Earnings call transcript: Hamborner REIT Q3 2025 sees rental income drop

Hamborner REIT AG reported a decline in rental income for the third quarter of 2025, reflecting a challenging market environment. The company recorded a 2.8% decrease in rental income to €67.9 million, with funds from operations (FFO) also falling 12.2% to €36.7 million. Despite these declines, the company maintained a high lease retention rate and low vacancy levels, underscoring its stable tenant base. The stock remained unchanged following the earnings announcement, with the last close at €5.14.

Key Takeaways

• Rental income decreased by 2.8% in Q3 2025.
• Funds from operations fell 12.2% year-over-year.
• High lease retention rate of 95% and low vacancy rate of 3.4%.
• Strategic focus on digitalization and sustainability initiatives.
• Stock price remained stable post-announcement.

Company Performance

Hamborner REIT AG’s performance in the third quarter highlights the pressures facing the real estate sector amid prolonged rental negotiations and increased lease agreement complexities. While the company’s rental income and FFO have declined compared to previous quarters, it continues to demonstrate resilience through a strong tenant base and strategic asset management.

Financial Highlights

• Rental Income: €67.9 million, down 2.8% from the previous year.
• Funds from Operations (FFO): €36.7 million, a 12.2% decline.
• FFO per Share: €0.45.
• EPRA Loan-to-Value (LTV): 43.3%, improved by 100 basis points.
• REIT Equity Ratio: 55.8%.

Outlook & Guidance

The company projects full-year rental income between €89.5 million and €90.5 million, with an operating result forecast ranging from €44 million to €46 million. Hamborner REIT’s commitment to decarbonization and enhanced property management signals a forward-looking strategy despite market challenges.

Executive Commentary

• "Despite the still challenging market environment, we remain fundamentally positive about the remainder of the year," said a company executive, expressing optimism in navigating current market conditions.
• "Letting agreements, especially on the larger side, tend to take longer," noted another executive, highlighting the impact of market dynamics on operations.
• "Financial institutions are more detailed and precise on sustainability expectations," indicating the increased scrutiny and expectations in financial dealings.

Risks and Challenges

• Prolonged rental negotiations due to market conditions.
• Increased complexity in lease agreements, particularly concerning sustainability.
• Rising maintenance and administrative costs impacting profitability.
• Sensitivity in rental pricing following high inflation periods.
• Potential economic downturn affecting tenant stability and rental income.

Q&A

During the earnings call, analysts inquired about the company’s facility management cost allocation and maintenance expense visibility. Discussions also covered market valuation processes and the dynamics of the letting market, reflecting investor interest in Hamborner REIT’s operational strategies and financial health.

Full transcript - Hamborner REIT AG (HAB2) Q3 2025:

Company Executive/Presenter: Good morning, ladies and gentlemen. Thanks for joining our conference call regarding our financial results for the 2025. Pleased to be here today with members of our team, including my colleague, Christoph. As usual, I will start with a short presentation followed by a q and a session. As was the the case last time, know, we, you know, have the opportunity to not only ask questions via the phone, but also via the webcast directly in your web browser.

We hope that everything will run smoothly from a technical perspective and look forward to interacting with you. So let’s start with a look at the key figures as of 09/30/2025. Yes, despite the ongoing difficult environmental and sector specific framework, we remain broadly on track, and we are able to continue our business as planned in the third quarter of the year. Following recent property disposals, income from rents and leases recorded a moderate decrease of 2.8% to €67,900,000 in the 2025, influenced by property sales as well as the projected cost increases at the operational level, FFO came down by 12.2% and amounted to 36,700,000.0 This corresponds to an FFO per share of €0.45 Key financial figures once again showed stable development with a slight decrease in LTV during the third quarter to forty three point three percent and, yes, a corresponding rise in the REIT equity ratio. Operating performance demonstrated continued resilience, I would think, reflected in a vacancy rate of 3.4% and a portfolio wall of five point five years.

Yes. And further details will be outlined on the following slides. Yes. On a year on year basis, our like for like annualized rental income rose by 1.5%, yes, mainly reflecting the impact of indexation adjustments, particularly in the office portfolio. The positive effects from indexation were partially offset by slightly lower rental levels Due to the numerous indexation related rent adjustments over the past two point five years, we have recently noticed that some lease renewals are taking place at slightly lower rent levels.

On an annualized basis, the disposal of the office properties in Hamburg and Osnabruck as well as the retail asset in Lubeck, This led to a decrease in rental income of €3,200,000 or 3.5%. As at the September, our annualized rents amounted to €88,600,000 On the next slide, we will provide a more detailed overview of our earnings situation. As highlighted earlier, rental income declined by 2.8% to 67,900,000.0 primarily reflecting the impact of asset disposals. During the year, we saw a slight reduction in the balance between operating expenses and income from ancillary costs allocation, mainly due to the restructuring of our external facility management. Yeah.

Following a tender process completed last year, we expanded FM services, including improved on-site support and systematic property data collection. Although this led to a temporary increase in nonrecoverable costs, we expect efficiency gains and significantly enhanced property data infrastructure, supporting future operational improvements and also data driven portfolio management. Maintenance costs rose by approximately 9% in the first three quarters, largely in line with our assumptions at the beginning of the year. As several planned measures are currently being carried out or scheduled for the fourth quarter, we still expect an increase in maintenance costs of around 10% to 20% for the full year 2025. Admin administrative and personnel expenses also increased in line with our estimates by around 819%, respectively, reflecting our digitalization efforts on the one hand and workforce changes as well as inflation market related salary adjustments on the other hand.

Other operating expenses increased mainly due to costs associated with strategic and regulatory projects, particularly in the areas of digitization and sustainability as well as the use of external personnel. Despite higher interest rates for the recently refinanced loans, interest expenses slightly decreased in the first nine months of the year, which is mainly due to the repayment of a bonded loan and loans associated with the recently sold assets. Declining interest rate environment led to lower interest income, which amounted to approximately €600,000 in the first three quarters here of 2025. Overall, and as pointed out before, funds from operations fell largely in line with our full year guidance by around 12% and came in at 36,700,000.0 On next slide, a few words on the development of our portfolio. Following the completion of our latest transactions, including the two sold properties in Ostabroek and Lubeck, our portfolio is currently consisting of 64 assets.

As already highlighted in our last call, we made selective fair value adjustments for four properties, as always, in close consultation with our external appraiser. The value changes were primarily related to the respective location and betting situation and resulted in a decline in fair value of 7,300,000.0 or 0.5%. Taking into account the property disposals and the impairments in H1, the fair value of the total portfolio decreased by €34,700,000 in the first nine months, standing at around €1,410,000,000 at the September. EPRA vacancy rate fell slightly over the past three months to 3.4%, reflecting several follow-up lease agreements, especially with office tenants. Total portfolio walls remained largely stable at five point five years during the third quarter with terms of six point seven years in the retail and four point zero years in the office portfolio.

The tenant base overview on the next slide is nearly unchanged compared to the June and underlines the largely stable performance of our operating business. Since beginning of the year, we saw only minor adjustments within our top tenant and sector allocation lists, mainly resulting from our disposal activities and the ongoing impact of indexations. As illustrated on the next slide, we achieved several letting successes in the course of the year with a contract volume of more than 25,000 square meters. Office space accounted for the vast majority of this volume. As in the past, we were once again able to record a remarkably high retention rate of around 95%.

With 0.7% of annualized rents up for renegotiation or re letting during the remainder of the year, our remaining rental tasks are manageable. Yes. And with that, let’s move on to the company’s financial situation. Total financial liabilities declined substantially in the first nine months of 2025 and amounted to around €630,000,000 As already indicated, the decrease is primarily due to the repayment of our remaining bonded loan in March as well as the loan repayments in connection with our latest property disposals. Yes, given the limited refinancing requirements during the first three months of the year, average interest costs remained at a low level of 2% within average loan maturity of three years.

Following the increase during the year as a result of the dividend payment and or influenced by the dividend payment and the value adjustments within the property portfolio. APRA LTV declined I’m sorry, following the increase during the year as a result of the dividend payment and the value adjustments within the property portfolio, APRA LTV declined by 100 bps over the last three months and amounted to 43.3% as at the September. Accordingly, REIT equity ratio is 55.8% compared with 55.2% as at the December 2024. Key debt metrics, EBITDA ratio of 10.2% and an interest coverage ratio of 5.1. We are currently finalizing our remaining refinancing tasks for 2025 and intend to sign the outstanding loan agreements shortly.

As part of our strategic sustainability roadmap, we continue to pursue the goal of reducing energy related greenhouse gas emissions across our business model. Our decarbonization strategy is driven by three core levers, reducing energy consumption, mainly through property specific energy efficiency measures, then increasing the use of renewable energy source as additional lever and improving data quality to support implementation and search. The 2024 GHG balance highlights measurable progress. Within energy related emission intensity of 45.1 kilogram equilative, we remain well within our target corridor and continue to implement our reduction pathway as planned. Total energy related emissions have been significantly reduced over the past three years.

Scope one emissions decreased by 15.4%, primarily due to efficiency gains and heating system optimizations. Scope two emissions also saw a notable reduction. And the largest share of emissions remains within scope three, particularly tenant related energy use. Here, the emissions fell by 10.1%. And tenant related energy consumption, by the way, remains the primary source of emissions, accounting for 83% of total energy related greenhouse gas emissions.

Thanks to improved data availability, the emission intensity for 2022 and 2023 are now below the thresholds of our defined reduction path. In 2024, the annual target was again met, confirming that our statutory remains intact. The sharper decline in emissions compared to energy consumption in 2024 is largely attributable to improved external emission factors, most notably the German electricity mix. And looking ahead, maintaining our target corridor will increasingly depend on external developments such as tenant behavior and further decarbonization of energy supplies. In this context, close collaboration with our stakeholders remains a key success factor for the continued implementation of our decarbonization strategy.

And with that, let me now finish the presentation with a short outlook. Yes, despite the still challenging market environment, we remain fundamentally positive about the remainder of the year and are therefore able to confirm our full year guidance. Taking into account the assumptions shown on the right hand side, we still forecast rental income for 2025 in a range between 89,500,000.0 and €90,500,000 The operating result is expected to be between €44,000,000 and €46,000,000 And with that, ladies and gentlemen, I would like to conclude the presentation and open the floor for questions. Thanks so much for your attention so

Conference Moderator: please dial the pound key followed by 6 on your telephone keypad if asking via phone, or click the raised hand icon again, which will appear as an x to cancel your request when using the video player. The next question comes from Philip Kaiser from Warburg Research GmbH. Please go ahead.

Philip Kaiser, Analyst, Warburg Research GmbH: Yes. Hello, everyone. Thanks for the presentation, and thanks for taking my question. Just a couple smaller ones. Starting with the income from passed on cost, you already elaborate the changes compared to the previous year period.

Can we take the current level kind of a range for the coming years? Or do you see any major changes in the next month with regards to this line?

Company Executive/Presenter: I may answer directly, Philippe. Good morning, by the way.

Philip Kaiser, Analyst, Warburg Research GmbH: Sure. Yes. Yes.

Company Executive/Presenter: Actually, I think first, we have to see until we have the full year behind us. I mean, what we are seeing at the moment is that we make now the first experience after we changed our providers here, and we get now all the billings in house and and then have to make our estimates. And then what’s also included in in this cost at the moment are in our estimates are onboarding costs that we have here. So I think we will be able to be more precise looking ahead once the full year is completed. Yes.

Philip Kaiser, Analyst, Warburg Research GmbH: Okay. Perfect. But do you expect any major changes from current levels for the last quarter kind of billing wise? Or anything else that could increase or decrease the number in the last quarter of this year?

Company Executive/Presenter: Not at the moment. Currently, we work with our assumptions based on what we have received so far. Perfect.

Philip Kaiser, Analyst, Warburg Research GmbH: Thanks a lot. My next one is on maintenance expenses. You already reiterated the kind of the increase between 1020% on the cost base. How much visibility do you have on maintenance expenses for the last quarter? Because if I do kind of quickly the math, the majority of maintenance costs will be then be coming in the last quarter, I mean, at least roughly 5,000,000 maybe even a little bit more.

How much of this cost you already have kind of booked or visibility on?

Company Executive/Presenter: Yes. Thanks for the question. Look, I mean, I know in the past, it was sometimes quite difficult for us to do the estimates here because it often depends on so many influencing factors like when when the individual tasks have been started, when the billing is coming in, then sometimes service, some service delays, etcetera, etcetera. So and and this in combination with the, high number of of measures from from smaller one to bigger ones. So it’s always quite a struggle here.

But for for this year, we are I think we have pretty good visibility on on what’s ahead of us here for the last quarter. So from today’s perspective, think whether we will clearly be in the range and might tend to be more a little bit more on the lower side, but it’s not fully clear at the moment, yes, but definitely within this range, yes, as of today, yes.

Norbert Doctor Kalawoda, Analyst, Doctor Kalawoda Research GmbH: Perfect. Thanks a lot. Very helpful. And my last one is regards to

Philip Kaiser, Analyst, Warburg Research GmbH: the market values. I mean, you concluded a a smaller valuation with the H1 results. Have you had any first indications for the full year for the entire valuation impact? And then yes, with regard to the overall market sentiment, any insights would be helpful here.

Company Executive/Presenter: Yes. Nothing that I can say at the moment. We are in the middle of the process. As as you might may know that we we have changed the the service providers, the value during the course of this year. So do we have a new one on board?

And for obvious reasons, this new valuer has has has to make up his mind for the first time across our portfolio. So, I mean, we we use them already for our communication, and and and we we we were in contact with them already for half year evaluation topics. So it’s not that they see the the portal the first time, but, obviously, it it takes a little bit until they’re really deep into everything. And and therefore, at the moment, I can’t say anything other. We have our clear process, and we will be in very close communication once the, the first results are on the table

Norbert Doctor Kalawoda, Analyst, Doctor Kalawoda Research GmbH: Okay. Perfect. Thanks a lot. That would be all from from my side. Very helpful.

Company Executive/Presenter: Yeah. Thanks, Philip.

Conference Moderator: The next question comes from Thomas Newhold from Kepler Cheuvreux. Please go ahead.

Thomas Newhold, Analyst, Kepler Cheuvreux: Yes, good morning. Thanks a lot for taking my questions. I actually have only two questions. The first one is on the letting market. You mentioned that due to the high indexation effects in the last year, three letting rents are slightly lower than in place rents.

We also saw a slight increase in the vacancy rates. So obviously, you don’t have a lot of short term maturities, but I was wondering if you can share some light on your view how the letting market might evolve next year?

Philip Kaiser, Analyst, Warburg Research GmbH: Good question.

Company Executive/Presenter: Thomas, thanks. And good morning, by the way, also to you. So letting market, I think my comment during my initial part here was referencing to to certain individual contracts that we see. I mean, it’s not across the board. I mean, you see Mhmm.

You see, obviously, different kind of of letting agreements and results here on an individual basis. But I just wanted to give a little hint to the fact that or remind everyone that based on the high inflation environment that we had in recent years and the consequence that a lot of contracts have been changed based on the indexation rules here within contracts. Some tenants of event, they they come from a higher level now if we talk about letting agreements and additional new leases. So there’s, a certain degree, a higher sensitivity also on this topic. On the other hand, you also I think we are, overall, we’re pretty happy on the letting side.

What we still see is that letting agreements, especially on the larger side, that’s at least my impression, tend to take longer. So negotiations tend to take longer, And and this can have, obviously, an impact on if you have a vacant space that it potentially stays a bit longer, on the vacant side, and that’s something also which we typically reflect in our internal planning. And a part of this, it’s, also a little bit more more, yeah, complex in negotiating, the the rental agreements, overall because you have additional topics like, for instance, sustainability related topics that take to, yeah, take more time sometimes in the communication and negotiations with the tenants.

Thomas Newhold, Analyst, Kepler Cheuvreux: Perfect. Understood. And my second question is on the financing market. Have there been any changes recently in terms of how banks behave, what spreads they’re charging? Or is it pretty much unchanged?

Company Executive/Presenter: During the course of this year, no major changes that we see. I think we have very, very good continue to have a very good communication here with the financing partners, at least on our side here. I mean, what we have seen during the course of the last, let’s say, twelve to eighteen months was, yes, being some institutions a little bit more selective maybe concerning their preferences and tend to at least partners we talk to tend to be interested more in larger volumes concerning the financing. And what we also see is concerning, again, the topic of sustainability, Financial institutions here be more detailed, more precise on what they expect. So they have, meanwhile, a very clear view on what kind of information and what kind of standard they expect concerning the sustainability strategy and the measures and the data.

So it’s getting all more and more detailed than if you compare it to, let’s say, two, three years ago.

Conference Moderator: As a reminder, if you wish to ask a question, please dial 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Company Executive/Presenter: Yeah. I keep it short. Thanks on behalf here of my colleagues. Also, thanks for your attention, and, yeah, hope to talk to you soon. Sorry.

One more question. Okay. Go ahead.

Conference Moderator: The next question comes from Norbert Doctor. Kalawoda from Doctor. Kalawoda Research GmbH. Please unmute your microphone.

Norbert Doctor Kalawoda, Analyst, Doctor Kalawoda Research GmbH: Hello. Good morning. Can you hear me? Hello, mister Karof?

Company Executive/Presenter: Can you

Philip Kaiser, Analyst, Warburg Research GmbH: hear me?

Company Executive/Presenter: Yes. I can hear you.

Norbert Doctor Kalawoda, Analyst, Doctor Kalawoda Research GmbH: Yeah. Thank you so much for your presentation. Just a quick short question about ESG and future topics. Can you repeat what is are the next can you shed some light on this topic for coming year? Can you give us a figure with costs?

Or is it already communicated with what you do next year in regards of ESG?

Company Executive/Presenter: Yes. Yes, I can hear you. Yes, thanks. I got your question. And yes, we have just maybe as a little reminder for everyone, we have communicated our cost estimates for sustainability measures.

And you can, by the way, find it in our standard presentation on the website where we give a preview on the based on the expenses in 2024 Mhmm. For this running for the for the current year, for 2025, as well as for 2026 and 2027. And we have divided this into expenses for maintenance on the maintenance level as well as for CapEx. So you find pretty detailed or at least, I think, a good overview, with this split up, here. And we split it up also in, typically in measures, exclusively for maintenance so that you can compare it with our, other maintenance tasks and, and another two buckets where we, divide it into measures exclusively for carbonization or measures, which, have at least as a part, decarbonization components in it.

Yeah. And just give you give you a number for 2025, our expectation for measures exclusively for the decarbonization is within a range of 400 to 800,000 concerning maintenance and for CapEx related measures for 300 to €500,000.

Norbert Doctor Kalawoda, Analyst, Doctor Kalawoda Research GmbH: Mhmm. Thank you so much. Thank you.

Company Executive/Presenter: Yeah. Pleasure. Okay. And with that, then if there are no other open questions, just go for sure. Then thanks again for your attention, and hope to talk to you soon, and have a good remainder of the week.

Thanks.

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