Ladies and gentlemen, welcome to the TAG Immobilien publication of Interim Statement Q3 2024-2025 conference call. I am George, the call's operator . I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Martin Thiel, CFO. Please go ahead, sir.
Yeah, many thanks and good morning all, and very warm welcome from our side. Many thanks for dialing in for our Q3 results. As always, let's start on page number three of the presentation, which shows a comprehensive overview about our results in the first nine months and also gives the first outlook on the guidance for 2026. Let's start with the operational development first in the first nine months of 2025. FFO I in the first nine months of 2025 came in at roughly EUR 136 million, compared to the previous year, just a 4% increase. That's important to point out that this increase was mainly driven by a higher EBITDA contribution from our rental business in Germany and in Poland, which increased by 6% year on year.
Looking at the sales result in Poland, we had a result that was more or less on the previous year level, so a little bit reduced. EUR 34 million was the sales result compared to EUR 38 million in the previous year. As already stated in the previous conference calls, we expect that in the fourth quarter of this year, we will have a large number of apartments handed over. As you know, as the result is realized when we hand over the apartments, we expect a quite strong increase in the fourth quarter 2025 for the sales result in Poland. Very positive development in the sales number. You'll see this on the right side. We sold in the first nine months 1,973 units in Poland. That compares to 1,435 units in the nine-month period in the previous year.
Especially the third quarter was a very strong one. I will come back to this a little bit later. Looking at the LTV development, it is quite strongly down at 42.3%, also driven by the capital increase that we conducted in August 2025 already to partially finance the Resi4Rent acquisition. We issued 7% of the share capital, total net gross proceeds at EUR 186 million. Also the operational development was quite helpful in reducing the LTV. Of course, fair to look at a kind of pro forma LTV post the closing of the R4R acquisition. This pro forma LTV would stand at 46.1%. Even after the acquisition, the LTV is down compared to the beginning of the year and already very close to our LTV target of 45%.
In a normal course of business, we would expect that we quite quickly, perhaps in the first one or two quarters of 2026, already at the LTV target of 45%. Looking at the guidance, firstly for 2025, we increased the FFO I guidance to EUR 174 million-EUR 179 million. If you look at the result that we have achieved in the first nine months, that should be all in a good way. As always, we expect in the fourth quarter of the year, a little bit more maintenance in the German business. Therefore, perhaps the Q4 result in FFO I is a little bit weaker than in previous quarters or will be a little bit weaker, but clearly better results than expected in 2025 for the total year on a per-share basis. Taking into account the higher share count after the capital increase, FFO I guidance is then more or less unchanged.
For 2026, we expect a quite strong increase. The guidance range for 2026 is between EUR 187 million and EUR 197 million. It assumes a closing of the R4R portfolio at the beginning of the second quarter or at the end of the first quarter. I will come back to this a little bit later in more detail. This is quite strong growth that we predict in FFO I, 9% in absolute amounts, 4% on a per-share basis. Even stronger is the growth that we expect in the FFO II guidance. Firstly, we also increased a little bit the FFO II guidance for 2025 following the increased guidance in FFO I. If you look at the result that we predict for the Polish sales business in 2026, where we expect nearly 50% growth, you see that the increase in FFO II that we expect for 2026 will be quite material.
The new guidance stands between EUR 279 million-EUR 295 million. That is an increase of 19% in absolute terms and still on a per-share basis of 14%. As we already announced, we want to increase the payout ratio for our dividends. For the first time, for the dividend paid for the financial year 2026. This is a dividend that is paid out then at the beginning of 2027. The new payout ratio is set at 50% of FFO I compared to 40% of FFO I for the guidance for this year. This translates into a quite strong growth in the dividend of nearly 30%. On page four, you find more details on the financial performance and the German portfolio. I do not want to discuss with you every figure, but it is interesting at the bottom of the page that we have begun also to acquire in Germany again.
Yes, it's still a quite small number, so 367 units acquired until end of October 2025, but perhaps there's more to come in the next week. We are finding opportunities, yes, on small sizes on one side, but if we look at the average acquisition multiple or the gross yield that we achieved, around 10%. These are really high-yielding assets, quite attractive portfolios. Still, vacancy rate in these portfolios, locations that we know very well in Eastern Germany. We're happy that we acquired also some units in Germany. Yes, of course, we have to invest into these properties, but not massively. Therefore, we see opportunities in the German market as well, although clearly, as already mentioned in the previous calls, the main capital allocation is currently happening in Poland.
Let's jump to page number seven of the presentation, where you'll find more details on the FFO I development. I think I already mentioned the main highlights. An increase by 4% year on year. Just as an explanation, if you look at the table, you find also one-offs that we eliminate. In this case, we're eliminating gains. A netted number is EUR 1.9 million. Just as a background, you'll find also more details in the interim report. You're here eliminating subsidies that we received for modernization work. Therefore, we have for the first time since longer ago, also already one-offs that we eliminate here. Let's go to page number eight. Page number eight shows you the development of FFO II, which is based on FFO I plus the Polish sales business. As said, the third quarter was already a good one.
The adjusted net income from sales in Poland came in at EUR 17.6 million compared to EUR 11.6 million in the second quarter. I think the first quarter was even lower. Once again, we expect now for the fourth quarter, as a result of high handovers, a quite strong result. Therefore, we're very confident that we achieve our full-year guidance for the sales result in Poland. Page number nine shows you the development of the EPRA NTA, also on a per-share basis. We still had a growth in the third quarter despite the capital increase conducted obviously below the NTA, but this impact was not meaningful. You see this on the chart. The dilution effect on a per-share basis was EUR 0.35. That means the net profit that we achieved during the first nine months was far higher than this smaller dilution effect.
You see that we had in the first half a positive impact on the NTA per share from the portfolio revaluation of EUR 0.69. If you remember the numbers, we had in Germany a value increase of 1.4% in the first half of 2025. If you ask us what is the expected valuation result for the second half 2025, I mean, obviously, as of today, we have not the precise number, but we expect that the value uplift in our German portfolio should be very similar to what we've seen in the first half. Something around 1.4%, like in the first half of 2025, is perhaps a good estimate. That is, yes, of course, on one side, still a small value increase, but important that we are now seeing the third valuation in a row in Germany, where values are growing again.
That's, of course, helpful not only for the NTA, but should also support the LTV development at year-end 2025. I'm on page number 11 of the presentation that shows the maturity profile. What I wanted to explain here is our quite strong cash position that we had at the end of the third quarter. In total, the group had available non-restricted cash of EUR 1.35 billion, which is, of course, for us, quite exceptionally high. Out of this EUR 1.35 billion, roughly EUR 565 million is then designated for the purchase price payment of the rental portfolio, which is still outstanding. We have a larger maturity next year, which is the EUR 470 million convertible bonds maturing in August 2026. We have the cash already in the balance sheet, and we will use part of our cash position to repay these convertible bonds.
A kind of normalized cash position after the payment of the purchase price for the Resi4Rent portfolio and after the repayment of the convertibles is around EUR 300 million-EUR 350 million. That is still a good cash position, but it is good to have it because we still want to grow and want to continue to grow, especially in the Polish rental portfolio. The cash will be, of course, the basis for this. Let's come to the German business. I am now on page 13 of the presentation. Quite good development that kicked in in vacancy reduction. As always, in the first quarter of the year, we had a slight increase in vacancy. We started the year at around 3.9%. Here we present also the vacancy rate from October, which is already down to 3.6%.
When we look in our business in the last days and weeks, how this develops, we clearly expect further vacancy reduction until year-end. Therefore, the German portfolio, which should perhaps not be a surprise, is still performing very well. Looking at the like-for-like rental growth in Germany, that was a little bit reduced compared to the previous year in the first nine months. 2.3% in the basis like-for-like rental growth and 2.6% in the like-for-like rental growth, including vacancy reduction. As said, firstly, we expect a stronger impact from vacancy reduction in the fourth quarter. Secondly, regarding the basis like-for-like rental growth, it is not a trend that this is going down in the future. Therefore, we should also see here improvement in the fourth quarter of 2025.
There's simply also a kind of seasonality in there, depending on certain rent decrease that you do in a quarter or do not in a quarter. It's clearly on an increasing path. The guidance for 2026, which I explained a little bit later, will also confirm this. Let's look at the Polish business. I'm now on page 15 of the presentation that summarizes the Resi4Rent acquisition. I mean, we have presented this back in August when we signed the contract, but perhaps some sentences that are necessary regarding the closing. As you perhaps know, with the press release after the signing in mid-August, we announced that we expect the closing to happen at the end of the third quarter or in the course of the fourth quarter 2025. Basically, there's just one main condition for the closing, which is the approval by the Polish Antitrust Authority.
We have to accept that the Polish Antitrust Authority extended the process for looking at this project. This is something where we have not really a chance to accelerate this. That is still all on a good way. We expect the approval to happen. We expect the closing to happen. As it is the first transaction of this kind in the Polish rental market, there has not been an acquisition of this size before. As it was basically the first time that the Polish Antitrust Authority needs to look at such an acquisition and at such a market, the Polish Antitrust Authority told us that they now want to conduct their own market research. That means they will reach out to other landlords. They will do some investigations around customer behavior. That should take some time.
Therefore, as a base case, at the end of the first quarter 2026, beginning of the second quarter 2026, the approval and the closing of this transaction should happen. Let's look at page number 16. After the acquisition closes of the rental portfolio, we are almost at our strategic target that we announced some time ago. Close to 10,000 units will be the rental portfolio size at the end of 2026. That does not mean that we are stopping now the growth in our Polish rental business. We already have units under construction, and we want to start additional construction of around 2,300 units in the course of next year, in the course of financial year 2026. As construction takes roughly two years, we will finish them in the course of 2028.
That means we will continue to grow in the Polish rental sector, even behind the acquisition of the Resi4Rent portfolio, because we simply see the market as attractive. We have a great team and a good platform there. We have a good cash position, as already mentioned before. A large part of these 2,300 units that we want to start to construct next year is basically already financed from the cash that we have on a balance sheet. Therefore, further growth in the Polish rental sector is clearly a target for us. Page 17 shows the operational development of the Polish rental portfolio. To keep it short, that is still very good and strong. The vacancy in the units that have been on the market for more than one year is still at a low 2.4%.
The like-for-like rental growth is still at a very good 3.4%. That means rents in our Polish portfolio are still growing despite the really exceptional growth that we have seen in 2002 and 2023. It gives us, of course, confidence for the further development of this portfolio. That was the rental business in Poland. A quick look on page number 18 regarding the sales business and a look especially at the sales results. As already mentioned, the number of units sold in the first nine months, and especially in the third quarter of 2025, was higher than in the previous period or in the previous quarter. We sold 815 units in the third quarter compared to 566 in the quarter before.
It means another quarter or another number of units sold in the fourth quarter, like in the third quarter, would bring us more or less exactly to a full-year guidance of 2,800 units. We also see that the sales volume is increasing. It is not only the pure number of units sold that is stronger. Also, the sales volume saw a quite strong increase. If you add up the first three quarters of 2025, we had a sales volume of EUR 327 million that compares to EUR 261 million in the previous year. We are very happy about this that we simply observe still quite strong margins. We are selling in Poland still at gross margins and expect also this to happen in 2026, above 30%.
Sales prices remain on high levels, and that creates quite exceptional results in the Polish sales business today and in the next year. That brings us more or less to the guidance for 2026, which is shown on page number 21. Firstly, a look on the FFO I guidance for 2026. As I said, an increase by 9% in absolute terms and by 4% on a per-share basis. The range that we set for the FFO I guidance is quite broad this year, from EUR 187 million-EUR 197 million, so EUR 10 million. The reason for this is simply the estimate that we needed to do for the Resi4Rent closing. The guidance assumes that the Resi4Rent closing is happening at the 31st of March. That would be exactly the midpoint of the guidance.
If it happens a little bit earlier, so more in the beginning of the first quarter, then we would be more at the upper end of the range. If we close more toward the end of the second quarter, then we would be more or less more at the lower end of the range. Therefore, a little bit broader range in FFO I guidance. Again, still, despite the little bit delayed closing, an increase of 9% in absolute terms, 4% on a per-share basis. Strong increase, as said, in the net income from sales in Poland that we expect. Nearly 50% increase as a result of higher handovers next year. As said, high sales prices and good margins that we currently achieve in Poland.
Also, the joint ventures that we have in Poland now since, I think, three years create for us a quite nice service income that also adds up to this good development. On the FFO II, it is a quite strong increase, 19% in absolute terms, plus 14% on a per-share basis. As already mentioned at the beginning, users also expect a quite strong increase in the dividend on a per-share basis. An increase that should add up to up to 30%. Page 22 of the presentation explains in more detail the development in the expected FFO I for 2025, which we also increased a little bit today, and the expected FFO I for 2026. As said, the Resi4Rent acquisition is not factored in for the full year. You see this year that we assume the closing for this purpose of the 31st of March 2026.
That is, of course, a main driver for the overall FFO I development, but also the existing German business and the existing Polish rental portfolio, which will grow, as discussed, strong in the future and contribute to this development. Finally, a look at page 23, where we find the key assumptions, the underlying assumptions that we expect for our guidance for 2026. Of course, also the EBITDA in more or less all businesses are expected to increase, so quite strongly if we look at 2026 numbers. Just to mention one or two things. Firstly, we still expect further vacancy reduction in the German portfolio. Whatever we exactly achieve here in 2025 will not be the end of the development. There is further potential in the portfolio. As you see, we expected also the like-for-like rental growth in Germany should be better next year compared to this year.
Perhaps not a surprising trend that the rents in Germany are increasing. Rental growth in Poland should still be above 3%. We still see growing rents there in Poland. Not only the rental business, but as mentioned, especially the sales business is running very well. When we look into, for example, the sales numbers, the sold units that we expect next year, we expect that we sell around 2,900 units. That should be even on the basis of a little bit higher prices. The sales volume that we expect in Poland 2026 should be close to EUR 0.5 billion . That is it from my side as a quick overview about our nine-month results and the guidance for financial year 2026. Many thanks so far for listening, but now I am, of course, very happy to take your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone 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 and one at this time. Our first question comes from Marios Pastou with Bernstein. Please go ahead.
Hi there, good morning. Thank you for taking my questions and for the presentation. I've got two questions from my side. Firstly, on the FFO II for next year, I see that's being supported by quite a significant ramp-up in the level of target handovers. Are you able to mention how many of these handovers are already pre-sold and fixed? Secondly, on the delayed closing of the acquisition in Poland, is there any risk that they place additional requirements on the deal for it to close or that it potentially gets delayed beyond your expectations? Any further comments here will be helpful. Thank you.
Yeah, good morning. Good morning, Marios. To answer your first question, firstly, it's absolutely correct. We expect a quite strongly increased number of handovers next year. As shown on page 23, this number of units should be around 3,200 units, including what we hand over in joint ventures compared to 2,100 for this financial year. That's, of course, a main driver of the increase. The pre-sale ratio is quite high, so that should be today almost at around 80%. We have very high visibility on our result for next year. As you know, the more only technical risk is that, as always, a larger part of the handovers should be in the fourth quarter next year. We need to hand it over until the 31st of the financial year to realize the profit in the balance sheet and the P&L.
If it's handed over on the 1st of January, then it would be next year. Economically, we have quite high visibility on that result for 2026 already. Regarding the Resi4Rent closing, I mean, we're very confident that this closes. Why are we? In fact, we are, yes, on the one side, after the acquisition, Poland's largest landlord with roughly then 9,000 units. If we look at the overall market, we are a very small part. We have 1.2 million rental apartments roughly in Poland, out of which we own 9,000. It means we are far away from dominating the market. We are far away from a situation where we can set prices. We are really price taker. We are competing really against a large number also of private landlords. Therefore, all the arguments on our side.
What we have to respect, as already mentioned, is that it takes time that the Polish Antitrust Authority basically says, well, this is the first transaction of this kind. We have never looked at the rental market before. We need to, or we want to do our own market research. This is then something where we not have the influence on the timing. The estimate that we've given, so something around 31st of March 2026, should be the best estimate that we have as of today.
Okay, thank you, very clear. Just sorry, as a slight follow-up to my first question, if you're now kind of looking at selling around 3,000 units or just below 3,000 units for next year, could we then think of around that level being a good kind of sales and handover assumption beyond 2026?
Yes, perhaps we are even a little bit more optimistic because we see a very good development in the Polish sales market. I mean, as you know, the overall fundamental data is quite excellent in this market. Now, as interest rates are going down in Poland quite significantly, we see simply more buyers coming back to the market. For more people, it's, let's see, more affordable also, again, to buy apartments. As of today, if we look after 2026, we're even more optimistic that this number is potentially also something we can increase.
Very clear. Thank you very much.
The next question comes from Andrew McCreath with Green Street. Please go ahead.
Hi Martin, good morning. Thank you for the presentation. Two questions from my side, please. Firstly, on capital allocation, how are you thinking about this with respect to both the built-to-rent and built-to-sell platforms in Poland? Are you seeing better relative returns in built-to-sell right now? My second question would be on the dividend. Announced back in August, your intention was to increase this to at least 50%. Today, of course, you have confirmed this. Does this decision to bump up to 50% therefore mean that you are not seeing much in the way of further acquisition opportunities? Also, perhaps just a bit more color on why 50% given your pro forma LTV. Thank you.
Yeah, good morning. Thanks for the questions. Perhaps I'll start with the second one. We currently, which is a little bit related to the first one, we currently pay out or want to pay out 50% of FFO I for the dividend for financial year 2026. That's correct. That means we are paying or we have the payout ratio defined in relation to FFO I. That means we are keeping the full sales result in the balance sheet. That simply helps us to grow. To grow more or less in two businesses. Firstly, in the sales business. Secondly, that's strategically even more important for us, to grow in the rental business. 50% of FFO I is, in fact, as I said, a smaller part of the total cash flow that we generate here. That's how it should be.
With an increased payout ratio, we are not hurting our ability to grow. We are not hurting our LTV target. That means in a kind of base case, we construct apartments on our own, we do not need really additional equity. I mean, the equity issues that we did this year in August, that was clearly on the back of an, let's say, exceptional acquisition. Like the Resi4Rent portfolio is EUR 565 million. This dividend policy allows us really to grow. Regarding capital allocation, I mean, on TAG level, we are supporting quite significantly the growth of the rental business. Because here you need, or you cannot finance that in full, that is very clear. You need additional funds or kind of equity proportion for the construction of the apartments.
Whereas in the sales business, this business is to a very large part financed via customer prepayments. The business, as you can see from the numbers, is generating a lot of cash surplus. Therefore, just to give an additional comment, as of today, there is no single shareholder loan in our sales business, meaning in our subsidiary Hobik. This company is really funding the full growth on its own and is able to grow. Therefore, we are not shrinking or limiting the sales business. We are very happy if this business is growing as well, but it is doing this based on its own cash flows.
Okay, that's very clear. Thank you, Martin.
The next question comes from John Vuong with Van Lanschot Kempen . Please go ahead.
Hi, good morning, Martin. Thank you for taking my questions. Just on that Resi4Rent delay, when you're talking about that the Antitrust Authority is conducting their own market research, what do they consider as the market? And what's the rest that they consider institutional market in isolation?
Yeah, good morning, John. Exactly, that's the purpose of the market research that the Antitrust Authority is conducting. That is simply once, based on their own research, an overview of how does this rental market in Poland look like. So how many landlords are on the market? Is there a differentiation between the landlords? Are there really different segments, or is it one rental market? In the end, the view of the customer is the deciding one. That's the purpose of this Antitrust approval. If the customer tenant is looking for an apartment, is there only one type of landlord he normally rents from, or is it a broad market? The second option is the case, right?
We know from customer service that, of course, most important for the choice of the customer is the price of the apartment, location of the apartment, standard of the apartment. A decision is more or less never really based on from whom am I renting for? If you look at internet platforms, you cannot even select offers based on who is renting out the apartments. This is something that you can read currently in reports issued from, if this is JLL or CBRE or Savills. In fact, the Antitrust Authority, and we have to accept this, says, okay, that's all good, we see this, but we have not investigated that on our own. Therefore, we have to accept that this takes them some weeks. Therefore, the approval and the closing of the Resi4Rent transaction is postponed.
Okay, that's very clear. Thank you. Just looking at the development start for built-to-rent, it's quite a significant step up compared to what you historically have had on the construction. At the same time, you said that there's scope for more units in the built-to-sell segment. Just trying to understand, are you growing your overheads, or was the platform underutilized? How should we think about your run rate of developments per annum for both segments?
Yeah, the platform is definitely able to do this. An additional 2,300 units construction start in the rental business compares units of under construction that we had in total. For example, when we have taken over WOBIG, it was, I think, for sales business, it was between 6,000 and 7,000 always units. It is not far away from that today. Yes, we have in 2022, 2023, after we also sold at that time, a little bit lower number of units, reduced the number of employees, especially in the construction department. We have increased this in the past month. It was never a change in overhead, or as already mentioned, we have never weakened our margins by doing that. The platform has definitely the potential to do this.
We are not concerned that with this new construction start, we are, how should I say it, overstretching the capability of the platform.
Just on run rate, how should we think about it in, say, 2026, 2027 in terms of new development starts?
Yeah, if you want to know for the rental business, firstly, we decided we give this year by year. As we said, we want to grow further. Perhaps 2,300 units construction start is a little bit more the upper end on what could be a future run rate. If you ask us for a base case, let's assume that perhaps around 1,500 units, perhaps a little bit more, is a good estimate for something that we can start every year. Again, this number of units could be financed purely from the cash surplus that we get from the sales business, plus, of course, from the now really growing cash flow from the existing rental portfolio, plus then some additional debt that we get perhaps from TAG level without hurting the LTV target. That's what's important.
We have a very visible growth opportunity based on cash flows that we produce in the portfolio already, based on financing assumptions that are not aggressive. We know that the LTV is not going up while we carry out this plan.
Okay, clear. Thank you.
Our next question comes from Thomas Neuhold with Kepler Cheuvreux. Please go ahead.
Good morning, everybody. Thank you for the presentation. Taking my questions. I have two. The first is on the Polish build-to-hoard portfolio. If I compare Q3 figures with Q2 figures, obviously, you reduce the number of units which you want to build quite significantly. I was just wondering, did you move units from build-to-hoard to build-to-sell, or did you just reduce the speed of the rollout after the acquisition you just did recently? That's the first question.
Yeah, good morning, Thomas. Yeah, indeed, with some projects, we waited a little bit because although the cash position is quite good, to be too aggressive to start construction with a lot of units, and then on top of that, the acquisition without having the financing in place, that could have been perhaps a little bit too aggressive. No, more or less, the plan to grow the portfolio is still unchanged. There's a time shift of some months, but overall, it has not really changed. Perhaps it's a little bit more, as I said in the answer before, what we want to start in 2026 compared to what should be the run rate in the future. The plan is clearly to grow the rental portfolio further.
Understood. My second question is on the 2024 FFO I guidance. If it were a simple math, that implies an FFO of EUR 39 million-EUR 43 million in Q4. You achieved EUR 45 million last year in Q4. I was just wondering, you mentioned there is a certain seasonality and modernization spending. Is this seasonality stronger this year, or is this just a conservative guidance?
Perhaps we always feel comfortable to be more on the lower end or more on the conservative side. Also, to make clear, there should be a little bit more maintenance in the fourth quarter. Therefore, the range EUR 174 million-EUR 179 million makes us really something that we absolutely believe in. It should not be aggressive. Therefore, we think it's appropriate to set the guidance in this range.
Understood. Thank you.
The next question comes from Sheetal Jaimalani with Deutsche Bank. Please go ahead.
Hi, can you hear me? It's Thomas, hi .
Thomas, good morning.
Yes, actually, two questions on the German business. I mean, you referred to attractive acquisition opportunities, and I think you mentioned yields of 10%. What would be the maximum amount you would allocate here? I mean, let's assume there would be an opportunity to acquire a large German portfolio.
Yeah, once again, good morning. Yes, then we would also do more. Is this a very realistic case that in such years, you find large portfolios? To be fair and to be fully open, the 10% gross yield is, of course, a little bit or needs to be seen in relation to some additional modernization work that we need to spend. After the modernization work, perhaps we are ending up at a sustainable gross yield, of course, like this of perhaps 8%, which is still good. The situation in the German acquisition market is that you find such opportunities, but more in the smaller sizes. If there would be something larger on the market, we are happy also to take this opportunity, always having in mind that we have good growth perspectives in Poland and our gross yields there.
We did not, how should I say it, stop the acquisitions in Germany. We are not saying that we only want to acquire in a certain size. It is really dependent on the market. If you ask me for a realistic estimate, yes, we will continue to acquire in the course of 2026. If we have a chance to buy something larger, happy to do it. You should expect more something in the sizes of some hundreds of units per quarter.
Okay, okay. Great. The second one is on the Poland rental business. I mean, you plan to grow further through constructions. I mean, how about acquisition opportunities, the likes like we saw with your recent portfolio acquisition?
That's definitely also in the future an option. The Resi4Rent acquisition was, of course, regarding the size, exceptional. So a portfolio of 5,300 rental units in Poland is not on the market every quarter. As already mentioned in the past, we are not the only large landlord in Poland. If you look at other larger landlords, like Safer Rent, for example, most of them have an investment horizon of perhaps five or seven years. In some cases, also private equity backed. They will exit at some point in time. Yes, we will definitely look at such portfolios and also be happy to acquire in the future. If then the pricing fits, that's another question. Generally, we are very open to further acquisitions in the Polish rental market as well.
Okay, thank you.
Our next question comes from [Shailene Suhuin] with Barclays. Please go ahead.
Good morning, Martin. Can I ask you two questions, please? The first one is about you raised the capital in August for the transaction closing now in end of March, best case. What are you planning to do with the cash until it gets deployed? That would be my first question. My second question is, can you tell us what you have assumed regarding the rolling of the convertible bond maturing in August, and also if there is any scrape dividend assumption into your FFO I and II guidances? Thank you.
Yeah, good morning. F irstly, yeah, correct, we raised the capital for the acquisition. So the capital increase plus the bond issuance already in August, this cash is currently on the balance sheet in our bank account. That's the reason why we have the strong cash position. We've already converted this into a złoty because we need to pay the purchase price in złoty. So there's no foreign currency exchange risk into that. Good news is that currently we get on deposits in złoty interest income of around 4%. So that reduces a little bit the earnings impact from the delayed closing. That's the situation regarding cash for the Resi4Rent portfolio and for the convertible bonds maturing in August 2026. We are simply repaying this convertible bonds from the existing cash position.
As I mentioned, the strong cash position that we currently have will be reduced in 2026 by, firstly, the purchase price payment of Resi4Rent, and secondly, the repayment of the EUR 470 million convertible bonds in August. After that, we still have a cash position of around EUR 350 million, which we then use for the further growth in the Polish rental portfolio. Regarding the last question, we have based our guidance for financial year 2026 on the current number of shares outstanding. If we again opt for a scrip dividend, that will be decided in March. We will give guidance with the full year figures. If you look at the impact from the last or from this year's scrip dividend, that would not change our per share guidance. It is not that meaningful.
Let us decide, please, in March where we stand there. If we say it makes sense to support a little bit to grow further by another scrip dividend, or if we change back to a full cash dividend, that's not decided already. Again, the impact is not that material.
Thank you, Martin.
The next question comes from Manuel Martin with ODDO. Please go ahead.
Hello, good morning, Martin. Two questions from my side, please. On the Polish business, as it is growing continuously, have you thought about złoty hedging one day? Because for the time being, I think TAG is unhedged. Might it make sense to do that one day? If yes, at which point?
Yeah, good morning, Manuel. Firstly, perhaps to explain our financing structure in Poland. The Polish sales business is fully financed in złoty. On one side, of course, our main financing is coming from customer prepayments, which are obviously in złoty. Secondly, we have local bank loans, also issued on the stock exchange, some bonds in złoty. That is fully financed in Polish złoty. Regarding the rental portfolio, it is financed in euro. In absolute terms, even after the Resi4Rent portfolio acquisition, I think the total debt, which is allocated then to the Polish rental portfolio, is around 10% of our total debt. That is still a manageable portion. For now, every złoty that is earned in Poland stays in złoty and is reinvested. This will change at some point in time. At some point in time, the rental portfolio will be even more meaningful.
That will be the point of time where we transfer cash from Poland to Germany, for example, to pay out a higher dividend for our shareholders. At that time, which is then, that's not 2026, we will look into hedging strategies for this cash flow. As we are a long-term investor in Poland, we don't need to hedge any equity portions or other things at one point in time. Right now, it's more about then future cash flows that we will then start to hedge in the future.
Okay, I see. Second question from my side, the potential value increase of the TAG portfolio in the second half of the year, this + 1.4%, is this including CapEx measures, or is this what we might see as a value increase coming from the market? Do you have any view on that for the time being?
Yeah, this includes the CapEx impact like in the figures before. The 1.4% that we had in H1 and I think it was 0.9% in H2 last year is the like-for-like value increase. After CapEx measures, if you eliminate that, the pure valuation result that is in the P&L is a bit lower. It is not then perhaps 1.4%, it is more 0.9% or 1.0%. That is not a super huge impact, but it includes CapEx.
Okay, thank you very much.
The next question comes from [Kai Klaus] with Berenberg. Please go ahead.
Yes, very good morning. I've got three quick questions for me. The first one is on page 15 of the nine-month report. The impairment losses were in nine months, EUR 3.5 million. So EUR 1.5 million in Q3, so a little bit higher. I assume it's mainly for the German portfolio, but maybe you could explain what is the reason for the slight increase Q on Q. Second question is on page 17. We had quite a strong increase in other services for the joint venture in Poland. Could you remind us, is this now more or less completed, or can we expect any more or significant contribution in Q4? And last question is on the government grants of EUR 3.4 million. This was EUR 1 million in H1. Could you also remind us what can we expect for full year and maybe beyond for this item? Thank you.
Yeah, good morning, [Kai]. Thanks for the questions. Firstly, to explain the volatility in impairment losses, firstly, that's more or less purely from the German portfolio. We're always doing in the third quarter of a year an update. So compare what we have seen in the past nine or twelve months in reality compared to our estimates. Therefore, there's always an adjustment. I think this year it's a little bit up. Last year, if I remember well, it was a little bit down. There's a slight volatility always in Q3. Overall, if you compare that on an annual basis, and this is also true for definitely next year to come, there's overall not an increase in impairment losses in German portfolio. I mean, to the contrary, I think this number is getting a little bit better year by year.
That is more technical as we do this update every year at the end of the third quarter. The other services in Poland indeed contain the services that we do for the joint ventures in the sales business. What are we doing here? We own normally 50% of the joint venture company. We do, in addition, the full construction work. We are doing the full planning process. We are doing the sales. We are doing the customer service. For all this, we get them fees. There is some volatility based on the number of apartments sold in the JV. If we sell more in one quarter, obviously the service fee is higher. Also here, perhaps it makes more sense to analyze the full year figure.
What we have already seen in 2024 and what we will see in 2025 is perhaps a good estimate for the years to come. I said perhaps to give a general flavor of the size of our joint venture business. We are selling in the sales business, I would say there's between 20%- 25% of the total sales business currently within JVs. The remaining part, so 75%- 80%, is really fully for the old bus. Regarding the government grants, that's difficult to predict because this is then coming once we really receive the approval from the government. This is mostly related to subsidies for modernization work.
As I explained during the presentation, if this happens, we're eliminating this from FFO I because as we are capitalizing the expenses, it makes no sense, although it would be, of course, some positive impact, but it makes no sense conceptually to include this grant or the subsidies in FFO I. Whenever it comes, we will eliminate this from FFO I.
Thank you very much. Just the technical question, where do I see the elimination in the FFO calculation?
In the FFO bridge. You will find this in our interim report. If you look in the presentation on page seven, you will also see this elimination.
Okay, okay. Okay, got it. Perfect. Thanks so much.
As a reminder, if you wish to register for a question, you may press star and one. Our next question comes from Simon Stippig with Warburg Research. Please go ahead.
Hi, good morning, team. Thank you for the opportunity to ask questions. First one would be on page five of your presentation. You show the Polish portfolio overview, and more precisely on the rental business. You show your gross asset value of almost EUR 730 million. In regard to that, my question would be, what's your LTV on that portfolio, your gross debt? I would also be interested in the debt split. How much of the debt is, for example, in shareholder loans?
Yeah, good morning, Simon. To give you the figures here, on the Polish rental portfolio, we have bank financing of EUR 190 million. The remaining part is then shareholder loans. We are deciding for shareholder loans because in the meanwhile, it is cheaper for us to issue on TAG level bonds and then to grant to our subsidiary in Poland these proceeds as shareholder loans because the margins that we have in our bonds today are lower than the margins that we get from bank loans in Poland on the rental business. Just to give you the dimensions, currently a five-year TAG bond is trading at a margin of around 120 basis points. That is more or less exactly the margin that we get from German banks. Perhaps German banks are a little bit cheaper, but the difference is not that huge anymore.
Polish bank loans would be margins of perhaps 180-200. Therefore, we are financing that to a larger part for these economic reasons from a group perspective via shareholder loans. If we then grant the flows or the financing for the Polish rental portfolio via shareholder loans, as I explained, or if we put in some equity into our subsidiary component, that is more or less completely tax-driven. At the moment, I think we have roughly EUR 200 million of equity, remaining part of shareholder loans, and I said EUR 190 million of bank loans.
Okay, great. Thank you. For 2026, do you plan any net investments from Germany into Poland due to your ramp-up in the rental portfolio, or you cross-finance that only from your sales business in Poland?
Yeah, we will use also part of the existing cash from that. If I simplify it a little bit, what we have as cash position in the balance sheet as of today is enough to finance the construction work for the rental portfolio in 2026 and 2027.
Okay, great. Thank you. The last question would be in regard to FFO. I think it's page seven. You show on a quarterly comparison from Q2 to Q3 and also nine months, 2025 to 2024, your AFFO decreased materially. I think it's EUR 16 million on a nine-month period basis. You have higher modernization CapEx. Could you comment on that? What are you using it for? Is that a run rate for the future in regard to CapEx? That would be much appreciated. Thank you.
I mean, we are now on a level where modernization CapEx for basically energetic modernization of the buildings in Germany has reached a level that we expect it to continue in the future. We have ramped that up more or less year by year. It's not a linear function. Also, this CapEx has a kind of volatility depending if we start new projects or if we do it a little bit later or earlier. We are now simply on a level that we basically already predicted when we published our decarbonization strategy back in 2021. You should not expect, how should I say it, very strong growth in the years to come.
Okay, great. Thank you.
Ladies and gentlemen, this was our last question. I would now like to turn the conference back over to Martin Thiel for any closing remarks.
Yeah, again, many thanks for dialing in and for listening to our call. As always, if there are any questions left, please feel free to contact us. Happy to answer that anytime. Have a good day and hope to see you soon on conferences or at the latest then in March next year for our full year results. Many thanks.
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