Ladies and gentlemen, very good morning to everybody and warm welcome to our Results Presentation for the Fiscal Year 2022. My name is Alexander Götz. I'm since January 1st this year, the new CEO. In the past, I was Chairman of the Supervisory Board and I returned to the operations business at the beginning of this year. Thank you for dialing in. I hope that you are all well. With me here is Tim Brückner. You know him, the DEMIRE CFO, and Julius Stinauer, our Head of Investor Relations. I'm sure, and I hope so, that you had a chance to look at our results, which are very strong operationally and show a record rental income on FFO I for the past year.
Let me jump right into what has happened in 2022 at DEMIRE and flip to page 4 of our presentation, which I hope that you can see it. You will surely remember that we defined and implemented some years ago the REALIZE POTENTIAL strategy. The main goals of the strategy were portfolio optimization, financial strength, operational excellence, and increased profitability. We have already come a long way in the process of implementing our strategy, and as you can see from the figures of 2022, helped to improve the overall performance of the company and made DEMIRE more resilient even before the pandemic and economic headwinds of the start of the war in Ukraine and some other disruptions we can at present see in the world.
Our REALIZE POTENTIAL strategy consists of 4 pillars. One is the asset management or strong asset management, focusing on assets, transactions, financial, and processes. They all together contributed here to our very strong performance in 2022. The revised and outcome REALIZE POTENTIAL encourage us to continue this success story in 2023 and beyond. Let me now briefly highlight the individual contribution of each of these four pillars of our strategy in 2022. Asset management. Asset management in 2022 was really great, I must say. We once again achieved a record letting regard. More than 287,000 sq m were let, which is more than last year's record, 483 ,000 sq m.
That is a more important figure. Roughly 32% of that are new rental contracts and about 68% are prolongations. This in a market situation, which was already last year, not very easy. Our extraordinary letting results are also reflected in the 8% vacancy rate. It declined from 11% to 9.5%. The mean time over the award increased slightly to 4.8 years, and our like-for-like rent growth keeps a very strong 10.2%. Consequently, the annualized contractual rents increased substantially to EUR 85.1 million, and that's really great. Our excellent operational performance, however, and this is what we have to add, of course, not fully balanced the market as yield expansions.
Hence the market value of our portfolio slightly decreased by 4.7% following disposed revaluations results at year-end. This reflects, of course, a different market situation or the rate of the interest rates, as we can see from nearly all real estate companies. Second pillar, the transactions or the portfolio, it's better said, portfolio dynamization. We continue to optimize our portfolio by disposing small and non-strategic assets over the year. As part of this process, we have also sold our logistic asset, LogPark in Leipzig, at the end of 2022. LogPark has been successfully repositioned with long-term leaders with Momox and Amazon, and this is part of our strategy too.
We felt that our job is done, and as we announced last summer, we aim at creating a liquidity cushion for refinancing purposes. In this regard, we achieved important milestones and generated proceeds from disposals of more than EUR 132 million in 2022. Financials. Tim will explain a little bit more in detail. Again, they underline the execution of the strategy. While the profit from rental of real estate was moderately lower at EUR 62.3 million, mainly due to the reduced asset base. Our key performance indicator, the funds from operation or you know it, FFO, improved by 4.88% to EUR 41.9 million. This is a new record high for DEMIRE.
Following the dividend payout last year and the reduced portfolio value, DEMIRE's net LTV increased to 54%. However, very important, after collecting disposal proceeds, it will drop to below 50% again this year. Please keep in mind. Average cost of debt remain low at roughly 1.7%. Tim will also give you some more details on these financials in a minute. Processes. Transferring from financials to processes, we see another reduction GMA of almost 5% compared to last year due to the ongoing implementation of our REALIZE POTENTIAL strategy. We strive for transparency. Our financial reporting has again been recognized with the EPRA Gold Award for implementing the EPRA best practice recommendations.
We published our first sustainability report, which EPRA recognized with the Silver Award and the Most Improved Award. We are keen to improve here our reporting even further, I hope we can use it more in the course of this year in this respect. You know, ESG is really a big, very important issue for all companies and as well as here for DEMIRE. Coming to last year's guidance, we can proudly say promise is over-delivered. We have exceeded our targets for 2022 with a rental income of more than EUR 81 million, while we only guide up to EUR 80 million.
As for the FFO, we also outperformed our guidance by more than EUR 1 million and came out at EUR 41.8 million. Now let's have a more detailed look at our KPIs and follow me here on page 6. The letting result once again speaks for itself. Coming from a very strong basis, we were able to record level of 2021 to top this level by more than 100,000 sq m on nearly 1/3 of our letting space. Highlights here were certainly, most of you have, I think, seen it from the press release, certainly the new rental contract with the state of North Rhine-Westphalia in Essen and the prolongation of IMOTEX in Neuss and the new contract with Premier Inn in Kassel.
These contracts here underline our strong asset management performance, we think that we will continue it successfully in the future too. The 2022 letting activities secured about EUR 24.3 million annual rental income and a standalone WALT of about 7.5 years. On the right side of the slide you'll see that our ongoing strong letting performance reflects well in our annualized contractual rent. The uplift of EUR 7 million, mainly done by Amazon in Leipzig and the indications like for like rental growth was strong 10.2% in 2022.
If you look on slide, page 7, you'll see on the right side the EPRA vacancy, which decreased to 9.5%, driven by our strong letting performance, particularly again, in Leipzig, Kassel and Berlin. If we include the joint ventures, yellow, you remember, in our vacancy rate, it will show even lower at around about 8%. In line with the already reported asset management performance, the WALT increased slightly to 4.8 years from 4.7 years one year ago. This natural WALT reduction was complemented our excellent leasing performance. Now let's have a look on the financials more in detail. Tim, I would like to ask to continue now with the next slide.
Thank you, Alex. Welcome also from my side. As you have already heard from Alex, we had an operationally very strong year. This is very much the result of a great team effort. Thank you everyone in the team who enabled this. I think the results speak for themselves. Let's have a look at the P&L on the next slide. As Alex already said, the P&L is heavily impacted by higher energy costs and fair value adjustments. Cost discipline helped to increase FFO to a historical high. Drilling down the P&L, starting from rental income. Despite the smaller portfolio, rental income remains almost stable due to strong letting performance and positive impact of indexation.
NOI and NOI margins are negatively affected, not only by significantly higher energy costs, but also by higher maintenance spend into our portfolio, partially connected to ESG investment. Looking further down to fair value adjustments. For clarity purposes, we have separated fair value adjustments in our investment properties portfolio at -4.7%, which I think is in line with the market, and I think it reflects fairly the market conditions at this stage. The next two lines, fair value adjustments in assets held for sale and profit loss from the sale of real estate, are mostly connected to the already announced disposal of LogPark that we successfully concluded at the end of last year.
Proceeds from the transactions are to be expected in about mid this year. Impairment of receivables down from -EUR 3.5 million to -EUR 1.5 million, which again reflects very much the operational performance of our asset management team and the strong tenant base we have. Other operating ex-expenses, negative at -EUR 16 million. Last one-off in 2022 reflects the final depreciation of goodwill related to Fair Value REITs and tenant improvements that have been activated in the past at Fair Value REIT level. Looking forward, this one-off depreciation will push the Fair Value REIT P&L slightly upwards as there is no further depreciation to be expected from tenant improvements in the P&L of our subsidiary.
G&A expenses down from EUR 11.2 million to EUR 10.7 million, despite the inflationary environment very much connected to cost discipline when spending, especially external costs. In total, EBIT is down from EUR 102 million to - EUR 73 million. As you can imagine, very much driven by fair value adjustments in our portfolio. Looking at the financial income and expenses section, financial expenses roughly stable. A slight increase connected to costs associated with our bond repurchase conducted at the end of last year. Financial income, huge increase due to the positive impact of the EUR 50 million nominal bond buyback as before conducted in Q4 last year.
After the relevant FFO adjustments, and Alex talked about that already, FFO I after taxes and before minorities at a historical high of EUR 41.8 million, exceeding our guidance slightly. Let's have a look at the balance sheet. It's not much of a surprise here. The revaluation has a negative impact on the total assets, total liabilities amount, and also on equity capital. Going down through the numbers, investment properties down from EUR 1.4 billion to EUR 1.2 billion, partially because assets have been transferred from investment properties to assets held for sale. The EUR 121 million is fully reflecting the asset LogPark which has been signed but not yet closed.
Cash and cash equivalents down from previous year, EUR 140 million to close to EUR 60 million at year end 2022, connected to the dividend payout and the bond repurchase. Total assets reduced from EUR 1.7 billion to EUR 1.5 billion. I think one other item is quite important. The long term financial liabilities decreased from roughly EUR 900 million to EUR 840 million, reflecting some regular amortization of existing loans and the bond repurchase, helping us in our refinancing efforts. Let's have a look at two other parameters. The Net LTV on the next slide. As we have already seen, the LTV increased slightly from 49.7% to 54%.
On a pro forma basis, meaning after the sales proceeds of Ludwigsburg and LogPark are received, the LTV will go down again to below 50%. As you could already read in our press release, we expect to lower the LTV to below 45% at year end, 2023. Average cost of debt remained stable. As you all know, there are no final relevant maturities of debt instruments until mid and the bond end of next year, 2024. With that, back to you, Alex.
Yes, thank you, Tim. After all and to conclude, I think we delivered impressive results driven by a strong motivated team. All my thanks from me too. To them, this is absolutely great what I have here found here in the company. Remain of course focused on our long-term goals of the REALIZE POTENTIAL strategy, which proved to be very successful. We are very confident that we will achieve our short-term goals as just as well. We will focus all our efforts not only on our asset management, but in addition this year on all options of early financing, as all companies at present have to do here in this present market situation.
We already executed, and the expected property exposed in line with our strategy. You see the sale of Ludwigsburg and the sale in particular of LogPark Leipzig. If we go on a little bit with disposals in particular, such assets where we think that our job has been done, this will result assumed reduction of rental income next year or this year by roughly EUR 10 million compared to 2022. The FFO I will also reduce by roughly EUR 10 million in this year. Again, against the background of intended sale of, yeah, as you say, assets where we think that they are now ripe for sale.
As regards to fiscal year 2023, we guide rental income of EUR 71 million-EUR 73 million, and we plan to generate an FFO I of EUR 30 million-EUR 32 million. Thank you very much for listening. This was a very brief summary of what has happened last year. We are now happy to answer questions you may have.
Ladies and gentlemen, if you'd like to raise a question now, please press nine and star on your telephone keypad. In case that you'd like to withdraw your question, please press nine and star again. The first one comes from Andre Remke. Your line is open now.
Yeah, good morning, sirs. Thank you very much for the presentation. A couple of questions from my side, please. First on your guidance. What kind of disposal volume is the base for your rental income guidance, i.e., in addition to the announced LogPark disposals, get it right at mid of the year? The first question, please.
At present it is difficult to say what the exact volume will be. It depends on the market situation. We are observing the market, we are observing the offers we have got. It's more at present a rough estimate. It will highly depend on which sort of assets we will sell. It will depend, of course, on the price we will get. Of course, we hope that we get something above market price, this will depend again on the market situation.
Probably other way around, what would be the rental income level, if there are no further disposals rather than already agreed disposals? To get a feeling from that, how its impact of like for like rental growth and your main achievements last year to peak in higher rental income. Is it possible to say?
Hello, Andre, it's Tim. I think you can do the math, basically. We've highlighted that we expect the closing of the LogPark transaction mid-year, so there will be a negative impact of about 60% of the annual rent of LogPark. From other disposals are not really relevant for stabilized rent and from the background of the indexations and the inflationary environment, we would expect rent to increase further. It's clearly, as also elaborated, indicated in our aim to reduce the LTV to below 45%. You can see that we are aiming to generate liquidity by disposals.
The next question is around the, the guided FFO decline by EUR 10 million. It's the same with service rental income. I guess not all forms of reduction will come from lower gross rental income. Do you already expecting higher interest costs this year, or are there any other topics to take into consideration?
No, I don't think that there are any other relevant topics, Andre. It's really mostly driven by a direct effect of lower rental income, potentially slightly higher modernization and investments in our portfolio that go through the P&L.
Not yet an impact from higher interest costs?
There are no final maturities this year. Our base case assumption does not assume any relevant higher interest expenses.
Okay. This leads me to the third question on the refinancing need. Are you already in discussions with banks to use mortgage loans on your existing stock? You already expect something in due course, and if so, at what terms?
We are certainly actively working on the upcoming refinancing next year. We are talking about this since basically last summer. We are not only in discussions with various mortgage banks about mortgage loans, but also considering all other options. We would think that over the coming months, there will also be some news about that.
Okay, excellent. The very last question on is on the dividend. In the annual report you stated not to pay a dividend. Is there still the possibility or slash risk that the majority shareholder will request a payout as happened last year?
If you have a look at the also published, German GAAP, accounts of business, there is no dividend capacity.
Okay.
On the balance sheet.
That's clear. Thank you very much. That's from my side.
Possibly I can add that of course the major shareholders support here the efforts of the management to find good options for the refinancing next year.
Okay. That's clear. Thank you.
The next question comes from Philipp Sennewald. Your line is open now.
Yeah. Good morning, guys. Thank you for the presentation, congratulations on the nice operational result. Was a bit surprised this morning, results were frankly above that. I wanna connect a bit to the questions of my predecessor, mainly on the disposal strategy for this year. If you do the math, I would say, you have to dispose around about EUR 300 million to be in the range, net rental income FFO you guided, so there is still some work to do.
Can you give us a quick update on the transaction market? How do you measure it right now? Are you confident that you can get the prices you wanna achieve? I mean, you disposed LogPark quite significantly below book value. Can you give us a bit more color on that?
You know how the market is at present. We are confident that we get a good price for such assets we want to, or we could, we are examining that they could be sold. We have to be of course careful. We don't want to lose money. You can understand this. That's the reason why we observe the market very well and see what will happen. Nobody of us can look into the future. You see every day new news. Look at Credit Suisse, surprise to everybody. So it's very difficult to give you here something which is where you can really rely on this.
You can be sure that we will be very careful look on the market and see what can be achieved. Very important, I mentioned this already, we will, if we sell or dispose, we make disposals of assets. These are in principle those assets where we have already done our asset management work, like LogPark. LogPark had come to an end. We have bought them some years ago for EUR 35 million. This we shouldn't forget here. We total here now the value of this.
This is a typical example of we are looking for. If we have done our job and there is a good profit margin in this, then okay. Then there comes a buyer that says, "Pay you a high price." We say, "Okay, that could be work.
Okay, understand. Fair enough. Thank you for that. Maybe one more question. You already mentioned that you can see the new report this year that the depreciation on your receivables declined compared to last year. Now with your index contract, you have a very high share of index contract, the rents will go up. Of course you have some flagship tenants also, but also some smaller tenants. Were there any pushbacks on those index related rent increases? Do you fear that some of your clients or some of your tenants might be not able to go along with that?
Interestingly not. Some expected this. I believe one of the last analyst calls there were such as questions. At present, we do not see any major pushbacks. Possibly you can see here the advantage of the DEMIRE portfolio, which are, our strategy. We have A and B cities. In the B cities there is relatively strong tenants, which have as far as at present what we see, no problems with in these indexations. No major pushbacks at this stage, and we don't expect any major pushbacks.
All right. Sounds pretty good. That's it from my side. Thank you very much for answering my questions.
Thank you.
The next question comes from Matthias Reinhardt. Your line is open now.
Hey, thanks for the presentation. Few questions from my side. First of all, on the LogPark, you said, you mentioned you have sold that for EUR 121. How much cash proceeds do you think you will receive from the sale? Presumably, I guess you have some taxes related, some costs, and I presume there will be some bank debts that you will have to repay there as well. Maybe if you could provide a little bit more color there.
Roughly EUR 80 million.
EUR 80 million. Right. that's how much bank debts?
After debt repayment.
How much roughly debt repayments would you do? Is that EUR 40 million, the difference? Or is there some other costs related?
It's a bit less than EUR 40 million and some other costs. We do expect slightly more than EUR 80 million in cash receipts when the deal closes.
Yeah. We should expect a decrease then in the bank debt as well of what? Anywhere in like EUR 35, something like that.
Correct.
Yep. Perfect. Thank you. That's my first question. Just, second question here. I see that you have sold the Ludvig Åberg asset as well. You have written here that you have a receivable of EUR 8.2 million. Is it correct and fair to assume that you have sold the property for EUR 8.2 million?
Yeah. We have received the cash already.
Yeah. No, that's good to hear. However, I think you had that asset valued at EUR 10 million, so that's roughly 18% lower than book value. The LogPark was sold at roughly 15% lower than book value. Do you feel confident that the 5% market revaluation downward is sufficient on the remainder of the portfolio?
I think the decrease in the value by the appraisers reflect the present market situation. In particular, not so much the value itself of the properties, but it reflects the different market situation with respect to interest rates. There's a cap rate influence, and so on. We think that's a fair price reflecting the private market situation.
Yeah. Okay. yeah, just one last question from my side. The rents on Cielo today, I think that was inflation indexed as well.
Yes.
Would you be able to say today how much in rental income is that JV generating the entire building?
We will have a look and answer the question later in the call.
Background is, it's a non-venture, as you may know, and...
No, I just kind of wanna get a feeling. I think it was close to EUR 10 million initially and like EUR 9.8 million, something like that. Just wanna hear where we are today.
Yeah.
Well, that's it from my side. Thank you. I appreciate it.
Currently we have one question left, so I may repeat once. If you have any further questions, please press nine and star on your telephone keypad. For now, the last question comes from Othman El Iraki. Your line is open now.
Thank you very much. Thank you for taking my question. Just to come back on the bond refinancing in 2024. You said that you are in talk with mortgage banks, but that you're considering all other options. Can you maybe share some thoughts, about the other options that you're looking at, please?
Well, actually we consider all options as discussed with you and others before. As Alex elaborated already, our guidance reflects some from disposals. Disposals will help us to generate liquidity and lower the portfolio LTV on DEMIRE level. As Andre Remke asked before, and we replied to that, we are also considering options regarding mortgage loans. We are in active contact with various banks. Obviously the lending environment also in the German banking universe changed. We remain a credible partner. We have long-established banking relationships to smaller but also bigger banks.
A mix of liquidity stemming from disposals, mortgage financing, and other financing options will put the money together we will require for the bond refinancing in 2024.
You're confident a mix of disposal and raising secured debt on an encumbered asset could be enough to refinance the bond in whole?
That is the clear aim of the business, to repay the bond in whole.
Okay. Thank you very much.
There was one remaining question regarding the Cielo rent for this year. We expect Cielo rent to be close to EUR 11 million for 2023.
It depends, of course, on the inflation. Possibly may be higher, it depends on what the inflation will be this year, because it's fully indexed.
Okay. The next question comes from Peter Wild. Your line is open now.
Hi, guys. I just wanted to pick up on a comment you made about restrictions on dividend paying based on German GAAP, and whether that is likely to change if you achieve significant disposals in 2023. Coming into 2024, you're likely to have a higher cash balance, possibly positive earnings on, at a group level. Therefore, may be not restricted from paying dividends anymore. Is it possible that we will then see some of that cash drained as a dividend at the beginning of 2024? Is there other restrictions in German GAAP that I'm not aware of?
No, I think you did the analysis right. If we sell properties above the German GAAP book value, there will be a positive result, potentially negative affected by any other circumstances. As I think as Alex elaborated, we have a strong commitment from our large shareholders, and I think they are pretty well aware of the refinancing requirements the company has. Any cash go out would make this more difficult. From today's perspective, we don't see that.
Okay, thank you.
There are no further questions from the audience. With this, we are closing the Q&A.
Yeah, many thanks to you all that you have dialed in. Should you have any follow-up questions, of course, please do get in touch with us. Tim and I and the team, we are more than happy to answer them.
Thank you.