Adler Group S.A. (ADJ) Earnings Call Transcript & Summary

Good afternoon, and welcome to the analyst and investor presentation for the full year 2020 results of Adler Group S.A. Our presenters today are Maximilian Rienecker and Thierry Beaudemoulin, Co-CEOs of Adler Group. [Operator Instructions] The link to the webcast is available on the website on the Financial Calendar section. [Operator Instructions] Today's presentation is available for download via the icon on the left-hand side of your screen. [Operator Instructions] This call will also be recorded and made available at the company's website after the call. I'd now like to hand over to Maximilian Rienecker. Max, please go ahead.

Thank you, and thank you all for joining us here today. We would like to use today to reflect on what has been a turbulent year, a year in which the COVID-19 pandemic affected the daily lives of so many. With the current number of COVID cases increasing again, and our Chancellor, Angela Merkel, extending the ongoing measures across Germany, we ought to say that this battle has not been won easily. 2020 has also been a year in which many of us started to cherish the homes that we live in even more, perhaps realizing that a notch more space would be a nice to have. That desire is clearly let to a positive business development for the group with all residential units at our Berlin Riverside project being fully let out. Moreover, 2020 also confirms the resilience of our business model with vacancy decreasing and average rents increasing. The main goals of the group remain that we will continue to manage our core residential rental portfolio, grow our top line rental income whilst being conscious of costs and continue to improve our margins. We will optimize the portfolio and aim to recycle capital by selectively disposing nonstrategic assets and acquiring bolt-on core products. We will add value and drive growth through development projects in Germany's top cities, such as the Riverside project in Berlin and focus on modernization of the existing core portfolio. We will work towards a simplified capital structure, further decreasing the group's weighted average cost of debt and target a 50% LTV in the midterm, clearly with the objective to reach an investment-grade credit rating. Now please join me to Page 3. Here, please allow me to present a small summary of our achievements during 2020. Net rental income came out at EUR 293 million in 2020 versus EUR 134 million over 2019. Clearly, this effect is caused by the consolidation of ADLER into our accounts since the 9th of April. And let's have a look at the underlying KPIs. The average rent per square meter increased by EUR 0.11 year-on-year to EUR 6.30 and has substantial further reversion potential. Despite the Berlin rent freeze legislation entering into effect, we were able to realize a like-for-like net rental growth of 2.2%. Vacancy decreased substantially to 3.4%, down 60 bps year-on-year. FFO 1 amounted to EUR 107 million versus EUR 63 million realized in the prior year. As of today, rent deferrals relating to COVID-19 stand at near 1.3% of our monthly rent, amounting to circa EUR 349,000 and are mainly related to the commercial parts of the portfolio. In December, we announced another disposal of 1,605 residential and commercial units at a marginal premium to Q3 book values. Close to 17.5% of the disposed units were vacant at the time of the disposal. And on average, the portfolio returned a rent of EUR 5.21 per square meter per month and exhibited an annual net rental income of EUR 4.8 million. Clearly, we continue to invest in our portfolio and have spent EUR 6.30 per square meter on maintenance and EUR 24.40 on CapEx. CapEx were lower compared to last year as we thoroughly reviewed the CapEx plan for our Berlin portfolio in light of the Berlin rent freeze legislation. Maintenance expenses were also lower as we now have a more optimized structure. At the end of 2020 and accounting for the series of disposals throughout the year, the combined group held EUR 11.4 billion of assets and embedded a net asset value of EUR 5.2 billion at the end of the period. For more detail on our EPRA NAV and also EPRA NRV, I'd like to refer you to the appendix. Let's move on to the next page to discuss financing, LTV and dividends. Now to financing, at the end of the period, the weighted average cost of debt stood at 3.04%, mainly as a result of the full consolidation of Consus, but was already lower than the 3.2% at the end of the third quarter. Since the start of the year, we have been quite active in debt capital markets and have been able to lower the cost of debt to 2.6% on a pro forma basis as per today. The lower pro forma cost of debt has been mainly caused by the refinancing enabled by the EUR 1.5 billion dual tranche bond issuance, which had a 5- and an 8-year maturity and a weighted average cost of debt of 2.1%. The issue was more than 2.7x oversubscribed and had a high-quality book of 10 European institutional investors. At the balance sheet date, the net LTV stood at 50.7%, excluding convertibles and 53.4% pro forma for the recent refinancing activity. In line with our guidance for 2020, the group would like to propose a dividend of 50% of FFO 1, equaling to EUR 0.46 per share. Now please have Thierry briefly touch upon the ongoing integration efforts that are being made on a daily basis.

Thank you, Max. Good morning. Good afternoon. Very early on the M&A process, we made a decision to establish a comprehensive integration project. We have hired an experienced post-merger integration expert and external consulting support. We have put in place a dedicated bi-weekly steering committee with senior management and most importantly, a clear road map with guiding integration principle. This project has not only delivered a competitive structure for the group, but also extend new motivation and identification for all employees. The integration project remain ongoing with now the responsibility having shifted from informal work stream to establish for functions. It's important to understand that our 2 business units, Manage & Service business for former ADO and ADLER, and the Development business for Consus and Consus RE are successfully being merged today on an operational level. On top of that, we are paying a lot of attention to ensure a smooth transition from a build-to-sell model to a build-to-hold business. This objective is reflected in our new strategy, which states a clear goal of creating an integrated platform that cover the entire real estate life cycle. The integration project has transformed into an engine which deliver strategic guidance, drive innovation and align the entire organization behind a common vision, mission and strategic objective. So this is a great dynamic for the company that we have been able to achieve in 2020. Moving on to Slide 8. This page shows a clear overview of the element we have touched upon already. As you can see, the key deliverable has been divided into a clear structure that can easily be understood by the entire organization. Many tasks have been completed, such as creating a detailed process landscape, providing clarity regarding the organization structure, role and responsibility. However, we are continuing to work on finalizing the integration, which should result in best-in-class practice process, a scalable IT landscape and the desired working culture. Max will now guide you through the synergy achievement.

Thank you, Thierry. One of the key pillars of the business combination between ADO Properties, ADLER Real Estate and Consus clearly was the envisaged ability to realize substantial cost savings, mainly on the higher cost of debt at Consus head. And we are very happy to be able to announce that we beat our initial 2020 guidance when it comes to synergy realization. Our previously communicated expectation was to end up between EUR 78 million and EUR 92 million in realized synergies throughout 2020. With our performance on both operational and financial cost savings, the group realized close to EUR 113 million in recurring cost savings during 2020. Adding the savings realized in the beginning of 2021, synergy realization stands at EUR 143 million as of today. Including the additional financial synergies for 2021, we expect total synergies of a shy of EUR 180 million by year-end 2021. Now please allow me to hand you over to Thierry on our operational performance on Slide 11.

Thank you, Max. On Page 11, you can see the operational highlights year-to-date. I would like to point out a number of items in particular. First, a successful sale of noncore assets. As announced in September, we successfully sold 5,000 units with a GAV of circa EUR 316 million at a premium to latest book value. On the back of the Consus transaction, 24 nonstrategic development projects with a GAV of EUR 1 billion were disposed towards the year-end. We also divest another 1,605 units at a slight premium to Q3 book value. Moreover, I think we can be proud on our letting team with vacancy being reduced further to a mere 2.3% on the top 13 portfolio, which also generated 3.9% rental growth outside of Berlin. Please join me to Page 12. On the left-hand side, you see the development of the growth asset value of our rental portfolio. At the end of the period, the portfolio reflects a fair value of circa EUR 8.3 billion with just shy of 70,000 units in the operational portfolio. The value per square meters increased by EUR 252 per square meters. This increase on a per square meter basis reflect 2 underlying movements. First, we have seen the 2020 disposal of 6,600 units as they had lower than average value per square meter than our core portfolio. Furthermore, the Riverside project in Berlin near full completion, the average tenancy of our project has gone up even further. Now let's turn to Page 13. This page show clearly how well the rental portfolio is performing and that we continue to reap the benefit of our integrated asset platform. Average rent per square meters increased by EUR 0.11 year-on-year to EUR 6.3 per square meters. As we have indicated before, like-for-like rental growth is affected by the Berlin rent freeze legislation, which has an impact on 31% of our portfolio. Outside of Berlin, we have been able to generate solid rental growth of 3.9%, and we're able to end the year at 2.2% like-for-like for the portfolio as a whole. For the year-end, we expect like-for-like rental growth to be higher than 2% for the part of the portfolio outside of Berlin. In Berlin itself, rental growth will be more and less nonexisting until Berlin rent freeze regulation is canceled, which we expect sooner. So downward sloping trend of our vacancy rate continue as we post a 60 basis point improvement to the prior year, ending 2020 with a vacancy of 3.4%. Part of this drop is caused by our intensify letting effort and the integration of our letting department but also on the back of recent disposal with high embedded vacancy number. Moving on to Page 14. Clearly, one of the key pillar of our integrated asset management strategy is to continue investing in our portfolio. On the left-hand side of the page, you do notice that throughout 2020, we have spent about EUR 60 million less on CapEx and maintenance combined. With the Berlin rent freeze legislation entering into effect, we have become more selective on the CapEx program on the Berlin portfolio. As a result, refurbishment and capitalized maintenance dropped from EUR 124 million last year to EUR 118 million this year. Maintenance decreased substantially by 27% to EUR 6.3 per square meter versus EUR 8.6 per square meter in the same period last year as we now have more demand structure, stronger purchasing power due to the increased size of the company, and we are also benefiting from high CapEx we spent in the last few years, which is translating in lower maintenance spending. CapEx has also decreased by 7% to EUR 24.4 per square meters versus EUR26.1 in 2019. However, this number is still up from 2018 and before, as we have invested in energy modernization. We have lowered our vacancy and had seen rental increase outside Berlin. However, it's good to note that we are expecting less CapEx for 2020. As always, please find a detailed overview of our portfolio metrics on Page 15. Berlin continue to account for almost EUR 4.5 billion fair value of our portfolio, which is more than half of the EUR 8.3 billion fair value of the German residential rental portfolio in operation. Together with other metropolitan area, the top 13 cities account for about 80% of the residential rental portfolio. Occupancy has improved year-on-year by 0.3% in the top 13 cities and by 0.6% in the other cities, bringing the total vacancy to 3.4% at the end of the year. The average rental income in the top 13 cities showed an average like-for-like net rental growth of 1.9%. As expected, late growth in Berlin was negative of 70 basis points as the impact of the Berlin rent freeze crystallize, but still resulted in a solid 2.2% LFL rental growth year-on-year as the rest of the portfolio continue to generate solid results and return of 3% increase like-for-like. Looking at reversionary potential, the portfolio has some solid prospect with reduction potentially in the third entity of 8.6% and 11.3% for the portfolio as a while. Looking at Berlin and during in my -- the ongoing discussion on the legality of the rent freeze, Berlin could be to -- improve the portfolio engine of future rental growth with 17% reversionary embedded in case a rent freeze would be removed. Now I'd like to hand you back to Max for an update on our financial structure on Page 17.

Thank you, Thierry. Please allow me to give you a short recap on what we have achieved in optimizing our financial structure over the course of 2020 and year-to-date. In addition to the successful rights issue in July, we also have been able to place 2 bonds in 2020 and a dual tranche in early January 2021, with a total volume of EUR 2.3 billion. On July 29, we placed a 5-year EUR 400 million bond with a fixed coupon of 3.25%. On November 9, we placed another EUR 400 million bond, now with a 6-year maturity and a 2.75% fixed coupon. On January 8, we placed a EUR 1.5 billion dual tranche, as mentioned earlier, with a 5- and 8-year maturity and a weighted average cost of coupon with average coupon of 2.075%. We continue to see support for attracting also secured financing at compelling rates. We have been able to attract EUR 728 million of secured instruments at a blended 2.08% cost of debt in 2020. The average maturity of these instruments is about 4.7 years and extends our maturity profile on group level. In addition, we already entered into two 7-year secured loans with a total volume of EUR 500 million at 1.53% average cost of debt in 2021. Overall, we managed to refinance more than EUR 3.5 billion in 2020 and 2021 to date, which is clearly a big success and gives us tailwind for the upcoming maturities in 2021 and 2022, where we can realize additional synergies and reduce our cost of debt even further. As a result of the consolidation of Consus, the weighted average cost of debt increased from 1.8% to 3.2% as for Q3 2020. However, when looking at the pro forma number, we already lowered the average cost of debt again by 63 basis points versus Q3 2020, bringing the weighted average cost to 2.57% as of today. And one of the most important achievements has been the repayment of EUR 1.3 billion in mezzanine debt. And as that -- part of the mezzanine refinancing with a weighted average cost of debt of 10%, we were able to lock in circa EUR 94 million interest savings as of today. When adding the effects of the embedded early repayment of the EUR 450 million high-yield bond at Consus level with 9.625% coupon, this could add around another EUR 30 million in recurring savings, which, together with some additional maturities, should bring run rate cumulative financial synergies to circa EUR 130 million by the end of the year. Now please follow me on to Page 18. In order to shed some light and detail on what our debt profile would look like as of today, please have a look at the tables on this page. As discussed on the page before, in 2021, we have been able to refinance large volumes and have been able to do so at a lower financing cost than expected. As such, we deem it relevant to update you on where we currently stand. Furthermore, we would like to rehighlight our recent bond issue in January of EUR 1.5 billion at an interest of 2.1%. As a result of this significant placement and other financing activities shown in the table, our cost of debt has decreased by circa 30 basis points to 2.6% as of 31st of March, and we have subsequently been able to extend our average debt maturity by 1.3 years to a total of 4.3 years. Let's now move to Page 19. At the end of 2020, our LTV stood at 53.4% or 50.7% when adjusting for the outstanding convertible bonds. Our weighted average cost of debt stands at 3.04% at the end of the period and 2.6%, as mentioned earlier, as of today. Considering the upcoming maturities, this provides further potential to reduce our cost of debt. Further strengthening the KPIs on slide -- on this slide remains a top priority, and we foresee ample opportunity to realize these improvements going forward. In the medium term, we target weighted average cost of debt of around 2% and a total amount of debt of circa EUR 6.5 billion, which would equal an annual interest payment of circa EUR 130 million. The debt reduction to EUR 6.5 billion can be achieved by selling mainly nonyielding development projects and does not include any capital increase. Moving on to Page 20. After closing the books for the year, as I have mentioned earlier, we successfully placed in January, EUR 1.5 billion dual tranche with a 5- and 8-year maturity and entered into 2 secured loans with a total volume of EUR 500 million. The proceeds have been used or will be used in the coming months to refinance existing loans. As you can see, our financing activities in 2021 further improved and smoothened our maturity profile massively since year-end 2020 by already reducing the refinancing volume for 2021 from EUR 1.7 billion to EUR 587 million. Now I would like to hand you back to Thierry for a view on where we see the portfolio moving in the future.

Thanks, Max. Let's move to Slide 22. In order to provide you a bit more color on where we intend to bring the portfolio, we have broken down both the portfolio and the development pipeline in a geographical as well as a sector split. As you can see on the left-hand side, the current rental portfolio has a strong focus on Berlin and only limited exposure to the top 7 cities. One of the strategic drivers behind going after Consus has always been to gain access to high-quality development in Germany top cities with the whole development pipeline being in exactly these cities. The future portfolio will have a more balanced profile with 75% of the assets being located in the top 8 German cities. On the bottom part of the graph, we show the composition of our current EUR 11.4 billion fair value of investment property, where we still have a large part of forward and condo sales project and some nonstrategic assets. With the completion of the development pipeline, we have revamped our portfolio to have transformed in a fully operational pan-German residential rental portfolio of around EUR 13 million in the future. So let's have a look at what the pipeline looks like in more detail on Page 23. Looking at the map, this is exactly where we would like to have your development pipeline located. The core project in Düsseldorf, Stuttgart and Hamburg will hank towards the strategic pipeline and balance the current Berlin exposure within the top 7 cities, as illustrated on the previous page. In the table on the left, we give you a detailed overview of the 11 projects in the pipeline, to which we have added additional information on the next couple of slides. The total book value of the pipeline is circa EUR 1.3 billion in exhibit GDV of more than EUR 4.7 billion, on which we expect to realize at least a EUR 4.3 billion yield on cost. Now I would like to give you some more detail on how the CapEx for the development look like on Page 24. I will refrain from going into detail on each and every year individually. But in general, you can imagine that in order to produce a volume of EUR 4.7 billion investment will have to be made over the next year. In the coming 6 years, we expect to invest EUR 350 million of CapEx per annum on average. For the coming years, we have good visibility on our CapEx requirement, which are rounding up just shy of EUR 0.5 billion per year towards 2025. The associated CapEx is expected to be funded on a project level with 65%-70% loan-to-cost, and we will bank on our active capital recycling strategy. Please allow me to follow up on this project on the following slide. This is more detailed figure of our projects, expected to complement our portfolio in the following year. As you can see, all these projects are located in the top 9 cities, and they are all -- have a lot of potential. The teams are currently very busy with the development planning process of all projects displayed with individual time line accelerating in the following years. To summarize the last few page, this build-to-hold project is the essential part of our transformation as an organization in one of the Germany's key residential player. Moreover, we will play an active part in realizing the solution to the current housing shortage in Germany. Thank you for being with me. Now Max will briefly touch upon our ESG ambition on Page 29.

Thanks, Thierry. Let us indeed move on to the next topic, ESG, which has become an ever more essential part to our business. As you can see, we have, therefore, implemented ESG as 1 of our 3 key strategic pillars. For the next years to come, ESG criteria will obtain a key role in our decision-making processes. In addition, we are closely working together with our stakeholders and various agencies to establish a prudent ESG strategy. We expect to publish our first ESG report at the end of April this year. Our increased focus has already resulted in our first measurable ESG target, which is to reduce our CO2 emission within the whole portfolio by 50% until 2030. With ESG being such a key role in our future strategy, our confidence to reach or even outperform this target is very high. This target is further supported by a set of various goals to improve our entire organization and business. To make our goals relatively to the rest of the world, we have also chosen several United Nations Sustainable Development Goals to commit to, as shown on the next page. From the United Nations Sustainable Development Goals, we have chosen a total of 8 goals to focus on. We believe we can bring a real impact towards these topics, and Adler Group's management team is fully committed to bring the organization towards ESG excellence. To quickly repeat myself, this commitment will be further effectuated when we will publish our first sustainability report at the end of April 2021. Let us now shift our focus to the near future and move on to our 2020 guidance -- 2021 guidance. We would like to end with the guidance and the outlook for 2021 on Page 32. In light of the disposals of 2020, Berlin Riverside expected to become fully let and competitive lending, we feel confident to issue an ambitious outlook in which we anticipate realizing between EUR 325 million to EUR 339 million of reported net rental income, which should result in FFO 1 of 117 -- EUR 127 million to EUR 133 million, which represents an increase of circa 21% besides the fact that we sold yielding assets in 2020 with almost EUR 400 million book value. For a more detailed view on the building blocks of our guidance, please refer to Page 33 and Page 34 in this presentation. So to summarize our achievements year-to-date, the acquisition of ADLER has been successfully completed and Consus has been consolidated. Synergies realized at the end of the year has beaten the guidance by circa EUR 21 million and ended up at EUR 113 million run rate. We placed a double tranche EUR 1.5 billion bond to refinance existing facilities, extending maturities, whilst lowering our weighted average cost of debt. So thank you all for joining us today. And I would now like to start answering the questions that have been submitted.

[Operator Instructions] We will now take our first question from Sander Bunck, who's calling from Barclays. "can you explain why EPRA NAV has declined 2% in the fourth quarter, despite posting positive revaluation in the same period?"

Sander, thanks for your question. I will take this one. So indeed, EPRA NAV in Q4 has been positively affected by the revaluation of the portfolio, most notably the yielding part. But in December 2020, we acquired another 29% stake in Consus. So we got from 64% to around 94% further the acquisition and integration process of Consus. At that point, in December, we, hence, issued some 12.7 million new shares and those have then seen the EPRA NAV decline slightly when compared to Q3. I hope that answers your question.

Thank you. The next question comes from Pranava Boyidapu. He is also from Barclays. "Thank you for your presentation. I have a few questions on LTV. Your LTV calculations include selected financial assets. Could you give us a bit more information or breakdown of this and how it might evolve in the future? Considering that your LTV is at a target of 50%, are you no longer looking to deliver. According to S&P calculations, the leverage remains high. Are you still looking towards an IG rating for the bonds? And if so, do we have a time line for that?"

Thank you, Pranava, for your question. I will take it. On the selected financial assets, they relate to financial receivables, EUR 627 million. We have trade receivables from sale of real estate for projects, EUR 325 million; and other financial assets, EUR 243 million. So overall, when you look at our disposal schedule from last year, you can see that certain projects have been signed and then obviously closed towards the end of the year, but some also, in terms of settlement, went into the next year 2021. That's why it still shows a significant number end of 2020. But of course, this has reduced significantly as we speak today. On the rating question, S&P leverage calculation is based on adjusted net debt over adjusted capital, and that is their methodology and definition instead of the LTV and hence, a little higher. We have achieved close to 50% LTV, excluding our convertibles, but we continue to target to delever further to improvement in operations and also portfolio rationalization. And it's worth noting that rating agencies recognized the improved portfolio diversity and financials being in line with BBB- anchor rating. However, we have 2 negative modifiers, in particular in the S&P note, for relative cash flow conversion compared to peers and the length of continued track record of the combined group. But both of these elements, we are actively addressing on a day-to-day basis. I think we made very good progress in the past, and we should be revisiting this positively in the near term. These are more qualitative in nature. So we cannot -- it's very difficult to put a timing -- specific timing for such an upgrade, but we are -- rest assured, we are committed to IG target rating in the midterm and the continued progress steps in that direction.

Okay. Thank you very much. We'll move on to the next question then. And the next question is from Sören Gjelstrup, who's calling from REIT Advisor. "Please explain why the synergies are greater than the FFO guidance, with the standalone businesses all have been loss-making?"

Yes. Sören, a very good question, indeed. So if you look at the synergy slide, again, it's on Page 9 of the presentation, they are on an annualized basis as they accrue and crystallize at different point in time. For example, we would refinance the 9.625% high-yield bond at Consus level with the first call in May this year to realize annualized synergies of greater than EUR 36 million. However, all of those EUR 36 million won't flow in the FFO for 2021 and the FFO guidance of EUR 127 million to EUR 133 million takes into account actual cash synergies realized for part of the year. So the business, even excluding all of the synergies is very much profit-making and cash flow positive.

Okay. Thank you. The next question is from Thomas Neuhold, who's calling from Kepler Cheuvreux. He asks, "are you reviewing the option to issue a green bond?"

Thomas, thank you for that question. Indeed, green bond is an alternative for us. As mentioned before, we intend to publish our ESG strategy in second half of 2021, and the green bond issuance is definitely something we are also looking at once we have done all our homeworks, so to speak. But our, let's say, product is eligible and prone for such a green bond issuance. So we are actively working on it.

The next question comes from [indiscernible], who's calling from Allianz. "Could you please explain why in Berlin, the like-for-like evolution in rents is negative and not just 0?"

Thank you for this question. So the reason for the like-for-like rental growth in Berlin to be negative is simple because the Berlin rent freeze legislation, which has entered in effect in February, after a 9-month integration period, is not only limited the rent increase but also we need to reduce the existing rent, which exceed a certain threshold in November. So as a result of that, we have been forced to lower the rent for a number of units and therefore, have a negative like-for-like rental growth. But we are very confident that this measure could be reversed in the future. Thank you.

The next question is from [Marco Nuti] who's calling -- who is an independent consultant, sorry? His question is, "why did debt increased between December 31, 2020, and March 31, 2021, by EUR 212 million?"

Yes. Marco, good to see you in the call, and thank you for your question. So this is mainly due to a timing point since we haven't used the total proceeds from the new debt issuances in order to repay existing loans. And therefore, we increased, in the same time, our cash balance, which we will now use to repay debt in the coming weeks or months.

And we also have a follow-up question from Marco and that is, "Do you still plan to achieve investment-grade status despite the need to fund development to 65%-70% debt?"

Yes. Thank you, Marco, for that question. I will also take it. So the 65%-70% loan-to-cost for build-to-hold CapEx would translate to 50% to 55% LTV based on a fair value, including the development profit, which we are envisaging between 20% and 30%, so that is fully in line with our financial policy. It excludes any cash generated from operations, potential revaluation or portfolio optimization at the company level. And so we are committed to less than 50% LTV in the midterm and achieve an IG credit rating. As mentioned also earlier on this call, rating agencies have recognized our improved portfolio metrics and also our significant improvement in the -- on the financial KPI side. And I hope that answers your question.

Thank you. We have a question now from Charles Watford, who's joined from PIMCO. First of 2 questions actually. First up, "What is the pro forma interest cost you are using in the FFO guidance?" Shall I repeat the question?

Yes, please. Repeat the question.

The question was, "what is the pro forma interest cost you are using in the FFO guidance?"

Okay. Thank you for that question, Charles. So on the interest cost side, we are using 2.1% on a forma basis, and this derives from our last issuances that we have made. So we feel confident that we can achieve in the FFO, our 2.1% on average.

Thank you. We have another question from Charles and that is "Given recent issuance, do you plan to issue again to take out the Consus debt?"

Thank you, Charles, for this question. So in terms of Consus bond, we have obviously earmarked May for the call of the higher bond. We have seen that coming already before and have enough liquidity to call the bond without having to go to market. So it is something that was also subject to the markets, how they develop. We've seen yields widening a little bit. So we are actively monitoring the market. There is no need for us to come to market for the repayment of this bond. But as I said, I cannot exclude any debt capital markets activity for this whole purpose of refinancing, but it has to come at attractive terms.

Your next question comes from Oliver Jones, who's joining from AEW. "Is there a guidance for FFO 2 profits for 2021, i.e., development income gains for 2021, Consus admin costs 2021 and Consus interest cost 2021?"

Oliver, thank you for your question. So given the fact we are still working with the Consus management and are still in the process of completing the integration, we have not particular guidance on the Consus part. Clearly, this is one of our key objectives going forward, and we will inform you on these items ASAP.

Thank you. We have a question now from Hans-Peter Klein, who's joined from Street Alpha. "Can you give us, please, an update on the planned control and profit transfer agreement with the subsidiary ADLER Real Estate AG?"

Peter, thank you for your question. On this one, termination agreement, that is something we are working on. One of the big 4 have been mandated to derive a valuation. This will also be made public in due course. So in time for the next general meeting at which this termination agreement will then have to be voted upon. So we are working on. General meeting typically happen midyear. So that's what I can say timing-wise.

[Operator Instructions] In the meantime, we're now ready to take the next question. This question comes from Bernd [indiscernible], who's calling from -- who's joining from [indiscernible]. The question is, "The market liquidity of the Adler Group share is still quite low, how should the previously communicated goal of inclusion in the MDAX be promoted?"

Thank you, Bernd, for your question. So whilst I would say, we have improved in the stock liquidity, there's still room to improve. I agree. On the MDAX inclusion, as we know, there have been some changes in methodology. I think the 2 main points were free flow market cap and the stock liquidity as such. And given the methodology of using the last 12 months and the fact that we had issued new shares intra-year, we were always somewhat lagging behind on the stock liquidity point. In terms of free float market cap, we would have to tick the box. We know that and we all know that at the end of 2021, the liquidity point will be excluded. So we should see our name coming into MDAX because we take the box on the free float market cap point of view. So I think good news.

Thank you very much. That will conclude today's presentation. Thank you for your participation, ladies and gentlemen. You may now disconnect.