Hello, and a warm welcome to today's earnings call of the UBM Development AG, following the publication of the H1 figures of 2026. We are delighted to welcome the Chief Executive Officer, Thomas Winkler, and the Chief Financial Officer, Patric Thate, who will speak in a moment and guide us through the presentation and the results. After the presentation, we will move on to an analysts' question-and-answer session. As an institutional investor, we would like to invite you to contact UBM Development AG directly after the earnings call to clarify any questions you may have. Mr. Winkler, please, the stage is yours.
Thank you, Mareike, and welcome everybody. Thank you for joining UBM's conference call on the first half of 2026 with what I would say a fair number of highlights that deserve the name highlight. Looking at slide one of our presentation, what did we achieve? Our turnaround has solidified, and we are able to report a significant earnings swing before and after tax. Second, the boom in residential sales continued, and with more than 200 premium apartments, we repeated the record sales number from last year. Three, we are making good progress in affordable housing, our major strategic initiative. More details later. Four, the enabler is a strategic sales program, as announced previously, with first assets having been sold at or above book value. In current market conditions, it could be called a good start.
Five, our equity ratio has further improved and even lies above our target range of 30%-35%, while our net debt decreased to just below EUR 475 million. The outlook is all about affordable housing, affordable housing, and affordable housing. I see a good chance that we can take a leading position again in this segment. More in a minute. Let us first zoom in on the half-year earnings swing, looking at slide two. An earnings swing from a loss of EUR 6 million to a profit before tax of more than EUR 7 million cannot be overestimated in a transitional year like the year 2026. Enabled by our successful resi business on the one hand, and the first asset sales on the other hand, it also shows up in revenue increase of 36%. We are not back to normal, but the direction justifies some optimism.
To have a closer look into the resi boom, please follow me to slide number three. We have hit last year's record level spot on, and projects like LeopoldQuartier C, Village im Dritten 11A, or Na Příčné phase I are sold out by now because you get the figures here by end of June. The boom holds. Please allow for highlighting the residential market. From the launch of our sales in Na Příčné phase I, we were able to increase the sq m price by no less than 20%. But you are sold out, you might say, and my answer is true, but only for phase I. We see the same interest in phase II, which is in the mirrored project on the other side of the street in Smíchov and shows up in the order backlog, one of the hottest districts in Prague.
The Czechs are almost obsessed, if I may say so, with owning real estate and particularly their own apartment. We have a different trend in Vienna and the big cities in Germany. In Vienna, almost 80% of the apartments are for rent. This market is grossly undersupplied, and our initiative in affordable housing is precisely targeting this market. Please turn to slide four. What is the issue? Even though Vienna has been a shining example for reasonable cost of living compared to cities like London, Paris, or Zurich, we now see an interesting phenomenon. Those who are and have been happy campers, if I may call them, do not move out of their apartments, even if they are too big when the kids have moved out.
The few new apartments are facing demand by a growing number of people desperately looking to find some living space at reasonable cost. I am not sure if we should call this locked in or locked out phenomenon. The issue is neither unique to Vienna nor easy to fix. With the apartments coming to the market at sq m prices well above EUR 8,000 and the current interest rate environment, we see rents promising a reasonable return close to EUR 30. This, however, represents often a portion of the disposable household income well above 40%-45%, far from affordable. The same is true with regional differences for many of the attractive cities in Europe. This constitutes a serious political issue. With people demonstrating on streets in many countries, you know the pictures from the news.
We, this is the developers and the construction industry, are challenged to bring down the cost of housing by thinking out of the box. UBM, together with PUUR Living, developed a first pilot project in Vienna to prove that affordable housing, eating up a maximum of 35%, better 30% of the net household income, is doable. It is a new way of thinking rather than stripping of quality. It is moving the construction site into the factory and assembling standardized elements rather than building prototypes. Because nothing else is what we are doing up to now. As can be seen from this slide, we are talking about timber frame wall facade elements with pre-installed windows and outside shading. We are talking about every apartment with a balcony photovoltaic for hot water supply and a heating or cooling by heat pumps.
All of this resulting in a very low monthly operating cost of EUR 1.70- EUR 1.90 per sq m . Pre-installed central home technology piping and electricity units or plug-in systems reduce the need for skilled workers. The same is true for the bathrooms or the kitchens. They come complete. With prefab elements, we are talking scale effects and a significant reduction of construction time. This, combined with the number of highly efficient layouts, is the solution. The best is that UBM is not only sitting on the land for the pictured pilot project, but six more plots in Vienna, resulting in over 50,000 sq m of rentable area, perfectly located for the purpose of affordable living. I shall provide you with some more information in the outlook.
Before this, I would, however, like to ask Patric to share with you a bit more of the commercial considerations behind affordable housing and also update you on our financials. Patric.
Thank you, Thomas. Good morning, everybody. Back in May, I walked you through our sample calculation for affordable housing. A net selling price of around EUR 5,000 per sq m, a monthly rent of EUR 15 per sq m, an annual return of 4% for an institutional investor, and as one of the key factors and the residual of the calculation, a land price of EUR 850 per sq m residential floor area. The obvious question was, does that EUR 850 stand a reality check? This slide tries to get answers. The table on this slide offers you an overview of how much we can invest in terms of land price per sq m residential floor area across 15 cities in Germany and Austria. How do we get to our figures?
We take the rent that is achievable in each city, capitalize it at the 4% yield an institutional investor expects, and derive from that the land price we can justify paying. That is the dark green bar. The light green bar does the same thing from the other direction. It starts from average net household income, applies the 33% that a household can reasonably devote to housing, and derives the land price. The dashed line running across the chart is the EUR 850 per sq m from our sample calculation. Take Vienna, the third example from the left. An average market rent of roughly EUR 22.5 per sq m justifies a land price of around EUR 1,641 per sq m.
Measured against household income, the figure is even about EUR 1,794. As we developed our strategy, it was clear that we would see regional differences. That is the point of this slide. In order to achieve the yield an institutional investor expects, we don't have to achieve acquisition with EUR 850 per sq m residential floor area in every city. In nearly all of the investigated cities, the price per sq m could be higher. In other words, our model does not depend on finding exceptionally cheap land in one particular city. It works across a broad set of markets, including the six cities marked with an asterisk where UBM is already developing residential projects.
Land cost is highly location dependent and directly tied to achievable rents. This chart is not a shopping list, and it is not a statement that we will pay these prices in the end. Two takeaways from this slide. First, the affordable housing calculation is not a Vienna special case. The arithmetic works across our markets. Second, we are entering this segment with a clear quantified benchmark for what we are prepared to pay. Please turn to slide six. At the full year presentation, and again in May, we told you that we need to free up cash from our standing and non-strategic portfolio in order to refinance this strategic shift.
This slide is proving a successful start of our sales progress. The first is Eckpfeiler Paket 6, a standing asset or rather a package of leasehold rights to various commercial properties in Vienna and the greater Vienna area. This partial sale transaction amounted to around EUR 35 million. UBM's ownership share was 50% of that. The cash inflow to UBM is EUR 11 million, of which EUR 10 million was received in the second quarter and a further EUR 1 million will follow in the third quarter. The second was a non-strategic asset held 100% by UBM.
The volume is EUR 10 million, and here the full EUR 10 million comes to UBM in cash. EUR 5 million in the third quarter of 2026, and the remaining EUR 5 million in the first quarter of 2027, so not part of our cash numbers yet. Taken together, that is around EUR 21 million of cash. The most important point is both were executed at or above book value. No doubt, this will not apply to every transaction in the future, but it is an encouraging start. Please turn to slide seven.
This slide brings me back to the two ratios we watch most closely, equity and leverage. Starting on the left. Equity stood at EUR 374 million at the end of June, and the equity ratio at 36.6%. That is above our target range of 30%-35%, and it is the highest level in the last three and a half years.
The drivers are the positive half-year result, and more significantly, the EUR 25 million of Genussrecht capital issued in the first quarter. A ratio at this level gives us flexibility at a point in the cycle where we are building a new pipeline in affordable housing, and we would rather enter that phase with capacity than have to create it. Turning to the right-hand chart. Net debt came down to EUR 475 million from EUR 546 million a year ago. That is a reduction of EUR 71 million year-on-year and the lowest level we have reported in years. The loan-to-value ratio stands at 46.5%. Two key messages from my side. First, the equity ratio is above our target range. Second, net debt is at its lowest level in years. With that, I would like to thank you for your attention and hand back to Thomas.
Thank you, Patric. Why do we think affordable housing is the next big thing, particularly for UBM? Let us have a look at the market environment as described on the right-hand side of slide eight. By the way, our last slide of the official presentation, but there are plenty of slides in the backup that I would refer you to because they are really interesting. Austria is seeing rent rises on average of 5%. Vienna is expected to be even at 7%. This is well above inflation and is going to continue above inflation for the foreseeable future. As mentioned before, Vienna is a traditional rent market, with 77% of the population being renters.
With less than 10,000 apartments expected to be completed this year and approximately only 2,250 freely financed apartment, which are also free on the market, compared to an estimated 13,000 apartments- 15,000 apartments needed, it is easy to see a growing demand for affordable housing. The situation in Germany is no better, rather the contrary. According to the Finance Minister, Lars Klingbeil, Germany is short of 1.4 million apartments today. I have seen a figure yesterday of 1.34 million apartments. It does not make a big difference. With an expected 185,000 units completed in 2026, the shortage is growing by 200,000 units per annum. A growing number of permissions, which we see in Germany, together with a growing number of cancellations, which we also see in Germany, does not change the picture. This is underpinned by a very low number of listings in most urban markets in Germany.
While the promise of EUR 23 billion of government subsidy programs gives hope, the political debate in cities like Berlin does not help. The Warsaw rent market, with rent levels above EUR 20 per sq m and month, is rounding up the situation. Here we have a potential of another 50,000 sq m right next to Poleczki Park. It is actually part of Poleczki Park not being built up.
This means UBM has identified a potential of more than 100,000 sq m of affordable living in its existing portfolio. Nothing is ready to be built immediately, but we have all the ingredients in-house. This perspective justifies the headline of our outlook, Affordable Housing is the Next Big Thing. I am not sure if I have already mentioned this one. I guess there are a number of questions, and let me open the line now for them, and thank you for your attention.
Thank you, Thomas and Patric. Ladies and gentlemen, we will now move on to the analysts' question-and-answer session. We kindly request that only analysts ask questions during this question-and-answer session, and all other participants are invited to contact the investor relations team following the call. Thank you for your understanding. To ensure a dynamic and interactive discussion, we encourage you to ask questions via the audio line. To do so, please click the Raise Hand button. If you are dialed in by phone, please use the combination star key nine to raise your hand and star key six to unmute yourself. Should you not have the opportunity to speak freely today, you can also place your questions in our chat box. We already received some risen hands. Mr. Stefan Scharff, I will ask you to unmute yourself. You should be able to ask your question now.
I do not hear anything, so unmute does not work.
Yes. I sent an invite to unmute.
Thank you. Yes. Now we hear.
Now. Yes.
Okay.
Good morning, gentlemen. My first question is about the affordable housing projects to come in Germany. When will we see the first project? Perhaps there is room to change some project types in Munich for affordable housing. The second question is about the bond market. You tapped the bond market almost in every of the former years in fall, September or October, November. Are there any plans to go to the bond market again? I know the equity ratio is quite high, but also we have the cash position slightly below EUR 100 million, and it was mostly between EUR 130 million or EUR 150 million.
Okay, these are your two questions, Stefan.
Perhaps I have one or two more.
Okay. Excellent. But then let me start. Of course, as a UBM expert, you have noticed that we did not mention Germany. The reason is we have one small plot identified that could be used for affordable housing. We are currently investigating it, and we hope that we can report on it in our Q3 call. But by and large, the properties that we own at the moment are not ideal for affordable housing for the simple reason that they are in super prime locations, and therefore the land cost is above our limits. And that kind of even answers your question with Munich. Part of the Munich project, as every resi project, is, of course, for subsidized living, and that is a different story, but that has nothing to do with our affordable housing.
Our affordable housing is a different way of building the properties and is clearly targeted for an institutional investor to buy it and rent it out. Whereas the locations that we are talking about here are all locations for ownership, preferably. I hope this answers the first question, and the second question to Patric.
Hi, Stefan. Bond market tapping was the question if I'm right. What we always do, we take a closer look at the market, and meanwhile, I have the impression that not everything what Mr. Trump is doing in the U.S. is immediately doing a lot of fluctuations in the market. If the markets are in a good condition, we are, as always, looking carefully and think about if we can do a bond transaction or not. In terms of cash, yes, of course, when you are in a strategic environment where you want to change the strategy and start a new asset class, affordable housing, there are some sources of cash in the company. One is the cash we are sitting on, which is a little bit lower, as you have pointed out, as we have repaid bonds with EUR 73 million in the second quarter.
You can use money from the market, and if there is a good opportunity, we will look at that and see what we can do with it.
Okay. How are the sales generally doing in Germany? I know you have the Mainzer Hafen project, and there are still some apartments to sell. How is the sale progress doing there? The other question is, you also mentioned it in your half year report, you have the five hotels to sell. What can we expect here about transactions to come in the second half of the year? Is it still too early and it's more a topic for 2027?
Again, you are always identifying the gaps, which is fair enough. Look, we've always been picturing Germany as the upside, and I still hold this up. As much as we love to talk about the Czech market, or I should rather say the Prague market, as difficult it is to talk about the German market. I mean, you have seen price developments in the German markets going the wrong direction from our point of view because prices have not increased anymore. The Germans, if I may say so, as I have lived long enough in Germany, are very pessimistic at the moment. The overall mood in the market is not ideal for selling really good quality apartments as we have them in Mainz.
Still, we see a slow pick up. I keep up my hope that Germany, because there is very low sales figures included in the first half year, is an upside more than anything else. Now, you have asked for our hotels, and that's also a good question. I must say, I've been more upbeat about the hotel transaction markets like six months ago than I am right now. We see that over summer, even the kind of drought situation, the lack of water in the rivers and therefore the river tourism, the ever-changing situation with Iran, and things like this have again made hospitality business plans a bit more cautious, which is not helpful for negotiation speed.
We are still in talks on our hotels. We also very openly have flagged that we want to sell them. We are a developer. We are not a real estate management company. I don't dare to give you a good timing, not even kind of is it still in 2026 or is it in 2027. My hope, of course, is that we will sign and close accordingly at least one deal in 2026. As I've described, I can't give you a guarantee on this one.
Okay, I see. Perhaps I have one final question. It's about the two offices in Mainz, the Timber Peak, and also in Frankfurt, the Timber Pioneer. Here are some in Frankfurt, just a little bit, and Mainz a bit more, some office space available. Are here some current negotiations or let's say some rental contracts you can talk about?
Nothing that we want to talk about because it is stupid to talk about something before the ink is dried. We see interest, and even though interest is materializing in a signed contract now in a timeframe more of 9 months- 12 months than three to six months, I am optimistic for some progress in this one. The Frankfurt market is the most difficult one when it comes to buildings outside CBD and outside the towers. Even there, my colleagues tell me that they do rent activities with 500 sq m- 900 sq m, which is very little per tenant. Yes, you are right. The things are slower than expected. It comes back to the overall kind of broken spirit that I must say we are seeing in Germany.
There is interest that could materialize in contracts also for Mainz, which is actually a great situation because you can live where you work. You have the 15-minute city materialized. It is a really beautiful icon building, the highest, by the way, in Mainz, and it is in timber construction.
Okay.
Stand by. We keep the tension up.
Okay.
Thank you.
Thank you very much. Thank you.
Thank you so much. We have a further raised hand by Elias New. I will ask you to unmute yourself now. You should be able to place your question.
Yes. Good morning, gents. I hope you can hear me. I guess my first question is really on the outlook for the second half of the year. Since you did not issue any guidance for this financial year, I was just wondering if you could sort of share your expectations for the second half following the strong first half, and whether you sort of expect the second half to be in line with what we have seen in the first half, or perhaps even better, both for top line and I guess bottom line. If you could comment on that would be very helpful.
Yeah. Look, there is a reason why we have not given an outlook, and I think it is justified given the volatility in the market. I have also read the kind of, if you want, cautionary statements of my colleagues, and we are not in the rent business. If I had a rent business, it would be a lot easier. On the top line, you see that we have been making quite a significant increase. You know that our top line always depends where the transactions take place because if it is an equity, it does not show up in the top line. So we have seen the progress in Q1. We have seen the progress in the half year. I hope that this momentum continues as much as the sales momentum in the apartments continue.
I have no doubt that the sales momentum in the apartment sales with an order backlog of almost 100 or let me be more precise, of more than 90. Which is eventually going to be converted to more than 90%, I probably should say 95%, into contracts eventually, because it's just the notary that is missing or the interior construction agreement that is still missing or something like this, is looking and encouraging. When it comes to the rest, Patric, and I may repeat this, we are always very straightforward. Yes, it's encouraging that we sold assets at or above book value. But Patric explicitly said, don't expect that to happen all the time. What is our strategic challenge in this one? It is, do we prefer speed over profitability? And this question we ask ourselves every time we have an offer concrete enough on the table.
I'm saying this even though we've taken down some of the values in the course of the aftermath of the Russians invading the Ukraine. So I'm afraid I can't be more precise. Not because I don't want to, but because I'm unable to do so. Rest assured that we try to do everything to optimize this kind of equilibrium that I've been talking about.
Okay, great. No, that's very helpful. I guess my second question is on the cost side. In the first half of the year, you've reported material costs are significantly down, which is due to lower construction activity. I'm just wondering, so for the second half, should we expect material costs roughly similar? When do you expect construction activity to pick up again? So 2027, at what point? That would be helpful. Also, I guess on the personal cost front, also personal costs down slightly. Number of employees now at 188. What are the expectations for the full year here? Is there a further reduction in the headcount expected?
Okay. Let me start with the material cost because it is obviously a question to the Chief Financial Officer. There is no one-to-one relationship of construction activity to that number. Why is that the case? It depends a little bit on where is the construction happening. Is that in the equity area or is it in the fully consolidated area? The second thing is, the numbers also influenced on do we sell IAS 40 as an asset deal, and they are also going into that number. So there is no one-to-one relationship, but in terms of what you phrased, you are right. Construction activity is not very high at the moment in the fully consolidated area. That has to do with the project cycles we are in. What is to be expected there? There are some project in terms of residential, which are coming up to stream soon.
That is probably Sandfeld and Unterhaching in Munich, for example, or also in the Czech Republic, the second phase of our project. I expect that this number will pick up sooner or later, of course, because otherwise, we are not investing enough money into the market. I hope that we will see a good thing then in 2027 and 2028 coming from our new asset class, which we are hoping to ramp up soon.
Absolutely. Elias, I'm grateful for your question, even though it makes me appear to be a bit thin-skinned talking about it. But over the last three years, we've halved our employee number. This is one of the worst things that you go through as top management to decide that you have to address your cost base. The cost base that we can influence the biggest is the personal cost. Because very little can we do about interest rates or others. Now we are down at 188 and this is end of the second quarter number. I know that this number is going to drop by a single-digit number still because of people that are still included in the statistics but are going to leave us. However, we are now at the bottom of the box. We are where we want to be.
On the contrary, we are looking for new colleagues on the technical side and on the finance side in Munich, for example. Then the question is, how quickly will they come on board? Because usually you have long notice periods. The thing that I have to point out is that other than in Austria, the annual salary increases come July 1st. So there is a little bit of buoyancy in this one. I'm not keeping up in the numbers, to be honest, if that is offset by the further reduction. But I think what you can take away from what I'm saying is we have costs well under control.
While it is the worst thing I can tell you still in 30 years or more than 30 years of work to tell people that they better look around and see if they find a job somewhere else because we can't afford them anymore. It is that for me, mentally, I'm at the end of this exercise. I believe as much as I believe in affordable housing that we are also going to get our projects started. We are always depending on public authorities getting the right construction prices and what have you because nothing is less fulfilling than sitting there and racking your brain when the thing is getting better. In this respect, our headline that the turnaround solidified is perfectly appropriate.
Okay, great. No, that's super helpful. That's all from me. Thanks.
No, thank you for your questions, Elias New.
Thank you.
Thank you very much. We have another risen hand from Christian Bruns, and we'll ask you to unmute yourself, and you should be able to place your question.
Yes. Hello. First of all, congratulations on this swing in half-year earnings. My question is: you mentioned the group cash inflow from the disposal of projects, but I would be interested to know what the impact on earnings is. I think you said it is at or above book value, but could you be a little bit more precise?
Happy to do that, Christian. We have pointed out that there were two deals. One was the Paket Sechs deal, and the other one was the deal we call Werche internally. The Paket Sechs deal, that was last year already. The impact we had from that in terms of numbers, that was roughly EUR 2.8 million positive. Because the deal started last year, it was at equity IAS 40, and therefore we have to reflect that in the full-year numbers. The deal we are talking about this year, the second one, that is a EUR 5 million number roughly in terms of EBT coming from this one. It was a very good deal we are striking there, and that was in the first half, the impact on the EBT.
Okay. Thank you. Maybe if I might add this, I would go for speed and prefer it over profitability. That is only my personal opinion.
Thank you, Christian. We try to balance that all the time so that everybody is happy with us.
Yes.
But you are right. Freeing up cash for something so good-looking, prosperous as this-
Affordable housing.
This affordable housing is probably the right thing to do.
Exactly. Thank you.
Thank you very much. With this, we have received no further questions. We come to the end of today's earnings call. Thank you, everyone, for joining and your shown interest in UBM Development AG. Please feel free to contact investor relations with further questions. A big thank you also to Thomas and Patric for your time. I wish you all a successful day, and hand over again to Mr. Winkler for some final remarks.
Thank you. Well, there's very little to say other than we are never satisfied, but we are reasonably happy with what we've achieved in the first half. Okay? We are looking ahead already to the second half and the first half of next year. We've got big plans. I hope that came through nicely. But we don't only have big plans, we are good in execution, and that has been proven by these numbers. Thank you to those who beared with us up to now. I hope you found it interesting and, as mentioned, always come back to us. Happy to answer any follow-up questions. Have a good day.