The following is a review of BUWOG's first ordinary general meeting today. The most important thing in advance: the proposed dividend distribution in the amount of EUR 0.69 per share was approved – and at a level of 100%. For IMMOFINANZ, which holds a stake of 49% since BUWOG's majority spin-off, this means a dividend distribution in the amount of EUR 33.7 million (48.8 million shares x EUR 0.69). The dividend ex-date is Wednesday, 15 October, the dividend payout date is 23 October.Incidentally, BUWOG has also had its own blog since the beginning of the week. It can be found under blog.buwog.com. The colleagues from BUWOG joined us in blogging live today.
The GM starts at 11.15 a.m., Supervisory Board Chairman Vitus Eckert welcomes all members of the board, shareholders and guests.
He also explains that the number of issued and voting shares are identical (BUWOG does not hold treasury shares).
We then come to the 1st item on the agenda, the presentation of the financial statements including the management report, the corporate governance report, the consolidated financial statements including the group management report, the proposal for the appropriation of the balance sheet profit and the report of the supervisory board for the 2013/2014 financial year.
CEO Daniel Riedl takes the floor and begins with an overview of the highlights of the past 2013/14 financial year (several of the points were also found in the IMMOFINANZ presentation for the 2013/14 financial year). Some of the highlights: the sale of part of the Upper Austrian portfolio to WAG took place in August 2013, as did the signing of 1,194 residential units in Kassel. A month later nearly 900 flats were acquired in Lüneburg and Syke, and in October and November the shopping tour in the German residential market continued. The high point was in February, when the acquisition of around 18,000 flats was announced (DGAG portfolio) – as is known, that was the kick-off for BUWOG becoming a separate entity via the capital market and for its majority spin-off from IMMOFINANZ. Additional stations: the extraordinary general meeting of IMMOFINANZ in March and BUWOG's stock exchange listing on 28 and 29 April.
Operationally, things continued in the current financial year with the sale of BUWOG Facility Management at the beginning of May. The closing of the DGAG acquisition took place in June 2014. In September BUWOG began the construction of a large-scale project in Berlin (Uferkrone / Lindenstraße).
Riedl gives a detailed presentation of BUWOG's business model again. Last year asset management contributed a share of 66% to the operating results, property sales contributed 30%, the development business 4%. Recurring FFO in 2013/14 was € 69.2 million and in Q1 2014/15 € 21.9 million. Total FFO (in which block sales in Austria are also included) totalled € 81.8 million for the overall year and € 22.3 million in the starting quarter.
A couple of brief details on the portfolio: BUWOG has a total of 52,546 flats which have a total rental yield of 5.6% and a vacancy rate of 4.2%. Austria accounts for 26,076 flats (with a yield of 4.4% and avacancy rate of 5.1%), Germany 26,470 flats (with a yield of 7.5% and a vacancy rate of 3%).
CFO Roos goes into detail on the business figures. FFO is one of the most important indicators for management control, perception on the capital market and dividend distributability, says Roos on the indicator's "multilevel" structure, which means the breakdown into FFO (excluding property sales) and the so-called "recurring" FFO, which includes the result from the sale of individual flats. Block sales are ultimately included in total FFO as well.
In the area of financing there are two major measures pending: on the one hand, an interest hedge is to be concluded for the approx. € 400 million loan taken out for the acquisition of DGAG. The interest rate will rise slightly as a result. The € 260 million convertible bond (interest rate: 3.5%) subscribed by IMMOFINANZ will also be refinanced. "In the present interest rate climate it will be possible for us to refinance the convertible bond at a more favourable rate", says Roos. BUWOG has the chance to call the bond in full by the end of January ("hard call"). BUWOG has decided to refinance with a mortgage loan. The potential advantages according to Roos: no dilution for existing shareholders, long maturity, and an interest rate of approx. 2.5%.
The outlook for the financing area:
The interest hedge and the refinancing of the convertible bond will bring LTV (loan-to-value) in the range of 50% to 55%. The average overall interest rate will be 2.5% to 2.6%, total maturity will increase to between 17 and 19 years.
CEO Riedl takes the floor again and goes into the structure of the existing portfolio. In regard to the DGAG part, investments are to be made in the existing portfolio in order to generate additional rental income. The next step is also the integration of 8,400 existing German BUWOG units into the management platform (with the DGAG deal BUWOG also took over a management platform with around 300 employees).
Riedl also addresses the sales activities: 93% of BUWOG’s apartments are the so-called core-portfolio of which 43% are earmarked for individual unit sales. The remaining 7% of the existing portfolio is intended for block sales. In the 2013/14 financial year a margin of 54% was achieved on the individual unit sales (at an average price of EUR 1,960 / sqm), in the first quarter the margin was 62% (at an average price of EUR 2,133 / sqm).
An overview of project development and BUWOG's strategic positioning follows. The geographic focus lies on Vienna and Berlin, about 80% of project development is for the purpose of selling, 20% for the existing portfolio. In Berlin project development is to be expanded, Riedl says.
An overview of BUWOG's capital market performance:
Current share price of € 15.21 (13.10.2014)
=> Increase of 17.0% compared to the initial listing price on 28.04.2014
=> Discount of 10.4% on analysts' average share price target
=> Discount of 14.0% on EPRA NAV (31.07.2014)
The average daily trading volume since the listing is approximately 250,000 shares (Vienna Stock Exchange), or EUR 3.6 million.
The outlook in brief:
For the current financial year a recurring FFO of at least € 75 million is expected. Riedl also emphasises the aim of a stable dividend policy: 60% to 65% of recurring FFO is to be paid out in the medium term. Furthermore, the optimisation of the financing structure is on the agenda, as previously mentioned.
Supervisory Board Chairman Eckert then opens the discussion concerning the first item on the agenda.
Mr Rasinger of the Austrian Association of Investors (IVA) comes to the podium: The IVA represents more than 75 shareholders or more than 3% of share capital. Most of them are institutional investors, quite a lot of them from America, Rasinger says.
"The figures are a proof of the success story. The expectations relating to the spin-off have been met". And there is still potential, though he doesn't necessarily take the analysts as a cue because they generally lag behind development. “Anyone who still has no or an insufficient number of BUWOG shares has only himself to blame", says Rasinger.
Concerning the dividend policy Rasinger says: “The 69 cents per share are a true delight. The first dividend is also right above dividend guidance. "Is that a welcome bonus?", Rasinger asks.
He also discusses the shares held by the board members and the positive signal for the market emanating from these director dealings. With a view to IMMOFINANZ CEO Eduard Zehetner, he says with a smile: "I'm almost worried about Mr Zehetner's risk diversification because he has such a considerable stake in IMMOFINANZ and BUWOG".
CEO Riedl explains that he received approx. 20,000 BUWOG shares from the spin-off ("and I still have my IMMOFINANZ shares"). With his wife he holds a total of about 74,000 BUWOG shares.
CFO Roos answers the question how long BUWOG’s dividend payments may be treated as capital repayment and therefore capital gains exempt for private Austrian investors: "With the dividend policy we've envisaged we expect the dividend to be capital gains exempt for up to 10 years for Austrian retail investors".
The costs of the listing on the stock exchanges were borne by IMMOFINANZ. A consulting investment bank accounted for the sum of € 200,000 to € 250,000. Of course there are ongoing costs, for example, BUWOG did not have an investor relations department before the listing, plus the marketing division has grown.
Concerning the liquidity of the BUWOG share: The most volume is traded in Vienna, and it is likely to stay that way. "And quite honestly: we're also quite comfortable with that", Riedl says.
Since the end of April 28.6 million shares have been traded in Vienna, 1.7 million shares in Frankfurt and fewer than a million in Warsaw. The Warsaw listing was important so that the Polish investors would not sell the share (due to more rigid investment restrictions).
Eckert reads a question: What's the effect of the planned rent control in Germany?
Riedl: It seems as if the government in Germany has agreed to rent control. The aim is to insert mitigating elements into regions with a disproportionate increase in rents in the last few years. If rents are 10% above the local rental table (Mietpreisspiegel), then the apartment can't be rented at a higher rate when the tenant moves out. "This can affect us in parts of Berlin, but most probably not in other regions. And it remains to be seen which regions even make use of it", says Riedl.
A question concerning the ongoing business relations with IMMOFINANZ: one issue concerns services in the area of consolidation and taxes. Remuneration is done on an hourly basis and is in conformity with the market. The contract runs until the end of the year.
Other questions follow from shareholders centring in part on the financial report, tenant issues, etc.
Riedl on acquisitions: acquisitions in Germany of between 2,000 and 2,400 flats are planned per year. In general, for more substantial growth a capital increase would probably be necessary. But there are no concrete plans at the moment. Besides, the aim before then is to reduce the gap between share price and NAV further.
Listing and marketing costs for all three stock exchanges are stated at approximately EUR 60,000.
Concerning the dividend policy Riedl says that the dividend for 2014/15 shouldn't end up below the EUR 0.69 per share for 2013/14. In the medium term the aim is to pay out between 60% and 65% of recurring FFO.
There are no further questions.
We come to the 2nd item on the agenda: the resolution on the appropriation of the balance sheet profit stated in the financial statements for the 2013/2014 financial year.
A distributable balance sheet profit in the amount of EUR 78.88 million was reported in BUWOG AG's annual financial statements. In accordance with the proposal for the appropriation of net profit, out of this balance sheet profit a dividend of EUR 0.69 per share bearing dividend entitlement will be distributed, Eckert reads. As of today the total number of company shares entitled to receive a dividend is 99,613,479. The dividend is to be paid out gross for net (no 25% capital gains tax for Austrian investors). For the dividend payout the shareholder’s portfolio balance on the day before the dividend ex-date, that is, the portfolio balance on Tuesday, 14 October 2014, is relevant. The dividend is due for payment on 23 October 2014.
Eckert on presence: 1,833 shareholders and representatives appeared, 53.9 million shares are represented.
Vote on the dividend: 100% approval.
The 3rd item on the agenda is next: the resolution on the approval of the actions of the members of the executive board for the 2013/2014 financial year.
Note: In accordance with the voting restrictions agreed in the de-domination agreement with BUWOG, IMMOFINANZ AG is required to refrain from exercising its voting rights in the vote on the approval of the actions of the members of the executive board.
The actions of the members of the executive board are approved at a rate of 99.9%.
This brings us to the 4th item on the agenda, the resolution on the approval of the actions of the members of the supervisory board for the 2013/2014 financial year.
In this vote, as well, IMMOFINANZ AG is subject to voting restrictions in accordance with the dedomination agreement. Specifically, this voting restriction applies to the resolution to approve the actions of Klaus Hübner.
There is a separate vote to approve the actions of each member of the supervisory board.
Approval of the actions of Birgit Noggler: 99.97%
Approval of the actions of Klaus Hübner: 99.89%
Approval of the actions of Eduard Zehetner: 99.97%
Approval of the actions of Vitus Eckert: 99.97%
We come to the 5th item on the agenda, the election of the auditor for the financial statements and the consolidated financial statements for the 2014/2015 financial year. The appointment of Deloitte is proposed and accepted (approval: 99.99%).
6th item: the resolution on a conditional increase in share capital for the purpose of granting stock options to the members of the executive board in the scope of the long-term incentive programme 2014 and the related amendments of the Articles of Association.
Eckert refers to the report of the supervisory board and also shows two slides for the purpose of explanation. The stock option programme is to link a part of the variable remuneration of executive board members directly to the performance of BUWOG's share price. The programme envisages various tranches. "It was always planned to introduce and implement the programme, and it was also a component of the talks in the run-up to the stock exchange listing", Eckert explains. Such a programme is also desired by international investors.
The members of the executive board have the opportunity to subscribe at € 13 per share (initial listing price of the BUWOG share). The entire programme has a volume of up to 720,000 shares (but it can only be exploited to its full potential if all of the performance targets have been met). Up to 480,000 shares are accounted for by the CEO, as many as 240,000 by the CFO. The maximum number was divided into four packages: so-called basis options (not dependent on fulfilling further performance targets) as well as three tranches in bonus options (dependent on fulfilling performance targets), more specifically, aligning the share price with NAV).
There are several comments, among them a question as to whether the programme couldn't have also been extended to other employees and why the initial listing price from Vienna (EUR 13.2) or a higher share price wasn't used. Eckert points again to the circumstance that the stock option programme was already a component of the talks prior to the spin-off.
There is a vote: the stock option programme is approved at a rate of 98.77%.
7th item on the agenda: the resolution on the cancellation of existing but unused conditional capital pursuant to the resolution of the general meeting of 14.03.2014 for the purpose of implementing the spin-off and takeover agreement with IMMOFINANZ AG. The item is approved at a rate of virtually 100%.
That brings us to item 8 of the agenda: the resolution on the authorisation to issue convertible bonds. This is a contingent resolution which envisages within five years the issue of convertible bonds with which conversion rights or subscription rights can be linked to as many as 19.9 million shares. Approval is about 96%.
Final item on the agenda: the by-election to the supervisory board.
The supervisory board currently consists of five members elected by the general meeting. The term of office of supervisory board member and IMMOFINANZ CEO Eduard Zehetner expires at the end of the general meeting resolving the approval of the actions for the 2018/2019 financial year. However, in connection with Eduard Zehetner ending his mandate as CEO of IMMOFINANZ AG, he will have effectively retired from the supervisory board of BUWOG AG, effective by the end of 30 April 2015. Oliver Schumy will succeed Zehetner as CEO of IMMOFINANZ at the beginning of May 2015 and is also to be elected to the supervisory board of BUWOG, effective 1 May 2015.
Schumy briefly introduces himself and discusses his curriculum vitae (years of management experience at a listed industrial group as well as experience in the real estate industry already in early years – commercial as well as residential real estate).
A comment: a shareholder wishes both Mr Schumy and Mr Zehetner all the best.
There is a vote: approval is 99.8%.
Before Mr Eckert closes the general meeting, he thanks Mr Zehetner on behalf of the executive board, the supervisory board and the entire BUWOG company. "Without your activity at IMMOFINANZ in critical times, none of us would be sitting here. I don't know who BUWOG would belong to, but it wouldn't be listed on the stock exchange, nor would it have purchased the DGAG portfolio".
The GM ends at 15.45.
All of the documents on the GM can be found on BUWOG's website: