billion of development rights for disposals above book value and continue to see further demand.

The composition of development rights is illustrated on 2 pie charts with 35% of all right values in Berlin. Grand City also identified most development rights in its Berlin portfolio.

We regard the German capital as the most attractive location in Germany for development due to its growing importance and severe shortage of offices and housing. In terms of asset type breakdown, 44% of these segments are offices, which matches the undersupply of high-quality and green office space in several prime locations.

38% of this portfolio was identified for residential and mixed-use and the remaining 18% for hotels. The locations of our largest development rights include Berlin, Paris, Frankfurt, Munich and Rotterdam.

These 5 hubs together make up around 70% of this segment. In the appendix of this presentation, you can find a detailed explanation of some development projects.

You will find new additional projects for which we obtained pre-permit. Please move to Slide 17 when we present the profit and loss results for the first half of the year.

Our recurring net rental income resulted in EUR 602 million. That's a growth of 36% year-over-year.

And as you can see from the chart on the right-hand side, it is resulting mostly from the consolidation of GCP and is partially offset by disposals. As always, assets that are already marked for sales are excluded in this figure as well as in the adjusted EBITDA and FFO despite their positive contribution.

Our like-for-like net rental income, excluding hotels, amounted to 2.9% in June. Including the hotel segment, the like-for-like growth amounted to a solid 2.3% overall, of which 2.7% comes from the in-place rents and minus 0.4% from occupancy decrease.

These like-for-like figures now include the achievements from GCP for the first time. We recorded property revaluation and capital gains in the amount of EUR 401 million.

As the negative impact of the Omicron variant was less impactful on the hotel bookings during the second quarter compared to the first, the rent collection from hotel operators improved, and we booked EUR 15 million extraordinary provision in Q2 in comparison to double the amount in Q1. That's 40% less compared to the first half of last year.

As stated in the beginning of the presentation, for the remainder of this year, we expect high collection rates in the range of 70% to 80%. Assuming no further restrictions or lockdowns will impact the hotel recovery.

Administrative and other expenses increased to EUR 31 million and finance expenses was up 16% year-over-year to EUR 94 million, both mainly due to the consolidation of GCP. We maintained a low average cost of debt or sold during the second quarter at 1.2%, which is 20 bps lower compared to the previous years.

Other financial results came in at EUR 131 million as they were negatively impacted by the volatility for increasing rates and the inflation over our derivatives. Current taxes were up 48%, resulting in 58% -- in EUR 58 million and mainly due to the consolidation with Grand City.

Deferred taxes amounted to EUR 116 million in the first half and will comprise mainly of deferred tax expenses relating to revaluation gains. And as a result, the net profit for the first 6 months of '22 amounted to EUR 471 million, generating EUR 0.25 earnings per share.

On Slide 18, we zoom into our portfolio valuation. As mentioned before, we recorded property revaluation and capital gains in the amount of EUR 401 million in H1 '22.

3/4 of these properties we revaluated in H1, we accelerated valuation to better reflect property values in such a volatile market. As a validated on the left-hand side of the slide, when comparing December '21 valuation with those of June '22, we highlight the positive like-for-like revaluation gains of 2%, including CapEx across our portfolio.

As you can see from the middle of the slide, our average portfolio valuation remains with a strong buffer of over 40% to the replacement cost, and this is not considering cost for land, which have materially increased in the last years. We expect that the cost inflation we faced throughout this year should lead to fewer speculative developments resulting in a stronger demand and tailwind for rents and valuation which might be offset by economic impacts of positive recession.

Additionally, please note that the sharp increase in inflation we currently witnessed has led to rent increases across our commercial rental agreements, which can partially absorb the impact of the increase in discount rates. Eyal, please continue with the next part.

Thank you, Barak. On Slide 19, we show the adjusted EBITDA before the contribution from joint ventures, which increased year-over-year by 32% from EUR 369 million to EUR 486 million in the first half, predominantly as a result of the consolidation of GCP and contribution of like-for-like, but offset by disposals.

The adjusted EBITDA calculation is after excluding EUR 8 million net rent contribution of asset sales for sale and, therefore, referring to the recurring long-term portfolio. Positive contributions derived again from our proportional holding in Globalworth for the first half of 2022 and other JV investments, which contributed EUR 24 million in total.

Last year's figure included GCP, which is now consolidated. Looking at our funds from operations on Slide 20.

We recorded in H1 an FFO of EUR 186 million or EUR 0.17 per share, therefore, well within our full year guidance expectations. Year-over-year, this reflects an 8% increase on an absolute level.

Further positive effects can be seen from our share buyback programs as the increase of FFO I per share by 13% year-over-year as seen on the right-hand side of the page. The FFO I per share before COVID adjustments came in at EUR 0.21.

The total profit over cost from disposals in H1 amounted to EUR 174 million as a result from the successfully completed disposals of EUR 625 million. The FFO II decreased to EUR 360 million from EUR 548 million year-over-year due to the lower disposals compared to last year.

On Slide 21, we provide a detailed split of the development of the EPRA NTA and NRV metrics. Year-over-year, the total EPRA NTA slightly decreased by about 1% to overall EUR 11.4 billion due to our ongoing accretive share buyback program, which in turn led to a growth of 2% on a per share basis to EUR 10.4 per share and 4%, including dividends.

The number of shares reduced to EUR 1.1 billion as of last June due to the accretive share buybacks, which are held in treasury. The dividend distribution was accounted for as a payable in the current period but was paid out post Q2.

Slide 22 emphasize the priority we placed throughout the last years to achieve our healthy balance sheet fundamentals and conservative debt metrics. As increased nominal debt yields have become much less attractive compared to just 1 or 2 quarters ago, the listed real estate space across Europe is facing a significant challenge in identifying attractive capital sources and a shift in its capital allocation.

Particularly, because of such potential risk, Aroundtown has always put great emphasize on its capital structure and liability management and continues the strategy of maintaining a defensive capital structure. We also maintained the high ratio of our unencumbered assets of 84%, representing over EUR 24 billion of portfolio value, which provide additional source of capital as we see bank financing becoming more attractive again compared to bond debt yields in capital markets.

In June '22, the LTV stood at 40%, whilst we continue to maintain sufficient headroom to all our covenants and our internal board LTV limit of 45%. We will maintain our lowest LTV -- sorry, lowest level of average cost of debt at 1.2% with an average maturity of 5.4 years and enhanced interest cover ratio of 5.3x.

In addition, our rate ratio of 98% as of June '22 protects us from future volatility in the fields. The net debt to EBITDA stands at 12.3x annualized at the end of the second quarter, including perpetual as 100% debt, this figure stands at 16.9x.

Oschrie, please continue to conclude the final part of the presentation.

Thanks a lot, Eyal. On Slide 23, we want to put our strong liquidity and spotlight.

Given the challenging financial markets and rapidly increased cost of finance in the market over the last few months, Aroundtown is looking back at years of disciplined and successful early refinancing achievements. On the right-hand side of the slide, we breakdown our current cash and upcoming disposal proceeds as of end of June, amounting to about EUR 3.3 billion and covering our debt maturities for the next 3 years until Q4 2025.

On top of that, we have available revolving credit facilities in the amount of over EUR 1 billion without net loss. As for additional financing options, we see bank financing more favorable than bond financing, and we benefit from the strong long-term relationships we fostered with many banks even in times when bank financing yields were less attractive than bond financing yields.

Our EUR 24.2 billion of unencumbered assets place us in a strong position to leverage from further bank financing. Moving on to Slide 24, you find a summary of some key options concerning our outstanding perpetual notes.

Having spoken to many of you in the last few months, we are well aware that the anticipation grows, the closer we get to the first call date. We are still observing the market situation before taking a decision on the treatment of our January hybrids.

The upper half of this slide is a summary of the different tools available to us when treating hybrid notes on their respective call dates, each with its impact on the equity content according to S&P standard practices. Our preferred option would be to replace the hybrid notes in advance to the first call date with note of a new series.

That, however, will also depend on the gap between the new issuance costs and the step-up on the reset date. An alternative would be to use the annual authorized 10% allowance according to S&P kept at 25% over a 10-year period.

The third option can be to replace the hybrid note partially with another equity content instrument. None of these 3 options would have a negative impact on the equity content of any outstanding hybrids.

Another option is do not call the hybrid note, which in turn will be considered as 100% debt for rating purposes only, but remain equity in its substance. However, without any subsequent impact on the equity content of other outstanding hybrid notes.

We will, however, have the option to call the note at any future coupon payment date with the replacement of a new issuance when we see that rates become economically attractive again. In summary, the defensive nature of this instrument is supportive of our corporate credit rating and a healthy mix in our capital structure during uncertain financial market times.

The first call date for Aroundtown and Grand City Properties are listed below, and you can find a full list of all perpetual notes in the appendix. We strongly emphasize the clear characteristics of perpetual notes as equity and reiterate the reasons for this view as well as on the left-hand side.

We will further examine the market until close out to the first call date before taking a decision for the January '23 perpetuals. On Slide 26, we reiterate our full year '22 guidance.

For the full year, we guide FFO I to be in the range of EUR 350 million to EUR 375 million and FFO I per share to be in the range of EUR 0.31 to EUR 0.34, up from EUR 0.30 in '21, which is also supported by the accretive share buyback programs executed. Based on a 75% dividend payout ratio, dividends per share for '22 should be in the range of EUR 0.23 to EUR 0.25.

So there are no changes to our full year guidance, and we continue to be well on track to achieving them. Finally, on Slide 27, we want to highlight 3 key strategic efforts that we aim for as we navigate through the current macro and geopolitical challenges.

Firstly, we continue to extract the embedded value in our portfolio through our highly experienced operational teams and management. We achieved this by unlocking the rent and occupancy potential as well as reducing the ongoing operational costs and optimizing the world and tenant mix of the portfolio in addition to achieving a greener portfolio.

Additionally, we identify and obtain development rights from our existing portfolio and generate capital gains from their disposal. Disposals as well as accretive acquisitions are the second element of our broader strategy to create value.

This asset rotation is the foundation to reinvest the capital into higher-yielding investments such as new asset acquisitions, share buybacks or debt repayments. Finally, we continue to apply best practices when it comes to our proactive liability management.

See a high level of liquidity essential to benefit from attractive acquisition opportunities, but equally, it serves as a downside protection in times of challenging access to capital. Therefore, we focus on creating long-term relationships to all stakeholders and we understand that such relationships are key to maintaining flexibility in sourcing capital.

With that, I conclude our first half '22 presentation and hand you over now to Katrin who will lead the Q&A session.

Thank you, Oschrie. So before we invite your direct telephone questions, we want to answer questions that we have received by e-mail prior and during this call.

Thank you for sending them in. For simplicity reasons, we have taken liberty to group similar questions in order to answer as many of them as possible.

Allow me now to read out these questions. Could you provide some details on the letting performance of your office portfolio?

How do you see the market developing? Do you see changes in trends in the letting market, Oschrie?

Continue to see stability in H1, but we do feel that due to the market conditions, tenants and potential tenants are more hesitant than before. We recorded like-for-like rental growth of 2.7% in our office portfolio as of June.

In the first half, we signed and prolonged 190,000 square meters. New lettings amounted to 74,000 square meter at an average in-place rent of EUR 14.2 per square meter and a WALT of 4.8 years.

Prolongations amounted to 120,000 square meter at EUR 13.3 in-place rent and the WALT of 4.9 years. The good thing is that there is demand for space while the supply in the market is low and not expected to increase in the midterm as the pipeline of new projects is decreasing and the replacement costs have increased dramatically.

We remain cautious on our outlook for the coming periods. There are several external factors increasing uncertainty for the European economy.

The supply chain shocks caused by the COVID pandemic are still impacting the economy and the recent months outbreaks in China have resulted in a slowdown of the Chinese economy, while the U.S. economy is also showing signs of slowing down.

These factors, we think, are likely to have at least some spillover effects to Europe. At the same time, the war in Ukraine is continuing, and we currently do not expect a resolution of the conflict in the near future.

Further excavating the current inflation environment and the problem of energy supply. We do expect that both Germany and the Netherlands will weather economic headwinds relatively better.

Both countries have strong labor markets and low unemployment, which is forecasted to stay stable going forward and keep them on for space. We significantly improved the portfolio through noncore disposals in recent years and are more focused on top cities.

Additionally, our office portfolio continues to maintain a defensive tenant structure with around 30% governmental and public sector tenants and a long WALT of 4.3 years.

The next question is for Eyal Ben David. How much are you being impacted by cost inflation?

How much of your leases have CPI protection?

The biggest cost drivers are energy materials, which are mainly pass-through cost to our tenants impact our CapEx projects, which we can limit. Costs for regular CapEx and tenant fit-out increased by around 10%, but do not impact the overall performance materially.

We experienced an increase of personnel expenses due to strong labor cost in markets in our locations. However, this amount is low in comparison to our total operating expenses.

As explained in the presentation, due to our CPI-linked or step-up rents, we are also benefiting from the increased inflation on the top line. And due to our high EBITDA margin, we are able to maintain our profitability.

Regarding the share of CPI-index leases, our portfolio asset breakdown is 69% of commercial properties and 31% of residential properties. The commercial leases are partially is CPI-linked or include step-up rent clauses.

The German residential portfolio has regulated increases at up to 20% within the 3 years period and up to 11% in tense markets. Around 20% of GCP portfolio is located in London, as we said before, where rents are not regulated with usually shorter term leases.

Could you share some more insight into your like-for-like rental performance? What are your expectations for the coming period?

Our like-for-like rental growth was 2.3% over the 12 months ending June, driven by 2.7% in-place rent growth, which was slightly offset by 0.4% occupancy decrease. Without the hotels, the net rent like-for-like is 2.9%.

We note that we included GCP in the like-for-like for the first time. The like-for-like was mostly driven by the office and residential portfolio.

Strong in-place rent like-for-like was impacted by new lettings and prolongations at higher rents and CPI indexation as a result of the current inflation environment as well as from in-place rent growth in the residential portfolio. The hotel portfolio had a flat rent like-for-like as we postponed rent increases until we see a more substantial recovery of the hotel market.

We expect that CPI indexation will drive rental growth. At the same time, the potential headwinds mentioned earlier may have a negative impact on rent and occupancy levels.

We, therefore, conservatively assume a slightly positive like-for-like performance for the commercial portfolio in 2022. We expect like-for-like for Grand City Properties portfolio of over 2.5% in line with Grand City's guidance.

It is difficult at this stage to predict rent and occupancy levels in the following years, and it depends mainly on the depth of the potential upcoming recession.

Next question. Can you provide some details on revaluation?

What are your expectations for the remainder of the year, Barak Bar-Hen?

We revalued about 3/4 of our portfolio in the first half of '22, resulting in a revaluation and capital gains of EUR 400 million. The revaluation were carried out across all of main locations and asset types.

We focused on a high share of portfolio being evaluated in order to reflect the impact of the currently turbulent times. The revaluations reflect a like-for-like gain of 2% including CapEx or 1.2% excluding CapEx.

We saw the strongest like-for-like including CapEx in the office with 2.7% and 3.3% like-for-like in residential properties. Revaluation gains were mostly driven by operational improvements and internal growth.

While we have seen good operational trends in our portfolio and stabilization of valuations, it is difficult in this current economic environment to make a qualified assessment of our future values in the long term. Valuations will be impacted by a comparable market transaction, which significantly slowed down in recent months.

At this stage, we assume no material change in values in the short term while it is hard to predict values direction in the following years.

Bond yields remain high and interest rates have increased in recent months. How do you expect this to impact your business?

Do you need to raise new debt in the near future? Do you expect a negative impact on your valuations?

We have always focused on proactively managing our debt profile by taking advantage of favorable rates to extend our debt profile and repay near-term maturities ahead of time. As a result, we currently are well positioned with no material maturity in the next few years and very high hedging ratio.

We currently maintain a strong liquidity position with EUR 2.2 billion of cash and liquid assets and a further EUR 1 billion of undrawn credit facilities, not subject to MAC, which is more than enough to cover our debt maturities in the next few years. We, therefore, do not need to raise new debt at such unfavorable market condition.

That being said, we maintain a strong portfolio of unencumbered assets and are in discussion with many banks regarding bank financing opportunities, which currently have attractive rates compared to bond markets in which we may tap if we see accretive opportunities. In addition to this, we have EUR 0.5 billion of vendor loans related to closed disposals as well as over EUR 600 million disposals which we expect will provide additional liquidity in the coming periods.

Regarding impact on valuations, these are based on the long-term 10 years this year. The higher expected rates in the current environment are driven by strong inflationary pressure, which also result in expected rental growth.

In addition, new constructions also became more expensive and developers start to postpone new development projects until more clarity on cost will be seen. This reduces new supply in the market, while currently demand remains strong.

Since there are several force pushing to different directions, it is uncertain when the market will stabilize.

The next question is for Frank Roseen, please. Can you provide an update on the hotel market?

The summer months are developing as expected, with demand rebounding well, although demand drivers remain asymmetric with leisure, recovering stronger than conferences and business travel. In many markets and locations, the hotel operators revenues have recovered to 2019 levels.

But due to cost structure and staff shortages, the profitability is not the same as 2019 levels. Energy and salaries are the biggest cost drivers for the hotel operation, and these 2 elements significantly increased in recent periods.

Currently, hotel revenues need to be on average around 20% above 2019 levels to achieve the same level of profitability. The hotel operations profitability impact is another factor currently impacting our collection rate.

Eventually, we believe that the hospital industry will be able to pass the higher costs on to their customer and not yet fully. This summer in comparison to the last 2 pandemic summers also saw a lower domestic demand, which was exceptionally strong in the last 2 summers as travel restrictions reduced the option to fly to other countries.

Our collection rate in Q2 was 70% and further recovering to 80% in July, compared to 45% in July last year and 33% in July 2020. We expect around 70% to 80% for the rest of the year, with further improvements next year to close to fully recovered by 2024.

Can you please provide an update on your development projects? Did you obtain any further building permits?

And do you prefer to sell or build yourself?

We had some great progress in recent months. We obtained the prepermit for conversion project in the middle of Alexanderplatz in Berlin next to the TV tower.

The 11,000 square meter property is currently used as a cinema, and we can convert it into a hotel, which is more suitable use in one of Berlin's more touristic locations. Our plans also include around 20% more lettable square meters through additions on the top floors.

Further, we obtained in Berlin District Mitte a prepermit for a new build of currently 1 floor retail into a mixed-use residential and office property while keeping the essential goods retail on the ground floor. This is basically the same concept as the development rights we sold in [indiscernible] last year.

The current property has a size of 3,000 square meter, which can now be extended into 11,000 square meter, around 4x the original size. Berlin and especially the central district has a shortage of new land for development.

So a project like this in these central locations with the permit attract strong demand. We obtained the full permit for the development of a new 11,000 square meter logistics hall in Kassel, located on an underutilized plot of one of our existing properties.

We have the entire new development fully pre-let already which reduces the risk for the project significantly. We expect to start construction this year and we'll finalize it within around 1.5 years.

In addition, we also received the permit for the conversion of the overground parking garage at the Hilton Hotel in Berlin, Gendarmenmarkt as well as for the redevelopment of the office tower in Frankfurt's main Central train station, which includes more space creation. You can find more details on these development rights in the appendix of our presentation.

Generally, we analyze our portfolio for internal value creation which includes, among others, to identify underutilized space or conversion rights of existing properties. We then aim to achieve the building permits and decide from there if we prefer to sell the rights as we have successfully done several times or consider developing ourselves if the project bears a low risk due to an instant high pre-let situation or a strong central position with a top-tier city marked by strong demand.

Could you provide an update on your disposal pipeline? Do you expect to continue disposals in the current market?

In the first half of this year, we closed EUR 625 million of disposals, and we have continued signing new disposals in the second quarter. As of June 2022, our held-for-sale portfolio amounts to EUR 0.9 billion, of which 60% has been signed or closed as of today.

We have used disposal proceeds in the first half to pay down approximately EUR 800 million of debt and have around EUR 260 million in debt maturing in Q3. We are in no need to dispose more assets as we have high liquidity, which covers our debt maturities in the coming years.

We would sell more properties if the offers are accretive for us and enable us to increase our capital allocation options including deleverage. We currently see buyers hesitating due to the market conditions, which results in less bidding competition.

Could you provide an update on your residential portfolio? Will you continue increasing your position in GCP?

As of June 2022, the residential portfolio through our stake in GCP makes up nearly 1/3 of our portfolio. We have increased our stake in recent years as we believe in the quality of the portfolio and skill of its management.

The residential portfolio provides us further diversification through a very stable asset class with strong and stable cash flows. As expected, German residential operations continued to perform very well despite the volatile capital markets.

We see this also in our residential portfolio, with GCP recording good rental like-for-like performance and a further reduction in vacancy to a record low vacancy of 4.7%. GCP recorded like-for-like rental growth of 3% in June, which was driven by 2.2% in-place rent growth and 0.8% occupancy increase.

We expect continued good performance in the long term due to a structural supply-demand imbalance and demographic trends. In recent periods, the replacement costs increased significantly, which is expected to reduce the supply of affordable rental housing even further.

We currently expect to continue increasing our position in GCP as long as Grand City trades significantly below its NTA. This allows us to further strengthen our position in GCP's platform and the stable cash flow generated from the underlying resilient residential real estate asset class.

Please, could you provide more insight into the vendor loan business -- vendor loans business, sorry, who are the counterparties? What are the underlying assets?

What covenants? What interest rate?

The vendor loans are several loans given to different buyers of our properties and are secured against the sold properties, which are the underlying assets. The average LTV of the vendor loan to the selling price is around 50%.

We don't see a material risk of default as the borrowers are strong groups and in case of default, we have the right to take back the asset and the defaulted buyer has a very significant penalty to pay. The loans will be paid back in installments from this year until 2024.

And since the security is very strong, the average interest rate is around 2.5%.

Okay. So thank you.

Those were the questions that we have received prior to this call, and we can now start the open session for your questions. We would appreciate if you can ask all your questions at once, and we will answer them one by one.

A couple of questions and a couple of comments before that. So firstly, I think the new kind of presentation format is really fresh.

And actually a useful Q&A session from yourself so far. Just several questions on my side.

So obviously, you flagged both to us previously and also, of course, on this call that you're looking at bank financing for some of the refi that's coming in the next couple of years and obviously, ongoing discussions with a number of lenders to help facilitate that. I just wonder if you could give any color on the cost of finance, for say, 10-year money.

I think when we last met a few months ago, it was about 225 bps all in. I wonder if that's ticked up slightly.

And secondly, linked to that, because I'm not a treasury expert. To what extent could you increase your secured lending?

I appreciate you've got a very large quantity of unencumbered assets, but how much you can increase your secured lending by before you get to a position where it starts to impact the rating on your unsecured debt? And then just a clarification question on hotels.

Am I rightly saying that you said that we need to see top line income for your hoteliers on average increase by 20% above pre-pandemic levels? Before we get to the level of profitability in line with prepandemic which, I guess, should potentially be synonymous with collecting 100% of your rents again?

Just some color on that would be helpful.

Thanks, Rob, for the questions. Referring to the cost of money as we see it now, I mean, in the secured lending level, currently, the main talk is on the period of 5 to 7 years.

And we see for 5 years, 11 of 2% to 2.5% all-in for properties. And if it goes to the 7 to 10 years can go to the level of 3 and a bit above.

In terms of capacity, we have a lot of headroom in our bond covenants that will allow us to increase debt. Remember that on the secured lending.

Remember that if we take that lending, we probably do it to use the funds also to deleverage more expensive debt. So it will be one on the account of other and we'll just increase the LTV.

On the hotels, many of the hotels top line -- many of the hotels at the moment are already at the level of 19 and they're leasing this extra part to cover, let's say, the cost inflation. So we see a good improvement in the collection rate.

So we saw now 80% in July also always looks strong. So we see that the progress is going.

Still a lot of uncertainty, and the market is very volatile and we see cost inflation continues. So we prefer to be a bit more conservative there.

But they are still missing this extra income in order to reach to the full collection rate. Thank you for your questions.

I was just wondering if I could get your thoughts on the potential higher discount rates on the write-down risk of the portfolio since that increasingly a concern in the market. And maybe you can share if with the last round of revaluations if the auditors were already using a higher discount rate compared to last year.

Ellis, we saw a very slight increase in these [indiscernible]. It was compensated by additional ERVs from indexation.

So we saw a small sign, but it was not material.

I have 2 questions regarding hybrids. So first one, will it be fair to assume that any decision regarding the upcoming calls will be similar for both Grand City and Aroundtown?

Or we could see some difference in approaches towards both the names? Secondly, regarding the option do not call the hybrids on first call date, do you think it will have any implications for any upcoming future hybrid issuance?

Thanks, [ Niraj ], for the question. I'm not sure I got the second one properly.

About the approaches, there could be different approaches in general between Aroundtown and Grand City, although we are a lot aligned in the way we see the market going forward and the parameters that influencing the decision of what to do. I'm not sure I got the second question.

But if it was referring to if what we are going to decide about the first one, the first call is referring to the rest. The answer is no.

We will analyze the market at the beginning -- before every core date and make a proper decision. But we do see and respect all hybrid [ orders ] together, and we try to align the way we treat them equally.

Two questions from my side, please. The first question is following up on the revaluation topic.

As far as I understood, you revalued 3 quarters of your portfolio. Is it fair to assume that you're going to revalue 1 quarter in H2?

Or is it -- or is there a possibility that you might touch parts of your portfolio, again, which you revalued in Q1 or in Q2? That would be the first question, please.

And the second question is on your ongoing disposal activity. The -- I mean, it's good to see that you do transactions in a market which becomes apparently more and more difficult.

Is it possible to tell us a bit more about your buyers. Which class of buyers are you finding?

Are you selling your properties to private equity or family offices? Maybe you can elaborate a bit on that.

And which buyers class needs or to whom do you give vendor loans in that regard?

Thank you, Manuel. Referring to revaluation, if we will see an indication for a change in value in H2 for property that we revalued in H1, we will, for sure, do an update for the valuation.

And on top of that, we will revalue all the additional 25% that we didn't revalue in H1. Referring to our buyers and vendor loans.

So the buyers are -- it's a very wide spread. We have family offices, real estate funds, a strong private investors and more that are buying our properties and place a demand.

The request for vendor loans is more of -- we see it and they see it more as a bridge loan since it takes sometimes longer to get bank financing at this point of time and both sides wants to close the transaction, then we basically give them a bridge loan until they get this financing, and that's why it's short, and allow us to close the deal, and that's why the security is in the [indiscernible].

A number of questions from me. First, a couple on disposals.

Looking at your disposal yield of 3.8% versus portfolio yield of 4.3%, is it fair to say you're selling [indiscernible] better quality properties where there is liquidity available? Second one on the just reconciling, you mentioned, I think EUR 1.3 billion signed in the first half, of which EUR 625 million completed, but there's an even EUR 421 million of cash inflow.

And then there's a subsequent EUR 463 million of cash outflow for acquisitions, CapEx advances. Just wondered if you could reconcile the net outflow effectively versus obviously the big numbers on disposals commented.

Secondly, what was the cost incurred for debt repayment? I think you've got EUR 108 million of other financing costs, which includes the negative impact.

It also includes financial derivatives, which I imagine are positive for the first half. So I'm just checking what the cost was to repay the debt in the first half.

You mentioned bank financing obviously being a little bit more attractive than bonds at the moment. It's still double, obviously, your in-place cost of debt.

Just wondering if that changes your thought process with regard to the strategy. And similar to Rob's question, just wondering is there a sufficient bank financing available to replace all of your bonds?

Would you think or do you still think you need the bond market in the future? Next one, do you believe a higher cost of capital slowing transaction market?

I think you mentioned a much more difficult situation to realize rental growth will lead to any impact on asset values moving forward. And then finally, on just a thought process, I guess, just behind the decision to do the share buyback versus the decision to have a scrip dividend.

I think share buyback over H1 was -- cost you sort of EUR 5.1 per share. And then you issued a scrip of EUR 2.48.

Seems a strange decision to buy back a EUR 5.1 and then issue a EUR 2.48. But just wondered what your thoughts were regarding that moving forward.

Thanks, Paul. I hope I will catch up all the questions that you've answered -- that you did.

About disposals and the yield. Since part of the disposals were included developed price, then the mix yield basically mix the yield and increase the yield -- decrease the yields that you saw.

And I think this is what create the difference in your calculation, but we can follow up on that after this call. Referring to disposals and the inflows of disposals, the EUR 1.3 billion disposals are including EUR 470 million disposals that were signed last year as we showed in the presentation, but didn't close.

So from a full package of EUR 1.3 billion disposals that we had up until H1, we closed EUR 625 million in H1. Additional EUR 410 million were closed in -- after H1, and we still have EUR 220 million signed deals that will be closed in the next period.

About the cost of debt and the impact on the other finance. So I think the other finance was heavily impacted mainly in Q1.

It was partially related to debt repayment. It was more related to inflation.

In Q1, we have several derivatives that were impacted by inflation indexation hedging instruments on 2 of Aroundtown's bonds. As the inflation expectation increase in Q1, more than the predetermined hedge level and expense was recorded in the other finance item, partially offset by an increase on the revenue line coming from inflation index leases.

Referring to bank financing and availability. In general, I think that the answer is yes.

I don't think that we would like or we will neglect completely the bond market. I think all the time, we will have a good mix unless it will have a big discrepancy between the cost of debt in the secured debt in comparison to the bonds.

So as long as they will be relatively close, we'll use both of them as we did in the past. But if we see that the gap is too high, we will work more towards the bank -- secured bank financing and less with bonds.

Referring to the way we see rental yields growing and effect on valuation. Look, we are in a market that there is a lot of volatility.

And yes, at the moment, we don't see [indiscernible] in the business itself. That's where we see rental growth recorded and positive like-for-likes.

But if a recession will start and the size and volume and damage of such a recession could for sure impact the business and impact the rental growth. And if this will happen, we see that it will affect as well valuation.

About the share buyback versus scrip dividend, we don't see it exactly like that. For us, we give a scrip dividend as almost -- always an option for shareholders.

We don't look at it specifically and decide is that we do and this we don't. So we are already in the third year that we allow shareholders to choose the scrip.

That is I think from your questions.

Two questions, if I may. On the first one, in your native like-for-like occupancy [indiscernible], could you please comment on where this is more specifically coming from?

And how do you expect that to evolve in the near term? Second question, just to come back to capital allocation.

And let's assume for a minute, no revaluation gains in the near future, given your investments in Grand City, further investment that you're making in the business. That's just the outlook for disposals, which seems to weaken as you highlighted, you expecting to limit your share buyback until you limit further investment in Grand City if you're not able to make disposals?

Or how do you expect disposals to evolve of life?

Thanks for the questions. So the -- we saw a slight decrease in occupancy like-for-like in part of the retail portfolio and part of the office.

In terms of the capital allocation, I mean, you're absolutely right. If we see that the disposals are not managing to execution, and we will for sure heavily considered limit share buybacks and further investments.

Just 1 quick question from me. Of the 4 options you have listed for the upcoming '23 -- January '23 call on the hybrids.

Am I correct in understanding that at this stage, you are pretty indifferent between the 4 options? And therefore, do you see any impact on your access to the hybrid markets in the event that you do not decide to call the hybrids in January next year?

Okay. Thanks for the questions.

For this -- look, we -- yes, the answer first is that we still haven't decided which option to take or maybe a combination of some of them. And we will wait a bit, let's say, closer to the first call in order to make a decision.

We -- part of the consideration of the -- what we will do will be as well what will be the impact on access to [ lease ] capital based on the decision that we have taken.

Many thanks to all who took the time to participate in this call. We now finish the Q&A session.

And I appreciate the questions that everyone has submitted before and during the call. As always, we look forward to meeting most of you in person again over the coming months and don't hesitate please to reach out to us if you like to discuss any of those topics in more detail.

All the best, and goodbye.