Dear ladies and gentlemen. Welcome to the presentation of the half year figure 2021 of DIC Asset AG. Today's call is recorded, and I will now hand you over to the host, Sonja Wärntges, CEO of DIC Asset AG. Please go ahead.
Good morning, ladies and gentlemen. A very warm welcome to DIC's half year results conference call. Today, as usual, I'm here with my colleague, Patrick Weiden, CCMO of DIC Asset, Dirk Oehme, our Head of Accounting, and our Investor Relations team headed by Peer Schlinkmann. As usual, I will give you a quick presentation of our results for the first half year of 2021, followed by the Q and A session.
Before I guide you through the details of the first half year results and the performance of our real estate platform, ladies and gentlemen, let me start my presentation with a quick overview of the operational highlights. You will see what we have achieved in the first six months of 2021 in a still challenging environment. Our unique business model has again shown its strength in a constant way, with growing Assets under Management, leading to a growing asset pool.
We have defined a new midterm target for Assets under Management with EUR 15 billion plus in the two segments, Commercial Portfolio and Institutional Business, driving the value of the two segments, and last but not least, our results. The reason for that is embedded in our 360-degree management approach. We transformed the real estate value chain into a dynamic circular process. We are able to deliver 360-degree value creation during the lifetime of the assets, while taking advantage of strong synergy effects, and it shows up in higher values and in higher results. Our success is based on the four key elements of this 360-degree management approach: Transact, Operate, Develop, and Match.
Under the term Transact, we see us as the local expert who is keen in initiating and structuring transactions, including the financing for the growth of our platform, and always with a view to find attractive opportunities which have further potential. The day-to-day businesses and ongoing management of our properties is what we define under the term of Operate. An active and sustainable management approach is key for today's and future success of our business model. Another central part of our platform is our track record in developing. That means, on the one hand, develop assets, but it does also mean develop the processes, bring it continuously to the next level. Under the term match, we summarize our goal to bring together the right properties with the right occupiers and the right investors. To say, the perfect match. It means acquiring suitable properties while disposing unsuitable ones.
Looking at the performance of our platform, we can state that our Assets under Management keep growing in the first six months with a volume of EUR 897 million. Compared to the transaction volume in the same period last year, they increased by 81%. Also due to the acquisition of the so-called Uptown Tower in Munich, which is our biggest transaction so far. The Uptown Tower was bought for warehousing and will be placed into a new vehicle for institutional investors in the next month. For our own balance sheet portfolio, we bought two assets for a total of EUR 138 million, one in Cologne and one in Munich. On the disposal side, we successfully sold two properties for our clients in the Institutional Business. The hotel in Frankfurt, Villa Kennedy, and the residential project, Riverpark Tower, also in Frankfurt, for around EUR 173 million together.
As of the balance sheet date, three properties are in the warehousing portfolio, with two logistics properties in the meanwhile already transferred to the new logistics funds and the Uptown Tower. On slide four, you see what we mean with Operate. Our letting teams signed just over 100,000 sq m in lease agreements with contractually agreed annualized rental income of around EUR 12.5 million in the first half of 2021. With a majority share of 73% coming from office leases. Compared to the same period last year, our new lettings saw a strong rebound. A significant part of new leases were attributable to the logistics asset class. The development of the like-for-like rental income for the entire managed portfolio slightly increased by 0.2%. The like-for-like rental growth for the Commercial Portfolio stood at 0.5%.
Our average rents in the Institutional Business grew by 4.2% to EUR 15.68, and in the Commercial Portfolio, 8.2% to EUR 11.21. Including the logistic assets from RLI, the average rent in the Institutional Business stood at EUR 11.90/sq m. At the same time, the average rent in the Commercial Portfolio, including the warehouse properties, stood at nearly EUR 12/sq m.
The remaining lease expiries of the portfolio are on a very low level. Only 2% of the rents are due to expire until the end of the year. Roughly 75% have a remaining term until 2025 or even longer. Let's take a quick view on our balance sheet portfolio on slide five. As of today, and not including the properties in the warehousing, our Commercial Portfolio has reached a size of EUR 2.1 billion. The office asset class is still dominating the composition of our portfolio.
Portfolio KPIs like the EPRA Vacancy Rate decreased to a very low level of 6.1%, which is a minus of 140 basis points compared to last year's period. The remaining average lease term, our WALT, stood at 5.9 years. In the first six months, we further strengthened our portfolio by two acquisitions with an annualized rent of EUR 7.2 million. The fully occupied MBC in Cologne is leased to the car manufacturer and blue-chip company Mercedes-Benz AG, and it provides a rental income of EUR 4.9 million and has a very long-term WALT. The total investment cost for the property amounted to EUR 71 million. The gross rental yield relative to the purchase price exceeds 7%. Besides a strong generation of rental cash flows, the property promises further value potential. Our newest acquisition is the property Campus C in Munich for a total of EUR 66 million.
The fully occupied multi-tenant property provides a gross lettable area of 9,200 sq m. Main tenants of the property are the U.S. software company Adobe Systems and two public sector tenants. The annual rental income approximates EUR 2.4 million, while the secured remaining lease term is over three years. We are witnessing a continuous inflow of companies and a steadily rising demand for modern and flexible office units in this area of Munich. Therefore, Campus C promises a steadily increasing value appreciation potential as we expect that Munich will keep its position as a highly attractive office location. Together with the acquisition of the Uptown Tower for our warehousing activities, we also significantly increased our overall footprint in the Munich area. Now we have an even stronger presence on Munich's market, and we expect to further increase our presence there.
As part of the key element Transact, warehousing plays an important role in our 360-degree management approach. During the first six months of 2021, we acquired the already mentioned Uptown Tower and one logistic property, ILP, near Erfurt. The logistic property has been already transferred to our first logistic fund after this balance sheet date end of June. For the Uptown Tower, the marketing was launched in July, and we expect the transfer to a new investment vehicle to take place in the second half of the year. Until then, we will profit from the additional rental cash flow in our P&L. Bringing together the right investment ideas with the right investors is what we define under the term match, as I already mentioned at the beginning of my presentation.
As of today, the Assets under Management in the Institutional Business grew by roughly EUR 2 billion within one year, which means an increase of 33% to EUR 8.6 billion. After the acquisition of the logistics asset manager RLI Investors at the beginning of this year, we have successfully completed the integration into our real estate platform. Just a couple of weeks after the acquisition, we quickly launched the first joint logistics fund, which targets investments in light industrial, urban logistics, and logistics assets. Only another four months later, we completed the fundraising for this new logistics fund. Therefore, we are now ready to fill the fund in accordance with the investment strategy. Including the fund raised for the new logistics fund, we still have more than EUR 700 million of equity commitments available for new investments, and in total, an amount of roughly EUR 1.3 billion.
Ladies and gentlemen, I wanted to shed some more light on our activities and measures, which shape our growth plan to reach the target of more than EUR 15 billion Assets under Management in the midterm. First of all, our target is based on our market view and expectations. Yes, COVID-19 has changed the world, to some extent, also the parameters in the real estate business. We view this rather as an opportunity than a risk after the pandemic. Germany as a real estate market will remain the most attractive in the European landscape. This is our home turf. Core, Core-Plus investments and the top seven locations are everybody's darling, and we can offer the product. Given the market environment, we believe that an active management approach is key to our success, along with our entrepreneurial mindset and high deal speed.
We are following an active management approach for many years now, cover a wide range of the real estate value chain. We are well prepared for ESG, as we already set up an updated ESG strategy and roadmap. Our action plan towards the next growth target is built on the following specific milestones. One simple formula. To grow, we need to invest. We will invest our own money to increase the balance sheet portfolio, but also the equity that our investors have entrusted us to further increase the AUM in the Institutional Business segment. We will expand our product offerings for investments in the German real estate market, but also especially for logistics outside Germany.
We stick to the level of our vertical integration as we truly believe it is a competitive USP in the transaction and letting markets, and it supports us to generate superior returns for our clients, and we can create added value on our platform. We will also deliver on our ESG roadmap and further develop it. Especially for the Institutional Business, our goal is to tap the potential from a growing international investor base. We are happy that we can rely on our strong domestic investor base now and will continue to further match existing and new investment ideas with this expanded investor base. Besides keeping the fees we generate from our transaction activities on a high level, we also target for a higher portion of our recurring fee base driven by the increasing number of Assets under Management.
For the Commercial Portfolio, we focus on the additional value creation through selective repositionings and refurbishments of existing properties, followed by a further strengthening of the portfolio quality by acquisitions on the one hand and disposals, if appropriate, on the other. On top of that, we will use our balance sheet capacity to some extent from time to time for the warehousing of attractive properties. This will generate significant and additional setup fees as well as rental cash flows. Through this action plan, we will achieve further values, FFO growth, and attractive dividends. What we also have seen over the last months, overall success is defined more and more by a company's ESG strategy. Therefore, let me reaffirm that the topic of ESG is seen as a long-term commitment for us.
This means that it's not only driven by legal obligations and new laws like the European Green Deal or the EU Taxonomy. Incorporating ESG criteria into real estate promises additional returns for our clients and for our operations. That was why we started to put our emphasis years ago on implementing ESG into our daily business. The ESG approach has become an essential and integral component of our corporate strategy approach and of our daily business activities. As part of our latest sustainability report, which we published end of June, we also presented our updated strategy for the next years. It demonstrates how the success and dynamic nature of our business model is clearly and decisively linked to sustainable management. Let me highlight some of our recent milestones and give you also an outlook on some of our targets as part of our ESG roadmap.
In the first half year, we updated our ESG strategy, as I already mentioned, newly created the position of a head of sustainability, and implemented an ESG committee, which will be responsible to further establish and implement ESG in our DNA. We placed an ESG linked promissory note with a volume of EUR 250 million for the first time, and set a green building target of 20% by the end of 2023 as part of the promissory note's issuance, and launched a new ESG website to give more regular updates on our milestones. Digitalization, thereby, is an incremental part for the further ESG process as it will guide us to a better understanding of the impact through faster analyzing the raw data of our properties. Looking at the half year figures, we were again able to benefit from several revenue streams.
A strong profit from disposals was achieved mainly from the transfer of the repositioned property in Darmstadt out of the Commercial Portfolio in the new office fund we have launched last year. Additional profits from disposals in the amount of EUR 4.3 million were generated in Q2, coming from last year's disposals. Our net rental income from the Commercial Portfolio is on a stable basis, but shows temporarily a lower level compared to the previous year due to the disposals in the previous year. The latest acquisitions, as well as further ones, will more than compensate the rents from disposed assets until year-end. Our management fees again significantly increased by roughly 20%. Thanks to the structuring of transactions and acquisitions, the transaction-related fees increased to EUR 31.7 million. The increased Assets under Management base, in particular, improved the asset property management and development fees to EUR 18.8 million.
Overall, the profit for the period increased by 32% to EUR 37.7 million in the first half of this year. Looking at our valuation and Adjusted NAV, which takes into account both the value of our balance sheet portfolio, as well as the full value of our asset management business, the Adjusted NAV amounted to EUR 21.91 per share, which was just slightly below the year-end figure of 2020, mainly due to a EUR 1.3 million higher amount of shares and the cash dividend paid in the first half of 2021. On the next slide, I just want to give a quick update on our financial structure. We are now looking at a more ESG-driven financial structure. According to the attractive conditions of the ESG link promissory note, our average cost of debt decreased to 1.9%, and the average maturity of loans and borrowings increased to 4.2 years.
With the funds from the promissory note, we already secured a refinancing of a major part of our maturities in the next year. Till then, we will use the funds to temporarily finance our warehousing activities. Mainly due to the most recent acquisitions for the Commercial Portfolio and the cash dividend payment in April, our LTV adjusted for warehousing increased to 48.1%. Including the full value of our Institutional Business, our Adjusted LTV stood at 43.2%. With still EUR 240 million cash on hand, we have sufficient liquidity to further finance our short term growth. Now let's have a look on the FFO. Compared to the previous period, the net rental income slightly decreased due to sales and transfer of warehouse assets. On the other hand, we saw significant growth of the real estate management fees.
Our OPEX increased in line with the growth of the platform and the acquisition of RLI Investors. The other operating income and expenses mainly increased year-over-year due to the release of provisions in Q1 2021. With EUR 53 million, our FFO achieved the best half-year result in DIC's history. Including sales profits, the FFO II reached EUR 69.3 million, which marks a plus of 31%. Ladies and gentlemen, despite the market challenges in the first half-year, we demonstrated once again how effective our real estate platform is. What a strong earnings dynamic it developed, and it has a tremendous potential going forward. That is exactly what we mean with the term dynamic performance. With our own momentum, we will reach our targets for 2021. Many thanks for your attention. Now we are ready to take your questions.
Ladies and gentlemen, if you would like to ask a question, you may do so now by pressing star one on your telephones. That's star one if you'd like to ask a question. We will now take our first question from Philipp Kaiser from Warburg Research. Please go ahead. The line is open.
I think it's my turn. Thanks a lot for the presentation. Just a couple of follow-up questions from my side. Just starting with the Institutional Business. You mentioned that the real estate management fee increased by around 20% up to over EUR 50 million. Could you elaborate how much of that is linked to the RLI acquisition and how much is kind of organic growth in the fee?
Good morning, Philipp. Thank you for the question. Yeah, for the RLI, it's around EUR 3 million for the acquisition coming from the run rate-
Okay.
So to say. Yeah, the rest of it is from organic growth.
Okay, perfect. The AuM increased by 30% on a year-on-year basis, only looking at the Institutional Business. The asset management, property management, and development fee only increased by around 4%. Could you shed some light on this difference and, yeah, between the two growth rates?
Yeah. If you look at the growing AuM, you have to keep in mind that it is the, so to say, signing date. Yeah. That means, for example, the warehousing of the Uptown Tower we have signed, but it's not in our P&L now, only for a small number. At the end of the day, we have bought nearly EUR 1 billion since beginning of this year, and the results of this you will see mainly in the second half of the year. Yeah.
Okay. The fee is only lagging behind the AuM growth. In the second half, there should be a sharp increase in AuM and PM fees according to the AuM increase in the first half.
Yes, definitely. If the signing has been finished, it will take, at the moment, at least eight weeks normally, or 12 weeks to complete the transaction because the government authorities are a little bit, not so fast at the moment because of COVID mainly. It takes much longer until the P&L comes after signing. To clarify it, the Uptown Tower, for example, which means over EUR 500 million growth in AuM, you will see in the fee after we have transferred it to a new vehicle in the IBU. For the next three to six months, I expect it to be in the Commercial Portfolio rental income, and afterwards we will create fees out of this. It will not show a very much increased number out of this in 2021, mainly then in 2022.
Okay. For example, the Uptown Tower is in the AuM increase of the Institutional Business, but not in the fee income because it's still in the warehouse on the balance sheet.
Yeah. It's in the number for the warehouse AuM, but it will go into the IBU AuM, I expect.
Yeah.
In the fourth quarter mainly, the fees out of this come in the P&L in the line fees.
Okay, perfect. Just a couple of questions to the ESG-linked promissory note. You mentioned the presentation. How do you get on with the green building certifications of the Commercial Portfolio, and could you might shed some light on the balance between costs for these particular certifications and the interest cost savings out of it due to this ESG link?
As mentioned, it is a part of our strategy for purchasing and transactions to buy also so-called green buildings. Our transaction volume mainly for the Commercial Portfolio is split into three parts. One is U.S., one is green buildings, and the third part is logistics. We have the goal to increase our number of green buildings, besides ESG link or anything like this for the promissory note. It's indeed difficult to find green buildings on the market because they are not so often sold, because they are not existing so much.
I think it's important that we also buy green buildings on the one hand, and we create green buildings from our existing portfolios. These are our two major streams for getting the ESG roadmap done. For the promissory note, we only have the link to new bought buildings. We have to buy green buildings over the next three to five years, but we find them. We are the biggest investor, so to say, in the German market. If not, we find them, who should find them, yeah.
Okay. Thanks. Understood. Very helpful. That was from my side. Thank you very much.
Thank you.
Thank you. We will now take our next question from Stefan Scharff from SRC Research. Please go ahead.
Good morning, Sonja. Good morning, gentlemen. First, congrats for the very decent FFO picture, I guess. FFO II + 30%, almost EUR 70 million. That's not too bad, and shows that you do the right things at the right time. My question is about slide four. In slide four, you mentioned your high letting volume for the first half of the year with about more than 100,000 sq m, and you also managed to lift the average rent of the new contracts. Are there any significant investments in the properties in connection with the new contracts or prolongations? That's my first question.
Good morning, Stefan Scharff. Yeah. Thank you for your words, and thank you for the question. No, we don't see any additional incentives which we have to give. What we see is that there is interest in new lettings coming back. If you compare it to last year, we have increased our letting volume mainly by renewals, because last year everybody said, "I want to stay at home," so to say. What we now see is that the letting market is back. It is in a very special way, so you have to work much more with potential tenants on how should the space look like, what will the future bring, and so on. What we saw in the past is that some of the, for example, or especially big tenants have their own consultants who prepared all these things.
Now it's more on us to find ways and to discuss with potential tenants how the spaces have to look like, what the employees want, how will it look in two to three years. This means more work for us. Yeah. We have to have more ideas, and we have to work on it, but it does not mean more incentives.
Okay. On slide nine, you mentioned that there are some good market opportunities outside Germany, and you expect attractive opportunities also to arrive in the value add segment. Perhaps you can say here a little bit more which countries and which value add properties might be interesting.
Beginning with the countries, we have launched our logistics fund, what says that we also will invest outside of Germany, and this means, I think especially the Netherlands, because that's a very interesting market for us. Belgium, maybe Austria, the western part of Europe, I would say. This is especially for the first time for logistics, not offices.
Okay.
We see good opportunities there with interesting yields. We expect them to come over the next weeks or months to be seen. The value add asset class, yeah, we always invested in value add and a little bit opportunistic, but it was not possible over the last years because you were able to find value add properties or manage to core, how you call it, but not for value add prices. Yeah. Therefore, we didn't buy one. Now we see this coming back. We have also increased our knowledge in repositioning and in creating potential from value add assets. So we are looking on this in another way. Therefore, we have established a team here in our company, which found value add and which brings value add potential to the assets.
Yeah, therefore, we will drive this in the Institutional Business as well as in our Commercial Portfolio.
Okay. One add-on on the new logistics fund, which you fully placed in July with the target volume of EUR 400 million. Can you give us here a timeline for the investments to fill up this fund?
Yeah. Definitely. We have got the equity in four months. It was a very fast process, and we have also two assets brought into this fund because we had it in the warehousing. It was after the balance sheet date. It was closed yesterday, so the two properties are in the fund now. We still have a good pipeline for the logistic area, but you have to keep in mind that it's a special asset class. What does it mean? It means that you have to calculate that you don't find normally assets with a volume of EUR 100 million-EUR 150 million, but it's our smaller ones, EUR 20 million-EUR 40 million. We have to buy even more assets in this asset class.
At the end of the day, normally we have a closing for investments of 12-18 months for our funds, and I expect it to be within this timeline, yeah.
Okay, means more or less first half of next year is realistic.
Yes.
Okay. Thank you.
Thank you.
Thank you. We will now take our next question from Jochen Schmitt from Metzler. Please go ahead.
Thank you. Good morning. I have a follow-up question on the management and development fees on slide 12. Are the margins in your business excluding RLI virtually unchanged compared to the first half 2020? That's my question. Thank you.
Excuse me, I didn't get it. Could you please repeat it?
Yes, sure. It's a follow-up question on the management and development fees on slide 12 because I actually had also expected a more pronounced increase in the first half 2021 compared to the first half 2020 just with regard to management and development fees. My question here is, are the margins basically unchanged in your book or is there any pressure excluding RLI acquisition? That's my question. Thank you.
No, I understood it. Thanks. The margin is still unchanged, yeah. It's as usual, but we have still less development at the moment, so we have still less development fees. It's a little bit like a wave, yeah. The margin itself is unchanged.
Okay. Thank you. This also means that the increase in management fees was actually stronger than the figure of EUR 18.8 versus of EUR 18.1 for the first half, right?
Yes. That's right.
Thank you very much. Bye-bye.
Thanks. Bye.
Thank you. We will now take our next question from Manuel Martin from ODDO BHF. Please go ahead. The line is open.
Thank you very much. Sonja, I have two questions on the Institutional Business. As far as I could understand, DIC plans a significant expansion also with international investors. Could you give us maybe some more color on that? How you're going to do that? Are you going to open offices abroad or are you going to do that from Frankfurt? Maybe you can shed some light on that and which region you might maybe tackle first.
Good morning, Manuel. Yeah, thanks for the question. It's a very interesting one where we worked on for some months now. As you know, our USP is that we have our own people in our own offices all over Germany. When we start to invest in foreign countries, as said, for the first part, only for logistics in Benelux, especially Netherlands and Austria maybe, we will do this from our German offices. We have Cologne, we have Düsseldorf in place, we have Munich and Stuttgart. We can do this with our own people from our own offices in Germany. When we have more than one or two assets in a special region, for example, in Netherlands, we will do this with our own persons there. We will open an office if it is appropriate.
Until then, we will outsource the property management to some specialists in the country. As said, when we have the right number of assets in place, we will create our own offices and our own people because we think it makes sense if we have our own personnel there who work on the same payroll as we do for the assets and, yeah, bring the potential out of it as we do it in Germany.
Okay. When it comes to clients, that means clients who bring more equity to invest in the Institutional Business, are there any plans for an international expansion right now?
Yes, definitely. We have put a new managing director in the GEG, who only cares about international investors. He has a very long track record with international investors. We increased this investor basis. We have started this, especially the big investments are very interesting for international investors, not only by us, but also on other big investments. We think about the Asian ones, and we also think about the Nordics. There is a lot of institutional money from the pension funds and so on, and they are interested in German investments on the one hand, but also in German players who care about the assets so that they have all these real estate value increasing things in one hand. I think we can fit to this, and, therefore, we will increase the investor basis.
It takes a little time because they cannot travel at the moment, or most of them don't travel at the moment. We have to do a lot of things via Teams or Zoom. Traveling is coming back, and so we expect to increase the basis over the next 12 months dramatically.
Okay. Thank you.
Thank you.
Thank you. As a reminder, if you'd like to ask a question, please do so now by pressing star one. There are currently no questions in the queue at this time. I will turn the call back to your host.
Hi. It's Peer speaking. Thank you for joining us today. If you have any follow-up questions, please reach out to the Investor Relations team. Max and I are available the whole day. Thank you. Bye-bye.
Ladies and gentlemen, that will conclude today's conference. You may now all disconnect.