Hello to everybody. I see we have a relatively many have dialed in, and welcome to our results presentation for the first six months of 2023. Thank you for dialing in. I trust you are well. With me here is DEMIRE's CFO, Tim Brückner, and DEMIRE's CIO, Ralf Bongers, as well as Julius Stinauer, our head of Investor relations. I'm sure you've had the chance to look at our results already, which I will summarize as solid and aligned with our expectations. However, before I start to dive into the presentation and provide you with the latest figures, let me briefly touch upon the current economic sentiment and how it affects the operations of DEMIRE. In the first half of 2023, the situation of the commercial property market in Germany, which had already been tense in the previous years already, deteriorated further.
The general economic conditions remain challenging, with the ongoing uncertainty about future economic developments having a strong impact on the market activity. You all know, high inflation, increasing interest rates continue to have a negative impact on transaction dynamics. In all asset classes, we saw significant slumps in transaction volumes combined with pronounced price reductions. In spite of these challenging circumstances, DEMIRE managed to achieve at least solid results in H1 2023, in line with our expectations. We continue to see rising property cash flows, mainly from indexations. Furthermore, we progress on our goal to create additional liquidity. Our cash position more than doubled compared to the end of last year and reached about EUR 123 million. So now after my opening remarks are made, please follow me on the next slide, and let me shortly summarize the development of our key metrics in H1.
All our four strategic pillars have contributed to a solid first half of 2023. Highlights clearly are continued strong like-for-like growth on the top line and our progress in disposing assets. The asset management contributed with a material like-for-like annual rental growth of 5.6%, which was largely driven by indexations. However, total annualized contractual rents decreased somewhat to EUR 79 million after disposal of our assets in Ulm. Meanwhile, the EPRA vacancy rate and the WALT remained relatively stable. The current market environment with rising interest rates made it sensible, in our view, to conduct another external valuation of our properties at the end of June. The valuation results in a value adjustment of 5.9% in line with our peers.
As announced last year, as you probably have seen in the high volume of assets held for sale on our balance sheet, we are currently highly active in the transaction market. We successfully closed the sale of the telecom asset in Ulm in May. On the other hand, the contract for the sale of the logistics property in Leipzig, which was notarized in December 2022, was not fulfilled. After reporting date, the buyer withdrew from the contract in early July. We are currently examining legal steps, but at the same time, relaunched the sale process and are optimistic that this property will be sold in the second half of the year. On top of that, we continue to focus on further disposals in the coming months to decrease leverage and create liquidity for refinancing purposes.
The financials saw an increasing profit from our rental activities, clearly driven by rent indexations. The FFO, however, declined to EUR 19.3 million due to tax effects. Net LTV has been slightly reduced to 52.9% and expected to decrease further with the disposal of LogPark Leipzig and other assets. However, its cost of debt remains at a still very effective level. In order to further reduce the upcoming refinancing burden, we bought back EUR 51 million notional of our bond below par in April. Tim will provide some more details on the financials in a minute. On processes, we published our second sustainability report in June, which included, for the first time, a record of our own company emissions. On top of that, the report was externally audited to assure high data quality.
With regards to new bank financing, we are in constructive talks with banks to refinance mortgage loans maturing next year. As a result, we can say that behind H1 is in line with our expectations, and so I'm happy to confirm our 2023 guidance on rental income and FFO. So let's now have a more detailed look at our operational KPIs here on page 6. Our record level letting performance in previous periods, in combination with indexation adjustments, results in strong like-for-like rental growth of 5.6% compared to the end of H1 2022. This positive development of rents is spread across almost all our properties. However, in light of the property size and the new tenant, Amazon, the LogPark Leipzig, you remember our logistics property, contributed more than half of the like-for-like growth.
The decrease of roughly EUR 6 million of annualized contractual rent to a total of EUR 79 million is primarily due to the sale of the asset in Ulm. The EPRA vacancy rate is almost unchanged at 9.6%. For the rest of 2023, we expect the vacancy rate to remain stable, as only a few rental contracts will expire until year-end. Including our equity, Properties Yellow, our vacancy rate would be around 8%. The weighted average lease term has decreased slightly to 4.6 years, which we still regard as a very solid level for our portfolio with an office overweight. So Tim, please go ahead with details about our financial performance.
Thank you, Alexander. Welcome, everyone. On page 9 of the presentation, we demonstrate the operating stability, and as Alex already elaborated, the positive impact from rent indexations, which as a total result leads to a stable NOI of roughly EUR 32 million, despite the aforementioned disposal. Our EBIT line is heavily negatively impacted by the revaluation and the disposal effect. Furthermore, you see a slight increase of G&A expenses, which are in general, driven by the inflationary environment and the accounting of the stock option program. Our financial results, for the first time ever, and probably also for the last time ever, show the positive impact, driven by the below par buyback of the bond in H1.
As Alex already said, our current financing costs are stable, but obviously we all have in mind the rising interest expense on the market that will affect the company going forward. Looking at the FFO level, our FFO is also nearly stable, negatively impacted slightly by increasing income taxes. Having a look at our balance sheet on page 10, you also see the impact of the revaluation results. On the other hand, the disposal, especially of the property in Ulm, enabled us to increase our liquidity position, which is now of about EUR 120 million. Also impacted, obviously, is the reserve position in equity capital, the negative EBIT results in lower NAV. On page 11, we, as promised, we lowered our net LTV for the portfolio from 54% to 52.9%.
On the one hand, negatively impacted by the below book disposals and also by the revaluation effect. On the other hand, positively impacted by the bond buyback below par and the disposal of unencumbered assets. As said before, the average cost of debt remains nearly stable at that point of time and will only change as soon as we refinance upcoming maturities going forward. Alex, back to you.
Thank you, Tim. After all, and here to conclude, we delivered, as you can see, solid results in H1 2023, on track with our plans, and are looking forward to and feel prepared for the remaining months of the year. With a sound start of the year, we are confident to achieve our rental income guidance of EUR 74.5 million-EUR 76.5 million, and to generate FFO of EUR 33 million-EUR 35 million. So thank you very much for listening, and we are now happy to answer your questions.
Ladies and gentlemen, if you'd like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to cancel your question, press nine and star again. Please state now your question. The first question comes from Andre Remke. Please state your question.
Do you hear me?
Yeah, we can hear you.
Yeah. Okay, it's Andre Remke from Baader Bank. Thank you for this presentation, sirs. A couple of questions from my side, please. Starting with the LogPark sales process. What is the latest value of the property in your books? Is still at around EUR 121 million, or do you face any change here with the H1 valuation? And do you expect any positive compensation from the withdrawal by the buyer, or is it fair to assume that this could be legally a long years process? This is the first question, please.
In short, the value is still EUR 121 million. There was no revaluation at this point of time. What the outcome of the legal dispute, or let me start say the negotiation first, we are start negotiations out of court before we start the legal proceedings. It's absolutely open, to be very honest. You know, different lawyers, different opinions. And at this time, we cannot predict yet any outcome exactly what will happen there. It depends on, of course, a little bit what the outcome of the started transaction process. We have started a new transaction process now for the LogPark Leipzig, and of course, depends on what the outcome there will be.
Okay. Okay. A question on your asset held for sale. You adjusted by, for the first half, EUR 9 million negative, i.e., in the Q2 , there is an uplift of EUR 60 million. Do I have to assume that the properties you you shifted to the disposition that you already have a sound basis for in the negotiation processes, or why did you uplift this position in value?
Well, the values that we reflect in the asset held for sale line of the balance sheet reflect the LOI level of offers we received.
Okay. And, excluding the, or apart from the LogPark property with EUR 120 million, are there any larger properties included here, or is it so to say too fragmented to give some examples here?
You understand that at present, we do not want to comment here on single assets which are held for sale. You have seen the overall amount of around about EUR 280 million, and it's a mixture. This is what I can say.
Okay, thank you. And you seem to be now more confident, and in the press release some weeks ago or some months ago, with the withdrawal of the property process, you are more confident now to dispose the LogPark until the end. So how confident are you on the other potential disposals?
Possibly Ralf, our CIO, probably you can say something, comment on this.
Maybe I take this one. Yes. Yes, we still see a strong buyer interest also for smaller assets and mid-sized assets, despite the current very challenging market situation. Therefore, we are slightly optimistic, but it's definitely too early to report on concrete expectation or results here. And, coming to the LogPark, again, there we see very strong buyer interest in the renewed sales process, but, I ask for your understanding, as already mentioned by Alexander, that I not want to go into details here in view of the current negotiations.
Yeah, absolutely. Thank you. The next question is concerning the bank financing. You highlighted that you are facing the 2024 financing, the existing financings. Are you already in the phase to elaborate with banks about the financing of unencumbered assets to provide higher cash position, or is this from time perspective, too early?
Well, we have signed three new or additional mortgage financings in May and June this year, but as you could see from our numbers, the total amount of new financial debt is considerably small. Obviously, we are in continuous dialogue with financing providers, and this obviously also includes discussion on both the mortgage and capital market financing. But we cannot elaborate on this any further at this moment.
Yeah. Okay. Okay. And the very last question from my side on your current cash position of EUR 120 million, do you envision any further bond buybacks this year?
Well, we have concluded two successful bond buybacks in the future, and we would not exclude any further buybacks in the future, but it's not yet decided on, and we cannot really comment any further on this.
Okay. Okay, that's from my side. Thank you very much, and good luck.
Thank you, Andre. The next question comes from Daniel Arendt. Please state your question.
Hi. Thank you. Can you hear me?
We can hear you.
Ah, perfect. Great. Thanks. Thank you for the presentation. Just 2, 3 questions, maybe following up on the LogPark. Can you, can you remind us how much of the annualized contractual rent was attributable to LogPark as of June 2023?
Round about eight million.
8 million. And okay, and you left, left the value stable at EUR 121 million, you said, right?
Yes. That's right.
So 6.6-year. Okay, got it. Second question. Well, actually, I wanted to ask about the bond buybacks as well, but you just answered that question. Maybe with respect to the assets held for sale, just, you know, just out of curiosity to better understand, how—like, what's the plan going forward on the Fair Value REIT participation? I mean, there have been some rumors in the market that a sale is being considered. There has been some press releases on this as well. Is there anything you can share with us? And if not, maybe second question, given the large share of participations on that side, are you in any way able to, you know, lift the unencumbered asset base, that is predominantly at the Fair Value REIT level to, you know, refinance wider group efforts?
But more to the first part of your question, strategic, there is no change in our strategy regarding Fair Value REIT. We know that there are rumors in the market, but you will understand that we, in in our view, do not comment on any rumors. At present, I can say our strategy is absolutely the same as it in the past. We have, in particular here, for example, implemented further steps to streamline processes and property management and asset management. You've seen we still are responsible for the Fair Value REIT and will hear our work. The other question, Tim?
Sure. I mean, there are a number of unencumbered assets in the Fair Value REIT. Nevertheless, it is a sole independent listed entity, and shifting cash flows or cash from this entity to the remainder of DEMIRE is structurally usually only possible via dividends. And Fair Value is, and will most likely remain, a continuous dividend payer. But the uplift of cash flow from any mortgage financings at the finance or at the fund or at Fair Value REIT REIT level is rather unlikely.
Yeah, and that's, that's understood. But the... Maybe then on the, on the financing on these assets, given, you know, the 50%-60% stakes in these fund participations at fair value level. I mean, because I've just, just for my understanding, how much, given that there is a third-party manager as well, how much influence do you actually have on, on these particular assets? I mean, Rostock, for example, is one of the larger assets that's in your top ten asset list included, but, you know, ultimately, you own, I don't know, 55-60% in that asset. How much control do you have over that?
Well, I think the information you have is not entirely correct. Asset management is conducted by DEMIRE Group.
Ah, perfect.
Property management is conducted by STRABAG, as for every asset in the entire DEMIRE business. And only the, in German, so-called Treuhänderschaft is with an external third party. So we have full control over the asset management from the Fair Value REIT-AG level.
Okay, perfect. Okay, then, then it was a misunderstanding. Good to know. Thank you.
The next question comes from Paul Zimanauer. Please state your question.
Hi, hi, good afternoon. My question is, you know, what type of rates are you seeing in the mortgage market right now when you're trying to refi, refi those?
The latest 3 mortgage refinancings were done slightly below 4.5% for five-year fixed-term mortgages.
Okay. And then, is that what you're kind of seeing today start in the current market environment?
Well, that was signed in May and June. It has slightly increased, I believe, given that the base rate slightly increased.
Got it.
It's very much dependent on the swap rates.
Got it. And have you bought back any more bonds after quarter end, by any chance?
No.
No. And then, would you consider maybe some sort of secured issuance to help refinance your 1 7/8 due 2024 at all? Is that something that you're thinking about? Maybe not a mortgage, but, you know, a secured offering.
Yeah, I can basically only repeat what I have already said. We are really in continuous dialogue with financing providers and include all options.
Okay. All right. That's all my questions for now. Thank you.
Okay, so at the moment, there are no further questions. So now let me hand back over to Professor Dr. Alexander Goepfert for some closing remarks.
Yeah, thank you. Thank you again for dialing in. We will be back with our Q3 results on the ninth of November. But of course, you know, if you would like to speak with us in the meantime, please feel free to get in touch at any time. So I will say thank you to all of you and wish you now still a wonderful day and a good post-summer period. Thank you so much.