At this time, it's my pleasure to hand over to Kyrill Turchaninov, CFO. Please go ahead.
Hello, everybody. My name is Kyrill Turchaninov, and I'm the CFO of Deutsche Konsum REIT. Before we start to look at the pages and then go to questions and answers, I would like to introduce my colleague, Lars Wittan, who joined the company as the second member or another member of the management board in February. He will say a few words about himself. Lars?
Yes, thanks, Kyrill. Hello, everyone. My name is Lars Wittan, born in 1977. Before I started here in Deutsche Konsum, I was for 12 years at Deutsche Wohnen in several management positions, starting as CFO in 2011 and later on as CIO and CEO before I left Deutsche Wohnen in 2019. After that, I was responsible for roughly five years for the direct real estate book of Obotritia in Potsdam. With the beginning of February, the Supervisory Board appointed me as the follower of Alex Kroth. That is from my side, and I hand it over to Kyrill. Thanks a lot.
Great. Thank you, Lars. Now we will start the presentation, and we'll take a look at page 4, which summarizes the highlights of the first quarter of the financial year 2024/2025. In the first part, we will be looking at the high-level numbers compared to the prior quarter, the fourth quarter of the financial year that ended on 30/09/2024. Rental income decreased slightly. It was EUR 18.2 million in the last quarter of the prior financial year, and it is now EUR 17.7 million. We had some asset sales that we'll take a look at a bit later. Net rental income is slightly up, lower property costs. FFO is slightly increased and is undiluted at 13. In Q4, it was 11 per share, or in absolute numbers, it was EUR 3.9 million.
AFFO is driven or impacted by higher CapEx. The CapEx in the prior quarter was EUR 4.1 million. It is now about 2. The FFO in the prior quarter was negative. One of the highlights of the quarter is the reduction of debt by roughly EUR 57 million compared to the balance sheet until July 2024, which also comes from sales proceeds. In terms of the sales, we have had sales closed in the quarter, which was notarized at the end of May 2024, and we have received the purchase price of EUR 4.1 million. The additional properties, the four properties notarized in 2024, are not entirely closed. The purchase price for those four properties of EUR 10.9 million is not received completely.
We did receive two properties in January, and there is still EUR 7 million, and there is still EUR 3.9 million outstanding. We are considering further disposal of properties, select properties, which we communicated before that this is an option, that this is what we are actually looking at as well. Another major event in the quarter was the repayment of EUR 38 million of a loan from Obotritia. When we closed the prior financial year in the 30/09/2024 balance sheet, we already knew that this is going to be happening, or actually, before we finalized, it did happen in Q4. The loan balance at the end of the financial year was EUR 53.9 million, and we also reversed a bad debt provision of EUR 28.2 million, which obviously affected the results of the Q4 of the last financial year.
There is still outstanding about EUR 60 million of loan to Obotritia. Those are deferred until December 2025. As we consider this to be there is some uncertainty to this, especially that we have given up the security once we received the EUR 28 or EUR 38 million, that that outstanding receivable is fully provided for. Another significant event was the conversion of a convertible bond of EUR 20.4 million in December. Sort of looking a bit ahead, now in January this year, another EUR 9.6 million was converted. That certainly impacted our numbers, and that certainly had a significant impact on our loan-to-value. Loan-to-value is now at 54.7%, and that conversion was the main driver. We also made some repayments from the property sales proceeds.
The EPRA NTA, its fully diluted, is slightly higher than at September 2024 at EUR 7.6, and our average debt cost is around 3.95%. In terms of the guidance, since we are planning substantial refinancings as well as property sales, we will not be making our forecast in terms of FFO results. We will probably do this when we present the half-year result later in the year. However, our rental income is estimated to be between EUR 66 million and EUR 71 million. FFO is expected to decrease. We can now skip a few pages and take a look at page 7, which is the detail, or summary actually, of our property portfolio. We have 165 properties. Two assets were closed in the quarter, so we ended the year, the calendar year, with 165.
The purchase price for those assets was EUR 4.1 million, and of course, we did receive the cash. In addition to this, also sort of looking a bit ahead, in January of 2025, two additional properties were closed. They were almost fully let. However, we obviously received the cash, which we are going to be using to decrease our liabilities as well. Our total fair value compared to 30/09/2024 is roughly the same. There were movements up and down. However, we did acquire a leasehold property for EUR 2.35 million, which was closed and paid for in October 2024. Also, that number, total fair value, includes both IAS 40 and IFRS 5. Obviously, the assets held for investments as well as assets held for sale. The two properties which were closed had some impact on our vacancy rate.
Those were two properties as well, fully let, with a total of 2,600 sq m. Our in-place rent per sq m decreased slightly, and annualized portfolio rent also decreased slightly, which is quite expected because we are selling some select properties. Now, we will now skip and take a look at page 9, where we have some details in our tenant structure, which did not really change much since last presentation, which we did in December. Rents, as before, the majority are coming from food retail. It is EUR 25.7 million with an amount of around EUR 4.6 million. As I mentioned, annualized rent is at EUR 69 million.
It was €69.7 million in the prior quarter. 48% of our rental income is coming from leases which still have five or more years until either expiration or prolongation option. That is still a pretty good number, and we are happy with that. Now, we can skip forward and take a look at page 12, which outlines the valuation or potential valuation of the portfolio. We still believe that the value of the portfolio is not entirely reflected in the current share price. With €886.6 million and almost no change to the prior quarters, our hypothetical EPRA NTA per share is at €7.6. As I said, slightly higher than the €7.55 in the prior quarter. The current trading, which was, I think, yesterday or the day before, is at €3.71 per share. The assumptions here do include sales notarized but not yet closed.
Those are the sort of theoretical, hypothetical numbers. We can now take a look at page 14, which is details on our debt structure and financing. As I mentioned before, our total debt went down by 10.4%. We have a few numbers or a few items affecting that. Obviously, a conversion of a convertible bond in the amount of EUR 20.4 million was a significant event. At the end of December, two real estate-backed loans in the amount of EUR 7.2 million were due. We repaid those, and those unencumbered assets were placed for refinancing with other financial institutions. We also repaid a promissory note in the amount of EUR 10 million. We have repaid partially; obviously, those are partially repaid bonds in EUR 10 million. There were regular amortizations of EUR 4.8 million, and those are the events in the financing or actually debt repayment side of the quarter.
Total debt costs has a very minor technical movement on it. However, debt cost obviously remains a concern since, as you know, as we know, some of the bonds are going to, one is already has an increased interest rate, and another is going to have an increased interest rate starting March. Obviously, we are watching that very carefully and making sure that our debt coverage is okay. The loan-to-value, predominantly due to the conversion, decreased by 4.4%, and it is now below 55 at EUR 54.7 million, which is a good place to be. We expect that within the next three quarters to the end of the current financial year, the LTV will go down, will decrease, obviously depending on the refinancing and how property sales develop.
We do not expect it to go up since we are not doing any new borrowing that do not lead to debt repayment. Scope has reinstated our rating. The issue rating is at C, unsecured debt is at CC. We did not have that issue rating when we closed the financial year on September 30, 2024. What is important and significant is the chart on the left-hand bottom side where we split the liabilities, split our debt by year. Of course, 2025 is now, and it went down. In terms of the total volume of debt, it was EUR 252 million as of September 30. Due to all those repayments, which I mentioned, as well as the conversion of the convertible, it is now lower. Of course, it is still a challenging number. The breakdown here is that we have EUR 93.2 million, which is real estate-backed loans.
million is already partially repaid because that is happening now in January and February. We are talking to the banks, we are talking to the Sparkasse. We are extending in some cases. We are discussing the topping up or refinancing with a higher loan amount, and we are planning to use those top-up additional funds to repay other liabilities. There are still, of course, two registered bonds. One is EUR 40 million, another is EUR 45.9 million, which are due in October, actually end of September 2025. There are convertible bonds. In terms of the convertible, the EUR 9.6 million, which is also listed here as part of the convertible bonds, has already been converted in January. That had a positive impact or will have a positive impact on our second quarter financial result. The EUR 7 million convertible is expected to be converted in the near term.
There is another EUR 10 million convertible, which is due in October this year, which we also expect to be converted. True, the situation is, the volume is significant. We are in discussion with the banks. We are talking to creditors. They are constructive. There is progress. Things are going in the right direction, and that is what we are planning for this financial year. With that, I would like to end the presentation part and open the floor for questions, please.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Tobias Rosa, Gator Trading Investment. Please go ahead.
Hello. First of all, warm welcome to Mr. Wittan and Mr. Turchaninov. I'm really happy you joined. I have a question for both of you. First, Mr. Turchaninov, as the financing side is obviously the more urgent one, as you have already discussed, I'd like to start there. You said everything is on its way, and I mean, I hope it's going fine. First question would be, where do you see the refinancing costs? What kind of rate are you getting for like five or ten years? How difficult is it?
The problem is that your predecessor basically promised us always everything is going to plan as well, and then nothing went to plan, and that's why he basically had to issue those Namensschuldverschreibungen with these exorbitant rates. If you see problems, would you basically, I mean, you have to do it now if you want to, would you discuss or consider a capital raise, which you would need approval for, I guess, or I hope by the shareholder meeting in April, which you would have to plan by now? Let's start there.
Right. There was a start here, but to answer this, as we said, it's a question. Certainly, the volume is substantial. To start with the last part, we haven't yet discussed the issue of additional shares to increase the capital. We are discussing that a large number of shares can be maintained the way it is now. I think we have that in the bylaws. In terms of financing and in terms of talking to the banks, we are always, and we have been talking to the banks because the real estate backed loans, which are become due and payable, is one thing. Obviously, we would like to refinance and top those up. In February, as I mentioned, we have been successful. There are extensions, there are prolongations, and there is one top-up.
Now, the loans which have not a maturity, but which have an ending of the fixed interest rate period, and they continue, unless canceled, and so far we do not have indications that they are canceled, they will continue with new terms. The new terms are varied. As we are also looking at select asset sales, the short-term goal is to have perhaps variable financing so that we have time to analyze the exact volume of sales so that we do not have breakage costs if we enter into a fixed-term, five-year-term loan, and six months later we sell the assets, and that would not make much sense. In terms of the usage of sales and refinancing proceeds, it is certainly the expensive Namensschuldverschreibungen, the expensive loans that we have that were restructured in June last year.
We are in discussions with the lenders in terms of the %. However, discussions are ongoing with various lenders. I will not be able to give you any details on that. As I mentioned, yes, it is a challenging situation. There is no hiding that we have a plan. We have a plan on how to overcome those challenges. The important thing is that we show the stable operational performance, and the company is not overdebted. We have over EUR 300 million in equity. The portfolio itself is doing more or less okay. Sure, we would like to have less vacancy, but we are working on lease-up. We are working with our tenants to increase the WALT. All of those things are in progress. Again, the situation is challenging because we all know that the volume of the financing is substantial.
Of course, the increasing interest rate is something which we are watching very carefully. True, we're not getting any more 1.6% or 1.7% interest loans. We are looking at 4-5% plus on the discussions we're having today. I hope that answers your question.
Yes, very interesting. On the operational side, I have a question to Mr. Wittan. As you know, by now, the operational performance of Deutsche Konsum has been, let's say, suboptimal. Rents hardly rose, especially indexed against inflation, and the vacancy rate is skyrocketing despite substantial investments in the last couple of years. With property management in-house, do you already have an idea if it will be possible to increase rents substantially looking forward, or do you have any view on the future vacancy rate? How promising would it be, or how much do you think can you bring it down?
I'm sorry, just a correction. You said with the property management in-house, the property management is not yet in-house.
I thought you are starting a project and you want to take it in-house, which I think could be a good idea because obviously the external property management wasn't really that successful.
Of course. Yes, I'm sorry. It's planned. The process is in the works. We're working closely. In terms of now, just to make sure that we don't have any misunderstanding in the facts, it is going to be we are planning to insource it. As of now, it is not yet insourced.
To answer your question, honestly, as you know, I'm for two weeks in a company, and the first week, holidays in Berlin-Brandenburg. I have some intensive discussions with our asset and property manager. From my perspective, we have some chances to increase rents, clearly. We have to work also on the vacancy rates, which seems very high. On the other side, what I have seen is that some of the properties had this high vacancy rates also at the time of the as they were bought by the company, which is then also reflected in the pricing. You are right.
We have to work on that, and we need a plan, what we can do. Perhaps there are some weaker assets we have to decide. Could we do something with investments or not? If not, can we then perhaps, or do we have then the chance to sell this or whatever? That is something what we have in our mind for the next couple of weeks.
Okay. One last question, Mr. Turchaninov. The former CFO issued a convertible bond to a member of the board at basically totally wrong conditions. As he apparently, I mean, at least that was my understanding at the shareholder meeting, was not totally understanding what a convertible bond is or something. What are your plans to potentially recoup the loss to Deutsche Konsum and its shareholders? Have you, for example, already contacted the insurance of your former CFO yet?
Let me put it this way. I do not see it as my job to take any action against my predecessor. In terms of the convertible bond, perhaps you're referring to the convertible bond issued in April 2024, which is I have been in contact with the bondholders in terms of their plans for converting this bond. Those discussions are ongoing because obviously, if it is converted, we will not have the interest expense. I cannot possibly comment on the prior CFO. I do not think it will be appropriate.
I mean, but someone in the company has to take actions, right? I mean, the CFO said in a conference call that he sees the interest rate at, let's say, 6%, and then he turned around and issued a bond at 12%, plus he gave a free option as well. Something is not really adding up here. I mean, let's say it's incompetence, and if it was, then there must be a way to recoup the huge loss to the company. You are the CFO. I mean, if you say it's not your cup of tea, then you should know who actually has to take care of it. You should be able to forward it to the, I don't know, yeah, I don't know who in the company should take a look at it. Obviously, something went really wrong here.
I will take your question or your comments or your concern, and we'll chat.
Okay. Those were my questions. Thanks a lot for your interesting answers.
Sure.
As a reminder, if you wish to register for a question, please press star and one on your telephone. We now have a question from the line of Kai Klose from Berenberg. Please go ahead.
Yes, good morning, gentlemen. I've got three questions for me. The first one, could you indicate about potential disposals, not the volume, of course, but how many assets are potentially for sale, or are there any assets which, because of collateral reasons, you're not able to sell even if you wanted to? Second question is, as I mentioned, this project of internalizing functions for asset and property management, how would the items in the income statement change regarding what kind of cost savings you expect on the operating expenses and, in return, higher admin costs? The third question is on the lease expiry in this year. Could you indicate how much do you intend or you need to spend for CapEx or give incentives to keep the tenants on board? Thank you. Right.
I guess there are actually three questions. Now, in terms of the insourcing, let's start with that. We have a service provider who provides asset management, property management costs, property management services, of course. Now, the asset management and property management is planned to be completely insourced in-house. That will obviously result that we will have an increased payroll because there will be a number of people that number I cannot possibly comment on that we will bring in-house. They will become employees of Deutsche Konsum REIT, and we will not be paying any asset or property management fees anymore. In terms of the P&L, we will have personnel costs, and we will have software licensing costs because we are in discussions with the software provider for the property asset management software that we will obviously license in our name, and then it will be used.
That is what we're planning to do in terms of asset management and property management. In terms of asset sales, now, it is a select asset sales plan. It is not that we sort of mechanically divide the portfolio into three parts and we sell that. It is a carefully select properties. Some are single asset sales, which I already mentioned in the beginning of our presentation. We are looking at some smaller portfolio group of sales, a group of assets, in the 5-10 number range. It is not a fire sale for sure. In terms of restrictions, that depends in the sense there are assets for which we might receive a substantial price, and they are financed with fixed-term loans. Depending on the rate and depending on conditions, there might be some breakage costs.
However, in the cases which we are looking at right now, those are not exorbitant costs. Those are manageable costs. In terms of the volume, I cannot comment on that right now since discussions are ongoing. I'm terribly sorry. You had three questions, and I just answered two. What was the other one?
The third question was on the lease expiry scheduled since this year. How much do you expect to spend for CapEx and/or to give potential incentives, discounts to tenants to facilitate that they stay in the building?
Understood. So far, our budget for, actually, I made it for the calendar year, but fine. It is slightly more than EUR 5 million, which is probably a somewhat lower number. There are plans for specific assets. There are some substantial revitalization projects which are going to indeed result in value increase for those assets because new additional space becomes lettable, which was not lettable before. Those are investments which will indeed bring us tenants, bring improvements in the rental income, and they require investment. In terms of the budget, it is EUR 5.2 million, which is somewhat of a low number. I expect that this might be somewhat higher.
Thank you very much.
Sure.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kyrill Turchaninov for any closing remarks.
Thank you. That pretty much concludes our presentations or presentation of the financial results of the first quarter of the financial year 2024/2025. Thank you very much, everybody, for your time and attention and interest during this call.