Welcome to the HAMBORNER REIT third quarter 2026 financial results conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions- and- answers 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. Now I will hand the conference over to the speaker. Please go ahead.
Good morning, ladies and gentlemen, and thanks for joining our conference call on our third quarter 2026 results. I am pleased to be joined today by members of our team, including, as usual, my colleague Christoph from Investor Relations. As usual, I will start with a presentation of our results and key developments, followed by a Q&A session. We hope everything runs smoothly from a technical perspective and look forward to the discussion with you. Let us start with an overview of our key financial figures as of 30 September 2026.
Rental income amounted to EUR 67.3 million, representing a moderate decrease of 0.9% in the first nine months, mainly due to the impact of property disposals. Reflecting the impact of these property sales as well as rising financing costs and also higher expenses for property operations and maintenance, FFO decreased by 6% to EUR 34.5 million.
This corresponds to an FFO per share of EUR 0.42. Overall, our key financial metrics remained stable during the third quarter. LTV decreased slightly to 44.2%, while the REIT equity ratio increased to 55.2%. EPRA NAV decreased slightly compared to year-end 2025 and amounted to EUR 8.85 per share as at the end of September. Operating performance was in line with expectations, reflected in a vacancy rate of 4.4% and a portfolio WALT of five years. Further details, as always, will be outlined now on the following slides. Let us take a closer look at the earnings development. Rental income amounted, as pointed out, to EUR 67.3 million in the first nine months. As mentioned earlier, the year-on-year decline was primarily attributable to property disposals completed in the last 12 months.
Income from passed-on costs increased by 12.1% to EUR 8.9 million, mainly driven by higher service charge prepayments from tenants, and also updated estimates for outstanding service charge receivables. Property operating expenses increased by 4.9% to EUR 15.1 million, primarily reflecting higher costs for technical and infrastructural building management. Maintenance expenses amounted to EUR 6.5 million compared with EUR 6.2 million in the same period last year. The maintenance cost in the third quarter mainly related to regular repair work and various smaller planned measures. However, compared with our expectations at the beginning of the year, expenses have been lower than anticipated, mainly due to a lower level of expenditure required for tenant improvements. Further projects are scheduled for completion by year-end, and we expect full-year maintenance expenses to be slightly above the previous year's level.
Administration costs increased to EUR 1.8 million, mainly due to high expenses for software solutions. Personnel expenses increased slightly year-on-year to EUR 6.1 million, mainly due to valuation effects related to the company's long-term incentive program. This does not reflect a structural increase in our personnel cost base. The decrease in other operating income mainly reflects a positive effect of around EUR 400,000 from the derecognition of a liability in the previous year. Other operating expenses were significantly lower year-on-year, reflecting reduced expenses across various cost categories, including legal and consultancy fees. Interest expenses increased by around 9%, primarily due to the refinancing of maturing loans at higher interest rates. Interest income also increased by approximately 10%, reflecting higher income from cash and short-term deposits.
Overall, as pointed out before, FFO for the first nine months of this year amounted to EUR 0.42 per share, representing a year-on-year decrease of 6%. On the next slide, we will briefly review the development of our key portfolio figures. Following the disposals of the DIY store in Ditzingen and the office property in Neu-Isenburg, which were transferred to the buyer in the first three quarters of this year, our portfolio currently comprises 62 properties. As of 30 September 2026, total market value of our property portfolio amounted to EUR 1 billion and 302 million. Compared with the year-end 2025, the value decreased by EUR 46.1 million, and besides the mentioned disposals, this also reflects the revaluation of selected properties as of the end of June 2026.
Following the valuation adjustments at the end of June, no further adjustments to the portfolio's market values were made in the third quarter. As part of our regular portfolio review, we reassigned several properties to the Manage-to-Core category as of the end of December 2025, and this mainly reflects shorter remaining lease terms at individual properties, which require a more active approach to asset management. Operational key figures remained largely stable during the first nine months of this year. EPRA vacancy rate increased slightly to 4.4%. Portfolio WALT amounted to five years, with six years in the retail portfolio and three point six years in the office portfolio. Let us now turn to the development on our rental income. On a like-for-like basis, annualized rental income was up 0.7% year-on-year, mainly as a result of indexation effects.
The positive impact of indexation was partly offset by higher vacancy and slightly lower rental levels agreed for follow-up leases. This development mainly reflects the strong indexation effects recorded over the past three years, particularly in our office portfolio. In the current market environment, our focus remains on achieving an attractive overall economic outcome when negotiating lease renewals and new lettings. This may involve some flexibility on rents where it helps us maintain an adequate balance with the aspects, occupancies, sustainable cash flows, and CapEx requirements. Compared with the previous year, rental income was also affected by the property disposals, which reduced rental income by EUR 1.4 million or 1.6%. As at the end of September, our annualized rental income amounted to EUR 87.2 million. Let us continue with a brief look at our tenant structure.
Yeah, tenant base remained broadly unchanged during the first nine months of this year and continues to be characterized by a high degree of diversification and a strong focus on established tenants. Our 10 largest tenants accounted for 54.5% of total annualized rental income as of 30th of September, and there were only minor changes within the top 10, mainly reflecting index-linked rent adjustments. Food retail remains the largest individual tenant sector and accounts for more than one-third of the annualized rents. Yeah, and this provides a stable foundation for our rental income, supported by the non-discretionary nature of local supply and also the long-term demand for food retail locations. Our office tenant base also remains well-diversified across sectors, with a significant proportion of rental income generated by public sector occupiers and tenants from the IT communications, financial services, and insurance sectors.
Overall, we think the composition of our tenant base continues to support here the stability and also predictability of our cash flows. Yeah, let's now take a look at our leasing activities, which continue to develop positively during the first nine months. Since the beginning of the year, we have signed lease agreements covering around 27,500 sq m. Majority of our letting result was driven by lease extensions and the exercise of renewal options by existing tenants, yeah, and resulting once again in a strong retention rate of around 85%. Looking at our lease expiry profile, only 2.1% of total annualized rental income is due to expire in the remainder of this year, 2026. The expiry profile remains well-balanced over the following years without any higher concentration in a single year. Yeah, on the next slide, we provide, as usual, an update on the company's financial situation.
Despite the continued challenging interest rate and also real estate market environment, our balance sheet and financing structure remained stable during the first nine months. As of 30th of September, REIT equity ratio stood at 55.2%, slightly above the year-end 2025 level. At the same time, EPRA LTV remained virtually unchanged at 44.2%. Compared with the year-end 2025, financial liabilities decreased to approximately EUR 622 million, mainly driven by loan repayments and scheduled amortization. Average cost of debt stood at 2.3%, while the average remaining maturity was two point nine years. Our net debt- to- EBITDA ratio amounted to 11.6x, while EBITDA interest coverage remained solid at 4.3x. Looking at our debt maturity profile, the remaining maturities for 2026 are fully manageable. Largest refinancing requirements relate to 2027 and 2028, accounting for approximately 21% and 22% of total financial liabilities, respectively.
We are addressing these maturities well in advance and continue to maintain an active dialogue with our financing partners. Based on current market conditions, refinancing expiring loans is expected to result in higher interest costs compared with the existing financing terms. Overall, our stable leverage ratios and solid interest coverage provide a sound basis for managing the upcoming refinancing requirements and implementing our strategic portfolio development. Yeah, let me conclude with an updated outlook for the full year 2026. Based on our performance in the first nine months and our updated expectations for the remainder of the year, we have refined our rental income guidance and raised our FFO guidance. We now expect rental income of between EUR 88.5 million and EUR 90 million, compared with our previous range of EUR 87.5 million-EUR 89.5 million.
Our FFO guidance has been raised from EUR 38 million to EUR 42 million, to a new range of EUR 42 million-EUR 44 million. The increase, among other things, reflects our successful letting activities during the year. The leases completed to date partly required lower expenditure for lease incentives, tenant improvements, and related maintenance measures than originally anticipated. The forecast continues to reflect the impact of property disposals, increased interest costs, as well as higher operating and maintenance expenses. Overall, we are satisfied with the business performance to date during 2026.
Our letting remains resilient, and the increase in our FFO guidance reflects the solid progress we have made during the first nine months. Based on the current operating trends, we remain confident about the development of our business for the full year 2026. At the same time, we will continue to implement the strategic development of our property portfolio.
Following the completion of our first office disposal, we have initiated further sales processes as part of our efforts to gradually reduce the office share of the portfolio. On the acquisition side, we continue to review opportunities in the retail segment. Based on our current pipeline, we see a realistic prospect of being successful here in the foreseeable future. At the same time, we will maintain our investment discipline and will only pursue transactions that meet our requirements in terms of property quality and return profile. With that, I would like to conclude the presentation. For now, thanks very much for the attention, and we are now happy to take your questions.
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 Philipp Kaiser from MPCM Research. Please go ahead.
Hello, everyone. Thanks for the presentation, and thanks for taking my question. I would start with the maintenance. You mentioned in the presentation, maintenance will end up only slightly above last year's level, well below the original budget. Is the difference kind of a saving or postponed to next year? Speaking of next year, which maintenance level would you expect for the coming year?
Yeah. Good morning, Philipp. Thanks for the question. I think overall it's fair to say that most of this amount, it can be referred to as real savings, and just a minor part there, we are talking about postponements for the next year of this slice. Concerning maintenance expenses for our future planning for next year, that's something which we are currently evaluating, as we are still in the planning process at the moment. We will then provide more information next year as part of our forecast.
Perfect. Thanks a lot for the clarification. I would move next to the refinancing. Could you provide some update on the Q4 maturities on a quite low rate of 1.4%? For 2027, which all-in rate would you get today for those refinancings? Some insight would be very helpful.
This represents just less than a handful of contracts for 2026 for the remainder of the year. We are making very good progress on this, so we're in the final stages here concerning this. The average cost of debt here, we're talking about the range between 4% and 4.5%, just in this range, I think, fair to say, based on the current financing cost environment.
That would also be the ballpark for next year, you're currently assuming, or what's your—
Yeah, I mean.
—observation on?
Yeah, I mean, obviously, we have seen some movement in the financing cost, as we all know, within the last couple of months. But as of today, and at the level of where we are talking about today, this should be in a range between 4% and 4.5%, yeah.
Okay, very helpful. Then one last question with regard to the last quarter. We already elaborated on the maintenance, so roughly EUR 3.5 million-EUR 4 million for the last quarter of this year. But even so, the bottom of your updated FFO range implies only EUR 7 million-EUR 7.5 million FFO for the last against EUR 10.7 million in the current quarter and EUR 12 million in the last quarter last year. Are there anything else weighting on the operations in the last quarter, or it is like kind of a conservative range?
[Non-English content] I mean, Q4 will be mainly influenced by additional interest costs and operating expenses here.
Okay, perfect. Thanks for the clarification. Very helpful.
Yeah.
All from my side. Thank you very.
Yeah.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I will hand the conference back to the speakers for any closing comments.
Okay. If there are no other questions, as we can see here from our side, thanks so much again for your attention, for your time. Should you have additional questions afterwards, please do not hesitate to get in touch with us. Apart from this, we wish you a good remainder of the week. Thanks so much, and bye-bye.