Good day, and welcome to DEMIRE AG Full Year Results 2021 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ingo Hartlief, CEO, DEMIRE. Please go ahead, sir.
Ladies and gentlemen, good morning, everybody, and welcome to our results presentation for the fiscal year 2021. Thank you again for dialing in. I trust you are all well and healthy. With me here is Tim Brückner, DEMIRE CFO, and Michael Tegeder, our Head of Investor Relations. I'm sure you have had the chance to look at our results already, which are very strong and highly satisfying. Let me start with three topics that might be as interesting as our numbers or even a bit more. The strategic review of our major shareholders. We have released on November 15th, that our major shareholders have initiated a strategic review of their stake in DEMIRE.
As it is their process, we can neither comment on the status of the review nor speculate about the outcome, the timeline, or potential consequences for DEMIRE. We understand that a further release will be published as early as there is any result of this review. Please understand that we have to await this release for further statement on this process. Second, Corona and the impact of DEMIRE. Corona is still not over and still impacting our lives, but we get more and more used to it while we see some approaches towards a release of certain restrictions. In line with that, the impact of our business diminishes as well, and we have decided not to classify any effects like outstanding rents as Corona or non-Corona specific anymore. Hence, we do not report Corona effects specifically anymore.
When a tenant is not paying his rent, we speak to him and find a solution independent from what the reason is. Third thing is the war in Ukraine and the impact on DEMIRE. The situation in the Ukraine is appalling to all of us, and we feel and pray with the people in the Ukraine. On the business of DEMIRE, we can say that the impact is very limited as of today. We obviously have neither operations in Ukraine nor in Russia or in Belarus. From our analysis, none of our tenants is directly linked to any of these countries or directly affected by sanctions. Nevertheless, and most important, we hope that the war in Ukraine will be ended very soon and a peaceful solution will be found.
Now, after the most important point, we are made and ready. Let me jump into what has happened in 2021 at DEMIRE. As stated initially, the results are strong, which is not surprising as we just increased our FFO guidance in November. Going on slide number four. You surely remember that we have defined the REALize Potential strategy back in early 2019 when Tim and I came into office. Our main goals were, and still are, portfolio optimization, financial strength, operational excellence, and increased profitability. This has helped to improve the overall performance of the company and made DEMIRE more resilient. Our REALize Potential strategy consists of four pillars: asset management, acquisitions, financials, and processes, which all have significantly supported us since Corona came over us and contributed to our strong performance in 2021.
Let's hope that we will not have to get back to any pandemic-caused measures at all, but the results and the outcome of the REALize Potential encourage us to keep going on this way. Now, this is the individual contribution of each of our four pillars of our strategy in 21. Let's start with asset management. In 2021, we achieved a record letting result. Again, I must say. More than 182,000 sq m were let, which is more than last year's record level of 177,000 sq m. Almost 46% of that are new rental contracts, and about 54% are prolongations of existing contracts. Some of the new contracts kicked later this year, and we lost two big tenants in Essen and Kassel back in 2021.
The vacancy amounts to 11%. The WALT has almost been stable at 4.7 years, and both rental income and annualized rent decreased as expected due to the numerous disposals we executed in 2020 and 2021. Acquisition and portfolio dynamization, the second point. Firstly, and most importantly, we were able to close the acquisition of CIELO at the beginning of July. This deal has a certain level of complexity and will be consolidated at Essen. Hence, the effect will not be included in rental income, but in interest and investment income. So it is not included in most of our portfolio KPI, but will contribute to our FFO significantly with about more than EUR 5 million per year, EUR 3 million in the last year.
In order to increase flexibility and efficiency of our portfolio, we disposed 11 non-strategic assets, gaining proceeds that exceeded the last market value by about 5%, underlining the effort of our active asset management. The average asset size, another KPI that does not include CIELO, increased to to EUR 22.1 billion at the end of 2021. We are coming from EUR 19.2 billion at the end of 2020. Financials, the third pillar. The financials underline again the execution of our strategy and prove that the REALize Potential strategy is successful. While the rental income decreased due to the disposals of the assets, EBT was positive, affected by smooth operations and the valuation result. It increased to almost EUR 102 million, after about EUR 28 million for 2020.
Even without the effect from the valuation, we were able to improve our results. With contributions from lower admin expenses and lower impairment of receivables, hence the FFO increased again to almost EUR 14 million. Tim will give you the details in just a minute. Processes, the fourth pillar. Transferring from financials to processes, I would like to stress that we have achieved about EUR 2 million of cost savings from various little, and of course, big measures due to the implementation of our REALize Potential strategy. Recently, we have streamlined processes at our subsidiary, Fair Value REIT, and included them into the DEMIRE property and asset management processes and hierarchies to act faster and better on an improved cost basis.
Besides financial success, we focus on our social and environmental responsibility as well. We have introduced and implemented the newly defined EPRA KPI that has been recognized with this EPRA Gold Award and a special award for the most improved. Furthermore, we are on track to define the ESG strategy and prepare our first sustainability report. We look forward with confidence and optimism. We have achieved our target in 2021 and guide to reach EUR 78 million-EUR 80 million in rental income. The decrease to last year is obvious due to the disposals. For the FFO, we aim to come out between EUR 38.5 million and EUR 40.5 million, not so far away from last year, which underlines our structural efficiency.
Let's have a more detailed look at our KPIs and follow me on page six. The letting results speak for itself. On a very strong basis, we were able to top last year's record level. Some of the contracts we signed over the course of 2021 will start later this year, like the Amazon contract, where the distribution hub is currently under construction. This result underlines our strong asset management performance and makes us confident for the future and looking at the increased vacancy rate. 2021 letting activity secured about EUR 14.6 million annual rental income, and the standalone WALT of about 6.4 years.
On the right, you see that this result was not boosted by one or two big contracts, but a solid basis of plenty contracts on different tenants, assets, and locations. The next slide about the valuation result is as well a result of the strong asset management performance. Of course, we have seen yield compression, especially in logistics and benefited from that. But obviously, the strong asset management performance helped to gain this valuation result. The disposals of non-strategic assets, in total about EUR 100 million, resulted in an increased average asset size to about EUR 22.1 million, while our portfolio value remains stable at EUR 1.4 billion. On the right, you see the effect on the disposals a little bit clearer.
The annualized contractual rent amounted to EUR 78.1 million due to disposals and due to temporary vacancy. As the latter can and will be influenced by us, we are optimistic to see improving numbers here over the course of 2022. Please note that all the numbers on this slide do not include CIELO. Data vacancy increased to 11%, but not as a surprise, up from a strong 6.9% at year-end 2020. Some of the contracts I just mentioned will become effective later this year. In case of Amazon, for example, the spike is mainly caused by two big vacancies in Essen and in Kassel. For Kassel, we are able to close the contract for a new hotel operator in some weeks. For Essen assets, we are generally optimistic.
Please also note that in line with the EPRA definition, we have not just excluded assets held for sale from the vacancy calculation, but also assets in development phase and hence not lettable. In line with the already reported strong asset management performance, the WALT remained almost stable at 4.7 years from 4.8 years one year ago. The natural WALT reduction was compensated by a long-term rental contract with a new hotel operator in Dresden. Tim, now please go along with details about the financial performance.
Thank you, Ingo. As you have already seen, we had another good year with record results. Let's have a look on the P&L for some more details. As you see on the right-hand side, first, we have slightly lower NOI, but if you look in-depth into the numbers, you see that we have increased our margins by 1.5 basis points, which we believe demonstrates our capability to work on our portfolio efficiently. We have a substantial valuation result, mainly driven by our logistics property in Leipzig and fueled by the new Amazon contract, but also fueled by a general after-COVID recovery. You see some positive effects from disposal. You see those numbers are maybe a bit lower than you expected, as they are partially mitigated by reserves on fair value risk levels that we use for future CapEx requirements.
We have way lower COVID-related impairments, and when we look forward into 2022, we expect that position to become smaller again. What Ingo also mentioned just before, we have record low GS&A position at EUR 11.2 million, despite the inflationary environment, representing a GS&A ratio of just 13.6% of rent. This is now, after years, well in line with our peers. Coming to the scale of transaction again, we see some positive effects from CIELO on the finance income, and generally, we see full year effects of refinancing and lower costs despite the increased debt volume. This all results in a very good EBT of EUR 87.8 million before minorities and the record funds from operations of EUR 39.8 million. Next slide, please. After looking at our P&L, let's now look at our balance sheet.
After 11 disposals, our investment property value is slightly up, driven by investment into the existing portfolio and, again, revaluation. All transactions signed in 2021 could be closed in 2021, but there are no assets held for sale on our balance sheet at year-end. The lending and financial assets increased substantially, fully connected to loans granted as part of the seller transaction, now delivering financial income for the coming years. Now on number four, you see a strong operating cash generation, disposals and new borrowings overcompensates the dividend payment and seller-connected loans, resulting in a substantial cash position of EUR 140 million at year-end. Finally, two additional mortgage loans increased financial debt position and helped to reduce average nominal interest expense.
Overall, our balance sheet expanded by roughly EUR 80 million to EUR 1.7 billion, with a stable equity position of close to EUR 600 million, demonstrating the ability of the group to grow profitably also in 2021. Next slide, please. Two words on relevant financing metrics and our communicated LTV strategy. At the end of last year, you could see that the CIELO transaction had a negative effect, also together with the dividend on our LTV, which was above our communicated target level. Driven by the strength of our balance sheets, you can now see that our LTV is back on target levels, now at 49%- 49.10% according to our own definition. Another great achievement in the current environment is the average cost of debt. We reduced that on a nominal basis to 1.66%.
Those two metrics demonstrate that we are completely on track and had another good year with record figures, demonstrating that we generate value with our REALize Potential strategy from all areas of our business. Back to you, Ingo.
Thank you, Tim. After all, and to conclude, we delivered very satisfying results driven by a strong and motivated team and smooth running organization. Internally, we remain focused on our costs and sticking to our REALize Potential strategy. With the tailwind of the positive scale impact, improved financial results, and the strong asset management setup, we are optimistic for 2022 and the near future. In numbers for the fiscal year 2022, we guide rental income of EUR 78 million-EUR 80 million including the disposals over the course of last year, and we plan to generate FFO of EUR 38.5 million-EUR 40.5 million. Thank you very much for listening. We are now happy to answer questions you may have.
Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one. We will now take our first question from Philipp Hässler from Pareto. Please go ahead.
Yes. Good morning, Philipp Hässler from Pareto. I have three questions. Please, firstly, could you perhaps explain again why you decided not to pay any dividend for 2021? Financially, I think you would have been easily able to afford a small dividend. Secondly, on the outlook for the current year, the FFO target range looks a little bit disappointing or cautious to me. The lower end would mean a decline year -on -year. Maybe you could explain why you are so cautious. Last but not least, I know that you are probably not the right ones to ask, but nevertheless, I'll try. Is there any progress on your major shareholders' intention to sell their stakes? Could you comment on this, please? Thank you.
Okay. Thank you, Philipp. It's Tim. Maybe first on your question regarding the dividends. I mean, as you saw in our result of DEMIRE AG, there is a potential for dividend, but as you could see from our ad hoc release yesterday, we decided for various reasons at this stage not to propose the dividend to the upcoming AGM, which is not set yet. I can maybe only repeat the reasons provided yesterday. It's the overall economic environment that gives some uncertainty and the other reason that as part of the strategic review, you can imagine that there is the potential for refinancing and the availability of cash on the company's balance sheet is certainly helpful for refinancing given the current environment.
Maybe the second question, let's just say, cautious target range, revenue-wise or rental income-wise, it's really a result of the disposal strategy that we had to sell smaller and non-strategic assets. We expect some lower rental income for the next year driven by the disposals concluded this last year. We see some positive effects, obviously, from the CIELO transaction, which helps us to have at the same time, as it's all stable or in a good case, even slightly above the 2021 ratio.
You have to have in mind that we are in this strategic review process, and you have to have in mind that we are in a high inflation environment, interest rates are going up. We think the FFO guide is not too cautious. It's from our point of view, just realistic at this stage. Ingo, do you want to speak about the process?
I take the third question, but the answer was given in the presentation already. Again, unfortunately, we are currently unable to comment on the process. The process is ongoing, and we appreciate the demand for our company. This should be enough for the moment.
Okay. Understand. Maybe just one follow-up question regarding the current year. You don't or we can't, we shouldn't expect any acquisitions from your side this year?
We plan with an acquisition this year, in the second half of the year.
Okay. Thank you.
As a reminder to ask a telephone question, please signal by pressing star one on your telephone keypad. We will now take our next question from Philipp Sennewald from Hauck Aufhäuser Investment Banking. Please go ahead.
Yeah, thanks, guys. First of all, for the nice presentation and congratulations to the strong result for the last year. What catches my eye is the vacancy rate. You also gave the reasons for the increase, as I guess, [Systems Group] moved out of the Essen property. Taking into account all your lettings that will come into effect in the course of the year, can you guide for a vacancy level which we can expect at year-end 2022?
Thank you for the questions. I think as you understood really correctly, Essen is a big impact, also Kassel and Cologne, which are the biggest impact in the last year. We are on a good track in Kassel asset. We are in contract negotiations with a very powerful hotel operator, and it's close to closing. Essen, we are in a public tender process for letting, maybe with some luck, of the whole property. This will lead to an absolute lower vacancy rate. Our target for the end of the year is approximately to be under 10%.
All right. Got you. Single digits again. Maybe one follow-up regarding acquisitions. You said before, in a question before that you plan to have an acquisition in H2. Can you give us some more color on the size of this acquisition? You promoted your cash position as quite comfortable at EUR 140 million. Can we expect a large acquisition there, going into the direction of triple-digit million? Or are you not able to say something on that as of now?
At the moment, we don't have more details on that. There is not a specific property in mind. We look in our acquisition pipeline, and it's filled, but there is no target so close that we are in negotiation so far.
All right, thank you. Fair enough.
To give a little bit more color, we plan a dummy acquisition in the last quarter of EUR 80 million, and I think this is absolutely reachable when I look at our pipeline.
All right, thank you. That's helpful.
As a final reminder, please press star one to ask a telephone question. We'll pause for just a moment to allow everyone an opportunity to signal. We will now take our next question from Oliver Isaac from Credit Suisse. Please go ahead.
Hi, good morning, guys. Thank you for the presentation and taking my question. Just one for me, please, on the strategic review timeline. I appreciate you cannot comment on what the conversations are behind the scenes, but on the timeline, right, like, are you able to give us a sense of when we will hear a decision? Because ultimately, as investors right now and stakeholders, there's a lot of uncertainty right now, and I imagine operationally the uncertainty in terms of ownership is presumably causing some delays in terms of CapEx decisions, investment decisions. Presumably there's incentive from all parties to come to a decision as soon as possible. With respect to that, are you able to give us some kind of hard deadline for when this process where we will have an answer for, please? Thank you very much.
Yeah, we would be delighted to give you a precise answer on the deadline, but it's actually really impossible. I mean, as you know, M&A processes tend to take between three to six months. We are right in the middle, and we are confident that we conclude the process in a, well, usual timeframe, but we are, at this stage, not able to provide any more guidance on that.
Okay, got it. Thank you.
There appears to be no further questions. I would like to turn the conference back to Mr. Hartlief for any additional or closing remarks.
Yeah. Closing remarks. Thank you again for dialing in, listening, and your interest, and stay healthy. Take care and bye.
This concludes today's call. Thank you for your participation. You may now disconnect.