Good morning, ladies and gentlemen. I would like to welcome you to our H1 earnings call. Also on behalf here of my colleagues, Hans Richard and Christoph from IR. Let me start today's presentation here with a short overview on the highlights, as well as the key results of the first half year. Afterwards, I will hand over to Hans Richard, who will guide you through further details concerning our operational business as well as the financial part. Okay. To the highlights. Despite the extensive challenges here related to the corona pandemic, we have been able to generate very satisfying H1 results. In order to achieve this, two major aspects here have been very supportive during the last corona months.
First, our portfolio structure here, including a large number of tenants in systemically relevant sectors, as well as, second, a very close and trustful dialogue with those tenants who have been hit by the shutdown phase and the pandemic situation especially hard. As a result, we have been able to agree with many of them on an individual basis, and are convinced that we are able to find a good balance between the pragmatic and precise support for the tenants, as well the fair outcome in the interest year of HAMBORNER, so our company. Meanwhile, our cash collection rate is almost back to a normal level that we also regard as a confirmation for the excellent performance as we think of our asset management team during the last couple of months. Later in the presentation, we will provide you here with further details concerning this topic.
In June, we were able to take the remaining out of three new assets here on board of HAMBORNER. As we think, excellent additions to our existing core portfolio. Next to the operational business, we also use the special corona situation here for an internal review of our corporate strategy. If you take into account the initial strategic situation from a property and capital market perspective, we are convinced that our company is in a very good position for an enhancement of its business model. The objective will be to broaden this model by using the existing strength of the platform. On top of it, adding further potential for accretive growth. More details regarding our refined strategy I will provide in a separate update later during this call. Finally, we recently published a fresh forecast for 2020 and confirmation concerning the dividend for 2019.
That has happened just last night. I guess you have seen the notes here. Indeed, a lot of topics which should be outlined here in more detail during the next minutes. However, before moving on to that, I would like to give you an overview regarding the major KPIs here for H1. As you can see in this overview, our rental income year-on-year, up close to 4%, driven by recent additions to our portfolio. On a like-for-like basis, slightly down, mainly influenced here by lower retail rents, especially within the high street subsector. Operating results driven by revaluation effect here. I get back to this and we get back to this later on. FFO per share, slightly up. Vacancy remains as you're used to from the past, in a way here on a very low level.
LTV also slightly up, influenced by the mentioned revaluation. However, still as we think on a comfortable level. With this short overview, let me hand over to Hans Richard. It's your turn.
Thank you, Niclas. Good morning, ladies and gentlemen, and a warm welcome from me as well. Let us now take a detailed look at the developments in the first half of the year. A brief overview of changes in our portfolio. Despite difficult overall conditions, three office assets in Neu-Isenburg, Bonn, and Aachen were transferred to HAMBORNER's portfolio in the first half of the year. The total investment volume came to around EUR 80 million. The properties will contribute a total of EUR 4.2 million to annual rental income and increase our annualized rental income to around EUR 89 million. We achieved two key successes in our letting activities in the second quarter for this asset. At the Aachen property, remaining vacancies of approximately 4,600 sq meters were leased to AOK, an anchor tenant in the insurance sector with a good credit rating for 10 years.
The property is now fully let with a WALT of 11.2 years. The final vacancies were also let on a long-term basis at the Bonn property with another sound tenant, the energy and property service provider ista secured for the location. The WALT is now 11.8 years. We were also active in terms of sales and last week signed the contract to sell a high street property in Osnabrück at EUR 5.9 million. The sale price is about EUR 2.8 million more than the residual carrying amount as at the end of June. The sale was therefore concluded under favorable conditions and represents another step in optimizing our portfolio. The transfer of possession is expected to take place no later than the beginning of the fourth quarter. Let us now take a closer look at the tenant structure.
The property additions in the first half of the year resulted in a change to HAMBORNER's top 10 tenants list. BARMER, another insurance sector tenant with a good credit standing, moved up to seventh place on the list of tenants following the handover of the office property in Aachen at the start of June, pushing food discounter Aldi out of the top 10. EDEKA, Kaufland, REWE, and real are still leading our top 10 list. In total, food retailers currently account for around a third of the company's total rental income. Other retail tenants such as drugstores, pharmacies, or do-it-yourself stores contribute around 12% of our rental income. Our office tenants, including medical care facilities, medical practices, educational institutions, and public authorities such as the Federal Employment Agency, generate around a third of total rental income.
Our solid tenant structure, and in particular, the high share of companies providing essential services, the basis for our stable cash inflows, even in these economically difficult times. The next slide gives an overview of our letting situation. The weighted remaining term of our leases for the portfolio as a whole is currently around 6.4 years. While average terms in retail are virtually unchanged at 7.5 years, office lease terms have risen to about 5.1 years on average in the last few weeks. This chiefly reflects letting successes in the second quarter. At an average of 8.4 years, terms for large-scale retail leases remain consistently high. The lease expiry schedule shows that the share of leases expiring remains well-balanced throughout the next years. As at the end of June, the remaining share of expiring rental agreements in 2020 accounted for 0.9% of total leases.
We have already renewed further expiring leases during this month, the share is currently less than 0.5%. The renewals and new rentals still pending in 2020 essentially relate to office leases that expire at the end of the year. Let's move on to the current rental situation at HAMBORNER. Despite the far-reaching restrictions on public life and the associated impact on individual HAMBORNER tenants, incoming rent payments have seen surprisingly good performance in the last few months. The rent collection rate fell to just under 90% in April as a result of the lockdown before picking up substantially in the following month up to July, and actually is 97.7% close to the pre-crisis figure. Most of the payments not made related to retail tenants, chiefly fashion tenants, and catering tenants that were affected by officially ordered closure of shops or had to cope with temporary revenue losses.
Our office tenants, on the other hand, almost entirely honored their payment obligations. As a percentage of the company's total rent, just 0.2% to a maximum of 0.4% of payments were not made in the period from April to July. HAMBORNER is currently in close contact with the tenants concerned to discuss outstanding rental payments for the period from April to July 2020 and is working hard to develop individual solutions. Mutual agreements have already been reached with many tenants. In this context, temporary rent reductions of just approximately EUR 0.5 million have been granted so far. This represents just 0.6% of annualized rental income. Furthermore, we agreed rent deferrals in an amount of EUR 0.3 million, which corresponds to a share of 0.4% of total annual rents. Leases with these tenants were extended in many cases during the negotiations.
The average term of the agreements in question was extended by about 19 months. In particular, rental agreements with retail tenants affected by the pandemic were extended significantly. The additional rental volume created by all these renewals totals EUR 7 million. The stability of HAMBORNER's tenant structure is also reflected in the low number of tenant insolvencies. To date, only two smaller retail tenants have filed for insolvency. The annual rental volume associated with this comes to around EUR 130,000, representing 0.15% of annualized total leases. These current figures clearly illustrate that HAMBORNER has a very sound portfolio that has proven relatively resilient even in times of crisis. The next chart include a few details on our half-year figures. As already mentioned by Niclas, we generated income from rents and leases of EUR 43.9 million in the first half of the year.
An increase of 3.7%, which was mainly due to the property transfers at the beginning of this year. For the same reason, income from incidental costs charged to our tenants was 5.5% higher and came in at around EUR 7 million. Current operating expenses rose slightly compared to the previous year's figures first quarter to EUR 9.6 million, an increase of 6%. Net rental income amounted to EUR 38.6 million, a plus of 4.1% compared to the previous year. Administrative expenses decreased by around 9%, mainly due to the postponement of our AGM, which was originally scheduled for May. Personnel expenses also increased by around 9% to EUR 2.6 million as a result of the changes in the management team. Accordingly, our operating cost ratio rose slightly to 7.3% compared to 7.2% in the previous year. Other operating income amounted to EUR 1 million.
The rise in income essentially related to contractually agreed compensation payments due to delays in transferring ownership of the office property developments in Aachen and Bonn. Other operating expenses were around EUR 1.7 million in the first half of 2020. The item includes corona-related write-downs on trade receivables of EUR 1 million and is therefore significantly higher compared to the previous year. As a result of income and expenses, the FFO came in at EUR 27 million in the reporting period. The corresponding FFO per share amounts to EUR 0.34. All in all, a slight increase of 1.5% year-on-year. Let me point out that we made no corona-related FFO adjustments. Moving to the next slide will give you further information on the NAV development.
In light of the impact of the coronavirus pandemic, we decided to have our external experts, JLL, carry out an additional valuation of our portfolio at the end of June. This resulted in a 3.3% decrease in the market value of the like-for-like portfolio in comparison to the end of 2019. The devaluations essentially related to high street properties that were hit particularly hard by the coronavirus pandemic. This is offset by the acquisition of office properties in Neu-Isenburg, Bonn, and Aachen in the first half of 2020. Taking into account hidden reserves, long-term assets rose by 2.8%. Short-term assets increased by 6.5% due to higher liquidity and receivables. Long-term liabilities climbed to EUR 671 million in the first half year as a result of additional loans taken out as part of the acquisitions. Overall, NAV saw a slight 2.8% decline as against the end of 2019.
NAV per share as at the end of June came to EUR 11.27. Now a short look at the balance sheet. As already explained, both the long-term assets and receivables at the end of June have increased. We were also able to increase liquidity holdings considerably to EUR 28.6 million by way of refinancing and cash inflows from operating activities. Currently, the company also has further credit facilities of around EUR 50 million that can be accessed at short notice. HAMBORNER's liquidity situation thus remains comfortable. This is also true of the company's financial position. HAMBORNER's equity situation remains solid. The REIT equity ratio of 54.7% is well in excess of the 45% required under the German REIT Act. The LTV at the end of June was 43.1%.
We again managed to reduce average financing costs slightly to 1.93%, with average remaining term of our loans decreasing marginally to 5.2 years. Having already concluded our following up financing for 2020 ahead of schedule, we increasingly turned our focus in the last few weeks to refinancing due in 2021. In the meantime, we have concluded all planned refinancing activities for 2020 and 2021. At 1.8% and 1.1% respectively, future weighted average interest rates are considerably lower than the expiring financing agreements, and HAMBORNER will benefit from the lower rates in the coming years. My colleague Niclas will now give an outlook for the fiscal year 2020 and will present the key aspects of our future growth strategy. Thank you for listening and let me now hand over to Niclas. The floor is yours.
Yeah, thanks, Hans Richard. Let's go on with the guidance and outlook here. In the meantime, we have a much better visibility on the operational and other effects concerning the corona crisis. Because of that reason, we recently published an updated forecast here for the current year. Rental income should come in slightly higher than last year. FFO will be expected to virtually match our high level of last year in a range between EUR 52 million and EUR 54 million. Based on market value effects here, we anticipate a limited decline in NAV. As a consequence, and especially also in light of the good H1 results here and the improved visibility, we together here with the supervisory board, we decided yesterday to stand by our original dividend proposal to distribute a dividend for 2019 of EUR 0.47 per share.
We also see this as a signal to our shareholders concerning HAMBORNER's reliable acting and this irrespective of obviously very challenging market environment. The AGM is now scheduled for the 8th of October. Contrary to our original plans, and in view here of the official restrictions, which are still in place, obviously it will be held in a virtual format. Looking forward to the next month, we will spend much further effort on the close tenant management, as we have done here in recent months. Obviously on the execution year of our updated strategy. For this topic, I will provide you now with more details. Let's go on to the strategy update. Let's start with the portfolio strategy of HAMBORNER here moving forward.
A major element that will remain unchanged our two pillar asset strategy, which means that we keep being invested in two asset classes here. However, what we intend to change is the following here. Based on a very stable core portfolio, as you know, which we definitely further want to increase in both asset classes. We intend to broaden our investment profile here by a couple of measures. Number one, we want to add properties with greater asset management tasks. Following, you can call the manage-to- core approach. These tasks can be, for instance, larger letting requirement, refurbishment needs, or also repositioning needs here. Based on the in-house asset management and the market expertise, we expect that these investments will generate additional attractive returns on a recurring basis.
In order to retain the definitely stable character of the total portfolio, we set for now a target range of 10%-20% for these kind of properties here, which I just described. Second, on the retail side, we will concentrate even more on properties with a strong food profile. Obviously, a sub-asset class which has performed very well not only during corona crisis, but especially during the last couple of months here. As an additional consequence, HAMBORNER will gradually sell its high street retail assets. As Richard described to you before that we sold an asset just a couple of days ago, and we continue to do so in a disciplined manner here.
With this, let me move on to the next slide which provides you a better overview of where we come from and where we intend to go. In addition to what I just outlined here on the acquisition side, we intend to unlock further value potential within our existing portfolio here. For instance, by selective development measures. This also obviously to create additional value here. On the development side, one example would be creating additional rental space out of our existing portfolio. From a greater perspective, HAMBORNER will move from a buy and hold to an active buy, hold and sell strategy, which will include a continuous streamlining of the portfolio. What I just described, this will happen here definitely under consideration of clear performance metrics, and as well, a regularly redefined sustainability strategy.
Based on this investment approach and apart from the growth aspect, we expect a greater flexibility concerning potential market changes, which should also in a way serve as an additional protection regarding the overall quality and value of our portfolio. On the next slide, providing you with more information on our regional focus. There it is. In steps here of a selection of cities, as you have seen it in the past, defined by category, size, or other characteristics. HAMBORNER will concentrate here its regional focus here on relevant metropolitan regions in the future year. Those areas including several key cities here, they contribute for the most part of the total national GDP, which you can see on the left side. Within these metropolitan regions, superior macroeconomic metrics, for instance, public and private infrastructure and other factors can frequently be found here.
As of today, already 70% of our assets anyhow, reside in these regions. Concerning office investments, we intend to concentrate on established office locations in key cities within these metropolitan regions. With reference to mainly food-anchored retail. Based on our profile here, the focus remains on strong micro locations. However, these micro locations obviously can be found in key cities as well as in prospering regional spots. All in all, this regional focus, this slightly revised regional focus will provide more flexibility regarding the intended further growth here. Moving on to financing. With reference to financing and the further growth of the portfolio, we will evaluate here the options to diversify our funding sources by adding public debt to our balance sheet. In addition to that here, we intend to further optimize our current financing. Some points you can see mentioned here on this page already.
In any case, we are committed to continuing a very disciplined financing approach, fully in line here with our overall balance sheet strategy. This also includes maintaining a solid equity base here with reference to the REIT legislation here for obvious reasons. Last but not least, quick update on dividend strategy. Going forward, we intend to take a slightly broader view here regarding the deduction of the yearly dividend recommendation. As a result of this, we will build a link to the relevant total return as well as the respective strategic situation and the market environment in which HAMBORNER is placed here. Depending on the individual situation of the company, this can add an additional contribution to further valuable growth.
In the same strategic context, we contemplate to offer a scrip dividend in the future, which would further strengthen here the internal financing of the company. In any case, we are clearly committed to providing here our shareholders with a reliable and attractive dividend also in the future as they're used to it from the past. This as an update on strategy. With this, I would give back to our conference lady to see what kind of questions we get from your side. Thank you very much for your attention.
We'll now take our first question from Dennis de Jong from Kempen. Please go ahead. Your line is now open.
Yeah. Good morning. I think it is a fairly solid set of results. Especially on the strategy update, there are some interesting things going on. I remember from last conference call, if I am not mistaken, that you still intend to keep a 33% office exposure and 66% retail exposure. Now, with the three offices coming to your portfolio, the value reduction of retail and the plan to sell high street retail, is there a change going on here or is the intention still to keep these exposure levels?
Yes, maybe I can. Hi, this is Niclas. Thanks for the question to Dennis. With reference to the individual exposure in the asset classes, as in the past, we don't see any targets ranges here that we need to achieve. Reason for this being, as before, that we want to keep the flexibility concerning the further growth path. As we could see in the past as well, it strongly depends on the individual market environment. There are phases where you get more interesting office opportunities and then a bit later on more retail. In the longer run, typically it balances out. The divestment decision for high street retail has nothing to do with kind of balancing thought behind it, so that we want to decrease retail and increase office to a certain extent. I hope this is an explanation which helps you.
Yeah, clear. No, it's more that selling the high street inevitably leads to less retail exposure. As you said, yeah, in the long term, it has, well, primarily been the 33%, 66%. Yeah, it's fair to state that this is not really the target that is set. This might change, correct?
Yeah, absolutely. That's right. It can be that the proceeds from the sale here from these assets, from the high street assets, will be invested mainly in office or in retail. We don't know yet. It depends on what we get in front of us.
Okay. Clear. As a follow-up of reinvesting the divestments, you say you're comfortable with your leverage. I understand that. Yeah, I was actually wondering if you are slowly looking to delever. There's no pressing matter to address it right now, I think. I can imagine that in the future, you would like to have a lower LTV. Well, yeah, if we look at the scrip dividend, this would obviously help as well. Yeah, also the buy, hold, sell could contribute to some delevering strategy there. I don't think there has to be a very significant delevering, are you looking to delever a bit? If so, what range would you like to have your LTV at?
Yeah. It obviously depends on the market situations. Clearly, as I stated, we intend to be disciplined here on the LTV side for obvious reasons, especially in market situations like at the moment where you rather see pressure on certain values. Yeah, that's clear. If you look where HAMBORNER comes from the past concerning LTV levels, I think you can make a pretty good guess on where we are heading to. Yeah, slight delevering here from current levels, it's definitely something. It all has to be viewed within the bigger picture, obviously. What kind of product, debt equity at which costs. For that reason, at the moment, I wouldn't give a precise range. Yeah. Historically, HAMBORNER has played it pretty defensively, and I think this is how we want to move forward as well.
Okay. Clear. Regarding the scrip dividend, you say this is something you contemplate. Is that something you contemplate for this year already, or should I look thereafter?
This is something which we want to make up our mind here shortly. We will use now the upcoming weeks here to get a better understanding about investors' feedback on this. This is one reason obviously why we handle this like we do at the moment, that we announce that we have this plan here, which gives us the flexibility for an open conversation with our investors, and then we want to make up our mind shortly. It could be that it's going to happen already here in autumn of this year. Yeah, we will see within the next weeks.
Okay. Clear. That was all from my side. Thank you.
Thank you very much.
Thank you. We will now take our next question from Monika Leykam from IZ. Please go ahead. Your line is now open.
Yes, hello. I got two questions for the selling side. You mentioned the sale in Osnabrück. I would like to know which kind of buyer is someone who likes to buy high street textile retail property in the moment. Who are the kind of investors that you have to sell your high street retail property to? You mentioned that metropolitan areas where you want to stay invested, and there are 22 properties that are currently outside of these metropolitan focus areas. Can we expect that you're going to dispose of 22 of your properties in the next time? That was my question.
Yes. Thank you, and good morning again to you, Monika. Answering your questions concerning the buyer for Osnabrück, the buyer has a family office background here.
This is one definitely in this phase we are in the moment in the market, the market situation, market environment, definitely is one group of investors which we feel remains to have a substantial appetite for high street retail for various reasons. Yeah. Very individual reasons. We get a pretty good feedback from this side. In addition to that, we see smaller funds being interested in these areas. Also private individuals. If you consider the fact that some of our assets are definitely below EUR 10 million.
This is also a size range where non-institutional investors are interesting. it's a interesting mixture you see at the moment for these kind of assets. typically investors which seem to have a very long-term view, also on these topics here. Which are discussed at the moment. Concerning the other assets which are outside currently of the metropolitan area within the portfolio of HAMBORNER, the answer is no, not necessarily. Concerning our sales program at the moment, we concentrate for the time being on high street retail assets, and in maybe a selective number of cases, on smaller individual assets. that's what we are looking for. it's not a big sales program apart from what I just outlined here, which would be driven by this regional aspect.
Okay. Thank you.
Thank you very much.
Thank you. We'll now take our next question from Georg Kanders from Bankhaus Lampe. Please go ahead. Your line is open.
Yeah. Good morning from Düsseldorf. I have also a question regarding the regional focus. Part of focus are now, I think, also attractive cities like Aachen, where you have already two properties, or Dresden or Freiberg or something. If you would get attractive opportunities, would you then not consider to grab them?
Yeah. You make it pretty difficult for us because you just mentioned a couple of locations which definitely are interesting, obviously. Not only because we are invested in those, but also because we strongly believe in the potential of these locations. Look, this is our investment strategy where we try to gain some flexibility. Yeah. These are the regions we want to focus to. I don't want to rule out that in the future, we would invest also in one or two spots outside of these regions. We want to remain a clear focus concerning our overall portfolio strategy. Yeah. This could mean that there are locations which for other reasons, are not investable for us. Yeah. Because we don't want to jeopardize our overall strategy. That's the balance we have to find. Yeah.
Just maybe let me add this comment, and I know as you are from Germany, you know anyhow, but that's the good thing about Germany because you can diversify your strategy here pretty well. You have so many interesting spots to invest to, also, especially on the city side. We try to give a good guidance here concerning what we're heading to concerning our future regional investment profile. Yeah.
Yeah. Okay. You probably when there is an attractive opportunity and one is a strategic focus and one is outside, then you have a clear preference.
Yeah. Exactly. Then we have to play the cards internally, and then we have to see what's more important for us. Yeah. That's clear. Just to make this clear, we will concentrate on these regions, yeah. If we find other spots outside of these regions, the investment story must be very clear and easy to understand. Otherwise, we won't do it. Yeah.
Yeah. Okay. Another question. Do you have already a kind of acquisition pipeline now, or are you now waiting to get the speed from data as a high street?
No. Clearly, we do both things at the same time. Yeah. We just started preparations here for the sales here, activities to increase the sales activity and the turnover in the portfolio. At the same time, we have as well things we are contemplating at the moment on the acquisition side. Yes, clearly both.
Okay. Yeah, thank you.
Thanks.
Thank you. We will now take our next caller, Georg von Wallwitz from Eyb & Wallwitz . Please go ahead. Your line is open.
Hello from Munich. I was stumbling over the line in your profit and loss statement, where it said that maintenance decreased by 5%. I would like to know if you can elaborate on that a bit further. Especially if you could tell us something about the environmental footprint of your properties. I guess the environmental aspect is going to get more important in the future. The follow-up question would be, how much of your maintenance budget is dedicated to environmental improvement of your properties?
Hans Richard, you want to explain a little bit about our maintenance budget here, about the numbers?
Yes.
Yes, of course. About the maintenance numbers, that already big part, there are costs for changes of the tenants so that we have some refurbishment to do if we have no new tenants. We have not so much money in the first half-year, what we have need for this. Again, where we don't know exactly what will be the liquidity situation during the lockdown period, we have shift some measures in the next year. That's the reason for the lower numbers here. I think for the environmental, Niclas can give you an answer.
Yes. Just that I get a better understanding of what you're heading to. You try to understand what part of our budget is reserved for environmental related matters within our CapEx and technical exposure here?
Yes, exactly.
Our maintenance budget.
Housing and real estate is one of the major contributors to climate change related issues. I guess the regulation is going to get more strict in the future. The question really is, yes, what do you do about heating and insulation and all these things?
Perhaps I can describe this a little bit. We don't have a specific budget for this. I think it's simple, but if we have any refurbishment to do, we see that we build in the newest technology. For example, for heating, for isolation of the roofs, for changing windows and so on. There's, at the moment, no specific money what we have reserved for these things.
Okay. Thank you.
Thank you. We have another question in the queue, but just as a reminder, if you would like to ask a question, it's star one on your telephone keypad. Our next question comes from Thomas Martin from HSBC. Please go ahead, sir, your line is open.
Good morning. It's Thomas Martin , HSBC. Just a few questions on your new strategy. Obviously, you've become a bit more total return driven. Here my question would be, do you have a concrete target total return for the group? On your manage to core assets and let's say, refurbishment value enhancing investment, do you have for this also a concrete target yield on cost in mind? That would be interesting for me to know.
Yeah. I can't give you at this stage at the moment here, defined target returns. Reason for this is because as I outlined before, we will now make this dependent on what kind of targets we see outside and as well within our portfolio. I can assure you that we definitely will have, and that's point of the which we have put on the presentation as well, that we will very carefully look at what we are doing here is accretive and on the value add side, I would expect it to be highly accretive, definitely, what we're doing. We will run every investment measure here through a detailed investment schedule process. Definitely our key drivers here are our FFO, our capital costs that we have, and I would expect typically for value add driven projects to have a substantially higher return for this.
Let's say within a spread, maybe give you a range of 150- 300 basis points. Yeah, that's what I would expect, depending obviously on the individual risk profile that you have. That's why I'm a bit shy of just giving you a precise number because it obviously is a difference if we buy, for instance, a property with a 20% vacancy, which can be reduced to 5% within a year, or if we have a property which has to be fully refurbished with substantial financial management and time exposure here. Give you a kind of range here, hopefully.
Okay. Then maybe a follow-up question. You have a target structure now, 10, 20% manage to core assets in both segments. Obviously, I think you have already screened your portfolio in detail. Can you quantify already the portion of your existing portfolio? Where do you see potential for value enhancing investments that you have already?
Yeah
percentage?
Yeah. Not a percentage because these are the individual measures, and we have to be fair. We have to define really in what order and based on our resources, how many we can do at the same time so that it works out here for a kind of forecast. Give you an example. The property we just took on board here in Bonn has a substantial reserve. This facility there, to create additional office space, couple of thousand sq m. Just give you an example here. In the past, HAMBORNER would have automatically more or less done this together with a project development partner, and would have most probably then taken on board as they've done in the past, also with this property, newly constructed property once it's done.
In the future, this would be an opportunity for us to create value by ourselves here out of our own resources to take the additional return here on our P&L. Just to give you an example. In other properties, we have some larger retail assets, for instance. We have the options to remodel internally the room structure within these properties substantially, and to reposition these assets as well. All these assets have a very different investment history and investment potential. Therefore at the moment, we are on our way to underline this with the financial KPIs here.
Maybe one last question. Regarding timeline, you just mentioned you have no concrete, I think, acquisition pipeline. Within the existing portfolio, obviously some potential. Any timeline you can share with us when you plan to start your first value creative or value enhancing investment in your standing portfolio?
I can tell you that we are right at the moment looking at those kind of assets. We're in the middle of acquisition search here for these assets. It's not that we want to wait a couple of months for this. As soon as we think we found the right asset, we will going to start right away. We definitely will also increase the internal resources here with HAMBORNER in the upcoming months to be able to work on these projects. Therefore, you can say it's a parallel track. We want to onboard these kind of assets as soon as possible. Parallel to it, we upgrade here our internal resources concerning this profile.
Okay. Many thanks.
Yeah. Thanks.
Thank you. We'll now take our next question. Again from Thomas from Jefferies. Please go ahead. Your line is open.
Hi, morning. Just follow up on your manage to core product plan. Actually, what kind of investment or what kind of cost can we expect, for example, this year? Is this already considered in your updated FFO guidance?
Yeah, Thomas. Additional costs for this are not included on our cost side. The reason is simple, because first of all, we need to find an asset or two or three assets which we can work on if we’re talking about the acquisition side. Within our portfolio, our own portfolio, I think it’s fair to assume that we will take the next couple of months for internal preparation, and don’t start before beginning of next year so that there will be no other costs apart from what we already calculated will come to HAMBORNER. For that reason, it made for us no sense here to put in a kind of ghost budget until end of the year, as long as we don’t know what kind of assets, at which size, and based on which timetable we want to work on.
Okay. What are the key capacities, actually, you need to build up from here?
It's quite simple. As you can imagine, during the last couple of months on the corona side, our asset management was pretty much under stress as the tenants were and spent a lot of time, much more time than normal, on coordinating everything here internally. For that reason, as we expect this to continue for a while, our internal resources are, at the moment, a bit more stretched than you would normally expect. As soon as this slows down, we can move resources on the other side. Also, you know that HAMBORNER didn't have a development history in the past. For that reason, we are upgrading as well our team here with, for instance, development expertise from outside. We are currently hiring the relevant people here.
I see overall, you would expect that to be a rather cost-efficient new approach.
As you know, you never get it all balanced at the same time. What we're talking about here, we're talking about two, three, four people that we are hiring here in the next phase. At the same time, we're identifying and preparing and onboarding first assets. I'll give you an example. It can be an asset where we can work on right away within the next couple of months. It could be as well an asset where whatever the asset is just fully let for another one or two years, and we have sufficient time to prepare ourselves for the substantial measures to have been done afterwards. Therefore, it all depends on the asset itself as you have it in front of you.
Okay. Maybe one question on property valuation. You did an update as of H1, which brought a negative and actually marked down. As I understand it correctly, it's mainly driven by high street retail. Could you provide a bit more color on this valuation update? For example, how was the performance per segment? Let's take high street retail and let's take the other retail and maybe office, just to get a rough idea how values developed in each segment.
You mean on the operating side or on the valuation side? Sorry.
No, on the valuation side.
Yeah. Okay. I think on the office side, the outcome has been slightly positive. Just a notch for our existing office portfolio, which has various individual reasons in some office assets. We are talking about a slight upside here that we could see. On the retail side, I think you have to differentiate between the high street retail and the large-scale retail. We have taken down values for a smaller number of large-scale retail assets because we are rather want to follow the cautious path here concerning specific topics. For instance, you know that we have a couple of Real areas here or as a major tenant in our portfolio, where after the sale now, which has happened, we have some unclarity at the moment about how it's going to proceed in the future.
On the high street retail side, for obvious reasons, as you can see in the market, they have suffered tremendously next to restaurants and entertainment facilities and hotels. They have suffered a lot from the lockdown. Anyhow, this industry is currently under substantial pressure in various ways. For that reason, the largest impact here comes definitely from the high street side.
What was the magnitude of the markdown in high street retail, just roughly? Was it -5%, -10% or?
No, we have taken it down -15%.
How is the rent development in high street retail?
Yeah.
Roughly like-for-like. How negative is it currently?
Yeah, you have seen in the figures like-for-like that we have a small minus, and that indeed is coming from the high street in here, from the rents, especially fashion and other parts, other branches. Especially fashion.
What's the magnitude, roughly? What would you say in the high street retail rent decline?
You know.
We don't have any segment reporting, so I don't have the exact figure here for this. I'm sorry.
Roughly, can you provide a rough figure? Is it more than minus 5% or?
No, it's less than 5% for overall. Otherwise, you wouldn't have this like-for-like of - 0.3. That you have 1%, 2%, perhaps for the only other high street sector.
Okay. Maybe a very last question on your liquidity. Maybe you can provide a rough outlook considering that you paid a full dividend in the second half.
Sorry, Thomas, I didn't get the question.
Yeah, maybe if you can provide a rough liquidity picture or outlook from here, considering that you pay dividend at the second half.
Yeah. Okay. I think we have published here our liquidity as of end of June. Meanwhile, we have onboarded additional liquidity in the past couple of weeks, and this amounts up to the volume that you see here moving forward. Yeah. Then if you deduct liquidity and take a normal operational business without any substantial ups and downs, you can see that we are moving forward on a, as we think, very solid liquidity level. This doesn't take into account any kind of additional sales at the moment here, sales proceeds from high street. Yeah. This is based on where we stand at the moment.
Okay, thanks.
Not considering assets that we have sold yet.
Thank you.
Yeah, pleasure.
Thank you. We'll take our next question from Simon Stippig from Warburg Research. Please go ahead. Your line is now open.
Hello. Thank you very much for taking my question. I actually have two questions, and the first one is in regard to the portfolio development. You acquired and onboarded those three assets in Neu-Isenburg, Bonn, and Aachen, and I wonder what the vacancy was Q1 2020 over Q2 2020. Could you just give me an indication of that?
You know that we have acquired these assets with rental guarantees. There was no change.
Okay, great. There were no new lettings or, I mean, new lettings to office and rental levels, that you could give an indication on. Hello?
I've given you the figures that now at the moment or now it's fully let Aachen and Bonn, and we have some rental guarantees in Neu-Isenburg. There we are working on this.
Okay, great. Thank you very much. Those would be, even a part of the rental levels. Is it being let in the last month at the levels you saw before? Even though it has no direct impact on your rental guarantee? Give any insight into that.
Yeah. In both cases, a little bit better than the rental guarantees was.
Okay, great. To the second part of the portfolio development question. You had this asset disposal in Osnabrück, and I just wonder if you had a revaluation also downwards of your hidden reserves on those assets. Here you have a very nice profit on book value. Just wondering regard on the hidden reserves issue, if you had a little bit higher hidden reserves earmarked to that property.
Sorry, I was on mute. The end of last year, market value for this property was EUR 6 million.
Okay, great.
Does this help you?
Yeah, that's perfect.
Yeah.
Just one last question. I definitely like the strategy update, and I think it's a great idea on the scrip dividend and to give investors those options. I just wonder in regard to capital allocation right now, don't you think that reverse would be the better way to go, just in regard to your discount as well as your FFO yield on your current share price? You would actually pay a dividend with a very nice dividend yield. In regard to your yields on the acquisitions you undertook. I just wonder in regard to capital allocation if there wouldn't be a better way actually to right now allocate capital, especially also as you indicated, 100-300 basis points of spread to your current year fund portfolio as the opportunity and manage to core strategy update.
Just that I get your question right. Do you mean by instead of provide or offering a scrip dividend to use the existing facility frame to do further investments? I'm sorry.
For example, and just in regard, you would issue shares at a huge discount to your NAV. In regard to NAV, that would be dilutive. I just wonder if it wouldn't be diverse would make maybe more sense or do you actually delay the scrip dividend until next year and your discount NAV would have closed maybe.
Yeah. You see, first of all, scrip dividend based on its structure, it's offered. It's upon the decision of the shareholder if they want to use this opportunity. Yeah. That's obvious, yeah, for technical reasons. It's in the hand of the shareholders. It's not in our hand once we offer it. Secondly, I think it depends on how you look at it, yeah. Scrip dividend offers, I think additional options for shareholders which is very beneficial to them, yeah. That they can make up their mind individually if they want to use it or not. For us as a company, it offers the option for additional to strengthen the internal financing, yeah. Yes, you are talking about the current share price level, yeah.
To be fair, if you look at the amount of the dividend compared to the total market value or if you compare it to a large capital increase and then depending on the acceptance level of a scrip dividend of course, in a greater context we are not talking about huge impact here on the value.
Okay. Maybe let's go one step back then in regard to capital allocation and to be more concrete, wouldn't you agree that it's more sensible and more efficient than capital allocation to purchase back shares?
Yeah. This could be as well an option. I'm with you. From a internal financing perspective, at the moment in this market environment we rather tend to keep our liquidity here together and if we see investment opportunities then follow these investment opportunities. HAMBORNER hasn't done any share buybacks in the past. To be honest, to communicate an updated strategy and then starting as a first initial step using the remaining liquidity to buy back shares, I don't think that this would be a very trustful signal to the market. Yeah.
Okay. Thank you very much for answering my questions.
Yeah. Pleasure.
Thank you. It appears there are no questions left in the queue at this time.
No further questions?
There are still no questions.
Okay. If there are no further questions, let's say thank you very much for your attention, for participation and questions, and if we can give you any further insight, please just get in touch with us, yeah. Thank you very much.
Thank you very much from my side, too.