Tag Immobilien Ag

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the TAG Immobilien AG Interim Statement Q3 2022. Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your telephone touch key. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Martin Thiel, CFO. Please go ahead.

Yeah, many thanks and good morning, everybody. Welcome to our Q3 earnings call. I mean, today, clearly, the most important points to discuss are the new guidance for 2023 that we have published today and, of course, also our decision on the suspension of the dividend for financial year 2022. So we will have definitely time to discuss this in the Q&A afterwards, and I will, of course, also elaborate on our thoughts behind. But let me please start with the highlights for the operational business in the third quarter 2022, which you see for Germany on page number four and for Poland on page number five. Both of them, I think, show that the business itself is running very well. So for example, in Germany, we are in the meanwhile in a vacancy rate of our residential units at 4.8%, coming from 5.5% at the beginning of the year. That means already at the end of the third quarter, we have basically achieved our guidance, which stood at 4.8% as target vacancy rate. And there's still a good chance to overachieve this guidance. We can tell you that as of today, we're already slightly below 4.8%. The same is true for like-for-like rental growth year-on-year, including vacant reduction. This number came in at 2.5% at the end of the third quarter compared to a number of 1.3% for the financial year 2021. And also here, we are already above our guidance, which stood between 1.5% and 2.0%. As a result, FFO1, which is still purely coming from the German rental business, increased year-on-year by 7% and was at 49.1 million euros. If you do a simple calculation and put this number additionally on top of the first nine months, you will see that we clearly on a very good way to achieve and perhaps even to slightly overachieve our FFO1 guidance for the full year. Quick look at APRA NTA and LCV. Basically, the numbers at the end of the third quarter are very similar to what we have guided to with the half year as we also presented pro forma numbers after the rights issue. So now the APRA NTA stands at 22.21 euro, and the LCV came down from formerly 47% as a result of the rights issue now to below 45%. Talking about acquisitions and disposals in Germany, there was just one acquisition that you already know from the second quarter. This was more or less an exception for this year, so we can clearly tell you that there are no further acquisitions planned in Germany. And on the other side, we have achieved to sell in the first nine months of 2022 725 units for a total selling price of 37 million, which is a disposal that led to a book profit of 1.5 million. And speaking more generally about the disposal program in Germany, you know that together with the rights issue, we announced a disposal program for altogether 200, 800 units with a targeted net proceeds around 300 million euros. This disposal program will clearly continue. As we expect now, the closing of a first tranche of 300 units with net proceeds of roughly 40 million. Now we have adjusted this because of the closing to a remaining roughly 2,500 units and, with a rounded number, expected net proceeds of around 250 million. But what we clearly need to accept and was clearly a consequence of the moment very limited investment market is that we're not able to sell this apartment as quick as originally planned. So we have to postpone this into the next month and quarter. And also with today's decision of the dividend suspension, simply we want to have here more time to do the asset disposals in a way that simply makes sense. So we are optimistic that with our approach to sell such portfolios in smaller tranches over the next month and quarter, we will be successful. But as I said, it takes longer than expected. And this is a picture, I think, that you know not only from us, but also from other companies. Coming to page number five and looking at the highlights for Poland, revenues increased in the first nine months of 2022 strongly in comparison to the previous year, because we had now, in 2022, ROEBIC from the second quarter onwards in our P&L. Please be aware that the fourth quarter will be by far the strongest, as most handovers for the financial year 2022 are planned for the fourth quarter. So therefore, looking at the results from operation in Poland, which was around 11 million for the first nine months. It's just a smaller part of the total result that we expect for the full year So when you remember that the RFFO2 guidance stands around 250 million euros, so the total result of RACES Poland should be closer to 60 million in total for the full financial year 2022 as a result of expected strong handovers in the fourth quarter. And we can tell you that here everything is on plan. And talking about more general in Poland, it's not only the case that the construction sites are running as planned, We also see that on the construction price side, the inflation rates have clearly come down the next month and, as a very positive aspect, sales numbers are picking up now again. So what we saw in September and October as an average sales volume was between 200 and 220 apartments. That compares to numbers more around 150 apartments per month during summer. So therefore, the Difficult market condition in Poland with high interest rates, high inflation now clearly leads to a reduced sales number, but we see here an increasing trend. And it's not the case that sales numbers are coming down and down again. So the business has not only stabilized, it shows clearly a positive and increasing development. Coming to the next slide where we show you our refinancing measures that we have already taken. Starting with the first two points, that's something that you already know. We have completed the rights issue with total proceeds of €22 million. We have taken this proceeds to repay part of the Robic Acquisition Bridge, which stands today at €310 million. We will use the disposal proceeds that are already mentioned to repay an additional part of the bridge. So the bridge should be at around €250 million by year-end. and we have also extended the bridge financing volume or the bridge maturity until January 2024. We've already indicated with the half-year report that we're working on additional early refinancing of German bank loans. This is now nearly completed in full, so some signs of contracts are already missing, but this is something that will happen basically in the next days. So the closing of this early refinancing of bank loans will take place in November and in December at the latest. All interest rates are already fixed and we expect an additional liquidity uplift of $161 million. So it's not only the case that we've extended all bank loans that originally matured In financial year 2023, the loan amount was 160 million. On top of this, we get additional liquidity of around 160 million euros because the LTV of these portfolios that we have now refinanced was quite low after 10 years of amortization of value growth. So therefore, this is definitely a good sign that we are able to create additional liquidity with a banking market that is still very much intact in Germany. At the next point, we have already adjusted our capex plans in Poland in the course of the year. So in summer, we decided to step all new residential for rent projects, and of course, to continue with the existing projects. But we said, for now, we concentrate on the residential for sale projects, which are not very capital intensive, if they are financed to the very last part by a customer prependence. And that leads to the fact that the net financing needs for Poland in financial year 2023 are only at around 50 million euros. And what we see in the sit for sale business is very visible in terms of cash flow. So 99% of all planned handovers for 2022 are clearly already sold. Into 2023, the pre-sale ratio today, or at the end of the third quarter today, it is even higher, was already more than 60%. So we have very good visibility on cash flow and results coming from Poland, not only for 2022, but also for 2023. I already mentioned the disposal program, which is now more extended into 2023 with an adjusted target size of around 250 million after now the closing of the first disposals will happen in the fourth quarter. And then some words about our decision to suspend the dividend for financial year 2022. We're talking here of an absolute amount of 143 million. That was the former dividend guidance. And we said, well, in the current market situation, we have to accept that A, we talked about this, investment markets are difficult. That B, financing markets, when we talk about capital market financing, unsecured financing, is extremely difficult. So therefore, we thought to be here clearly more on the conservative side. to have here every decision in our hands to tackle the upcoming refinancing in 2023. It's in this situation, also in the interest of our shareholders, the best situation to suspend the dividend for financial year 2022. You can assume that this decision wasn't easy for us. I mean, TAG has always paid an attractive and growing dividend over the last years. And we will also, of course, return to our dividend policy once this market situation is more on a positive way, once we have done all the refinancings, which is basically the bridge loan maturing at the beginning of 2024. But for now, we think it's clearly an appropriate decision to suspend the dividend. And if you turn to the next slide, you can also already see that with this decision and with the already completed bank refinancings, we have basically tackled all upcoming refinancing in financial year 2023. So if you look in the maturity profile, you can see this later in the presentation, there are still refinancing means until end of 2023 for 492 million euros, that is set The bank loans are, as far as they refer to German portfolio financings, already refinanced or extended. We have additional liquidity of 161 million euros from this refinancing. We are keeping the cash that we generate from the German business. We don't pay any dividend. We can use that to repay debt. And in the simplified chart on page number 7 in the end, We are only talking about roughly 17 million euros as remaining refinancing needs for the next more than 12 months. And of course, we have here further options. And we just give you two examples on the top right. Additional mortgage financing in Germany is something that works very well. So therefore, we have clearly, as an example here, additional financing sources that we can use. And of course, we will continue with our disposal program as said. So therefore, this decision, which is on the one side, hard for shareholders in the short term, mid to long term, this should be an appropriate way to maneuver in this market. Coming to page number eight and talking about our new FFO guidance for financial year 2023. We predict here a reduction in FFO1 by 9% from the current midpoint guidance of $190 million to now $172 million. What are the reasons for this reduction? One main reason are planned higher interest rates. And these high interest rates are coming, for example, from the fact that today's bank loan in the refinancing that I already discussed are at around 4%. We will use this to repay unsecured debt maturing in 2023, for example, from one promissory note, for example, from one corporate bond, with coupons on average below 1%. And on the other side, we have also penciled into the guidance in 2023, no disposals from this 2,500 units, but we have penciled in, of course, the interest rates from bridge financing from this 2,500 unit portfolio. So therefore, higher interest costs from the bridge higher interest costs because of already completed refinancing. If there are no really material refinancings ahead of us, it should give us a good picture, lead to a 10 million increase in interest rates. You see marked with this small number one, asset disposal of two million. These are already signed disposals. So just to make this clear again, we have not incorporated any disposals in this guidance. And if you incorporate that, so if you ask us what is the effect if you sell these 2,500 units on FFO1 after all interest costs, after taxes, this is 6 billion euro roughly for the full year. So in a simple example, if we would sell these 2,500 units in the middle of the year, we would have a 3 million euro reduction. We, of course, see increased prices for maintenance. We see higher heating costs for our tenants. Therefore, we have taken into account an increased number of around 8 million euros for this. Roughly 50% of that 4 million is for higher prices for maintenance work as a result of the current cost inflation, and roughly 50%, so another 4 million, is something where we take into account, first of all, the new CO2 tax. That's an amount of around 1.7 billion euros. And then the remaining part, it's close to 2.5 million, is something where we say, well, we need to plan at least higher impairments on receivables from our tenants because they will face increasing or strongly increasing heating costs. As of now, this is not really an issue, but We know that in 2023, we will have the service charge bills for 2022 and increased prepayments. So simply to be in a safe side, we've taken care of that. So there is a one-time drop by 9% in the FFO1, but looking into 2024 and 2025, and we think it's also worth to mention and important, we expect on this basis a stable FFO1 level. And included in this guidance for the financial year 2024 and 2025 is the assumption that the 2,500 units are disposed. So that's already a number after the disposals. And what's the reason why we can keep the FFO1 stable on the one side? Yeah, clearly we still expect higher financing costs in our group. mainly coming from unsecured debt that is maturing, or even from bank loans where we now have high interest rates. But we see a growing FFO for our business in Poland. So at the beginning of 2023, we will have already 2,000 residential units for rent on the market in Poland. In the middle of 2024, this will be around 4,000 units, and having in mind that the average per square meter rent in Poland is roughly double the number in Germany. This means that it is an equivalent of roughly 8,000 German assets that come now into our group and come now also into the FFO1. So therefore, 9% reduction in FFO1 mainly coming from increased financing costs and increased prices for maintenance and heating costs. So that's the effect in 2023, but after that, a stable outlook for FFO1, leaving out any further acquisitions. Yeah, let's go perhaps a little bit quicker through the remaining financial slides on page number 10. I think the P&L development in the third quarter of 2022 has not really any very material developments to comment, and general numbers look, as I said, very positive. Perhaps one comment on the variation results. what the expected value issues are for the full year. As always, we're giving not here official guidance and we have so far not any numbers from our value of our debt. But what we could expect or what do we expect for the full year? That's of course difficult to predict as we see ourselves that the investment market is very limited in size, that we don't see really a lot of transactions. By the way, we don't see any distressed sellers. But that's a reasonable assumption, and maybe that's in line with what you hear from other companies, that the value uplift that we had in the first half turns now into a value reduction in the same size in the second half. So in the first half of 2022, we had a 4% increase. So what we expect is a kind of base case, and please just take this as a rough guidance, could be that this reverts in the second half. That means for the full year 2022, perhaps a flat valuation result is a good estimate as of today. Page number 11 shows you more details on the EBITDR, where we saw an improved margin in the course of the year. shows also the FFO1 for the full nine months 2022 in comparison to the previous year, which is another increase of 6%. On page number 12, a quick look at the APRA NTA calculation. The main result for the reduction by 13% is a capital increase, which was, as we issued shares, at 6,090, then deductive in terms of the APRA NTA, Just to make clear, this was already the case from the very beginning. The Robic goodwill is already excluded from this APRA NTA calculation from the very beginning, as this is a consequence of the APRA NTA definition given by APRA. Page number 13 shows the finance structure, and here you see, and that's important to point out again, the maturity profile as it is on the 13th of December. before the extension of the bank loans and before the additional liquidity from the bank loans and also before our decision to suspend the dividend. So the more or less former maturity profile and the kind of performer maturity profile we just discussed. And looking into the next three years. We think it's fair to say there's one material refinancing to come. That's the 310 million bridge loan, which will be reduced at around 250 million by year-end. And beside that, in 2023, where nearly everything is already done, and in 2024 and 2025, there are not any major refinancing needs outside of mortgage-secured general bank loans, which you see in the dark blue color. And as we have just shown and discussed, this market is still open. So therefore, once the bridge financing is completed, and we will be clearly able to refinance this in the next month, for 2023, 2024, 2025, there should not be anything in the maturity profile that leads to a big concern. Let me comment additionally on rating decisions. You have seen the smoothies. that Moody's in October 2022 has downgraded us to non-investment rate to be a one with a stable outlook, and that Standard & Poor's confirmed our investment rate rating at BBB- and put the outlook from formally stable down to negative. Clearly for us, the decision of Moody's was disappointing. We thought, and I think we could clearly also show the rating agency that we've done a lot. So we have done rights issue, we have extended the bridge loan, Rating agencies were also very well about directions about upcoming refinancings with our bank loans. But still, for example, Moody's decided on the back of expected negative market developments in Germany to downgrade us. Clearly, this is, let me say it like this, frustrating as a company. If you do a lot, if you really fight for your investment grade rating, on the other side, the market goes into a direction where the rating agency finally decides to downgrade you. So we have to accept this. What's the consequence for this? If you look again into the maturity profile and all the discussions that we already had, main refinancing source currently is definitely not unsecured debt. So therefore, for a short term, this is not really, how should I say it, a big issue for us that we received the Moody's down rate. We still have an investment rate rate at standard and post. And the outlook also turned to negative, also on back of the market conditions. But here, of course, we are much more optimistic to keep this investment rate rating. But investment rate ratings are for us more something for the mid to long term. Clearly, once we restart projects in Poland and Brazil, the foreign sector, unsecured financing is for us more on the table, and therefore, clearly, an investment-grade rating is very helpful. But this is realistically seen nothing for 2023, and perhaps also in 2024. This is something that perhaps slowly starts again, but we simply need to postpone any decisions on further investments here. Moving on to page number 16, quick look on like-for-like rental growth. As I said, we are already above our guidance with 2.5% in the total like-for-like rental growth. You see also the composition of the rental growth on this slide that's without any effect from the monetization surcharge. So it's really purely underlying rental growth coming from HBV increases, coming from tenant turnover, and coming from vacancy reduction. And the vacancy development is once again shown on page number 17. As I said, a very good development after a slight increase in the first quarter. We are now down by 90 basis points within six months, and that should be definitely something positive. Some words about Poland. On page number 19 is an overview of the portfolio. Just to reconfirm this again, we have a sizeable land bank in Poland. for the build-to-hold model, so for the rental apartment, as well as for the build-to-sell apartment. But it's up to us to decide when we start the project. So the potential is there, but it's not an obligation. And we will, of course, carefully manage our topics. And you've already seen this with our decision to postpone any new residential for rent projects. The residential for rent portfolio That is around 540 units, but as I already mentioned, this will now grow in the next quarters as more and more projects are completed. You see that we have 3,500 units under construction, so that's the roughly 4,000 units in the rental portfolio that we will have finished by the middle of 2024, so in roughly one and a half years, that's very visible. Page 20 shows you, again, an overview about our rental projects in Poland. The demand for this project is extremely strong. So the vacancy rate is basically down to a kind of minimum vacancy rate after the balance sheet date in October and November. We had an additional project that was finished from roughly 200 units. Here also the leasing success is extremely strong. rents that we see are in double-digit percentages above planned rents, and rent increases that we have now after the first year with existing tenants are also 10% to 15% above the previous rent. So, therefore, the demand for our product for the rental units we offer in Poland is still extremely strong. Yeah, page 22 shows the FFO2 guidance for 2017. Once again, we confirm the guidance for FFO1 as well as for FFO2. That should be both in a very good way. We already have discussed our thoughts behind the dividend suspension. In our next slide, you'll see the guidance for 2023 that I've already elaborated on as far as the FFO1 is concerned. Important to mention that we also, of course, published an FFO2 guidance, and that here the reduction compared to the FFO1 is lower. It's just 3% in absolute amounts, and that means we expect for the next year, for 2023, an increased result from our operations in Poland, coming mainly from sales or from the sales business, as we will have more handovers in 2023 compared to 2022. Not only because OBIC is now fully consolidated for the full year compared to just nine months in 2022, also we have here projects with higher sales prices, a good margin that will lead to an increased revenue and to an increased sales result. So therefore, FFO2 is broadly stable, and in this market environment, we think this is definitely good news. A final comment on the dividend for financial year 2023. Today, or yesterday evening, we announced that we will take a decision on the dividend for the financial year 2023, perhaps at year end 2023 at the earliest. This will be dependent on market conditions and on the completions of our refinancings, which is basically the bridge loan that we have already discussed. but they clearly return to our FF01, sorry, to our dividend policy of 75% of FF01 once market conditions are better, once we have completed the refinancings. But in the current market environment, and please understand this, it's extremely difficult to predict when does this change. That's really not in our hands in full, so therefore, We will come back with the dividend guidance on the financial year 2023 in some quarters. Clear, once again, the FFO1 will be the basis for dividend distribution also in the future. And once the market conditions are better, we will also return to the former dividend policies. That's it from my side as an overview about the Q3 numbers and our decisions that we have taken regarding refinancing and dividend policy. But now I'm of course very happy to take your questions.

Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. Our first question is from Andres Tuma of Green Street. Please go ahead.

Hi, good morning. Firstly, I wanted to inquire about the disposal progress just to see where it stands when you're sort of thinking about early next year and also what sort of buyers are in the bidding tents at the moment and what sort of pricing discussions are you having insofar as the spread between the asking price that you're looking for and the bids that are coming through and just to follow up on that as well. Are you willing to go below, I guess, the last reported values also, just given that you're guiding to effectively decline by year-end already?

Yeah, good morning, Anders. It's extremely to predict the progress on a disposal program. We had really processes in the past weeks and months where we were very close to signing And then very shortly before signing was scheduled or we even had an appointment at the notary, then the potential buyer simply stepped back. And it was not a decision in the sense of that he tried to force us to reduce prices. Simply, a lot of buyers and most buyers are currently waiting. And then they extend negotiations. We postponed the whole transaction. So even today we have, of course, disposals in the pipeline in the sense that there are due diligence processes, negotiations. So it could also be the case that we can report something quite quickly, but in the meanwhile we are extremely careful on this. So there is activity. We see clearly interest in the portfolios itself, but the problem is a little bit that everyone's waiting until we really see first transactions, and then I'm sure that confidence will get back to the market, more people will start to buy and so on. Talking about pricing, I mean, one needs to be realistic and to have successful disposals compared with the current book value, which is the book value at half year, I think one needs to give a discount. And if this is a discount of, let's say, 5% or 10% to the current book value, we think that is something worth looking into. So we are not a company who is telling, well, the book value is the kind of minimum price that we want to achieve. And so far, we have achieved it. If you remember at the end of the conference, I said that we have already sold 800 units slightly above book value, but I think in the current market environment, that's not realistic. One needs to incentivize potential buyers. So just as a rough estimate, the discount perhaps of 5% to 10% to the current book value is something that we expect as something we need to give to have successful disposals. And finally, you asked about the the potential buyer, clearly we see more people with equity interested in our portfolios. And these are then people that buy in the first step in full out of cash or with a large portion of cash and are waiting for the refinancing and perhaps are not forced to finance that or to refinance that very quickly. But it's not really a complete new buyer group on the market, but this It's clearly there, and this also then leads to the fact that that's also how we set up the disposal program that we're selling in smaller portfolios and tackling or looking for such equity buyers is more successful than being with a large portfolio on the market.

Thank you. And then one question on the debt side also with the disposals. When you are disposing assets, are the buyers able to take on the mortgage debt you already had on these assets, or is that not possible and they have to actually get a new facility for financing?

Well, in the current negotiations or in the disposal that we've completed, the financing was not taken on. So in our contracts, in our bank contracts, I would say in nearly every case, the bank has the right to terminate the contract. If we, as TEG, sell the portfolio, then it's basically something the new buyer needs to negotiate with our bank or with this new bank.

Understood. Thank you. And then maybe just understanding the Polish bonds as well. They're quite expensive. So I'm just wondering what sort of optionality you have there. Is there a way for you to sort of opt to not to refinance in the Polish market and maybe use disposal proceeds in Germany to pay that down or just take on more debt in the German side of the business?

That's an option that we have. The bonds issued by OBIC have, I think, every quarter a chance to be repaid. At the moment, there's still an interest rate protection in place. That means there are still interest rate swaps in place that we can use. So therefore, the average financing costs in Poland are still at a reasonable level. But yes, this option is there.

And the final question about the Polish just business as it stands, maybe just understanding the built to rent side of things and how are you seeing the yield on cost evolving there because rental rates are spiking and you're sort of commenting that construction costs are now stabilizing or even going down. So is there a potential for that 7% to turn into seven and a half or something even above?

That's indeed the case. So that's exactly what's currently happening. I mean, perhaps it's too early and the portfolio depth in the market is too small to say, well, this is the new level. Still, if we complete the project, look at the first rents, the guidance or the number that we have guided to, the 7% yielding cost is true. But then very quickly we see here strong rent increases in the current market situation. So therefore... And yes, it's the case that the gross yield that we are seeing in the Polish rental project is perhaps higher than expected.

Thank you. That's it from my side.

Next question is from .

Good morning. Thank you, Martin, for the presentation. A couple of questions from my side, starting with a kind of follow-up to the previous question on disposals. Well, you acted so far very clear and straightforward in terms of capital needs, especially with the 20%. a highly-valuative cap hike and a clear message to cut the dividend in full. But in terms of disposals, it seems to me that all acting in the same direction currently, except the wait-and-see position, yes, you would expect disposals at, as I get it right, 5% to 10% below book value, but why do you not accept even lower prices at this point in time? And to lock in already now the cash gives you more freeway to act in general. So it seems to me that you and also other companies wait on lower prices and book values. The day should be confirmed in the first half of next year or whenever. and then to accept these lower prices, because at least the direction of prices seems to be clear. So it's a more aggressive point, probably, but what is your view on that?

Good morning, Andreas. Perhaps you can understand that I don't want to comment too much on pricing thoughts. As we have current negotiations, projects running, But let me answer more generally. With today's decision on the dividend, as we've shown that we are willing really to do also hard steps because we think that the current marketing environment requires such steps. So if such a situation would arise that we were able to have a significant disposal and get rid of coming refinancings and perhaps the discount is even a little bit higher than what I indicated to, yeah, definitely we would look into it. But I'm not careful with guiding about any kind of pricing that would be acceptable.

But at the moment, you are not really willing to accept lower prices. That's in a nutshell the outcome.

I think the problem is different with the investment market. Everyone's really looking, what is the exact pricing point? It's not the case that you have a process where, for example, you ask for a price of 100 and then the buyer says, but I'm just willing to pay 80. It's more the case that the buyer says, well, you agreed in the current process perhaps to a preliminary price of 100, and then the potential buyer says, well, I need more time. I will come back to you. Portfolio is interesting. And then for some weeks, the process is on hold because buyers are, of course, also uncertain what happens with prices, with interest rates, and so on. So it's not really a decision at the moment, at least in the processes that we see, that we have a chance. or a concrete offer to sell at a specific price, and we say, well, but that's, I don't know, 5% too low, 10% too low. It's more a situation, and at one point in time, we're convinced this will change. It's more a situation where everyone's waiting. So defining an exact pricing point that is the pricing point where we see strongly increased sales is very difficult. And I think that's not only for us the situation, that's the situation in the whole market.

Okay, I get it. I have a question on your bridge loan of 310 million currently. Did I get it right that this will be reduced to 50 already at year end? Then a specific question on the cost of debt. So at the moment at 0.6%, when will be the next step up and to what level for the remaining 250 million? And would you be able to redeem the financing at any time and without any further cost?

Or is it fluctuating? Well, we are planning to reduce the bridge loan to 250 million euros. And why is that? I mean, we are basically incentivized to do this because if this is above that, another fee would be payable. And we think economically that makes sense to use part of the disposals that we now have in the next week's disposal proceeds to repay that. And then, as is typical for a bridge loan, each quarter the interest rate increases or the margin increases. That's a floating rate bridge loan. Please understand that I can't give you any very detailed numbers, but assume that Today, it's still below the cost of new debt financing in the mortgage secured towards the end of the bridge. That means towards the end of 2023, this is something that is then very similar to interest rates that you see without bank loans. To the current, let's say, 4%. Yeah, yeah. To give you a guidance, it's roughly that range.

Then a last question, a more technical question. At what point in time you will change the FFO calculation, not fully focus on German business to include also the Polish business into the FFO1?

That's already the case for 2023. So, Andreas, thank you for this question. Perhaps I should have mentioned that when presenting the guidance. So a 4 million contribution to the FFO1 is already included in the 2023 guidance. And we will report from 2023 onwards in the sense that we split also the FFO1 and make clear which part is coming from the German business and which part is coming from the Polish business. And that's it. In 2024, 2025, you should expect strong increases in this FFO1 contribution from Poland as more and more apartments are then finished.

Okay, excellent. That's from my side. Thank you very much.

Our next question is from Sander Brunk of Barclays. Please go ahead.

Hi, good morning, team, and thanks very much for that. A couple of questions from my side as well. Can you talk a bit about your current cost of financing and how you're thinking about financing in bond market versus bank market versus secured bond market versus secured? What are kind of the differences and how are you thinking about that going forward?

Yeah, good morning. I would say the clear preference at the moment is for mortgage-secured financing. And talking about the current cost of debt, we notice now very well from the recent refinancing, I would say margins currently around perhaps 100 to 120 basis points for a Kenya bank loan. So on top of that, the MISWAP rate, that brings you to a total coupon of that's slightly below 4%. So that's for secured debt. That's a preference. Talking about unsecured debt, Honestly, a pricing for a new corporate bond is extremely difficult, as we have not really any outstanding benchmark corporate bonds. The two corporate bonds that we have issued in the past were private placements with a very small number of investments. Their pricing is not really representative. That's a more realistic option that we have, our additional promissory notes. Schulz & Dahlem has issued a promissory note in June. with a margin for five years of around 190 basis points. And so that would lead them, we put a five-year mid-soft rate on top to a coupon slightly below 5%. I think more realistic is perhaps today that the margin is closer to 250, 300 basis points. So that would bring us For a promissory note, that's somewhere a coupon of 5.5, 6%. So therefore, you can see this is not really a preferred way of financing for us, but perhaps something that we do additionally, but in smaller sizes.

Okay. That's very helpful. And in terms of taking on more secure debt, have you discussed that with rating agencies? Like, are they concerned about it? Obviously, there's quite a bit of layering going on in your debt books. Would you be happy to just keep on tapping the secure debt market, or is there kind of a limit that you have in your head in terms of how much you would be willing to do?

No, there's not really a limit. I think also not from the rating agencies. Of course, for rating agencies, always the pool of unencumbered, as I said, is good. We still have the complete Polish portfolio, which is unencumbered. So this is now over time really a significant part of our portfolio. And I think also for rating agencies, today's liquidity, maturities, upcoming refinancing is more important than the unencumbered asset ratio. And basically, that's the reason why a pool of unencumbered assets is there. to use that in a situation as we and other companies have it today where unsecured financing is difficult or very expensive.

Okay, that's very helpful. The other question I had was on the dividend cut and I was wondering that did you discuss it with rating agencies and if so, what was the response and if they did say anything about it like Do you have a sense what it would take to come back to IG, or in the case of S&P, back to a stable outlook?

I have to start with the second question. I think in the last S&P announcement from November, it was very clear that they expect refinancing of the upcoming maturities from our side, and that refers then to 2023. I think that's to the very largest part already done. And we have additionally the bridge loan maturity in 2024. So once this is done, I think there's a good chance, looking into the announcement for S&P, that also the outlook changes again. That's the main issue. All other numbers, like LCB, like Net Depth, like ICR, are absolutely in the range that basically both rating agencies, including Moody's, expect foreign investment in great rating. And, I mean, we have intensively discussed here with the supervisory board the dividend suspension for 2022. Rating agencies have been informed that we discussed that. But let me also clearly say that it was not a decision that was driven from a crime and from the rating agency's side. It was clearly a decision that we had taken. And of course, for a rating agency, I think for every creditor, that's more and more good news. So this is helpful for the rating, but it was not the driving reason to put it like this behind the decision.

Okay. So the dividend cut in isolation, you would not expect to have a positive impact on the rating?

Yeah, I think that would be also too early. Knowing how rating agencies act, they don't want to change their decisions within two or three weeks. So I think the realistic estimate is that we have now the negative outlook from S&P for some months. Especially once we have refinanced the bridge loan, I think there's a good chance that the outlook changes again to stable. And, of course, in itself, the decision for the dividend suspension is, of course, helpful.

Okay, great. And then the final one for me. Obviously, there is a positive contribution from Poland into the FFO one over the next, particularly in 2024-2025. I was just wondering, how much additional capex do you still need to spend on that? And does that drive additional disposals within Germany?

That's not so much. So I said that in the middle of 2024, the current projects, the current 24M projects are finished. For 2023, the net financing needs for Poland are roughly 50 million. That, by the way, breaks down into 1 million gross investments for the rental business and 50 million cash surplus, so numbers from the disposal business. So perhaps there's another 50 million needed for the first half of 2024. So we're really talking here about, how should I say, the manageable amounts, and that's That's, I think, also important to mention it once again. We have really adjusted our capex programs in Poland in the way that the Polish business is more and more a self-funding business.

Okay. So, sorry, just to confirm, the net capex spent for the positive and favorable contribution in 2024-2025 is in total, in aggregate, is around 50 million?

Now, that's the gross investment that we need to take in 2024 as a rough number to complete the residential for rent projects. But also in 2024, we will have cash inflow from disposals. And perhaps a little bit early to predict the exact cash inflow that we will have in 2024. But if we continue with the current position to just finish the current residential for rent project and not start anything new, already in 2024 Poland would be cash neutral or would already deliver a cash surplus because then we have the rental portfolio fully on the market, we have disposals, so that's very visible and the Polish business is not only self-funding but it's really creating cash surpluses.

Okay, and self-funding basically the cash to sell, the development to sell, funding the development to hold? Okay, that's helpful. Thank you very much for that, Tim.

Our next question is from Thomas Rothausler of Deutsche Bank. Please go ahead.

Hi, morning, everybody. A couple of questions, maybe starting, coming back on the rating, specifically on Moody's rating. I think it assumes the successful execution of your disposal schedule. By when do they expect this and, I mean, is there a further downside risk if it won't happen?

Moody says not set a specific date to that. It's clearly, as they've communicated today and also in the past, our target to use net proceeds from disposals to repay the bridge loan, but there are also other financing sources possible. So, of course, today's decision or yesterday's decision to suspend a dividend helps us to preserve cash. As discussed, we have also the chance to raise additional mortgage-secured debt, perhaps not only in Germany, but perhaps also in Poland. So, therefore, there's also clearly a plan B if really nothing is possible. We don't expect this, but if really nothing is possible in the investment market in Germany in 2023, And it's not the only source of repaying the bridge loan. And I think for both rating agencies, the most important question is that upcoming maturities are taken. And as discussed for 2023, basically everything's done, or nearly everything's done. And the only really upcoming material maturities in the beginning of 2024, the bridge loan, and after that, I'm coming back to what I said. In 2024, 2025, material maturities are only coming from mortgage-secured bank loans in Germany, where the LCV is already very low. We have additional potential to create liquidity. So besides the bridge loan for the next three years, there's not really any larger maturity that should be a concern. I think that's also the view of the rating agency.

Okay, maybe coming back on this secured lending volume, I think it was 260 million. Is it right? It's not finally closed, this deal, and is there any risk it won't close? And then also on that, I mean, when did you initiate negotiation with the banks and how would be the situation if you would start nowadays? Do you think there would be a quite different term on it than the roughly 4%?

No, I don't think so. So financing conditions have not really changed. We started this process more as a connection with the rights issue. So in summer, I mean, this process, and it's not unusual, it takes four years, sorry, four months, three months, something like that. Coming back to your question, $260 million, these are several bank loans, so it's not one large bank loan. I think we're talking here about five or six bank loans, out of which more than 50% is already signed, so that's everything fixed. And for the remaining part, the credit approvals are already there. We have fixed all interest costs. So it should be a question of days or very few weeks until we have here signing and closing. We don't expect here any delays. Otherwise, we would have not communicated that today.

OK. Another question, actually, just to clarify on your 23 earnings guidance. I mean, does it consider already the early refinancing of the debt maturities in 24 and specifically the 250 million bridge, which is open by then?

No, the 2023 guidance assumes that the 2,500 German assets that we want to sell are still in full in the company for the full year. That also assumes that the bridge financing is in place in full for the full year. And as I said, this 2,500 units disposal package has an FFO contribution after interest cost for the bridge after taxes of roughly 6 billion euros. So if we would sell it at the 1st of July, then it would be to a roughly 3 million euro FFO1 deduction or reduction for 2023.

Okay. Maybe a last one on overall the financial situation, the leveraging options. As I understand, you have improved your situation with the dividend suspension and also the early refinancing. But how do you consider potential headwinds from lower property values? I mean, what are your options to deliver if we should – Let's say get a 10% cut maybe next year in property values. I mean, and also maybe assuming disposals remaining difficult. Of course, dividend cuts are an option, but how would you look at this?

Yeah, first of all, we have really done already steps. Not only with the dividend cuts, please also remember the rights issue that we've done in summer. And then, I mean, if property values fall stronger than everyone expects, the question is, okay, what's the consequence? Most important thing are always covenants. Is it a concern that we're breaching covenants? For us, the most tight cabinets are in the promissory notes. Around 350 million is the total volume, and here the cabinet is an LCV cabinet of 60% at maximum, and an ICR of at least 1.8 times. So we're really far away from a cabinet. By the way, this LCV cabinet is based on total assets in the balance sheet, so in a scenario, values could drop by nearly 40%. 4.0% until we reach that covenant. And we have no corporate bonds with financial covenants outstanding. We have a convertible bond without financial covenants from the bank loans. All the covenants are on portfolio levels. So, therefore, that's the most important thing to look at. And then secondly, I mean, once values would drop strongly, then, of course, LTV increases, then at some point in time, the rating could come under pressure. But in such a scenario, with strongly dropping property values, then we are really still in a crisis which is even more heavy. And here we are already concentrating on mortgage secret financing, where the LTV on group level is not that relevant and I mean, of course, if a company is very much exposed to the unsecured market, perhaps looking at financing or financing options, LCV rating is extremely important, but we would have, just to put it like this, simply more freedom. We would not be under pressure to do any actions to deliver it. Let me also state this very clearly, because you've seen this in the press piece already. we don't see here any need for any equity measure, any equity raise after our decisions. So after the rights issue, after the dividend cut, when we have really done strong and for our shareholders, I think also painful steps. So there's not any need that we see for any equity measure.

Okay, thank you.

Our next question is from Simon Smith of Warburg. Good morning.

Thank you very much for taking my question. My first question would be in regard to the valuation effect in Poland. On page 11 of your presentation, you're showing a valuation result of negative 16.5 million. To what refers that?

I'm sorry, this was hard to understand. Can you repeat this once again?

Sure, again, so on the presentation slide 11, you're showing an evaluation result in Poland of 16.5 million, so could you just elaborate on that?

Yeah, so that's not a negative evaluation result, perhaps it's a little bit confusing here. On PITM 11, we're calculating what we call the Results Operation Poland that starts from the net income from Poland and then deducts any valuation gains that are included. So we had a 16.5 million valuation gain in Poland in the first half or the first nine months of 2022, which was coming from the Polish renter business. And we see here valuation uplift once we have finished projects.

Okay, so that refers only to the residential-to-rent projects you're taking on the balance sheet?

Yeah, just for the investment properties which are in residential-to-rent projects.

Great. And then maybe your whole valuation of the residential-to-rent portfolio in Poland, to what amount currently? What's the full value you have on balance sheet of the 545 units?

This is something at around... 100 million and the valuation uplift was indeed something around, I think slightly below 15% for the first half.

Okay. And so, and what you just said before, you might have, I'm just thinking forward and then 2024, the bridge loan comes due and the remaining part. And if you have, At the beginning of 2024, what would be your best guess of your full value? I know it's a bit far forward looking and with a lot of moving parts, but your full value or your portfolio value of your residential to rent portfolio in Poland, what would you expect it to be? And then what do you think you could take on in mortgage financing in Poland if you were to need it?

Indeed, we have also done such scenarios, and we know that the total value of the rental portfolio, once it is finished, that means that's not at the very beginning of 2024, but at the end of the second quarter of 2024, should have a value of 450 to 500 million euros, depending on valuation effects. And even in Poland, 50% LTV for such a portfolio should be and is realistic. So there's also an additional potential refinancing on this asset that could lead in rough numbers to an additional cash inflow of around 250 million.

Okay, but I mean, they are already mortgaged right now, I guess. I mean, even your 100 million... in assets you have right now, they are already mortgaged. So you wouldn't have an additional... That's not the case.

So that's fully unencumbered. It's completely financed currently via TAG shareholder loans.

Okay, great. Okay, that's interesting. So you would have an additional cash inflow capacity from that of, let's say, 200 million in the beginning of 2024. But then I wonder, I mean, it makes it very likely that you would reinstate your dividend paid in 2024 for your financial year of 2023.

Yeah, I mean, please understand that today we simply want to be careful. And I mean, predicting dividends in the current market situation is extremely difficult. Once again, we will return to our former dividend policy whether this is already for the financial year 2023, the case needs to be seen perhaps in the end of next year. Yeah, and of course, if you're able to do refinancing as planned, if you're also able to do more disposals in Germany in the next month, if perhaps sales numbers in Poland pick up even more than in the previous weeks, then the likelihood that the return to a dividend payment even for the financial year 2023, very early is higher. But as of today, we simply put the dividend for the financial year 2023 under this statement that it really depends on the further development of the market.

Okay, great. Thank you. And then maybe one more question regarding capital allocation also. There's a gap between your FFO1 and FFO2 and you mentioned also that this is probably the part of the self-funding business going into Poland, but maybe in 2024 or maybe also already in 2023 with what you just indicated with your financing needs, what are you trying or what are you intending to do or where do you intend to allocate your capital of the gap between FFO1 and FFO2 going forward beyond maybe 2023, because, I mean, there will still, I assume, some capital be left, and you're obviously not indicating to use that for dividend payout. Are you thinking to allocate that capital solely into the development pipeline in Poland, or could you also think of I mean, it's too early for now, but do you also think maybe to allocate in the future some part of that capital towards share buybacks, just in respect to what shareholders had to live through, I would say, dividend cuts and equity capital increase at the market, huge discount to NTA? Is that something you are thinking about with the supervisory board, or is it something you will need to direct into the Poland business?

And there's no need to direct this into the Polish business. And perhaps I try to give a broader picture. What's the view about future cash flows? And perhaps I can break that down quite simple. FFO1 will always be the basis for the dividends in the future, not only coming from the German rental business, also from the Polish rental business. We will use, as in the past, 75% of that to pay the dividend. The difference of the 25% is then there to finance the capex for the general portfolio. That's one side. Then, it's correct, we create additional surplus, cash surplus from the bid-to-sell business in Poland. Let's take a round number of currently 50, 60 million euros a year. Perhaps this increases in the past once the market is improving even further. as a kind of base case that would be used to finance or as an equity part to build up the residential for rent portfolio in Poland. So perhaps 50, 60 million equity cash surplus from disposals. We get an additional valuation uplift. We get perhaps 100 million euros a year of unsecured debt. That brings us to a total investment volume of 200 million euros which is then possible without increasing our LTV. So really a meaningful portfolio build-up could then be possible again just from the existing cash flow with the help of some unsecured financing and without any new equity raise. That's the kind of, I would say, base case. If the situation is really that still at that moment in time, share price is at current levels and we're trading with a heavy discount to the apprentice. Yeah, of course, share buybacks are an option for us as well. I mean, we've done this in the past. It's some years back, but in 2014, we've done it in a very concentrated transaction. So today, that's not really something that we discuss as we think refinancing is still more important, but Once we are, or once we have done this refinancing, and again, I think it's very visible that we're close to that, and we create these cash flows that are very visible too, that could be an option, but it's nothing, I think, for 2023.

Sure, that's totally clear. And it was more referring to beyond the year 2024 and 2025. It's all clear. Thank you very much. Maybe in regard to your disposals again, I just wonder where do you intend to sell and out of what brackets or what portfolio clusters you have earmarked for the asset to sale or the net proceeds of 250 million remaining?

These are really different regions, so we are not selling, let's say, TG-specific portfolio in the sense that these are locations like our largest locations, like Gitter, Orgera, We're talking here about locations, I'll just give you some examples, like in Princeton, like Leipzig, also some locations in Northern Westphalia, also Hamburg, also some secondary locations. So we try to create packages where we really have the chance to get to as broad a buyer potential as possible. It's not very much concentrated on one type of asset or one type of location. That's not the case. Typically, transaction size is perhaps more something of 30 to 40 million.

Okay, that's also understood. But then if you're selling across a lot of different segments or you have earmarked a lot of units in different segments, then Can you speak about differences in valuation or difference in buyer's behavior? Some of them may be standing back more in some regions that are economically weaker or maybe in Hamburg where the market should be more liquid and prices keep up a bit better. Can you give any comments in regard to valuation differences?

What I can give as a general comment is, and that's interesting and also good for our strategy, is that the higher-yielding assets seem to be more easy to sell than the low-yielding assets. But it's a little bit contrary to what we've seen in the past, where a market like Hamburg, Berlin, was, of course, extremely liquid, has seen a lot of demand, now has seen, of course, a lot of e-compression in the past. Assets are in everyone's balance sheet, perhaps at a 3% gross yield. And perhaps you find an equity buyer, but also for this equity buyer, this yield is then quite hard. If someone needs to finance that at a 4% interest rate, clearly that's really hard to justify. So that simply supports also our strategy and gives us the feeling that we're in a good position With high giving assets in a world of high interest rates, we're still able to earn a good cash flow. And we see simple thoughts in buyers' mind out there. If this is really representative, it needs to be seen. But I think that's a kind of move that we currently see.

Okay, good. And if I may, just one last one. You're not having a lot of turnover in your portfolio currently, except of maybe some of the disposals. So your best guess of your structural vacancy within the portfolio, what would you think? Is it between 3% and 3.5%?

Yeah, I think that's a fair estimate. Always difficult to predict something like that, but it should be a good estimate what we expect. I mean, also CBOE or the valuers are doing an estimation for the structural vacancy rate, is that over the last years, also the assumption for such structural vacancy rates have come down. So perhaps looking into annual reports, five years back, it's more around 4%. Test today, it's more around 3%.

Okay, great. Thank you very much.

Our next question is from Manuel Martin of OdoBHF. Please go ahead.

Thank you for taking my questions. Just a quick follow-up on the vacancy rate and your rental growth. How do you see your rental growth going forward for the next two years? In view of the energy situation, it could be a bit more tricky to increase rent. It's 2.5% going forward, a fair assumption. Connected with that, it's Do you think you could further reduce the vacancy rate of your portfolio towards the structured vacancy rate? And combined with that, what does it mean to your investment in the portfolio to try to reduce your investments?

Yeah, perhaps to give you a little bit more background on our assumptions for this mid-term outlook that we've given today for the FFO, one for 2024 and 2025, where we said, well, in the current portfolio, after the disposal of the 2,500 assets, that should be stable. There's also an assumption for rental growth behind it. We simply assume that rental growth 2024 and 2025 is unchanged to what we expect for 2023, where the guidance is between 2.5% and 2.5%. On one side, this is perhaps conservative. If we see clearly in the market increasing demand for affordable housing, on the other side, you're completely right. One needs to take into account that tenants simply have to pay higher service charges and that perhaps affordability is more difficult in the next one or two years, at least as long as there is an energy crisis. So therefore, it takes a fair estimate and conservative estimate to expect rental growth on a similar level for the next two to three years. But long term, I think the market dynamics are even stronger. OK.

And so for investments? Are you ready to lower the investments in your portfolio or do you think it's sustainable for the company?

For now, we will continue with our ongoing investments in the German portfolio, which have been very targeted for years. We have not started any huge investment programs in the past because we own a very well-maintained portfolio. We will, of course, invest a little bit more when it comes to our decarbonization targets, but that's still an absolute amount, I would say a reasonable amount. So the CAPEX strategy is unchanged. I mean, if needed, if the whole market turns even worse, then, of course, we would have the potential to reduce capex and to postpone new investments. But for now, that's not planned. But again, it's still not material.

Thank you, Jesse. Last question from my side. Sorry, the line was somehow too bad, the acoustic problems. Your FFR1 guidance for 2023 says Is that based on an unchanged portfolio, or does that include the disposal of the 2,500 units?

No, no, happy to make this clear once again. That's based on an unchanged portfolio. And the outlook that we've given for 2024 and 2025 assumes a portfolio reduction by 2,500 units. So not for 2023, but just for this midterm outlook. Okay, great. Thank you very much.

Thank you. Our last question is from Paul Rich of R&Co. Go ahead.

Can you hear me? Yeah, good morning. Good morning, Martin. Can you hear me? Yeah, we can hear you. Yeah, sorry, Paul Rich. Yeah, just two more questions on my side. Can you give a bit more colors on your pre-sales on your Poland portfolio and So it's a 60%, what do you expect for 2023 and what is the increase of interest rates effect on buyers? Can you give some more detail on that? And second question, the goodwill on RIOB, can you expect another decrease? I mean, what is the value in your balance sheet now? Can you give us some color on that, please?

Actually, I'm quite happy to do this. First of all, indeed, the pre-sale ratio for the 2023 handovers is already, or was at the end of the third quarter, above 60%. That's also compared to previous years, a good ratio. Therefore, we have a good visibility on that. What we expect for financial year 2023 is that we sell at least 2,700 apartments in Poland. So compared to this year, taking full year numbers into account, that's a slight increase, but that compares to a number of more than 4,500 units for Robic and for Vantage in total in 2021. So you see the guidance for 2023 still takes into account that sales levels are reduced in Poland, but on a good level. So compared with the years 2018, 2019, that's, how should I say, the typical sales level, this 2,700 units. And why is that sales number reduced currently compared to previous year? That's simply because mortgage rates in Poland have increased strongly. So for a buyer today, perhaps a mortgage rate is at 8%, 9%, or even 10%. And on top of that, The regulation requires that banks take into account when granting a loan an additional 500 basis points and step up so the credit worth in this check is then even 500 basis points higher. So a simple example, if the rate would be 10%, bank needs to check. whether the client is also potentially or can potentially pay even 50%. And that leads them to the fact that currently 80, 85% of our customers in Poland are cash buyers. And these cash buyers have always been there and are, as said today, the largest group of buyers. So still, we're able to sell this 2,500, 2,700 units. So once Perhaps the regulation in Poland is not that tight anymore. Once perhaps interest rates in Poland comes down perhaps even just slightly, we are very optimistic that the sales numbers will increase quite strongly.

Okay, thank you.

And the goodwill? Sorry, the goodwill is around 250 million for the total Polish business. Last part of that is HOBIT. It's excluded in the NTA calculation. It's, of course, also not included in LCV calculations or in FFO definitions. So this would be, if we have an impairment, a pure impact on IFRS numbers and not on our key metrics. It has not been impaired so far. We will have, of course, the impairment test now with the full year numbers together with our auditor. If there is a risk that we see an impairment, I think that that's fair that the risk is there simply because of the increased interest rates. We need to take or to make it a model where we have, of course, future cash flows, and perhaps these cash flows are unchanged compared to the acquisition process or even a little bit better than originally expected, but what we have to apply are interest rates based on Polish market conditions. So therefore, as interest rates have increased here strongly in the past quarters, also discount rates will increase. And that, yeah, could lead to risk that we do an impairment on the Rubik goodwill or on the Polish goodwill. But again, that would not have any consequences on our key metrics.

So sorry, what is the total amount of goodwill which is still on your balance sheet?

Yeah, I can give you the... exact amount, you see this also in the NTA bridge on page number 12, that's 252 million euros. Okay.

Okay, thank you. Yeah, many thanks, Paul.

There are no further questions at this time. And back to Martin Thiel for closing comments.

Yeah, many thanks all for your detailed and many questions. Happy, of course, to answer further questions. Please feel free to contact Dominique from our department or myself. Thank you for listening to the call and talk soon again.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day.