Citycon Oyj

Good morning and welcome Citicon's Q1 result webcast. My name is Valtteri Piri and I'm working as Legal and Investor Relations Manager here in Citicon. Today with me, we have our CEO, Henrika Jindström and CFO, Sakari Järvelä. They will now present the key highlights from the first quarter. And after that, we open the line for the questions. Henrika, please go ahead.

Thank you, Valtteri. I'm also on my behalf to this Q1 results webcast. I want to start by presenting the new senior management team in Citigon. I'm both excited and grateful for the opportunity to serve as the CEO of Citigon. During my 13 years in the company, I've had the privilege to be part of Citigon's journey to become the leading owner and developer of urban hubs in the Nordics and Baltics. Together with me, developing Citigon for the future, I have a strong and experienced team. Sakari started as the CFO in February and Helen and Jusse started in their respective roles in April. All internal recruitments. This is a group with varied backgrounds in the areas of financing, retail operations and investments. And I believe this is exactly the qualities we need in the company. As the new CEO, I want to start by highlighting that we continue to stay committed to our long-stated necessity-based strategy, where we focus on high-quality assets in strong, growing urban markets in the major Nordic cities. Our centres are connected to public transportation, and we focus on necessity-based retail and essential services. With this, we address the everyday needs of our communities. This type of retail promotes the daily traffic to our properties, and it creates stability throughout the cycles. During the last five years, Citigon has actively been evolving the tenant mix, where we have been increasing the share of groceries, municipal tenants and other day-to-day services. And I believe we are at the forefront of this development, de-risking our business. Today, 45% of Citigon's tenants are necessity-based, and importantly, the public tenants represent more than 7% of our GRI. In this chart, it's good to note that the groceries and service tenants pay higher rent on average than the fashion tenants, and also they have longer maturities, and the investment needs are usually significantly smaller over time as we compare to the faster changing fashion concepts. And then to the Q1 performance. Operational performance in January to March 24 was strong, with like-for-like net rental income increasing by 6.5%, supported by rent indexations and also strong performance in our core assets. Like-for-like tenant sales increased 3% as the sales development continued strong, especially in our main tenant categories. We saw a decline only in the fashion and home and sporting goods segments, but groceries, our main segment, grew by 5%. Footfall was flat over last year, but that was partially also impacted by the timing of Easter. And fair values were stable in all countries, but we did note a gain in the consolidation of the Chista acquisition of 46 million euros. Average rents increased for 0.1%, and we have been able to push through full indexations also this year. And on top of that, also, we have had a small positive leasing spread. And it's good to know that the occupancy cost ratio remains at the low level, and that demonstrates the healthiness of our tenants, but also the increasing tenant sales. Occupancy decreased slightly from year end due to normal seasonal variation as the beginning of the year is usually slower, but more importantly when you compare to last year, occupancy increased and we are expecting also occupancy to move up during the year. And then to the balance sheet side, a key focus area for us. I would like to highlight Citicom's commitment to the investment grade credit rating. We demonstrated this commitment during this quarter when we executed a 48 million euro share issue. This action was necessary to address the elevated LTV and secure our credit rating. Also, we had to act very quickly and we decided that a direct share issue was the best option for the company and for all shareholders. Following that, we did a very successful 300 million euro green bond issuance. And at the same time, we tendered back 200 million euros of the bonds maturing in 24. And this was another very important transaction where we addressed our main near-term debt maturities. And more recently, after the quarter end, we have extended our debt maturities further to reduce the refinancing risk. And Sakari will comment on this in more detail shortly. And in connection with the financial statements 24, we, 23, we outlined the targets regarding asset disposals and cost savings measures with the main goal of strengthening our balance sheet and cash flows. And we announced yesterday in the financial statements the divestment of Concentret in Norway, very close to book value. The book value was approximately 30 million euros. And this shows that the transaction market is picking up and that the sellers and buyers prices are coming closer. We are committed to our announced divestment target and following the recent divestment the remaining target for this year is approximately 350 million euros. We have several active ongoing discussions in excess of this amount and we are working with the prospective buyers. Erik and his team are fully dedicated to the process and we are confident that some of these negotiations will lead into the signed deals and we will keep you informed. During the beginning of the year, we have executed several cost savings measures. Through organizational changes and consolidation of group functions to our ISOM and our head office, we have been able to reduce our headcount costs substantially. Earlier this week, we also announced outsourcing of certain financial functions to create flexibility and efficiencies. We are committed to delivering on our overhead run rate target of less than 10% of NRI by the end of this year. And this corresponds to a run rate GNA of approximately 8 to 10 million euros less than in 2023. And these changes resulted in some reorganization and one-time costs, as you could note in our Q1 admin costs. ESG is a key cornerstone in how we are operating our business and Citigroup was recognized as European climate leader again for the fourth consecutive year. And I think this reflects our commitment and is a testament to our efforts, to the efforts of our whole team. And we are also a Nordic leader with sustainable financing. We have over one billion green issuances and all our recent bonds and loans have been in green format or sustainability linked. Our work at Lippulaiva is a great example of how sustainability can be integrated into our operations, demonstrating how environmental responsibility is an integral part of our business strategy. And with that, I will now turn over to Sakari to review the financial performance.

Thank you, Henrika, and welcome also on my behalf. Financially, we can report another solid quarter, with net rental income growing 6.7% or 8.2% in constant currencies. It should be noted, though, that as we consolidated Shista Galleria at the end of February, the first quarter includes one month of income from Shista. This added approximately 1 million euros to the NRI that was not there in the previous year. This impact, among others, is adjusted for in the like-for-like NRI, which grew by 6.5%. As already noted by Henrika, this is a year of restructuring for Citicon, which means we will be incurring one-time restructuring costs throughout the year, mainly during the first half. We already booked a total of 4.3 million euros of restructuring and other one-time costs in the first quarter, negatively impacting our direct operating profit and EPRA earnings, which declined 1.1% compared to last year. To present a better view of the underlying earnings performance, we have for this year changed the calculation method for adjusted EPRA earnings, which is now reported excluding the one-time costs. Importantly, we have not restated the historical adjusted upper earnings numbers accordingly, so it is not directly comparable to last year's level, and hence the reported 27.4% growth rate in Q1 does not reflect a like-for-like comparison. Just as a rough guidance, if we had restated 2023, the growth rate in adjusted upper earnings would have been around 10% or around 5% per share. On this slide, we show a more detailed breakdown of changes in net rental income from last year to this year. As you can see, our like-for-like properties and redevelopment project added a total of 3.6 million euros compared to Q1 last year. And as mentioned on previous slide, the one month of Sista added another 1 million. This positive 4.6 million growth was partly offset by some negative items, mainly still coming from the closed Torbjörn Center in Norway. Also, the Swedish and Norwegian kronors again weakened in the first quarter, which continued to impact our NRI negatively. Similarly, on this slide, we show the development of EPRA earnings. Apart from the 3.9 million positive NRI change shown in the previous slide, there are two notable items affecting earnings. First, the G&A costs were 1.7 million euros higher compared to last year, driven by the reorganization costs and other one-time items. Also, the net financial expense was 2.8 million euros higher compared to last year. This, in turn, follows partly from the increased interest rates on the debt we have refinanced during the last 12 months, and also partly from the consolidation of Sister Galleria, which added more debt into our balance sheet. The valuations were relatively uneventful in this first quarter as the total value of our asset portfolio remained largely stable. The positive 46.2 million increase in our total asset values resulted fully from the acquisition of 50% of Shista Galleria at the large discounted bulk value. The rest of the portfolio recorded flat fair values. We've reported an EPRA NRV of 8.96 per share down from 10.78 last year. 20 cents of this change was due to weaker currencies and all per share items were negatively affected by the increased share count by approximately 12 million shares during the first quarter. On the funding side though, the first quarter was in turn very eventful. First, we completed a directed share issue of approximately 48 million euros or 11.9 million shares to institutional investors. We have commented on this transaction extensively over the last months, but I would still like to emphasize, as Henrika did before, that the driver for the issue was concern expressed about our reported credit metrics after our Q4 report. We remain fully committed to our investment grade rating and hence we wanted to act swiftly and decisively to protect our rating. The issue in itself was very successfully executed and we received wide support from existing and new shareholders, which we were extremely pleased about. In March, following the equity issue, we issued a new 300 million five-year green euro bond with a simultaneous tender offer for the October 2024 euro bond maturity. This was another very important and very successful transaction, taking out the near-term refinancing risk and extending our average debt maturities. The weighted average maturity is another very important credit metric for us right now, and we have been putting an increased focus on improving it. Last night and this morning, we announced several important actions to this end. First, we have recently completed extensions of over 850 million of loans. We exercised the one-year extension option in our 650 million euro credit facility, pushing the tenor back to three years. Also, we completed a full renegotiation and extension of the approximately 206 million euro term loan, which we consolidated with Shista Galleria. This loan was due to mature next year, but has now been extended to five years. Finally, we are today launching a make-hold process to repay the remaining outstanding amount of the October 2024 bond maturity, which now completes the refinancing of the originally 550 million euro bond in October, which is a real milestone for us. On slide 17, you can see the impact of the loan extensions where the bulk of the maturities has now been pushed to year 2027 and beyond. Also, as we clear the remaining part of the 2024 October bond, we will not have any debt maturities before the end of 2025. Following these extensions, we increase our weighted average maturity to 3.4 years above the three-year trigger that S&P is monitoring. Our total available liquidity is strong at 535 million and share of secured loans from our total debt remains relatively low at 26%, with some further remaining capacity to access secured loan market if needed. Our core credit metrics weakened somewhat this quarter, mainly due to the consolidation of Shista and weaker currencies, which offset the positive effect coming from the equity issue. There is also a slight seasonal effect in cash flows, which typically make Q1 ratios slightly weaker. We are of course working actively to turn this trend and expect all the core ratios to improve by year end, mainly driven by the divestments. As discussed before, the average interest rate is also increasing mainly due to the refinancings we have undertaken over the last 12 months and the Shista loan added to our balance sheet. We are reaffirming the financial guidance for the full year 2024, which we gave in February, keeping the ranges unchanged. I would note at this point that the guidance is based on year-end 2023 exchange rates. But at this early point in the year, we are not yet giving any indications on what the expected FX impact would be for the full year. Also, I can confirm that the guidance for adjusted EPRA earnings is set based on the new calculation method, which excludes reorganization costs and other one-time items. With that, I can complete our presentation and open up for questions. Operator, please go ahead.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

The next question comes from Simon Mortensen from DNB Markets. Please go ahead.

Hi guys, thank you for a good presentation.

I just have a few questions. In terms of the communication on average interest rate, which you now say 3.18, does that include the recent loans refinanced announced post the quarter or is it excluding those?

It's excluding those given that it is end of the quarter. So refinancing is where post-quarter end.

Can you give any flavoring on the terms of the new loans you have received after the end of the quarter?

We're not disclosing the interest rate in a lot of detail, but what I can say is that, of course, the Especially the Schist renegotiated loan will carry a higher base rate, given that we had a relatively low interest rate cap on majority of that amount. But now we are still putting in place a cap which lowers the interest rate or the Stibor base rate. But the interest rate will be above the average, but lower than what the recent bond issues have shown.

And secondly, on hedging, will this be a floating mortgage, floating loan or a fixed loan long term? And your recent refinancing also, I can't see anything on your hedging ratio in the report and if you can communicate a bit on that, on interest rate expense.

The loan is based on the floating interest rate, so STIBOR three months. But as I said, we're putting a cap on full amount of the loan. So it will be at current point fixed. But if the interest rate or the base rates decline, then there will be hopefully a low interest rate in the future.

Okay, my second question goes on the sale of Kong Centret. If you can communicate anything on the value of that transaction? And secondly, you communicated at the Q4 results that you had two transactions pending in Norway. Is this one of them? And secondly, what about number two?

Yes, so first to answer the first question, we sold very close to book value. And as I mentioned, the book value is around 30 million euros. And yes, this was one of the transactions in the Norwegian market. And we have also one smaller transaction there, which we have also in the held for sale. But then in addition, as I said, we have many different active dialogues at the moment also beyond those two.

Thank you. You also said on the reorganization that you had, if I understood correctly, throughout the year, there will come more reorganization charges. Are we to understand that this is something that will occur also in Q2 and perhaps in Q3?

I would say that the bulk of the actions have been completed. There are some restructuring costs that still will go into Q2 and potentially even to Q3. But I would say that after the first half, we have basically completed or recorded all of the costs. It's just that the timing effect in booking the costs and some of the restructuring costs take a little bit of time to realize, mainly in the severance payments. the actions to get the FTEs closer to the run rate where we want it to be have almost 100% been already executed.

Can you give a numerical guidance on kind of what we're talking about in terms of charges for the reorganization in Q2 and Q3?

If we added 4.3 million in the first quarter, we probably expect, you can expect another maybe 2 million for the rest of the year to come after Q1. But that's not an accurate number. So it's an estimate.

It's an estimate. Thank you. Secondly, my last question, it comes to the announcement of your outsourcing, accounting and financing. Can you just give us a bit of coloring on the rationale behind that and how we're to think about that externally?

Sure. So the driver has been that we operate in several countries. We have, of course, properties and the related property accounting in several countries. And once we are in the divestment mode, we will be reducing our operations in some countries and operations as a whole. So we feel that at this point in time, this outsourcing provides us a greater flexibility uh to uh adjust the size of our operations and um you know as as we divest the assets because the outsourcing will be much more flexible and the costs will re react much quicker than if we would be adjusting in a way the fd run rate ourselves thank you those are all my questions um i will give the line to the next guy thank you for

The next question comes from Neeraj Kumar from Barclays. Please go ahead.

Good morning, everyone. I have two questions. The first one is in regards to your commitment to the IG rating. I really appreciate all the actions you have taken so far with regards to it. However, if I may ask, Why is IGT trading important for you? I mean, given your disposal target of 950 million in next one and a half year or so, looks like the size of the company is going to shrink a lot and you'll have a lot of disposal proceeds to deleverage. Isn't it easy to just rely on the bank market for your financing needs and not take actions, which may be sort of not accurate from an equity point of view?

I can take that question. Thank you, Neeraj, for the question. The IG rating remains critically important for us, the way we see it. We will be an issuer in the bond markets and we have a large outstanding bond portfolio. The divestments will realise and that will provide funding to repay debt. But in this process, we also operate under the covenants of um the current bonds which include secured solvency so so in terms of um funding our business going forward we feel that the bank market is very important but there will always be a balance between banks and bonds um and at this point um we want to underline that we we will stay investment grade and we will and that will continue to support our pricing in the bond market got it and uh second question is just linked to this so how should i be thinking about your hybrid Well, the hybrid, as we have said before, the first hybrid comes to call end of this year. We've been reviewing our options. We're reviewing transactions that other hybrid holders have been doing in the market. There seems to be quite a lot of activity and sort of a certain structure unfolding that probably is also available for us. We have not taken any decisions on that. We will do that later in the year. But what we can say, as we've said all along, we committed to IG and hence we commit to retaining that equity credit. And we will be choosing a structure that retains that in dealing with the hybrid.

Got it. And just like a linked question on that. So given your disposal target of 950 million, the asset base is going to reduce over a period of time. So aren't your hybrid exposures going to go beyond 15% limit from S&P and you sort of risk losing the equity treatment on that incremental portion? Do you have any thoughts to share on that?

I think after the consolidation of Shista, our asset base actually increased. So currently we don't have any overhang above that 15%. So all of our hybrid bonds carry the equity credit. There's still some room to reduce the hybrid stack according to S&P's methodology as we interpret it. If the size of the hybrid stack becomes inefficient, we can always consider that. But at the end of the day, we want to underline that we committed to keeping those hybrid points on the balance sheet. They're permanent and they're important for the investment grade rating. So any changes will be reviewed in future stage in the light of or through the lens of retaining the IG.

Got it. Thank you very much, Kari. That's all from me.

The next question comes from Michael Chakardjian from BNP Paribas. Please go ahead.

Hi, thanks for the call.

I just want to make sure I get a few things straight. On Custer Galleria, you bought this acquisition for $110 million from your JV partner. You had it on your book at $173 million. I believe your JV was very strongly looking to sell. The first one would be what gives you the confidence to right-size this asset up and what gives you the confidence that when you do your appraisals externally that they wouldn't write it down probably close to the transaction level of this acquisition. The next question is on Costa Galleria. I see the principal amount of the bond of the loan has dropped. Can you tell me why that is the case? Then the next one is, so your debt-to-debt plus equity is probably, from an S&P basis, is probably 58%, so above the 55% threshold. Would it not be prudent to cut the dividend? And then the other thing, too, is can you tell me anything about the NDAs which you had in November from your predecessors were talking about? I think you said there was $350 million. What happened to that interest? Was it price-based? I do notice your cap rates are basically flat while the market has gone up. And then lastly, you've got the dividend and actually finding a solution for the hybrids all in one. I guess you have three different stakeholders. So what comes up top is that does the dividend get cut first or which is the one which is a sacrosanct? Thanks.

Starting with Chisto, I'm not sure I got the first question, the first part of Chisto. Was it like the growth of Chisto? Could you still specify?

Sure. In your annual report, you said you bought the 50% of the JV for 110 million and you had it valued at 173 million. So that's a very big disconnect. So you bought it at a 36% discount to where you have it on your books. And you've now just revalued that asset up quite substantially. So that's essentially the bulk of the question. Is that even prudent to be doing that?

Yeah, we didn't, of course, we didn't revalue the asset up. But of course, compared to the purchase price, there is, as you say, there is a difference. But I would say this was a seller who wanted to exit the market. So We have had discussions with the valuator and don't see it as the market indication. So we had a dialogue and the yield of Chista remains flat compared to the end of the year. So I think that is. And then you had a second. Did you have a second question on Chista still there?

of the loan? Yes, about the loan. I saw that it dropped in size. It was like 206 million and the new one is probably equivalent to around 177 million. You know, how come?

So the Schuster loan originally was around 2 billion SEK. And now we, in the process of renegotiation or as we renegotiated the loan, we repaid the principal by 300 million SEK. So around 330 million euros, say.

Okay. Was that mandated from the banks because the LTV had come down? What was the reason there?

There were other structural things around that loan, so we also added collateral.

Oh, you added extra collateral with the 30 million coming down? Yes, that's correct. How much extra collateral?

We're not specifically disclosing that, but the LTV is somewhere maybe around 40 to 45.

Okay. And then the next one was on the debt set plus equity at 50. S&P is equivalent of approximately 58%. The threshold is 55. Would it not be prudent to cut the dividend, given that you are basically on notice to be downgraded to high yield?

That is, of course, always a balancing act. But as we stated also already in last quarter, we cut the dividend quite substantially. And actually this year we have made several measures. We have cut capex to the minimum. We have done, as you can see here in the presentation, a lot of savings on both the admin side and on the OPEX side, creating more room for the dividend on that side. The AGM has decided on the full year mandate and now the board makes the decision basically quarterly, but at this point there was a decision made to be paid dividend for this quarter.

And then the next question was on the, so in November, your predecessor talked about, yeah, there was 350 million of transactions with under NDAs. I mean, substantial amount of time has passed. What happened to those? I do notice your net initial yields have stayed flat around 5.3, 5.4% over five years. And most of the market has actually risen substantially. Has that been like a blockage for why we haven't heard progress from that? If you could comment.

Yes, there was one larger deal there in that one. And there was just we didn't feel that that was the right pricing for that specific asset. And now we have dialogues where we feel we are closer to our book values and feel that those are better deals for us. That's the main reason.

So how much was the gap? Was it 20 percent, 10 percent?

We don't want to comment, but in general, we are looking for, we think we can divest at not very big discounts to our book values. So, but not want to comment more on that. But I think we can. I think the deals we are discussing at this point are not very, very big gaps to our book values.

Okay. And then lastly, on the ICR, I mean, you've got the bridge, you've got your Custer Gallery alone, you've got the Nokia bonds coming due in September. Your ICR is going to probably face quite a bit of pressure, assuming you're looking at the bond market to finance that. How are you going to address those hybrids? Would you cut the dividend or suspend the dividend to give you that extra capital? Because those hybrids go to around seven, reset to around a seven-handle yield. You're probably looking at six at the senior market right now, which is pretty similar level. Who comes out on top?

I'm not sure who comes out on top, but I think what I can say is that if you read the S&P report that they published earlier this year after our capital markets transactions, it gives a relatively clear runway when it comes to the rating. And the ICR trigger was actually reduced or reintroduced at 1.8, which is a lower level than before. So currently we actually have a relatively decent headroom when it comes to the ICR. Of course, the hybrid bonds, whether they reset or get exchanged or refinanced, the coupon will increase and that will affect the ICR going forward. But at this point, I mean, once we execute our divestments, we repay some near-term loans. And I would like to just note that we've cleared now all of the near-term maturities, so the next one is in 2025. So we see the path for the ICR that stays within the metrics as we reduce also the LTV. When it comes to the De Chiesa loan, I would just reiterate what I answered previously that of course the interest rate will be higher than you know that it was before or what our average interest rate has been, but it's not punitively so, given that we have capped 100% of that nominal to a lower level where this library is.

Should we be thinking 5% for modeling purposes?

That's not too far off, so I think that's a fair assumption. Okay, thank you. Thanks for the questions.

The next question comes from Venci Elieff from Kempen. Please go ahead.

Hi, good morning. Thank you for the presentation and taking my questions. Two questions. First one, a bit on the operational side, usually you publish releasing spreads, but this time I failed to find this in the report. Is there anything you can comment and also what the outlook is in general?

Yeah, I think leasing spread is a pretty difficult metric because everybody is calculating it in their own way. So we mainly use it actually as an internal metric. We are actually pretty pleased to see that we can, on top of the indexation, get a positive leasing spread, a slight positive leasing spread, given we have had now a few years of very high indexations. which we have gotten through. I would say we don't see anything. We see the leasing market pretty normal. It is a little bit weaker in Sweden compared to the other markets, maybe a little bit stronger in Norway compared to the average. But we see the market being pretty good and stable at the moment. That is what we see at the moment.

Yes, and then second question, also a bit more operational. So if I look at the like for likes, NRI growth, it's also partly driven by margin improvement, is that correct to assume? And also, let's say, how are electricity costs feeding into that? Should we expect some worsening or should we expect it to improve going forward?

Yes, so yes, there is also a little bit of margin improvement. We have been working a lot on our recovery rates during the last years. And that is now starting to show also that we're able to recover a bigger proportion of the OPEXs. And then on the electricity, we hedge it running forward 12 months. So how it moves, it will start. Now we did hedging for this year from last year. So now we saw a pretty big increase in electricity costs for this year.

but now we will see it go down also i think going forward a little bit depending on on how the how the market is moving okay thank you the last one just electricity as you know we operate the triple net so typically we recover the electricity cost from the tenants okay thanks

And then just a follow-up question on the discussions you have because you also remain committed to disposing $380 million by the end of the year. Could you please quantify whether you're in discussions that exceed this amount or what gives you confidence that you will reach it?

We are in discussions for in excess of this amount, but we don't want to be too specific. And we rather would like to inform you whenever we have completed a deal. But we are very committed now to these divestments and we are in active dialogue and we have good ongoing discussions on the table.

Okay, thank you. That's it from my side.

The next question comes from Svante Krokfers from Nordia. Please go ahead.

Good morning.

Thank you, Henrika and Sakari, for the good presentation. A couple of questions left from my side. First, regarding the divestments. I mean, your announced divestments have been quite heavily tilted towards Norway. Could you elaborate a bit on what makes divesting in Norway easier than in other countries? And could we expect, do you have ongoing discussions in other countries also.

I think Norway has now been the most active transaction market. I think there has been a lot of local money and funds there that have been looking for objects. So I think, as you state, Norway is probably the most active market, but also in some other markets we have active dialogues. So it's not only in Norway, but that is a very good market at the moment.

Have you seen any change in the market activity in Finland and Sweden? Are the bid-ask spreads narrowing?

Yeah, we see absolutely the dialogues becoming more and there starts to be more appetite at the moment. So we see it. But I think let's see how it evolves from now on. Now, of course, in Sweden with the interest rate cut, we expect that also to start showing slowly.

Thank you. And the last question regarding your APRA earnings per share and just the APRA earnings per share guidance. Could you remind us about the assumptions regarding refinancing both when it comes to hybrids and other financing?

We have the guidance underlying in the guidance when it comes to interest expense and the hybrids is that we keep refinancing near-term maturities. Of course, we have now completed most of them. And when it comes to hybrids, we assume, as we have stated, that the hybrids are permanent and they're staying in place. So we are projecting a coupon according to that.

Okay, thank you. That is all from me. Thanks. Thank you.

The next question comes from Simon Mortensen from DNB Markets. Please go ahead.

Thank you. A follow-up question from me. In terms of CapEx, you have driven this down quite significantly, if I understand correctly. But at the same time, the hybrids are going to remain in place The cash flow from operations free cash flow for doing capex will be reduced And I'm just curious. How have you seen your portfolio? compared to the new energy building performance directive revisions which will require refurbishment of assets for having them to be left out in European markets and and if you can give any coloring on the status of your portfolio and what kind of impact you can see from the energy performance of building directive revisions.

Maybe to answer the first question, I mean, now we are talking about a pretty short period. We have been working on our assets actively for, you know, years and years. So one year with a little bit less does not move the needle for a building. So I would say we are very well set up in our properties. We have been working with energy efficiency projects for a long, long time. So we are actually, we feel pretty confident pretty confident that we will not be hitting any limits. But then, of course, we have very ambitious targets going forward and see opportunities still on that side. And there's also different ways to finance and have third parties in the energy side. Do you want to comment, Sakari, on the reporting side here?

We haven't really publicly commented on the regulation, as you mentioned. The only thing we can say is that we've been, as Henrik has said, investing our assets proactively over the years before, and we're confident that our assets will be in compliance at all times with all the regulations, including this one. I think I would just, you know, further comment on the capex that, of course, we've reduced the capex a lot, also a little bit on the maintenance side. But the bulk of the reduction comes from developments, which we have basically mostly put on hold. And also from tenant improvements, which we used to do quite a bit actually when we were actively managing tenant mix towards the more necessity-based and grocery-driven. But we're much, much further there. So this year we will be doing much less of that. So it's not so much that we are compromising on maintenance or energy.

Okay and to understand also all your properties are currently now above the energy performance certificate grades for the first few years in the energy building performance directive if I understood correctly or is there any assets that?

No we are not aware of any assets which would not fill the requirements. Okay thank you. Thank you. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

We would like to thank you for this call and have a good day. Thank you.