Ladies and gentlemen, welcome to the PATRIZIA three months 2024 conference call. I'm Moritz, the call operator. I would like to remind you that all participants will be in the listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Martin Praum. Please go ahead, sir.
Thank you, Moritz, and welcome everyone to our analyst and investor call for the first quarter results 2024. This is Martin Praum speaking, Head of Investor Relations and Group Reporting. I'm happy to have our CEO, Asoka Wöhrmann, and CFO, Christoph Glaser, in the room with me today. We'll present you an overview of the operating business, the market environment, and the financials for the first quarter. We will, during today's call, refer to the results presentation, which you'll find on our website in the IR section, home under most recent publications. As usual, this call will be recorded and will be made available on our website later. We will also offer a call transcript for further reference later today or tomorrow. With that, I'd like to hand over to Asoka to start the presentation of today. Asoka.
Thank you, Martin. Also, a very warm welcome from my side. After releasing our quarter one earnings results yesterday evening, after the stock market closed, I would like to briefly today comment on market as well as our business development topics. For us, the overall business development in quarter one remained muted. We saw overall low levels of capital raising and transactions in the market, but also early signs of stabilization and slow recovery. We see more deals recently but below or around EUR 100 million, which means more transparency for price finding and price setting. Equity raise increased to more than EUR 300 million in quarter one. If you want to express it positively, you can say 10x more than last year, but we have to say last year was extremely historical low levels.
Therefore, EUR 300 million is also in a part what we are saying is quite muted market in general. Our transaction volume is increasing, more than EUR 320 million of signed transactions, up over 20% compared to the last year. In real estate sector, we have seen more than 50% of transaction volumes predominantly sales. Clients were reducing exposure to commercial real estate sectors, precisely saying in retail as well as in office space. In the infrastructure sector, what we have seen and what we had mainly transacted was acquisitions fully in line with what we are calling in some second level explained that in line with our mega trends, what we analyzed for the future strategy. Increased fund of funds business, what we are seeing, there's also more life and more traction there, and we are successfully expanding our Danish platform there. Our outlook remains cautiously optimistic.
In infrastructure, we see increased demand for investments in mega trends, in particular digitalization and energy transition. In the real estate sector, there is more focus on value-added products, and particularly in residential and logistics, and some areas, we would say, in alternative sectors. To sum up, the investors are testing recently in the last three months and especially last four weeks, testing the waters, and are slowly returning to the market. The good news is more participants means more deals, and also more pricing transparency is super relevant compared to the last year situation. Our most important advantage is PATRIZIA will use our significant dry powder to invest in attractive market opportunities for our clients. Looking forward into 2024 and beyond, we are well-positioned to take advantage of the mega trends of our time. We are on track to develop our strategy and a new midterm plan.
We will update the market once we are ready. Our goal is to present our strategy update in quarter three. We have the clear ambition to become a key provider for Smart real asset solutions, and that is something what we are really working on. I'm seeing also more and more significant conversion of both key sectors, real estate and infrastructure. Smart investments in both real estate as well as in infrastructure area reflect the major transition themes of our time: Digitalization, Urbanization 2.0, Energy transition, and Modern living. I do think we are seeing already some of the key transitions. There is already traction, and especially in digital transition is accelerating the next generation high-speed connectivity and intelligent networks, e.g. investments in fiber networks, 5G, and data centers.
Somewhere more in the U.S., the last topic than Europe, but I'm sure that these trends will come very fast over to European topics too. The second, the Urban Transition 2.0, we are realizing more or less 80% of the population will live in cities in 2050 in Europe. Investment in modern technology, modern infrastructure for new businesses, knowledge hubs, cultural exchange, and innovation will be the key themes in this Urban Transition 2.0, and I think we feel we are well-positioned for that. Energy transition is one of the most driving topics, especially in Europe, and we are seeing EUR 9 trillion a year needed to finance energy transition with huge reliance on private capital for decarbonization, renewables, enabling infrastructure. As you might recognize, PATRIZIA recently executed the EV charging project in Germany called Corymbia.
We are also involved in battery storage, energy from waste, the Greenthesis investment, and also we are more and more working on circular economy. The energy transition will play, in our view in Europe, a very dominant theme and a transition what we want to be in. A modern living transition driven by demographics, future housing needs, affordability themes, but also new work needs, all that is driving the modern living transition. Additionally to that, the increased social services, but also new diverse lifestyles, all that is a very core themes of the living transition. I do think with our heritage that we are very strongly executed in the last 40 years in residential and in living area, I do think we felt that is an area we want to focus on. Therefore, I'm coming to the end.
Our heritage and our broad expertise in real estate as well as in infrastructure enable us to offer attractive investment opportunities also in smart sectors for all the four mega trends. As discussed earlier, I would ask you all stay tuned for our strategy update in quarter three. With that, I would like to hand over to our CFO, Christoph Glaser, to present our financials in detail. Thank you.
Thank you very much, Asoka, and welcome everybody. Good afternoon. I will spend some time with you on today's call to discuss the first quarter financials and also our view on guidance regarding the total year 2024. With that, if we go to page 6 of the deck, let's start and talk a little bit about assets under management. The good news here is that our AUM base is quite stable, and the resilience of our assets under management can be considered confirmed. There has been positive developments regarding transaction intensity in the first quarter, albeit at a fairly high sorry, fairly low level in absolute terms, netting out to an effect on AUM of 0.
On top of that, we have seen, as expected, a bit of remaining valuation impact to the tune of EUR 0.5 billion, which left our AUM at the end of the quarter around EUR 56.7, which is, in essence, a stable position. Now, the good news here is that this stable AUM base keeps supporting our recurring management fee income, which I will allude to a little bit later. On slide seven, you can see the composition of our assets under management.
There is not a lot of movement here in terms of the split by geography. And going forward, I guess once transactions come back, we expect to be a net buyer, and we expect to grow in pretty much most of our geography, so there will be no specific area that will be faster or slower. But if and when growth comes back, we'll probably see it across the board.
When you look at the asset class, clearly, again, a lot of stability here in terms of the composition of the AUM. If and when transactions come back, we expect pretty much all sectors to grow, maybe with the exception of office, where we would only make a move if we get our hands on assets that we consider intrinsically valuable and coming at a reasonable price. So we'll tread carefully in that space. Now, when it comes to risk style, again, stable compared to the recent past. Going forward, we expect the value-add and the core plus segment to grow faster. We expect in the foreseeable future, the core component to remain somewhat stable, at least in the foreseeable future.
If we turn to Slide 8, which is summarizing our total service fee income picture, first of all, it is, of course, still reflective at this point in the year of continued low market activity. Again, we expect that to directionally change later in the year. Key question is when. Management fees have dropped from EUR 62 million to EUR 57.7 million compared to last year, but it's probably important to note here that if you correct this number in this year for the fact that we had an exceptionally high level of management fee income from development services in the first quarter of 2023, as well as a couple of one-offs and two of our flagship funds, which all add up to EUR 5.1 million. If you normalize the starting point for that, we're actually seeing management fees growing in the core by 0.9% or 1% roughly.
So normalized for these exceptional adders in the first quarter of 2023, we see stable or very mildly growing recurring management fee income right now. Transaction fee income is, needless to say, at an all-time low close to zero, not surprisingly so. We believe that the first quarter this year and perhaps still also the second quarter of this year will be fairly mute in terms of transaction fee income. Some people call it the silence before the storm in a sense of transaction activity rebounding later in the year and people staying put for the time being. Let's see how that unfolds. Performance fees have moderately declined as expected, just given the nature of the cycle. So total service fee income in aggregate has been reduced compared to prior year by 13.3%.
Again, if you normalize it for the anomalies in the starting point of the management fee discussion, the number is a little bit more favorable but still negative. The outcome of the first quarter is predominantly driven in terms of absolute numbers by management fee adders and by the annual carry payments from the Dawonia co-investment, which makes up the majority of the performance fee income. With that, we can transition to Slide 9. Clearly, when it comes to cost, there is a mixed picture here because we feel very good in terms of our performance regarding general administrative expenses, which we continue to compress and to reduce and to lead to long-term low levels. That's the good news.
The staff expense side is a bit of a mixed bag because it's reflective of a constant battle between the positive effects of the restructurings we undertook and the negative effects of the inflation pressure we face for the remaining 90% of the organization, which is not insignificant. Broadly speaking, when it comes to staff cost, we see a flat development regarding fixed salary lines, again, driven by mutually offsetting positive effects from restructuring and negative effects from inflation. We see a bit of increase in variable comp because we are deliberately lumping more variable comp into long-term tools or long-term incentive schemes for which we, of course, accrue as we make decisions. We're directionally behaving a little bit more conservative or harder when it comes to short-term and closer to cash short-term incentives.
I think we think that's the right mix of an approach to keep the organization incentivized but keep them incentivized in the medium and long term through the cycles and not in the short term through cash. So that's really it on that topic. Overall, we did not manage to offset some of the pressure in the staff expenses linked to inflation through a very good story on general administrative expenses, but we are managing well, and the cost containment certainly stays on top of management agenda. And as we're going to update you later on in the year on our strategic direction, that will also come with an update on certain structural questions regarding the company, which should, in the medium and long term, also yield a more favorable cost-income ratio. But we'll brief you on that when we get there.
With that, turning the page to Slide 10, overall, looking at EBITDA, the development of EBITDA is in line with management expectations in a, not surprisingly, still somewhat challenging market. It's down year-over-year by a not-so-insignificant amount, which is, in essence, market-driven predominantly. And net sales revenue and co-investment income are down as rental revenues could not compensate for some of the negative earnings from temporarily consolidated equity investments. Other than that, there's, of course, a comment here to be made on other income that's largely driven by us being a bit harder, ultimately, on 2023 short-term incentive payouts, which resulted in a small release of liabilities. And then there is a deconsolidation effect that are positive from a temporarily warehoused product. So that's it on that topic.
Overall, at a level of EUR 17.3 million, the EBITDA of the quarter is on track to reach the guidance range that we have communicated for the year. There's not really much to add to that. As promised before, as we go through the year, we will update you on where we think we'll directionally come in inside the range. Balance sheet remains one of the strong points of the company regarding both equity and liquidity. First, net cash currently stands at roughly EUR 50 million. We're still enjoying a very high net equity ratio of 69.1%, so not much change in that respect over time. Liquidity is quite strong, adding up bank balances, cash, term deposits, and subtracting the usual reserves. We have an available liquidity level of almost EUR 323 million.
So we will very diligently continue to manage and deploy that, which takes me to the next Slide 12. So we do use our balance sheet to support strategic investment initiatives. They usually have a duration of 6-36 months. When it comes to seed funding, we're probably talking more about 6-24 months. When it comes to warehousing, we're talking more about longer term, like perhaps 24-36 months. And you can see the composition of our major balance sheet investments as of the end of the quarter on the left part of the page. What is probably good to know and also comforting from an investor point of view is that some of these short to medium-term seed investments have started to roll back. So in the first quarter, we've seen another EUR 25 million rolling back in.
So the effort is getting traction, and we see some of the cash we have deployed rolling back as expected, which is good. Obviously, some of these seeding and warehousing activities have an impact on the composition and geography of our balance sheet. So in order to enable you to have full transparency there and to read the balance sheet correctly, we have given you a bit of an overview here as to how these seeding and warehousing activities are impacting our non-current assets, our current assets, and so on and so forth. So long story short, we're enjoying sufficient liquidity, which gives us the freedom to make selective strategic moves. And we're going to continue that, and hopefully, this will pay back nicely as markets will pick up again and first and second closings and third closings and certain vehicles will occur at speed.
We are preparing for the annual meeting, which will be hosted in June on the 12th of June. So here's an overview on Slide 13 regarding that topic. The management board of directors, quite importantly, will propose a dividend per share of EUR 0.34 for the fiscal year 2023. That's the sixth consecutive increase in dividends and represents a 3% year-over-year growth. We are expecting to trade ex-dividend on the 13th of June, and the dividend will be payable four days later. So in a nutshell, there's sustained dividend growth backed by solid balance sheets, sufficient liquidity, and a positive operating cash flow. I would like to stress that last point again. Despite our fairly compressed income statement, given the fact that we're having to deal with a lot of non-cash effective P&L items, especially below EBITDA, we are enjoying, actually, a healthy operating cash flow.
So the proposal to pay a dividend at the magnitude described here is quite well supported by both the balance sheet and the operating cash flow, regardless of a temporarily compressed income profile. Last but not least, when it comes to guidance for the year, I already briefly alluded to that. At this point, we are confirming our guidance. We remain cautiously optimistic for the full year. Dr. Wöhrmann already alluded to the fact that we are transacting, albeit in absolute terms, low level. There is movement in the markets. Other market participants, up until yesterday, were releasing some information indicating that deals are in the making, pipelines are being created. So we look forward to the second, third, and fourth quarter of the year.
Our AUM guidance remains between 54-60, perhaps for the time being through the middle of the year, somewhere in the middle of that range. EBITDA outlook remains between 30-60, and EBITDA margin remains between 11%-19%. Maybe one more comment on the short and medium-term expectations. The second quarter, we expect still to be a muted one because transaction activity will be in a silent mode awaiting rate cuts and other activities later on in summer and autumn, which then leads us to believe that the third and fourth quarter could become more interesting. That's what we're focused on. Let's see how the market will develop, but that's where we stand mentally right now.
AUM, as I mentioned, is expected to stay flat at midpoint in the fiscal year because there is still some valuation pressure in the pipe, but planned organic growth will put a positive spin on that. EBITDA is expected to be clearly below the levels of 2023 at the midpoint of 2024 guidance due to lower support from other income but also cyclically driven lower performance fee income. That's really it from me today on the first quarter financials and our current view on guidance. I assume, Martin, we will transition now to Q&A.
Yes, absolutely. Operator, we're open to Q&A now.
Ladies and gentlemen, we will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue.
If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star, followed by one at this time. One moment for the first question, please. And the first question comes from Andre Remke from Baader Bank. Please go ahead.
Yeah, good afternoon, and thanks for the presentation. A couple of questions. Starting with the transactions, the split in terms of acquisition and disposal was almost equal in the last quarter. Could this also be the expectation for a split for the upcoming quarters be? What are your indications you receive from or plan to receive from your client side? Are there more appetite for disposals or acquisitions at the moment? That's the first question, please.
Yeah, thanks, Andre, and good to have you on the call. Look, we expect the mix to be more in favor of acquisitions as we go through the year and also the next year. As I mentioned before, we intend to be a net buyer when the market comes back for a couple of reasons. One, we don't see a lot of vehicles in which we would have any pressure to dispose from an investor or PATRIZIA angle.
Secondly, we believe to have our hands, in general, on high-quality assets. So there is not so much disposition dynamics in the mix other than rationally planned ones over lifecycle of certain vehicles. And there is maybe an occasional redemption request-driven disposition, but those are really outliers. So that contrasted with an acquisition-geared stance, we will definitely have a favorable mix in favor of acquisitions and also be a net buyer in that respect.
The key question from a P&L point of view, of course, will be where the acquisitions and dispositions will occur because that will drive the occurrence or non-occurrence of transaction fee income. So the more in Germany grounded vehicles, the more transaction fee income, the more in international flagship vehicles, the less transaction fee income, but going forward, higher levels of all-in management fee income. Second and last point, maybe, our infrastructure business is definitely in an acquisition mode. And there, I will see a quite healthy acquisition-geared transaction mix. So that will put a positively exacerbating effect on top of the net-net positive real estate mix.
Okay, thank you. The second question also refers to the asset under management. You said that EUR 0.5 billion devaluation in the first quarter was in line with your expectation, which we all see in the market. In the last call, you stated you are expecting some 3% or so could be an indication for this year. Is this still the case? And what are your expectations for redemption? Is it all already visible?
Okay. Look, last time I checked, we indicated that we expect something potentially up to 5%, so between 0% and 5%. Directionally, I would probably say at the moment, I'm seeing something like three or four maybe, but not more than that. And we believe that that should then be it in aggregate again. Now, the ranges there will be quite substantial between double-digit impacts in the commercial asset sector and close to zero impact or even positive impact in some residential buckets. So we expect residential to be rather uneventful as we go through 2024, in some cases, even positive.
We expect logistics and retail to be quite reasonable, and office will still continue to see, in some cases, especially in B locations with ESG capital expense pressure, double-digit devaluation pressure. So that's on point one. With regard to redemptions, I can very clearly say that there are no signs of any major redemptions in the world that we live in. We do see in some of our U.K. vehicles a couple of redemption requests, which are not atypical for those type of vehicles in this part of the cycle. In the continental European environment, we see very, very few redemption requests. And those we are handling so far with almost no negative fallout because of the strengths of our investor base, which has a tendency to, let's call it, circle the wagons in some cases, believing in the assets, and then dealing with small occasional redemption requests quite effectively.
So that's our world, and we know that we positively differentiate ourselves in that respect compared to some competitors. But again, there are a couple of U.K.-based vehicles where you'll see some redemptions, but the grand scheme of things, manageable. Okay. The last question on the performance fees. Probably, you can explain to me why a performance fee could be negative. You had a slightly negative really, and minor topic, but a negative performance fee sounds weird. The first point and the second point, you get the Dawonia carry of EUR 50 million in the first quarter. This comes not as a surprise that this is lower than last year. Could this be seen as a new run rate, or will this tail down going forward? And maybe you could also elaborate on the negotiation you indicated in the last call. Yeah, clear.
Look, I'm not surprised you picked up on a negative performance fee stream to the tune of EUR 500,000. The answer to that is quite straightforward. There was a single mandate for which we had to make an adjustment in this period, which calculates a performance fee in certain steps over the lifetime of the mandate. And it's currently in an unwinding phase, and we had to make an adjustment there. And because this was the only entry of that type, we ended up having a negative number here, which is, A, somewhat unusual, but B, linked to the very nature of the single mandate and probably a rare occurrence of a standalone single negative entry. So that's the answer on that one.
We still have, now that said, we still have three-digit million hidden reserves in quotation marks in the form of embedded performance fees in our German vehicles. So when you put a corrective entry on a single mandate to the tune of EUR 500,000 in context of that, we're talking about that versus something north of EUR 200 million of embedded performance fees, just as a little side note. Now, on the topic of Dawonia, you rightly observed that the current level of performance fees, which is slightly lower than last year's, that is quite natural given the return profile of that vehicle over time. And we have alluded to that before, that there is a gradually declining performance fee or annual carry income expected here. Now, that said, the question regarding a new run rate requires a more holistic answer.
We are in very, very active discussions with our Dawonia investor consortium as we speak right now, and we are progressing quite well. Our objective here as an investment manager and advisor is to lead these discussions to a new contract with the existing investor base, i.e., to retain the mandate as an AIFM and as an advisor for the long term, to retain the AUM base, and to retain a market-level conforming management fee in that context. You can expect a different mix of income in the context of such a deal if and when it gets concluded. Therefore, the question regarding a performance fee trend may become a potentially obsolete question, to put it simply. We are on a very good track, and I hope to be able to give you a bit of a more detailed update on the next call.
Our objective remains to renegotiate this mandate well within the extension period. At the moment, we are halfway through the extension period of the old contract, and that's really it on that topic.
Excellent. That's from my side. Thank you very much.
Yeah. Okay. Looking at the list of call participants and the question queue, I realized that there appear to be no more questions at this point in time. We obviously take that as a sign of very transparent and clear financial reporting. So I appreciate that sign of confidence and trust and response. Thanks for dialing in. More details will be shared with you, as already mentioned by Asoka Wöhrmann, during our Q3 call and hopefully a bit sooner than that with regard to the Dawonia topic. Otherwise, we will see each other and hear each other again three months from now.
Thank you very much for joining today, and appreciate the questions that were asked.
Thank you.
Thank you.
Ladies and gentlemen, the conference is now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.