Thank you, Sara. Welcome, everyone, to our today's analyst and investor call for the H1 2025 financials. This is Tobi speaking. I'm happy to have our CEO, Asoka Wöhrmann, and our CFO, Martin Praum, with us today. Asoka will present you our highlights of the first half of 2025, as well as an overview on the market environment. Afterwards, Martin will guide you through our financials. As Sara said, this will be followed by a Q&A session. During today's call, we will refer to the results presentation already shared on our IR website and also during the call. In case of questions, our IR team is more than happy to take them. This call will be recorded and will be made available on our website. With that, Asoka, I'd like to hand over to you.
Tobi, thank you very much. Dear ladies and gentlemen, a warm welcome from my side as well. Let us look at our financial performance in the first half of 2025. Most of our top KPIs have either grown or are at the point of growing again. EBITDA almost doubled compared to the first six months in 2024. This was mainly driven by continued cost discipline, leading to lower operating expenses. The EBITDA margin grew by 10.9% to 21.5%. AUM remained relatively stable at €55.9 billion. Our organic AUM growth is continuing. We successfully converted open equity commitments, being a net buyer for our clients. Asset valuations have stabilized in the first half of 2025, while currency effects on our AUM prevented a return to AUM growth already in the first half of 2025. Despite the stabilization of inflation and interest rates, we see ongoing geopolitical tensions and other uncertainties.
Nevertheless, we are at the inflection point, like our top KPIs. We are at the beginning of a new investment cycle, but this new cycle will be slower, tougher, and more bumpy. Cost discipline and resilience remain crucial to our business success. That's why we adjusted our organizational setup and built key platforms that allow us to scale efficiently. We have established key global platforms to drive our business, including an integrated investment management platform, a fund management platform, and a new operations platform, all designed to drive our entire value chain. We will use this operational strength to leverage the upcoming investment cycle for profitable growth. We see that investors' demand is coming back to the asset classes where PATRIZIA can play to its strengths. It is our clear ambition to step up fundraising and to increase transactions in the second half of 2025.
We already have seen stronger momentum going into the second half of 2025. Those newly arising opportunities set the stage for a pivotal year 2025 for PATRIZIA and the broader industry. Cautious optimism is returning to the markets we operate in. International investor sentiment shifted towards Europe and APAC in the second quarter. Also, in terms of asset classes, more capital is flowing back into infrastructure and real estate. This rising demand plays directly to our strength. We already see increasing demand for the living value-add sector, core and core plus logistics, operated real estate, and premium office locations. We see a strong appetite for infrastructure, also driven by the large public infrastructure budgets in Germany and across Europe. This positive market sentiment is evidenced by the transaction volumes in real estate and infrastructure. Volumes have slowly increased over the last 12 months. Investors are more active in seeking opportunities.
The improved outlook will lead to growing ticket sizes. More deals will arise, tempting investors to start looking beyond just re-upping commitments. We have more than 40 years' experience of managing the cycle and cycles of real estate investments and more than 25 years in managing infrastructure investments. We are confident that we can deliver attractive investment opportunities in smart real assets for our German and our international clients. Real estate has long provided solid cash-on-cash returns, which is something our clients value deeply. As you can see, in the last two years of the down cycle, especially after the valuation storm, capital returns turned negative. Meanwhile, we have seen five quarters of positive total returns, with capital returns recently offering additional value on top of overall stable income returns.
Looking at the positive trend in valuations, we believe that real estate has passed the performance drop and chances to improve that real estate returns will reach again median performance levels. Our increased transaction activities demonstrate that clients are re-engaging and shifting to the buyer side. As a result, our closed acquisitions surged by around 58%, reaching €1.2 billion in the first half of 2025, and a positive trend since the first half of 2024. Divestments, in contrast, were limited to €0.3 billion, underlying growing investor confidence in the quality and the resilience of our real asset portfolios. Most of these transactions were driven by infrastructure. However, real estate investment activity is clearly gaining momentum, particularly in residential and logistics. We remain optimistic about living, which is a strategic growth pillar for us. Living today is more than just traditional residential real estate.
Living includes promising subsegments like affordable housing, micro living, co-living, and senior living. These sectors are poised for structural growth in 2025 and beyond. We continue to be excited about growth opportunities in the emerging re-infi asset class. One year ago, we introduced our new midterm strategy 2030. Our strategy is driven by the dual mega trends: digitalization, urbanization 2.0, energy transition, and the living transition. Future real asset returns will be driven by the dual mega trends and by the transition that our societies and economies are undergoing. We will stay laser-focused on execution for growth in the second half of 2025. Together with our clients, we aim to shape tomorrow by channeling their capital into long-term value creation and new attractive growth opportunities. Thank you for your attention. I would like to hand over to our CFO, Martin Praum.
Thank you, Asoka. Hi, everyone also from my side. Let's continue on page 11 of the presentation with details about our development of assets under management. The key message here is that overall, we talk about a stable development with a slight decrease in total AUM. Important for me, we've seen net organic growth and positive currency effects were actually a drag on the first six months in AUM. Also important, the pressure from valuation has diminished, as you can see in the chart. We do expect to continue to grow AUM throughout the second half. One of the drivers is certainly raised equity, but also the existing commitments that we have from our clients that will convert into investments through the second half of the year. Let's go to the next page, page 12, to look at the overall P&L picture.
We see stable management fees, but pressure from market-driven revenues, although transaction and performance fees are in relatively low absolute figures. The positive news on this chart is that we see that balance sheet investments contribute more positively to our P&L. This is evident from the significant growth in net sales revenues and co-investment income. Very important, our cost measures show material positive impact on the P&L. In terms of other revenue items, they are down significantly year on year. The quality of the EBITDA that we see here has further improved. As you can see, as an overall message, the EBITDA has nearly doubled with a better composition and better quality. Let's look at the details of the revenue side. In terms of management fees, as I said, we've seen a slight decrease year on year, but that was primarily driven by lower project development service fees.
Overall, a stable development based on AUM and business. Transaction fees are down 27%, still a reflection of lower activity, especially for continental European clients and especially in real estate. You might remember that Asoka mentioned that a lot of the new acquisitions and activity happened in the infrastructure area. Lastly, performance fees, we see continued lower realizations for our clients. We are more a net buyer for our clients. We expected lower annual carry payments, which is reflective in the performance fee numbers in the first half. On page 14, we've added, for your convenience, a quarterly overview of the revenue development. I think this nicely shows you how stable the management fee development has been throughout the last quarters and also the volatility of especially performance fees that you see here on a quarterly basis.
That is why I would not recommend to simply extrapolate the EBITDA that you've seen in the first half with $29 million, given we had annual carry payments in the first quarter of $10.6 million, which are unlikely to reoccur in the remainder of the quarters. Overall, the message is still that we do expect market activity and client activity to pick up throughout the second half of the year. This should especially be evident in transaction fees. Let's look at the cost side of the P&L on page 15. You know that we've been quite active over the last few quarters to react to the market cycle and to lower the lower client activity to become more efficient and more profitable. We can now harvest the first fruits with a decent cost reduction across different cost lines, as you can see here.
We might see some year-end catch-up effects depending on business activity. Overall, also based on year endeavors, we expect very good cost reduction percentages compared to last year. On page 16, we provide you with an update on our segment reporting. We want to further increase the transparency to the capital markets. We introduced an updated and more granular segment reporting with a clearer distinction between our asset-light investment management business model, the capital deployed in co-investments and seed investments, and thirdly, with other partially non-cash effects driving our P&L, partially stemming from M&A activities, reorganizations, or one-offs and consolidation effects. Here you can see nicely that the contribution from the capital that we have invested from our balance sheet has improved materially. Let's stay with that topic on page 17. Where have we allocated our balance sheet capital?
Around 85% is allocated to real estate, co-investments, especially in the areas of living and residential. We have invested around 15% in the infrastructure sector. If you look at the development between the invested capital at cost and at fair value, you can see a value creation of over $350 million over time. These numbers are based on the current numbers, i.e., we talk about numbers at the bottom of the cycle. We think there's further upside to the fair values of the exposure. That also explains why we've taken some opportunities now at the bottom of the cycle to increase certain stakes in certain co-investments or seed investments to create value for our shareholders. Let's go to the next page, the balance sheet situation. The key story here is the financial flexibility is unchanged. We talk about a net equity ratio of 68%.
Available liquidity with €80 million is down, basically due to dividend payments and capital deployments. Access to further financing or funding options is available. We talk about a revolving credit facility of €100 million. In addition, we have the option to use treasury shares just in case. Let me also use this opportunity to talk about our operating cash flow, which has improved materially in the first half to now €27 million after close to zero in the last year, also a driver for liquidity and future cash flow generation. Let's look at the guidance as the last page of my presentation. Let's start with AUM. You can see that if you look at AUM, there's some way to go from the €55.9 billion we have at the moment. If you adjust for foreign exchange impact on AUM, the starting base is €56.6 billion.
As I mentioned before, we do see rising momentum in client activity. We also saw rising momentum in equity raised, for example, in the month of July. That's why we are optimistic that together with the committed capital, we can convert that into investments and AUM during the second half of the year. In terms of EBITDA and EBITDA margin, I think we're well on track to meet the guidance range. Certainly, whether we come out at the lower or at the upper end of the range depends on the client and market activity that we realize through the remainder of the year. With that, I'd like to hand back to the operator to start the Q&A.
Thank you so much, Asoka and Martin, for your presentation. Dear participants, we're now open for your questions. To keep this conversation engaging, we kindly ask you to ask questions in person via the audio line. To do so, just raise up your virtual hand. If you have dialed in by phone, you can use the key combination Star, nine to enter the queue, followed by pressing Star key, six to unmute yourself. Having said this, we received the first virtual hand from Andre Remke. Please go ahead and ask your questions.
Good afternoon. Do you hear me?
Yes, loud and clear.
Thank you. A couple of questions from my side, please. First, on the AUM development. You had a zero valuation impact in the first half. It was - 0.6 in the first quarter, i.e., there was an uplift in the second quarter. Would you expect further value increases from this point of time until the year end, or is this a too optimistic assumption? Further on, on the AUM guidance, you mentioned you are optimistic to reach it, but this would mean a plus of $2 billion to $4 billion. What are your assumptions for reaching this? Are you seeing a reversion of the FX or the positive valuation impact, or should it purely come from net organic growth? This is the first question, please.
Thank you. Thank you, Andre, for the questions. First of all, you're right in your observation that the AUM valuation effects have reversed, and we now stand at zero at the first half. For the remainder of the year, we would guide for zero to positive or smaller positive development. You know that also if you compare us to other listed companies that, first of all, our AUM are very well diversified, and some of our AUM are valued once a year. This is why you see some trailing effects on valuation through the cycle. A quick answer is zero to slightly positive in terms of AUM valuation towards the end of the year. In terms of guidance range, as I mentioned before, first of all, we have existing capital commitments that we can and will convert into AUM.
We've already at this stage converted $0.4 billion of that into investments for our clients. Secondly, you might have seen that the equity raising level compared to last year was slightly down. I can confirm that in July, we've seen much more activity, and these items together make us more optimistic on our AUM guidance. In terms of FX, that's nothing we can really forecast. There might be some reversal and some normalization, but nothing we depend on.
Excellent. Thank you, Martin. Does the organic growth fit really to the open equity commitments? These are, as of June, below $1 billion, which is probably good for $2 billion, including leverage. You are striving for new commitments. On the timeline, are you really able to close the transaction because only closing is relevant for AUM growth until year end?
Yes, yes, we are optimistic. We can deliver on that. You're mentioning a fair point that there's always a certain gap between signing and closing. There could be deals that slip over year end, but we all work hard to deliver on closed acquisitions until year end. Again, as I mentioned before, we've seen a clear pickup in momentum in July, also versus the first half, which supports our view.
Okay, thank you. First, a minor question on AUM and particularly the infrastructure part. You reported a share of 18% by the end of June, and it was 19% as of March. It's only one percentage point, but around half a billion reduction. How does it fit together with your statements that acquisitions were more related to infrastructure investments?
The reason for that can be partially foreign exchange related. It can also be valuation driven, Andre. These can be smaller effects that lead to the shift in AUM.
Okay, so the infrastructure investments would be higher valuation gains and more as they are usually foreign investments, more FX related. Did I get it right?
You would typically have, I mean, if you look at the assets that we have with FX exposure, then yes, infrastructure is more exposed. Also, if you look at our AIP business, then you also have a higher share of U.S, dollar exposure. Part of the infrastructure business has Australian dollar exposure, which showed an impact on our AUM after the first six months.
Okay, excellent. Thank you for the clarification. The last question is on your cost reductions. You already mentioned some words here. Would we see a level of $56 million, $60 million, which we saw in the first and second quarter, also as a kind of run rate in case business activities would not pick up? Do you see a way around? Would you see further reduction potential in case the business would not pick up?
No, thank you for the question, Andre. I think it is fair to work with that run rate for the time being. As I mentioned in my presentation, there might be some pickup in costs over the second half, which is if you have higher business volume, higher activity, this leads to higher travel and higher overall business activity and can increase the cost base towards the fourth quarter. Overall, our aim is certainly to keep costs on a super low level throughout the year.
Okay, perfect. That's from my side. Thank you very much.
Thank you so much for your questions, Andre. We move on with Manuel and Martin. Please go ahead and ask your questions. Manuel, unfortunately, we cannot hear you, let's retry. Manuel, I can see that you're unmuted, but it seems it is the wrong device as we cannot hear you. Maybe we can retry. I make a short reminder. Ladies and gentlemen, if there's still open topics you would like to discuss, just let us know. Manuel, we come back to you in a few minutes. In the meantime, we move on with Philip Kaiser. Please go ahead and ask your questions, Philip.
Hello everyone. Thanks for taking my questions. Starting with an understanding one. With regards to capital allocation, when the H1 report you split or seem to split it, the Dawonia profit entitlements and now adding another line, Dawoinia fund, is the sum of both the profit entitlements or how can I understand this split?
Philip, can you hear me, Philip?
Yes.
Oh, good. Perfect. Sorry. Yes, well spotted. We did update the capital allocation because what we did in the first half, I mentioned that we used some of our balance sheet capital to increase exposure to very attractive assets. We had the opportunity in the first half to negotiate with selected investors in Dawonia who wanted to sell their stake in Dawonia to also be part of the buyer group. Other institutional investors took over the stakes. This is why you find a new line in the capital allocation, which is the increased exposure to Dawonia . If you look in detail at our half-year report, you'll also see that this also triggered early exit carry payments. We basically, as a broad picture, financed this acquisition of the stake with early exit carry payments.
Effectively, we converted exit carry claims into a higher stake in Dawonia in the first half.
Okay, perfect. Thanks a lot. Now €250 million, €40 million, €250 million compared to the good €270 million in the first quarter.
Sorry, say it again.
The profit entitlements are reduced now to €255 million due to the mentioned effect.
Yes, absolutely. As I said, we used part of these profit entitlements and realized some of them. At the same time, it increased our stake, right?
Perfect. Thanks a lot for the clarification. Coming to your net sales revenue, you also mentioned the contribution. I mean, the predominant part is driven by rental income from properties you warehouse. Do you have any visibility if those assets will be transferred into funds within the second half of the year, or are you confident that it will stay on your balance sheet throughout the second half of 2025?
Yeah, I think we have to differ here between strategic co-investments and seed investments that we acquired for the benefit of future products of PATRIZIA. In the latter case, if you have the right market and if you have the client interest, then some of these assets could be divested selectively also already this year. I would expect more activity in the years to come because we don't want to sell assets early if the market is not right. You know we have a strong balance sheet and we have the time to optimize returns for our shareholders.
Okay, perfect. Thanks a lot. The last one refers to other income, as you stated during the presentation, that now normalized than expected. Could we take this current level as a kind of run rate for the next quarters and years? Are there any positive one-offs still included in this line?
No, my best guidance would be that we're starting from a level of around €5 million, €6 million here, that something between €6 million and €10 million could be a good guidance for the year 2025.
Okay, perfect. Thanks a lot. All from my side, all the best.
Thanks.
Thank you, Philip. We move on again with Manuel. Please go ahead and ask your questions.
Hello, I hope now you can hear me.
Absolutely, we can hear you.
I must get used to this tool. Always nice to discover new things. All right, just two questions from my side. In terms of potential M&A activity in your sector, I know that transactions on real assets have been very slow. Have you observed anything in terms of M&A? That means, is it becoming more interesting to buy another asset manager, for example? What about price levels?
Manuel, I think you always said you want to do first our homework, platform organization, as I described. I do think we've done in the last two years quite much on this topic. I do think also, we said also if things come across and fit into our strategic positioning, what we are looking for as a smart real asset manager, and we are missing the skills or new client sets, we are open for M&A transactions, but it was not the highest priority because we want to bring our organic growth forward. That's why we also use our balance sheet some way to propel growth with seed investments, with investments, you know, what is supporting our clients' interests. I do think that can shift in the next now 18 months.
If we have opportunities in M&A and it's affordable, it's fitting to our strategic direction, as I said, and feeling in some way missing skills or can go faster to build up new skills, yes, we will. I think at the moment, we have nothing in the hand, but we can communicate to you.
All right. My second question would be in terms of fundraising. If I understood correctly, you are a bit more optimistic in terms of fundraising for the second half of the year. Could you give us maybe some details or insight which kind of clients might be willing to open their wallets and to give some funds to PATRIZIA and for which kind of asset classes?
Yes, happy to outline you. I do think we have a European client base. For example, I was excited to go into data center strategies that have been executed by us with two other partners, global partners, and I do think that works well. I do think we are seeing out of Europe demand now to look into, especially now, the first time I felt after two and a half years into real estate, infrastructure is now a strategy that's still, since 12 months, ongoing interest and there. All low levels, Manuel, I have to admit it. At the same time, I went now this year twice to Japan and Korea. Korea is more confident that clients' big pension funds are confident to invest in the U.S., but as well as now turning to Europe.
Also Japanese investors, not that they only recover their own market, and after 30 years of downturn, where we also now just investing into housing strategies for one of the big sovereign wealth funds in Japan, but also they have an interest to invest now into Europe. I can see especially Asian clients, but also European clients are interested in real estate. I think that's after, as I said, nearly 30 months. Now also, I think with the all-government programs, there's a heightened view on Europe that especially also Germany, by the way, but also core Europe can get profited from the governmental bills in infrastructure, but also U.K. government, what they have installed as investment bills, I think can might be propelled very much into infrastructure, especially in the U.K. I want to also highlight people are interested increasingly more in living strategies.
I do think Europeans are looking somewhere to get into the affordable housing topic if that well positioned in return as well as risk. I think I can see especially this kind of clients. German clients said it's still cautious because they have a high real estate quota in their investments. I do think they are on a wait-and-see position still. Hopefully, I gave you enough, you know, of feedback.
Yes, very comprehensive. Thank you very much. That's fine.
Thank you, Manuel.
Thank you for your questions, Manuel. The last person in the line would be Thomas Neuhold. Dear participants, just a reminder for you, it's still possible to ask questions. Thomas, please go ahead and ask your questions.
Good afternoon. Thanks a lot for the presentation. Thank you for my questions. There's only one left, and that's for Martin. Slide 17. Can you give us an indication of what the annualized total return was of the owned invested capital over the years?
You mean the IRR basically for the invested capital?
Yeah.
That certainly depends on asset class and exposure. Overall, out of my head, we would talk about double-digit IRRs that we generated with the balance sheet money.
Okay, thank you.
Thank you so much, Thomas. In the meantime, we did not receive any further questions. Everything seems to be answered by now. Therefore, we come to the end of today's earnings call. We say thank you for joining and you've shown interest in this lively conversation. Should further questions arise at a later time, please feel invited to get in touch with Tobi and his team. Also, a big thank you to you, Asoka and Martin, for your presentation. All the best for the second half of 2025. It was a pleasure to be your host today. With this, I hand back to you, Martin, for some final remarks, which concludes our call for today.
Thank you so much for listening in. Thank you for all the interesting questions. As Tobias Ender mentioned before, the IR team is more than happy to take any follow-ups. Asoka Wöhrmann and I both very much look forward to meeting one or the other from you on one of the next roadshows and conferences to discuss our progress and the strategy in detail. Have a good rest of the summer and see you soon. Thank you.