Welcome to the Hamborner REIT Preliminary Figures 2025 conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad or clicking the Raise Your Hand icon in the lower right corner in the video player. I will hand the conference over to the speakers. Please go ahead.
Good morning, ladies and gentlemen. Thanks for joining our conference call to discuss our preliminary figures for the financial year 2025. I'm pleased to be here today together with members of our team, including my colleague, Christoph, from Investor Relations. As usual, I will begin with a brief presentation, after which we will open the floor for a Q&A session. As in our previous calls, you now have the opportunity to submit your questions not only by phone, but also via the webcast directly through our web browser. We hope everything will run smoothly from a technical standpoint and look forward to, yeah, engaging with you.
Let's start with an overview of the key figures as of 31st of December, 2025. Despite the ongoing difficult environment and sector-specific framework, we remained broadly on track and were able to continue our business as planned in the fourth quarter of the year. Influenced by last year's property disposals, income from rents and leases declined moderately by 2.9% to EUR 90.3 million in 2025. FFO decreased by 5.7% year-on-year and amounted to EUR 48.6 million. This corresponds to an FFO per share of EUR 0.60.
Key financial figures once again showed stable development with a slight increase in LTV in 2025 to 44.3% and a corresponding decline in the REIT equity ratio. EPRA net asset value development was negatively affected by the year-end portfolio revaluation and amounted to EUR 9.07. Operating performance remained resilient with a vacancy rate of 3.5% and a portfolio wall of 5.3 years. As always, we will provide more details now on the next slides. First of all, a closer look at earnings performance. From the management of our properties, we generated income from rents and leases of EUR 90.3 million. As mentioned, the 2.9% year-on-year decline is primarily due to the sale of properties.
During the year, operating expenses and income from ancillary cost allocations declined by around 13%, mainly related to the property disposals, as well as the restructuring of our facility management. The integration of our new external providers, that led to a temporary reduction in services and associated costs during the onboarding phase, resulting in a positive one-off effect of approximately EUR 1.5 million in 2025. O ngoing maintenance measures and several larger projects, for example, roof renovations and modernization of building systems or energy efficiency measures led to maintenance expenses of EUR 10.2 million in the financial year, slightly up from EUR 10.1 million in the previous year. The increase originally anticipated at the beginning of last year have thus turned out to be significantly lower which is partly attributable to a postponement of measures to the current year.
Admin and personnel expenses increased largely in line with our estimates by around 4% and 14% respectively, reflecting our digitalization efforts on the one hand, and workforce changes on the other hand. Other operating expenses rose mainly due to costs related to strategic and regulatory projects, especially in the areas of digitalization and sustainability. Despite the significantly changed interest rate environment, interest expenses slightly declined in 2025, mainly due to the repayment of a bonded loan and loans linked to recently sold assets. Apart from that, the interest cost development was positively affected by the limited refinancing needs during the first nine months of last year. On the other hand, declined interest rates led to a lower interest income, which amounted to approximately EUR 0.7 million at the end of 2025. Total FFO for the 2025 financial year amounted to EUR 48.6 million.
Yeah, down 5.7% compared to the previous year. As a result of disciplined cost and revenue management, we were able to exceed our original earnings forecast of EUR 44 million-EUR 46 million. On the next slide, you will find a portfolio bridge showing the development of our portfolio value in 2025. It reflects the impact of our transaction activities, as well as the external portfolio valuation, which was for the first time carried out by our new external appraiser, Savills. Based on the reassessment, the market value of our like-for-like portfolio decreased by 4.6%, with office down 4.2% and retail down 4.9%.
The decline was mainly due to property-specific value adjustments, which were primarily attributable to market developments and also increased CapEx requirements at individual property locations. The effects are reflected in adjustments to discount and capitalization rates, whose development is shown on the right-hand side. Despite the value adjustments, Hamborner remains confident in the quality and resilience of its property portfolio, with the positive factors outweighing the negative, above all, the solid tenant base, including renowned local suppliers and stable office tenants, which is offering consistently stable cash flows. On the next slide, we will briefly review the development of our portfolio key figures. Following last year's property disposals, our portfolio is currently consisting of 64 assets.
Taking into account the disposals and the year-end revaluation of our portfolio, the fair value of the total portfolio decreased by EUR 92.4 million in 2025, standing at around EUR 1.35 billion at the end of December. EPRA vacancy rate rose slightly over the course of the year and remained at a low level of 3.5% at the end of the year. Total portfolio WALT also remained largely stable at 5.3 years, with terms of 6.6 years in the retail and 3.8 years in the office portfolio. Yeah, year-on-year, our like-for-like annualized rental income increased by 0.5%, primarily driven by indexation effects, especially in the office portfolio.
The positive impact of indexation was partly offset by the effects from the vacancy increase and slightly lower rent levels for new and follow-up leases, which are partly the result of numerous indexation-related rent adjustments over the past two and a half years. On an annualized basis, the disposal of the office property in Osnabrück, as well as the retail asset in Lübeck, led to increase in rental income of EUR 2.8 million or 3.1%. As at the end of December, our annualized rents amounted to EUR 88.4 million. In 2025, our only small changes occurred within our tenant structure, mainly due to index-based rent adjustments as well as property disposals.
The table on the left-hand provides you with an overview of the company's 10 largest tenants, which are characterized by high overall, high stability. As shown on the right-hand side, food retailers again contributed to more than 1/3 of the company's rental income in fiscal year 2025. The consistently high level of satisfaction among our tenants is reflected on the next slide. In 2025, we were able to achieve numerous letting successes with a total contract volume of more than 39,000 sqm . As in recent years, the majority of this was attributable to contract extensions and the exercise of options by existing tenants. Once again, reflected in a high retention rate of around 89%.
Looking ahead, Hamborner does not anticipate any significant cluster risks related to upcoming relettings in the coming years. Yeah, this is also well illustrated in the lease expiry schedule shown at the bottom of the slide. Before addressing the financial situation, let's take a quick look at the transaction activities. After the successful disposal of the two properties in Lübeck and Osnabr ü ck in 2025, we were able to sign a further sales agreement for retail property in Ditzingen at the end of December. The property is a DIY store that we acquired in 2016, and recently contributed around EUR 0.9 million to the annual rental income. The property was sold as part of our active portfolio management, the selling price amounted to EUR 11.9 million, which was around 10% above the recent market value. Transfer of ownership is expected to take place at the end of this month.
On the financing side, our company remains in a very solid position. With 44.3%, our LTV remained at a comfortable level and within our current target range. Following the repayment of the last remaining bonded loan issued in Q1 2025, our existing financial liabilities now consist exclusively of mortgage-backed loans. At this point in time, traditional bank loans continue to be the most reliable and cost-efficient form of financing for Hamborner. They enable a clear structure, high degree of planning security, as well as comparatively attractive terms, and are therefore well suited to, for our long-term business model. In 2025, we were able to reduce the financial liabilities to around EUR 640 million, down EUR 41 million year-on-year. By that reflecting the repayment of the bonded loan, as well as loans linked to the recently sold assets.
Given the limited refinancing requirements during the year, average interest costs remained at a low level of 2.1%, with an average loan maturity of 3.2 years. Further debt metrics also remained largely stable, with a net debt EBITDA ratio of 9.8, and an interest coverage ratio of 5.0. Over the next month, the volume of expiring contracts will be limited, and as was the case last year, we are very confident that we will be able to complete the upcoming tasks early and on attractive terms. Let me now continue the presentation with a brief outlook on the next slide. Our rental income for the full year 2026 is expected to be between EUR 87.5 million and EUR 89.5 million, and our assumptions for the FFO range between EUR 38 million and EUR 42 million. Both the rents and FFO are negatively affected by the property disposals just described.
Furthermore, operating results will be burdened by higher expenses compared with the previous year, with the majority attributable to maintenance essentially in connection with upcoming letting activities in 2026, which are reflected in increased costs for tenant improvements. In addition, we expect an increase in the operating expenses as a result of the expansion of the scope of our external facility management services to return to a normal level. Following the reduction in total liabilities and interest expenses in 2025, we forecast an increase in the current financial year, which is mainly due to the refinancing of several mortgage-backed loans at higher interest rates at the end of 2025, as well as in the course of 2026. Further effects on operating results are expected from the expansion of personnel capacities and the filling of vacant positions during the last month and in the first half of 2026.
Regarding the strategy adjustments announced this week, as well as the information provided on this slide, I would like to provide some additional context. The local supply market for fast-moving consumer goods in Germany, particularly concerning the food segment, has long been characterized by comparatively high stability across market cycles and changing social trends. We've been able to benefit from this during the development of our high-quality retail portfolio and also see attractive prospects for further development going forward. At the same time, it is a sector that is viewed very positively, not only by us, but also by many of our stakeholders. This assessment is based on impressions gained from numerous conversations in the recent past.
In contrast, the office market in Germany is subject to significantly changing requirements on the part of tenants and investors. For instance, with regard to location building and fitting quality as well as surrounding infrastructure. In our opinion, this will result in continued concentration between office locations, with the prospective consequence of a declining number of suitable investment locations in the future from a growth perspective. Such a dynamic environment requires to put even our successful previous strategy to the test. Against this backdrop, we have therefore further developed our corporate strategy accordingly. In the future, as part of an asset rotation process, we will focus consistently on expanding our exposure to local retail and DIY stores, building on our longstanding expertise and strong network.
Based on the quality of our existing portfolio, we intend to add attractive core and core plus properties with stable yields, supplemented by selected assets with a manage-to-core profile. As a result, we are aiming step by step for a medium-term reduction of our office exposure to 10%-20% of the total portfolio. The task at hand will be a disciplined rotation while simultaneously exploiting opportunities that arise. T alking about future opportunities, on the next and last slide, let me provide you with an overview of selected adjustments to our existing acquisition profile. We have updated this profile, for example, by adding core plus properties to support the overall return profile without jeopardizing the overall balance of the portfolio. In addition, we are expanding our regional focus to include attractive mid-sized and major urban centers, as well as rural locations with strong local supply.
We are also opening up our to smaller transaction volumes below EUR 10 million, now starting at around EUR 3 million, which will clearly be reflected in our respective pipeline, including more food retail assets. We intend to diversify our tenant structure, for example, by targeting further non-food concepts. Overall, these adjustments will help us identify significantly more attractive investment opportunities and further diversify our portfolio. With that, ladies and gentlemen, I would like to conclude the presentation and open the floor for your questions. Thanks so much so far for your attention.
If you wish to ask a question, please dial the pound key followed by five on your telephone keypad, or click the Raise Your Hand icon in the lower right corner of the video player to enter the queue. To withdraw your question, please dial the pound key followed by six on your telephone keypad if asking via phone, or click the Raised Hand icon again, which will appear as an X to cancel your request when using the video player. The next question comes from Kai Klose from Berenberg. Please go ahead.
Hi. Yes, sir. Good morning. I've got four questions for me. The first one is on the CapEx maintenance spendings. Could you explain why, again, you were not able to spend as much as you were initially planning? Did it come out of the blue in Q4? Because if I remember correctly, in the month numbers, that was right on track. It's a miss in maintenance spending, one reason that portfolio values went down quite significantly. Second question, third question is on the [audio distortion] and which levels?
Sorry, sorry.
Going forward.
I'm sorry, Kai. Good morning. This is Niclas. Sorry, you're pretty hard to understand, at least on our side. Sorry, the connection is pretty poor, I don't know. Is there any chance maybe that you could kindly repeat?
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad, or click the Raise Your Hand icon in the lower right corner of the video player. The next question comes from Philipp Kaiser from Warburg Research GmbH. Please go ahead.
Hello, everyone. Thanks for the presentation, and thanks for taking my question. Also, one question with regards to the maintenance CapEx, and I think that's also what Kai was asking with regards to the visibility. You reiterated your guidance with the nine-month figure. Came the less than expected maintenance spending as a surprise in the last quarter? That would be the first one.
Thanks for the question, Philipp. I think also that Kai wanted to raise a similar question or the same question concerning maintenance. I tried to explain it in the past because we obviously, we had this issue, not only in 2025. This includes on one hand, so many different measures across the portfolio. Secondly, what we have is that, if we have, during the course of the year, various measures which have been started and where it's not really clear if they can be finished or not on the one hand, it's not untypical that until in the second half, especially towards end of the year, there's a lot larger bundle of measures, which needs to be executed or where we are not sure if the services can be provided in the last quarter or not, when the bills will be sent in, when the services are ready with their work.
I can tell you it's something that we are intensely working on, and hopefully in the future, this will work out better than before because it's always, it's a lot of hassle for us internally, as you can imagine. Yeah, that's all I can say. Especially if you have also larger measures, which are being executed, like we have them in the past. We sometimes talk about also larger volumes, to the end of the year if measures can't be executed anymore.
Okay, thanks for the clarification then. My second one is on the restructuring of the external facility management and the positive one-off. That's just only from the integration and the current income from passed-on costs is not the run rate we should implement in our models for the coming years. Is that correct?
Yeah, that's correct. That's exactly why that's one reason why we want to be very clear on that this is a one-off effect in 2025 based on, as I pointed out, on certain services which have not been executed from the services. For that reason, we don't have the effect on the P&L side, but we think that we are going to step up to the regular base during 2026. Yeah.
Okay. the delay was caused by the first-time integration or any other problems?
No, I mean, from our point of view, this was clearly connected to the transfer now and implementation of the new service provider. I can tell you, it's a highly complex project because we changed our service providers across the entire portfolio. There are a lot of things that you need to keep in mind here. It was a project which took quite a long time, but also the implementation, not only the preparation, but also the implementation obviously takes a bit longer than originally expected.
Okay, perfect. Understood. Thanks a lot. My last one with regards to your strategy update published on Monday, so the shift more towards the retail properties and dispose the kind of or parts of the office portfolio. The office market in general remains highly competitive also, and the transaction volume itself remains muted. Do you already have any visibility or attract any interest for some of your office portfolio already, or you just kind of start screening the market for possible exits?
Yeah. Yeah, thanks. No, we are active already on the sales side here, coming from our existing portfolio, clearly. We are also going to prepare additional assets now for entering the market in the upcoming months. We have seen some more activity recently, clearly on the office side, on the transaction side. Therefore, from today's perspective, we are looking positively generally, let's say, coming from a lower level, as the market has presented itself recently, and based on the overall quality existing in our portfolio, on the office side as it is today, also, we are pretty confident that we will attract also interest on the side. We will do this step by step, and no reason to rush here. We will carefully look at the market, what kind of product, in which locations, under which circumstances, will attract the market and then react accordingly here concerning our preparation. Yeah.
Okay, perfect. Thanks for that. That's all from my side.
Yeah, and just maybe, I'm not sure if everyone was aware. Oh, yeah, I think Kai is back on the line, because I would just want to hint that he dropped off the line.
The next question comes from Kai Klose from Berenberg. Please go ahead.
Yes, sir, good morning. Two questions from my side. Could you indicate again on the cap on the maintenance side, is the reason that you saw quite a strong fall in values also for retail, that you were not able to spend as many maintenance and CapEx as you wanted to?
I'm sorry, could you repeat the what was connection for retail? I'm sorry, I didn't get it right. Could you repeat it again? I'm sorry, Kai.
I was asking the strong fall in values, like for like. Was this driven that you were not able to spend as much maintenance as you wanted to?
No, I don't think that there's a direct connection associated to this. No. I mean, this is, I mean, obviously, the overall valuation is driven by so many individual effects on the asset side. There are no major drivers here which influence the overall valuation. Might be on one or two assets, but nothing on top of my head here. It's mainly ongoing maintenance, which has been postponed.
Okay.
Kai, I'm sorry. Do you have another question? You had two questions, I think, right?
No, thanks. All good.
Okay. Good.
As a reminder, if you wish to ask a question, please dial #5 on your telephone keypad or click the Raise Your Hand icon in the lower right corner of the video player. There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Yeah. Thanks so much for your attention during this call, which was a bit more content here concerning our strategy update as in the past. Thanks for your patience. Whenever you have questions, please do not hesitate, and give us a call or contact us in other forms. So far, thanks on behalf here of our team, and talk to you soon. Bye-bye.