Earnings call: Branicks Group on track with financial consolidation

Branicks Group AG (BRNKn), a real estate asset management firm, conducted its Half-Year Results 2024 earnings call, with CEO Sonja Warntges summarizing the company’s financial health and strategic initiatives. The company is progressing with its financial consolidation and has reported significant advancements in its Performance 2024 action plan.

Branicks Group is also actively transforming its portfolio towards sustainability, with a focus on becoming a profitable, ESG-focused entity by 2026. The call outlined the company’s current financial standing, including the reduction of its initial EUR 500 million bridge financing to EUR 40 million, the sale of 15 properties totaling EUR 361 million, and an expected like-for-like rental growth.

Key Takeaways

• Branicks Group AG is advancing with its financial consolidation, reducing bridge financing to EUR 40 million.
• The company sold 15 properties for EUR 361 million in the first half of 2024.
• They are focusing on office and logistics real estate, with positive momentum in their commercial portfolio.
• Branicks Group aims to return to net profit and positive net cash flow by 2026.
• A green buildings initiative is underway, targeting a 70% improvement in sustainability.
• The company plans to dispose of EUR 650 million to EUR 900 million worth of assets.
• They anticipate a mix of office, retail, and logistics transactions in their pipeline.
• The company is developing a renewables asset class, expecting fees in 2025.
• They are working towards an interest coverage ratio (ICR) of around 2.0 by year-end.

Company Outlook

• Branicks Group’s mid-term ambition is to evolve into a profitable, ESG-focused asset expert.
• The company is on a clear path to achieve a 70% improvement in the sustainability of its portfolio.
• The asset disposal plan is well underway, with more than half of the targeted amount already completed.

Bearish Highlights

• The company reported negative growth in the retail sector.
• Impairment charges of approximately EUR 150 million were recognized, with an expected overall portfolio impairment of 5% to 8%.

Bullish Highlights

• Branicks Group experienced a 0.8% increase in like-for-like rental growth, driven by the office and logistics sectors.
• The final handover of the Global Tower generated a development fee of around EUR 6.5 million.

Misses

• While the company has EUR 90 million in cash, it has not yet fully repaid the bridge financing, with the remainder expected to be settled by the end of September.

Q&A Highlights

• CEO Sonja Warntges confirmed the bridge financing would likely be reduced to zero by the end of September.
• The sales figure of EUR 361 million only pertains to transactions with external buyers, excluding disposals to VIB.
• The company clarified that the stronger rent growth in logistics compared to office properties was offset by the retail sector’s negative performance.
• The next significant update will be the publication of the nine-month results on November 7.

Branicks Group AG remains committed to its strategic goals and financial health amidst a challenging market environment. The company’s efforts to enhance its portfolio’s sustainability and focus on profitable sectors such as office and logistics real estate are central to its future growth. The financial maturity profile and the ongoing asset disposal plan reflect Branicks Group’s dedication to improving its financial position and delivering value to its stakeholders. The company’s next update is eagerly anticipated, with the nine-month results expected to provide further insights into its progress.

Full transcript – None (DDCCF) Q2 2024:

Operator: Good morning, ladies and gentlemen, and welcome to the Branicks Group AG Half-Year Results 2024. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Peter Dietz.

Peter Dietz: Thank you, operator. A warm welcome from my side, from the IR side, everybody, to our half-year result presentation for 2024. Before we start some quick remarks from the IR site, this call will also be webcasted live on branicksgroup.com. A replay of the call will be available on our website shortly after the end of the call. Our CEO Sonja Warntges will now give you an overview of our financials, our guidance, and the current market environment. After the presentation, we will be happy to take your questions. Please note that management comments during this call will include forward-looking statements, which involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the Safe Harbor Statement contained in today’s press release and presentation. As always, all documents relating to our half-year reporting have been made available on our website. I now turn the call over to Sonja Warntges for her remarks. Sonja, please, the floor is yours.

Sonja Warntges: Thank you, Peter. And good morning, ladies and gentlemen. Also, a very warm welcome from my side to Branicks half-year 2024 results conference call. Today I’m joined by my colleagues from the accounting and investor relations. As usual during our quarterly calls I will give you an overview on our key number and what has been achieved in the first-half year followed by a Q&A session. Here all, in terms of a rough overview about the last half-year, I would like to highlight the topics mentioned on slide number two. Also our market environment remains challenging. We deliver on our promises and have achieved a lot. First of all, and maybe the most important message for today, we are fully on track in terms of our financial consolidation and our planned disposal. From initially EUR500 million bridge financing for the acquisition of VIB, we only have EUR40 million outstanding. Our focus remains on reducing our liabilities further with a continued concentration on our liquidity situation laying the foundation for shaping the company in the future. With regards to our disposals, Branicks was a very active participant in the market in the first six months of the current year, with selling 15 properties for a combined EUR361 million. This underscores the high quality of our real estate portfolio. Following the original expectation that the market would not pick up again until the second-half of the year, Branicks can already look back on a satisfactory business performance in the first six months of the financial year. Our commercial portfolio shows a positive momentum and our clear strategic focus on office and logistics real estate is once again reflected in the high percentage rate these two asset classes constitute with regards to their market value. As in former quarters and years, our commercial portfolio generates stable and predictable rents benefiting from the rent indexation. So again, we can report a like-for-like rental growth. With EUR9 billion assets under management, our institutional business remains the second strong pillar of our business model, also recording a 2.5% like-for-like rental growth during the reporting period. The announced partnership with Encavis regarding our new asset class renewables has the potential for further successful activity supporting profitable growth within this segment. And last but not least, again, we saw further progress regarding our Performance 2024 action plan. We saw the further OpEx reduction mentioned on the slide. We also made progress on the other points of this program. For example, the mentioned reduction of liabilities, the realization of this total, the concentration on the operational portfolio business, as well as attractive investment ideas. With regards to our financial maturity profile, we set the course already in the first quarter of the business year when the lender of the 2024 promissory notes loans amounting to EUR225 million voted in favor of the company’s restructuring plan. In doing so, the promissory notes were extended to June 30, 2025. Another major milestone in the first quarter was the agreement with the lenders of the bridge financing for the acquisition of the shares in the VIB Vermögen AG completed in 2022. We agreed on an immediate repayment of EUR40 million and an extension of the term concerning that at the point remaining EUR160 million until the 20 — until 31st of December 2024. The extension had been achieved on almost unchanged conditions. Since then, we were already able to pay back another EUR40 million at the end of Q2, as well as another EUR80 million in August, resulting in an outstanding bridge debt of EUR40 million. Let me also underline that our focus to deleverage, while monitoring our green bond covenants remains one of our priorities. With 59.1%, the bond loan to value covenants should have peaked and will improve due to the disposals and the planned redemption of the bridge financing over the course of the year. We are aiming to reduce our LTV further in 2024 and achieve an even bigger headroom in the mid-term. With 2.0, the ICR covenant had also enough headroom to the 1.8 threshold. And we are confident to keep our interest cover ratio stable with even an improvement expected in 2024, also due to the planned redemption of bridge and of course above the 1.8 threshold. In terms of our average interest rates that you can see that the redemption of the bridge improved our average interest rate already by 15 points to 3.21%, compared to 3.36% as of end of March 2024. Let’s now take a deeper look in the results of our real estate platform in the first six months 2024, shown on slide number four. As already mentioned, our like-for-like rental income remains strong and our teams once again performed exceptionally well. The like-for-like rental income rose by 2% for the entire portfolio under management. The rent increases were realized primarily through indexations in the commercial portfolio with a plus of 0.8% and in the institutional business with a plus of 2.5%. In terms of square meters, the letting performance of the Branicks platform in the first-half year 2024 declined by 30% year-on-year to 180,900 square meters, mainly due to the disposals. In total, assets under management was EUR12.5 billion, we’re slightly down compared to last year’s end of Q2, mostly due to the disposals, which became effective in the course of the year. The commercial portfolio saw a decrease from EUR4.1 billion to EUR3.6 billion, which was a direct result of the disposal activities year-on-year. The institutional business was also affected by the end of a larger property management mandate. And as of today, only 1.8% of the total annualized rental income would expire in 2024, if lease contracts would not be prolonged. Over 70% of the annualized rental income has a lease length until 2027 and longer. For larger expiries in 2024 and 2025, we already proactively started discussions with the tenant. On our next slide, let me highlight the development of our main income stream. Net rental income fell to EUR77.1 million, primarily driven from the sale of the retail properties into the VIB Retail Balance I fund. The same effect you see in the increase of income from associated companies resulting from fund shares, and it contains the share of profits in VIB Retail Balance I. The real estate management fees slightly decreased from EUR21.8 million to EUR20.8 million. This number solely comprised recurring assets, property, and development fees. As in the prior year period, no fees were generated from transactions. Therefore, our recurring income on the platform with EUR97.9 million was slightly lower year-on-year. Now let’s take a closer look on the development of the FFO year-on-year that were overall in line with our guided expectations. The net rental income for a decrease of EUR7.9 million, due to disposals and to the fact that the prior year period still included rent from properties in the VIB Retail Balance I fund. Development fees decreased by EUR1 million, while the share of the profit from associates and our OpEx development had a positive contribution to our FFO. The increase of our net interest result was mainly due to the restructuring of our liabilities resulting in higher interest expenses and incurred non-recurring expenses. Until year-end, we will see significant improvements here. Also taking into account adjustments for transaction, legal and consulting costs in respect of the restructuring of liabilities in the amount of EUR10.3 million and EUR4 million of non-controlling interest, we see an FFO of EUR19.4 million for the first-half year of 2024. In view of our expectations for the current business year, we did not make any changes. We still expect cross-rental income in the range from EUR160 million to EUR175 million, real estate management fees between EUR40 million and EUR50 million, and FFO one after minorities and before taxes of EUR40 million to EUR55 million. Acquisitions of EUR150 million to EUR300 million, whereas we expect all of them in our institutional business. And last but not least disposals of EUR650 million to EUR900 million. Thereof EUR500 million to EUR600 million in our commercial portfolio and EUR150 million to EUR300 million in the institutional business. Beyond our unchanged guidance for the current year, our mid-term ambition also remains unchanged. We strive to transform Branicks Group towards a profitable ESG-focused and value-generating asset expert with sustainably cash flows and financial positions. Our ambitions are clear and we are working hard to achieve them. We want to substantially improve our earnings and cash flows and we want to return to net profit and positive net cash flow in 2026. In doing that, we will monitorize our ESG expertise. And we have a clear mid-term ambition to further reduce our debt going along with improving the respective KPI. Having said that, I would like to hand over now to the moderator for your question.

Operator: Thank you very much. [Operator Instructions] The first question comes from Stefan Scharff, SRC Research. Please go ahead.

Stefan Scharff: Yes, good morning, Sonja. I have a couple of questions, perhaps step-by-step. The first question is about your green buildings. You have now a share of 44%. And my question is, is there a roadmap to reach 50% next year? Or let’s say even 66% or something in the following years?

Sonja Warntges: Good morning, Stefan. Yes, indeed. So if you remember, we had the goal to have more than 20% until the end of last year. So we now have reached or we have more than doubled this. So we have, as you said 43.6% now and we have the goal to reach 70%, because we are now on a very good trip, so to say. We have a very clear roadmap what to do and how to do this. And the good news is we have a very professional department installed here during the last year. And we cannot only analyze what the assets — what stage has the asset at the moment, but also see what the potential is for the future and we can also realize these changes. So therefore we have a very clear roadmap and we see a lot of potential in our portfolio, because it’s a, yes, middle portfolio, so to say, where it is good to improve to green, but without billions of euros. And I think we have shown this in the past that we can do this without billions of euros. And so we will go further here. And we try to reach the 70% within the next three years.

Stefan Scharff: Okay, okay. What’s your forecast for the office transactions in your pipeline? The first-half was more or less the focus or the majority was more on the logistics side. So what may we expect with a slightly improving market in office transactions to come for the second-half of the year?

Sonja Warntges: Yes, as I said, we have at least our goal for disposal of EUR650 million to EUR900 million. We have reached more than half of this now. And we have the process in place also for retail and for office buildings. It takes a little bit longer, because as I said at the beginning of the year if you sell office buildings, these are very special deals so to say with a very special interest from the potential buyer. And so therefore we will see some transactions, but I think it will be a mix of office, retail and logistics until the end of the year. And besides of this, we are planning — we are in the planning phase for the next year now and so yes, seeing that the market is a little bit better than the last month, it will also be a mix of all these three asset classes for the next month.

Stefan Scharff: Okay, okay. If we have a look at the letting performance, the renewals were quite stable from 169,000 square meter to 161,000 square meters, that’s more or less the same, but the new lettings were down remarkably from 90,000 square meters to just 20,000 square meters. Perhaps you can say a bit more about a possible reluctance of tenants to rent office, or also say something about the prolongation terms. Are they shorter now, the new contracts than the old contracts have been?

Sonja Warntges: Yes, it’s a very good question, Stefan. So at first, you’re right. What we see at the moment, and I’ve said this also in the last months and years, if there are crisis, it’s normal that the tenants stay where they are and do not change. So this is the very good positive news. And the same positive news on this side is that we can renew the lettings or the contract with the higher rent, so to say. So they pay the index rent then also in the future. What we have had in the past was when you remember development and therefore we brought up new floors so to say to rent — for new rent so to say. And we were successful in this. If you remember here the global tower, we had 1,000s of square meters and we have let them within 18 months and so this was all new lettings. At the moment we do not have such developments and what we see in the office is that as I said the tenants stay where they are. They do not lose less places so to say, but yes it’s hard to do something new and what we also see is that there is a lot of questions about ESG also on the floor, because the big companies have their own roadmaps to have floors with ESG, yes, linked, so to say. And on the other hand, there is also the question, how does the office look? How should the offices look like to bring the people back in the offices? That’s the two major issues and I think we have answer on this, but it takes a long time to bring the tenants in new floors and it’s generally more than they stay where they are.

Stefan Scharff: I see. I see. Yes, that’s also my assumption for the development at the moment. So one other question is about your new renewables asset class that you started some months ago with a partner and perhaps you can say a little bit more here about what you expect for fees to come in, let’s say for ‘25 or ’26?

Sonja Warntges: Yes, we are working on this asset class and also on the investor side. At the moment, the investors are — how should I say this, they do not have that much money and they are thinking very deep what they are doing with their money and how to use it, besides the fact that a lot of funds do have a lot of cash in their funds and they want to stay with that cash, because they do not really know what the investors in these funds do and whether they have to pay out some of them or not. So the cash positions are higher than in the past and therefore the investments are not so quickly done as it was in the past. On the other hand there is a lot of interest in renewables and we have a lot of discussions with potential investors and they look at this. And we have also a very strong partner here in Encavis, but I don’t think that we will have a lot of fees out of this until the end of the year, but we expect them to come in 2025. It will also not be a high number, because we have to start this and this is a fund where we have a mix of development and existing assets, so to say, and we are doing the fine-tuning of the fees until November, as always in our planning. So I cannot really say what we will expect for next two years. But definitely we are working on these asset class with a lot of interest from the investors.

Stefan Scharff: Okay, I see, I see. One last question is about your debt profile. There are next year the EUR290 million in promissory notes. Perhaps you can say us a little bit more here about the structure and the maturity structure? What comes in the first quarter, say in the second, in the third quarter or in the final quarter?

Sonja Warntges: Yes, most of them are the EUR225 million promissory notes, which we have pro-launched until mid of next year, meaning 30th of June 2025. And the rest of it comes in the third quarter 2025.

Stefan Scharff: Okay, thank you very much.

Sonja Warntges: Thank you, Stefan.

Operator: Thank you also from my side. The next question comes from Markus Schmitt, ODDO BHF. Please go ahead.

Markus Schmitt: Yes, thank you. Thanks for taking the questions. I have also a couple, so first of all, you had these two transactions post-reporting date. Could you disclose what the net proceeds were? And then I have a couple of other questions.

Sonja Warntges: We have to look it up. Perhaps you make the next question.

Markus Schmitt: Okay, sure. I will, and then I have another question on the vacancy. I mean, you just spoke about the new lettings is a little bit difficult right now? But I’m interested what the split is between, I mean, you had asset sales and maybe letting business, which is imperfect, I want to call it that way. So what is the split about in terms of vacancy increases? Is it more coming from the asset sales or is it more coming from the letting business? Maybe you could quantify that?

Sonja Warntges: It’s difficult to quantify that, but it will come more from the letting business, I would say.

Markus Schmitt: Okay. And then another question on the funding situation right now. I mean, when you discuss funding costs with your financing partners for secured and unsecured? I mean, what are the levels you are discussing right now?

Sonja Warntges: Can you repeat this? I haven’t got this really.

Markus Schmitt: No, when you talk to your financing partners, you have banks and promissory note lenders and so on. I mean, I think you’re in constant discussion with them in terms of managing also your debt maturity profile. So, I’m interested what levels are you discussing currently for secured debt? And what are your levels are you discussing for unsecured debt? Secured debt, I would assume you are able to secure debt at let’s say 3% and maybe unsecured, I don’t know, 4% to 5% whatsoever. So that is something I’m looking for, for the levels you are discussing with your financing partners?

Sonja Warntges: I understand you mean the interest levels?

Markus Schmitt: Exactly. Exactly.

Sonja Warntges: Okay, sorry. [Technical Difficulty]. Yes, at the moment, so we had the decrease of the interest rates and they are, yes, in the perspective of the bank, so to say. So we are discussing more or less only with secured debt at the moment on the capital market and thereof we had around about 4%, 3.75% to 4%, which are in discussion here.

Markus Schmitt: This is the range. Okay, I see. Good. And yes, another question. I mean you mentioned just that the ICR will likely improve in the second-half from now 2 times. I have a little bit of a hurdle there, because EBITDA is coming down to the asset sales, your funding costs improve because you bring down the bridge now. So is there any guidance where you see ICR in the next month or maybe at the end of the year?

Sonja Warntges: Yes, we are looking at our model for this. And in the meanwhile, I can answer the first question.

Markus Schmitt: Very good.

Sonja Warntges: For both of the transactions, we had net proceeds of EUR351 million.

Markus Schmitt: EUR351 million, that is net proceeds to really collect eventually. Because I saw in the H1 report, one of the transactions with the 12 assets, the logistic assets, was I think EUR309 million and the other, I think the two retail assets, if I’m not wrong, was EUR27 million. So, that gives me EUR336 million. So, any net proceeds must be materially lower given that there is a mortgage on these assets, right? So — because I’m looking actually for what your pro forma liquidity is. I mean you had cash of EUR91 million now, then you had net proceeds which is coming in, then you paid down the bridge by EUR80 million, and I am looking now for what is your pro forma liquidity as of today basically?

Peer Schlinkmann: Let me take this one. Hello?

Markus Schmitt: Hello.

Peer Schlinkmann: We define the net proceeds as the gross purchase price deducted by the costs, but if we deduct the mortgage, which is on it, it will be. Hold on a second. Round about EUR140 million we are expecting as cash inflow.

Markus Schmitt: Yes. That is the — I mean the equity value eventually, what you got. So that is what I’m looking for EUR140 million, okay. So it’s EUR91 million plus EUR140 million minus EUR80 million to give me the pro forma liquidity, I guess?

Sonja Warntges: Yes.

Markus Schmitt: About, okay, good. Yes, and coming back to the ICR, maybe you have a figure available what — around about what you have in mind until the end of the year?

Sonja Warntges: For the end of the year we expect around about 2.0.

Markus Schmitt: 2.0, so flat from now, basically.

Sonja Warntges: Yes.

Markus Schmitt: Okay, yeah. Thank you very much, yes.

Sonja Warntges: Thank you.

Operator: Thanks a lot. Next question comes from Philipp Kaiser of Warburg Research. Over to you.

Philipp Kaiser: Yes. Hello everyone and thanks for the presentation. I’m taking my question [Indiscernible] couple of — from my side. I’m starting with the admin expenses, I think you mentioned during the Q1 call that this number should come down the rest of the course of the year, but now it’s up again. Could you just explain why is it? And could you give us a run rate for the rest of the year, if it goes to the admin expenses?

Sonja Warntges: Yes, good morning. So yes, we had the one-off for the restructuring, so to say, for the banks and so on for the fees. But at the end of the day, if you look on the split, you see that the personal expenses are down a lot, compared to last year. And so this is what we worked on and what we had achieved. And so we will also see a decrease in the second-half of the year because, yes, the actions which we have taken will result in the second-half of the year. But nevertheless, the admin expenses went up, because of all these restructuring things and fees for banks and so on. And if you look on the run rate, let me see. It will be around about EUR22 million for the admin expenses as a run rate.

Philipp Kaiser: Okay, perfect. Thanks a lot. And then I think a couple of weeks ago, you finally handed over the global tower. Are there any related fees triggered by the final handover? First and second, if they are already included in the H1 result in the management fee? Or is more to come out of this in the second-half of the year?

Sonja Warntges: Yes. So as you know, we had a percentage of completion metal, so to say during the development of the global tower in the balance sheet and in our results. And with finalizing and handing over the complete tower, we had got the last mile of the development fee, so to say, with around about EUR6.5 million. And you will see this in Q3 then.

Philipp Kaiser: Okay, perfect. So that means you now stood at almost EUR21 million, so you’re not really related to transaction performance in the second-half, just the run rate, and you will reach the lower end of your guided range for the industry business fees, is that correct?

Sonja Warntges: Definitely with the EUR6.5 million, we have now reached according to our recurring fees, which still are unchanged. And I think that’s a very, very positive news, which we see here that we haven’t lost any investor here and that we get the recurring fees out of it. And therefore we have now reached the target of our guided management fees, yes.

Philipp Kaiser: Okay perfect thanks. Then the next part is the interest expenses. They went up again compared to Q1, which should actually be the highest number. And that’s due to restructuring of liabilities. Could you shed some light on this effect? And could you give us a kind of a run rate for H2? Now we have like 2 times a bit elevated interest expenses and then now the redemption of the bridge. So what can we expect for H2?

Sonja Warntges: One moment please.

Philipp Kaiser: Yes, sure.

Peer Schlinkmann: So hello, it’s me again. So the reason why the interest expense went up in Q2, compared to Q1 is that we already paid back a huge amount of debt and considering those we have to as under IFRS 9 we are using this amortized cost method we have to recognize those fees that has been deducted when we got the invoices now has to be recognized in the P&L. So that’s the reason why it went up. And as a run rate for the entire year, we are around about EUR125 million interest expenses we are expecting, including one-of items.

Philipp Kaiser: Okay, including one-of items. Okay, perfect. Thanks for the clarification. And then with regards to the impairment charges of roughly EURE150 million related to the transaction you did. Could you give us an average discount to book value first? And secondly, is this linked to one specific transaction or across all the transactions you did in the first-half, the discount? That would be helpful.

Sonja Warntges: I haven’t understood the first question, but I answer the second one. So no, we do not expect that to come for the whole portfolio, so to say. So we had thought a lot of what we want to sell and who can sell this and so at the end of the day we tried to sell the assets where we expect and write-off so to say anyway and where the interest of the potential buyers are there. So they can do this better than we and therefore we sold this. For the total portfolio we do not expect a high impairment. We expect one, I would say, between 5% and 8%. So maybe you can repeat the first question, because I haven’t got it.

Philipp Kaiser: Yes sure. Just in brief, could you give us the average discount to book value, which cost the EUR150 million in impairment charges in relation to the transaction?

Sonja Warntges: It was around about 20%.

Philipp Kaiser: Okay. Thanks a lot. And that was all from my side. Thanks a lot for taking my question and the answer.

Operator: Thank you. Thank you very much. We are moving on to the next question. Next question is from Andre Remke, Baader Bank AG. Please go ahead.

Andre Remke: Yes, good morning, Sonja. Thanks for the presentation. Starting with a follow-up on Philipp’s question on the impairments. Again, does the impairment only relate to the already signed property disposals? Or also to other properties you may intend to sell? This is the first question, please.

Sonja Warntges: Yes, good morning. So yes, at the end of the day, we are in a selling process and try to reach the best out of it. We do not have a real picture on this, so I cannot say a lot more than that set for the sales and for our existing portfolio for the evaluation as said some minutes ago, we expect them to be between 5% to 8%.

Andre Remke: Okay. And on the EUR300 million, roughly EUR310 million disposals from the commercial portfolio, how much relate to the disposals to VIB? And what is already included in the balance sheet as of first-half? And when do you expect the next — the rest being closed?

Peer Schlinkmann: So the transaction that has been closed in half-year or until June of 30th there was just the selling of the assets at the VIB level and the one in Regensburg that we already discussed in the Q1 call. And there’s no closing done yet for the rest of the transactions. So they’re all signed, but not closed yet. And then you will see the numbers in the Q3 report then.

Andre Remke: Yes, and when you mean in the headlines you mentioned sometimes significant debt reduction in the first-half. Well, the net debt was basically flat, slightly increased here, but basically flat. So when you are talking about debt reduction, you’re talking about the pro forma, including the non-closed deals. Is this right?

Peer Schlinkmann: Yes, and especially also we published that we reduced the bridge further, and that’s included in there.

Andre Remke: Yes, okay, but this reduced also the cash position, by the way. The last question is the decline in asset on the management of the IBU business by EUR700 million. What were the main drivers here? You mentioned in your presentations on your losing a mandate, a bigger mandate for this amount here? And then what will be the effect on future management fees on the lower AUM basis?

Sonja Warntges: Yes, this property management mandate is a very old thing, so to say. We have — this was [Mine Tower] (ph). This was the last tower of the Mine Tower we had during the development phase. And one or two years after finishing the development, it was around about EUR340,000, because it was only property management, not asset management. And the second question, we have a very bad line here today, so I’m very sorry for asking again. Can you repeat please the second question?

Andre Remke: Well, it was the first question of the EUR700 million in assets under management from the IBU business. So I got the — this was a property management for the Mine Tower, what was the exact amount here?

Sonja Warntges: So we had the Global Tower which was — which has gone away so to say, with round about EUR340 million. And the other things are concerned depreciation or not revaluation.

Andre Remke: So, revaluation of roughly EUR350 million.

Sonja Warntges: I think maybe it’s better to talk about this after the call, because we do not have the numbers.

Andre Remke: Yes, sure.

Sonja Warntges: We have to calculate this, so maybe we can call after the call here.

Andre Remke: Okay, that’s fine for me. That’s for my side. Thank you.

Sonja Warntges: Thank you.

Operator: Thank you very much. The next question is from Markus Schmitt again, ODDO BHF.

Markus Schmitt: Yes, thank you. I just want to follow-up. I just realized that, I mean, we just did that pro forma liquidity calculation with EUR150 million on balance sheet so to speak and only EUR40 million left in terms of the bridge financing. So why was there no appetite on your side to bring the bridge down to zero now? I mean, even then you have EUR110 million in form of liquidity afterwards, so this is a solid position in my view. So why didn’t you fully repay the bridge?

Sonja Warntges: From my point of view, we have round about EUR90 million cash in the balance sheet.

Markus Schmitt: Yes, but we just discussed, I mean, you have EUR140 million coming in now from the asset sales. You reduced EUR80 million off the bridge, so this leaves still EUR150 million, and you could have taken another EUR40 million to fully pay down the bridge, that is where I’m coming from?

Sonja Warntges: Yes, but we don’t have this. So we have, so to say, after Q2, so to say, we have got liquidity money and therefore, yes, yes, we will reduce the bridge in the next month, so to say. But on the other hand, we have to have a solid cash position here for the two companies and therefore we pay it when it’s appropriate and according to the contract we have. And that way, we will reduce the bridge in the next week, so to say.

Markus Schmitt: So the bridge coming down to zero by end September or whatsoever, is this a likely scenario?

Sonja Warntges: No. Sorry, yes, that’s the likely scenario.

Markus Schmitt: Okay, yes. Okay, thank you very much.

Sonja Warntges: Thank you.

Operator: Thanks a lot. The next question comes from Manuel Martin, ODDO BHF.

Manuel Martin: Hello, two questions from my side. Sorry I’m a bit confused with the disposals. If I look at slide number two of your presentation, there is a sale of 15 objects amounting to EUR361 million. Now, does this contain the disposals to VIB, or how can I understand that number, please?

Sonja Warntges: No. Our sales number is always and only the number which we sold to external buyers.

Manuel Martin: Okay, okay. Very good helpful. Second and last question on the like-for-like rental growth in the commercial portfolio. I think it was 0.8%, given the fact that basically half of that is office and half of that is logistics in the portfolio? Do you have a split or indication where does the growth come from? Is it — what are the growth rates in logistics and in office?

Sonja Warntges: Yes, it’s a little bit more in office than in logistics. I would say from the 0.8% there is round about 60% from office and 40% from logistics.

Manuel Martin: Okay. All right. And then logistics and the rent growth is not that strong. Is there a reason, or because actually logistics is not after real estate class?

Sonja Warntges: You mean the rent growth?

Manuel Martin: Yes.

Sonja Warntges: One minute please. Yes, so at the end of the day, it’s logistic a little bit more than office, but the negative thing is in retail, so this brings [Indiscernible] the average down then.

Manuel Martin: Okay. Okay, thank you.

Sonja Warntges: Thank you.

Operator: Thank you very much. As there are no further questions in the Q&A session. I’m handing the floor back over to the host.

Peter Dietz: So thank you very much, ladies and gentlemen. This concludes our Q&A session. Thank you for joining us today. Our next IR highlight will be the publication of our nine-month results on November 7. Until then, stay healthy and let’s talk again soon.

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