Catella AB (publ) (CATB) Earnings Call Transcript & Summary

Welcome to the Catella Q3 2024 Report Presentation. [Operator Instructions] Now I will hand the conference over to the CEO, Daniel Gorosch; and CFO, Michel Fischier. Please go ahead.

Thank you. Good morning, everybody, and welcome to Catella's Interim Report for the third quarter of 2024. My name is Daniel Gorosch, and I'm the Interim CEO of Catella Group, and together with Michel Fischier, CFO and Head of Investor Relations, we will walk you through the highlights of the quarter. After the presentation, we will open up for a Q&A session, and the material and reports are, as always, available on our website. So I'd like to start the presentation with a brief overview of Catella starting on Page 3. Catella operates in 3 property-focused business areas: Investment Management, Principal Investments and Corporate Finance. We manage over SEK 150 billion in our pan-European investment management platform and a bit more than 70% of the assets under management are managed in property funds and the remaining part in a significant number of asset management mandates across Europe. Principal Investments is where we invest our own equity into a broad and diversified portfolio of European investment projects together with partners. Most of our own investments are managed by our own asset management companies across Europe, managing our financial partners' investments as well as ours and then generating additional fee revenue streams besides our targeted returns on our invested capital. Corporate Finance is our real estate advisory and brokerage arm with leading positions in our 5 large European countries. And Corporate Finance is also an important adviser to our other business areas, Investment Management and Principal Investments. Our operations are taking place from 25 different offices in 12 countries within Europe, and we have approximately 500 employees. So with that brief introduction, I'd like to start this quarter's presentation with a short market summary on Page 4. In second quarter, where we experienced some transaction volume recovery, mostly due to seasonality effects the transaction activity decreased slightly now in Q3 with industrial and logistics being the most sought for segment from investors. Looking at valuations of European real estate assets, they seem now to have stabilized after declining over the last 2 years, and I, together with some European colleagues, recently visited one of the largest real estate fairs in Munich, Expo real. And our summary of those days were just compared to 6 months ago, there is now a significantly stronger and well-founded interest in finalizing transactions. So we see the cost of capital coming down, pricing meeting buyer and seller expectations, and we optimistically believe that we are in or very close to at least the turning point now after 2 challenging years. Currently, however, overall transaction volumes as well as capital inflows in the European real estate market continues to be low and Catella has taken and continues to take necessary actions throughout this downturn in the industry. We have preserved liquidity and a strong capital position. And furthermore, we have realized material cost efficiency improvements and preserved AUM in existing funds as well as launching new product initiatives. With these efforts, Catella is now in a better position today than when now the market slowly recovers. So with that brief market backdrop, I'd like to move on to the next page, Page 5, for a summary of our key operational highlights of the quarter. Even though the market continues to be quiet, we continue to focus on adapting and evolving our business to increase efficiencies, securing existing assets under management and preserve a solid liquidity and capital position. During the quarter, one-off restructuring costs of SEK 13 million impacted the result. Taking this into account, the EBIT was unchanged year-on-year despite a SEK 10 million decline in net revenues. As mentioned, we continue to have a strong balance sheet and liquidity position. And during the quarter, we have also issued a new bond under the newly established MTN program and green book framework. The issue of NOK 600 million was met with strong investor interest. And in parallel, we tendered over NOK 300 million of the bond maturing in March next year. And with forthcoming divestments that further will strengthen our liquidity, we will also review the remainder of the bond maturing in March '25 during the next couple of months. Moving on to Investment Management, the AUM was unchanged compared to last quarter when taking revaluation and FX effects into consideration. We see this as a sign of strength in the current market where capital inflows in our core property funds business remain limited, but outflows as well are very limited. So this in a market where competition is facing significant redemption requests and where some funds also have closed. The largest growth possibilities we see today is within asset management operations within our Investment Management business. Here, we have signed new mandates managing underperforming assets and assets which require repositioning. In recent quarters, we have seen growth in these types of mandates in Finland and in the Netherlands and continue to see additional opportunities across Europe, where we see that our investors value our group's know-how as well as our strong local competence. So the growth in AUM through asset management proves the resilience of our business model in a weaker and more hesitant transaction markets. So in order to create a stronger, more efficient and larger fund platform in investment management, we continue to work combining our 2 fund companies, Catella Residential Investment Management, CRIM, and Catella Real Estate AG, CREAG. We expect that this merger will be finalized by the year-end, resulting in a joint EUR 10 billion fund platform, leveraging capital raising, coordinated Investor Relations and research as well as a fully focused and efficient back office and fund administration for Catella and external partners. Looking ahead, new product development and sales continue to be a priority, but we are humble that despite we have -- we see strong investor interest, capital raising takes time and much longer now in today's market. If we then turn into principal investments, primary focus there is to remain on completing existing projects and positioning the assets for sale. Our largest project, Kaktus, was awarded Europe's best Tall building during the quarter, and this award further emphasizes the attractiveness of this landmark object in Central Copenhagen. Besides winning this award, we continue to make progress in sales discussions with investors. Looking ahead, we expect the sale of our logistics development project in France, Polaxis in late November, and this divestment will further strengthen our liquidity with the marginal profits. Total investments in principal investments amounted to SEK 1.85 billion at the end of the quarter, and this is an increase of SEK 350 million since last quarter, mainly as an effect for us deciding to replace expensive junior financing in Kaktus with less expensive capital through a shareholder loan. And finally, Corporate Finance. As I initially discussed, transaction volumes fell quarter-on-quarter, but market sentiment seems to be recovering. With a bit of optimism, we could see a stronger Q4, and we are currently building up a strong pipeline, which indicates a promising start of 2025. And as I mentioned, my personal reflection from Expo real is that we've gone from a market where everyone was trying to figure out what everyone else would have wanted to do to a market with real and initiated discussions with new potential investments at a good entry points. At the same time, most of the larger real estate companies have managed their leverage and with a lower cost of capital going forward as well as expected increase in rents, where we see that valuations have stabilized, yielding an improved fundamentals for transactions now to finally pick up again. So let's move on to Page 6 for a summary of the group's consolidated results. Net revenue decreased by SEK 10 million, explained by lower transaction activity affecting all business areas. As described, one-off costs amounted to SEK 13 million in the quarter, and taking this into account, the EBIT was flat year-on-year despite the lower revenues. Excluding one-offs and depreciations, costs were SEK 16 million lower year-on-year, showing that efficiency improvements also are reflected in our numbers. Investment Management, we see that the AUM was flat after taking the FX and revaluation effects into consideration and AUM in funds remained stable, which is quite an achievement, I must say, in today's market. But importantly, we continue to gain traction in new asset management mandates. Despite a slower transaction market, the underlying business model continues to perform, and we maintain our focus on improving our margins and developing new products. And in Principal Investments, it was yet another quiet quarter, but one divestment is now planned to take place in Q4, and we have ongoing dialogues to find the right investors for projects that are finalized or are close to being finalized. In Corporate Finance, we experienced yet another weak quarter as an effect of the slow transaction market. We see increased activity, especially here in the Nordics, but Continental Europe and especially France continue to be very weak. The repositioned Corporate Finance at a lower cost base provides good opportunities for growth profitably when the cycle finally now turns. If we then move on to Page 8 to discuss Investment Management more in detail. Having the slower growth of 2023 and '24 in mind, the business area has, since inception, delivered a strong average annual growth rate of nearly 20% -- during last year as well as this year, organic growth has been muted. But again, we see this as a strength and a continued investor confidence in the current market backdrop we experienced and continue to experience. In the funds business, we have retained the capital with limited outflows. At the same time as asset management mandates have reached their maturity, we have replaced these with new mandates. New mandates with a new focus where we aid investors to manage underperforming or defaulted assets to reposition them and increase returns. Asset Management provides a balance to our business model and provides opportunities to grow in an environment where investor interest in core or core plus investments is limited. In this setting, our pan-European reach, coupled with strong on-the-ground local market competence is something investors and partners value highly. Moving on to Page 9, we see here the continued muted transaction volumes, timing effects and revaluations led to a slight decrease of top line compared to last year. However, our cost reduction initiatives are shown in the results and by taking one-off costs in the business area amounting to SEK 3 million, we show an EBIT increase despite lower revenues. The merger of our fund platforms will further harmonize operations and increase efficiencies going forward. Besides the continued strong focus on efficiency improvements, we continue to -- continue our efforts of retaining and growing our assets under management to be well positioned for profitable growth when looking ahead. So that was Investment Management. If we now turn to Page 11 for an overview of Principal Investments. Our principal investment portfolio continued to comprise of 8 active investment projects at quarter end, plus a few smaller seed investments and equity co-investments in larger aggregation mandates. As mentioned, the closing of Polaxis is expected to take place in late November, and we also expect an additional milestone payment in Metz Eurolog. Both events will further strengthen our liquidity, which has been a key priority for Catella to manage during this part of the cycle. We remain committed to our projects, and based on our financial position, we have the opportunity to be patient to protect value and generate shareholder returns. In parallel, we continue to review smaller investment opportunities as they emerge with the ambition to generate returns on equity and gain new revenues in asset management mandates. So let's focus on Corporate Finance on Page 13. The overall transaction market decreased slightly compared to the second quarter with Catella transacted volumes within our Continental platform decreased sharply, mainly due to a slow market in France, whereas the transacted volumes in Nordics decreased steadily. From a financial perspective, a stable quarter with net revenues and EBIT in line with the same quarter 2023. And to reiterate what we previously communicated, our Corporate Finance division holds a strong market position in the 5 markets where we have operations and with a couple of new recruitments and increased cost efficiencies, the business area is in a better position to return to a highly profitable business as the market returns. Furthermore, the pipeline that has been built promises a revenue increase as transactions start to close. So I'll now hand over to Michel, who will share a brief financial summary, beginning on Page 15.

Thank you, Daniel, and good morning, everyone. And as you're well aware of, and as usual, the CEO has steal the majority of my show. And to start by repeating what has already been mentioned, lower revenues have been more than offset by a lower cost base. One-off restructuring costs amounted to SEK 13 million in the quarter, and the current full year estimate is expected to be around SEK 20 million. Worth to reiterate is that our work to adapt the organization to a market with lower activity continues to be reflected in our numbers, and we still expect more to come. Looking below the EBIT line, the negative net financial increased, but this was mainly due to the buyback of the March 17 bond and interest costs on the junior financing of Kaktus, which was repaid in late September. Additionally, average interest on the market debt increased compared to the first 9 months as an effect of market -- increased market interest rates simply. And as the Swedish krona strengthened in the quarter, we also had FX headwinds in the period amounting to SEK 11 million. Altogether, this led to a net loss of SEK 23 million. But when adjusting for one-offs, and FX effects, it takes us to a slightly positive net profit for the quarter, which is an improvement year-over-year. If we then continue to Page 16 and look at our balance sheet and financial position. Our balance sheet and liquidity has remained strong and remains strong in this quarter, enabling patience and continued investments in our current pipeline. And as already mentioned, we issued a green bond of SEK 600 million with strong investor demand and tendered SEK 308 million of the March '25 bond. In parallel, and with the forthcoming divestments that will further strengthen our liquidity, we will also review the remainder of the outstanding bond maturing in March '25 during the next couple of months. As usual, I'd like to spend some time on describing how you should view our balance sheet. The overall majority of our liabilities are related to development projects and principal investments. These projects are in turn valued at cost. So hypothetically, if our projects were to be divested today at cost, our net debt would be negative after adding cash. In other words, we would hold more cash than our financial obligations. Even though the projects are valued at cost, we continuously review their values on our balance sheet to determine if there is a need for an impairment. And the values we have on each and each individual project are confirmed to be above cost. Since development projects are treated differently, depending on Catella's ownership, we have provided a slide you have in front of you to help you in your understanding. To -- before I move on to the next slide, at the end of the quarter, we had an equity ratio of 34%, and our cash position was SEK 870 million, down from SEK 951 million in the last quarter, but this is mainly an effect of the Kaktus junior financing repayment. So in summary, we continue to have balance sheet strength and sound available liquidity going forward. If we then move on to the next slide, #17. We shared this slide during our investor presentation for the bond issue and since it was well received, we have updated it and we'll include it in our quarterly presentations going forward. The slide you see in front of you summarizes how we look at our net debt or in our case, net cash position. If we start from the left and move to the right, summarizing all our investments valued and cost, that amounts to approximately SEK 3 billion. If we then add the current cash position of nearly SEK 900 million, we reached a total of nearly SEK 4 billion. If we then deduct our market debt and the financing of our projects and also make slight adjustments to the cash position with working capital needs and bonus accruals, this takes us to a cash position of SEK 715 million. And once again, and as I summarized also on the previous page, if all the investments were divested at cost, it would lead to a negative net debt, i.e., excess liquidity after the debt being repaid. Once again, this is a hypothetical scenario, but in this scenario, we would still have Investment Management and Corporate Finance as revenue-generating businesses going forward. And to state the obvious, it's not our ambition to divest our projects, and we will continue to invest in our existing pipeline and also continue to review new projects that meet the business area's long-term return requirements of 15% to 20% IRRs. And with that said, I'll hand back over to you, Daniel.

Thank you, Michel. So before we conclude and open up for Q&A, I'd like to summarize briefly the quarter from our perspective on Slide 19. And as mentioned, the market environment was still in a waiting mode during Q3. We are starting to see some positive signs, and our house view is that the market will slowly start to recover from this point. This is supported by the current dialogues we have across Europe, the fact that the swap rates and that the capital costs are coming down, and we also see that the rental levels are increasing. But as the famous quote from the Nobel Prize winning Quantum physicist Niels Bohr says, it is difficult to make predictions, especially about the future. And this, of course, applies also to our market as well. So with that being said, the predictions about the future being difficult, all else being equal, the current fundamentals support at least a slow recovery from the muted environment we see now we have seen over the last 2 years. So if or if not this materializes, Catella is still in a better position today with a higher efficiency, lower costs and a continued strong financial position. So our key takeaways from this quarter is that we continue to do the right things, and we are making progress. We have preserved liquidity, and we continue to have a strong capital position. We have made cost reductions and continue that will have a positive effect, and we see -- we show an EBIT increase, excluding one-off costs despite somewhat lower revenues, and also the merger of our fund platforms will further harmonize our operations and increase efficiencies going forward. And we expect the closing of some of our planned projects, which will further strengthen our liquidity, which is a key priority for us during this part of the cycle. And also finally, the AUM in funds remained stable, which has been quite an achievement in today's market, and we continue at the same time to see gain traction in the new asset management mandates. So all in all, we are satisfied and see that we are well positioned to reap the benefits of going into, hopefully, a more active and interesting cycle of this market. So with that, we would like to thank you all for listening, and we now open up for questions.

[Operator Instructions] The next question comes from Emil Jonsson from DNB Markets.

Daniel, congratulations on your new position. I'd like to start by asking on the fixed fees. They've -- over the past 5 quarters or so, they've been around 14 bps as a percentage of AUM, whereas before, they've sometimes been around 15 or 16 bps. Should we expect the fixed fees to sort of remain around this level as a percentage of AUM over the foreseeable future or is there something that we should expect to drive fixed fees up or down?

As there's been a transition from more fund-based fixed fees to asset management-based fixed fees, you should expect it to be around the current levels in the current levels and the current market. But of course, with the asset management mandates that we have entered, it also comes with a significant upside if -- when we divest, when we increase the value of the assets and long term, of course, when investments into core funds start to increase and revaluations, which may have bottomed out now start to increase, then you should expect us going back to the levels which you have seen historically.

Going back to historical levels in terms of fixed fees?

Yes. I mean the bps that you mentioned.

Okay. All right. And in your CEO comments in the report, you state that you're optimistic that corporate finance volumes will pick up in Q4. Does that mean that you're confident that they'll do that or that you hope they'll do that? Could you offer any color on that?

This is a very cyclical business and a seasonality effect, and we see the largest volumes in Q4 over the year and so that's typically what happens. So Q4 will, by historical evidence, be a stronger quarter. Then if it's going to be stronger than the last year or not, we don't know, but we see signs that the market is picking up. So yes, that's our prediction.

All right. And you also talked quite a bit about seeing a brighter transaction market in Corporate Finance. Is it safe to say that, that sort of improved sentiment is also translating into the discussions with potential buyers of Kaktus? Or are those sort of independent markets, so to speak?

No, of course it's related. I mean, a better market with more capital in the market will, of course, increase the probability to also close that transaction. But you should of course state again that we are not in a hurry regarding Kaktus. We are in a good position with a good product, and we have a good cash position. So it's important for us to await the right buyer at the right price. And hopefully, that will occur during next year.

All right. That makes sense. And you also state that you are continuing with active dialogues with potential buyers of Kaktus. Does that mean that during the quarter, you've sort of moved further ahead in discussions with the same counterparties as before? Or should we rather interpret it as you're presenting or reaching out to new counterparties?

I would not like to comment really on the details. What we can say is that we are having continuous dialogues, and we will present to the market when we have something to say on that. But as we said, we want to own this asset for the eternity and the objective is to divest it at a good timing. So let's stay with that.

All right, fair enough. And just a final question. You've previously carried out quite a few different cost efficiency measures and staff costs and so on. Do you foresee doing anything additional of this sort in the near future?

Yes. I mean, we continuously review where we can reduce costs. And as we've previously done, I mean, we haven't communicated on external redundancy program or cost cuttings for 2024, but it's an ongoing process and as we mentioned in today's report as well as in previous report, you see those being reflected in our numbers as well. And going ahead, the work is not stopped and as I mentioned previously earlier is that we expect more to come, but it's -- I won't give you a number to pencil in going forward.

Okay. But can you give any color on whether we should expect to see anything more near term as the next quarter? Or is this more of a...

That's going into -- I mean, of course, you will see some things into the last quarter and -- but then also moving into 2024 -- 2025. But let's have in mind then, if our expectation and our predictions which are hard to predict play out and the market picks up in early 2025 or during 2025, then of course, increased revenues will also increase our costs, which is a thing which we're happy with, of course, as long as it supports our long-term margins.

The next question comes from Patrik Brattelius from ABG.

A few questions from my side. If we start about -- if we start with this expected divestment of Polaxis here in Q4, how certain are you that you will be able to close this transaction in the quarter? And can you talk about the expectations of IRR in relation to your IRR target of 20%, please?

Yes. So let's start with the long-term ambition and IRR target of Principal Investments. That is a 20% IRR over time and as you saw, as we've had discussions for a couple of years, back in 2022, we had IRRs of 65%, 70% on our investments. Of course, in today's market, the IRRs are close to 0, to be honest. And that is also the expectation you should have on the sale of Polaxis. But it does finalize this project. We have a buyer, we expect it with certainty to close it by the end of the month, and it releases a lot of invested capital and releases liquidity.

So should we view the divestments in a way that it releases capital and it also helps you in the bond maturity for 2025? Is that a part of the underlying reason?

No, I wouldn't say so. I think this is a finalized project and divesting something in a different market with different assumptions than we had when we started the project at a marginal profit is a strength in this market. And then bond refinancing, I think that's a separate issue.

And you don't see a potential with the falling interest rate environment that this project could potentially be valued higher in a year forward compared to divesting it now where it would be close to an IRR of 0 using your words.

I'll go back to what Daniel said, quoting Niels Bohr. It's hard to make prediction especially about the future. I think at this point in time, we're happy with releasing this investment at book values and releasing the liquidity. And in this market, of course, there is a lot of opportunities to redeploy capital into higher-yielding investments going forward.

I see. And then turning over to transaction activity. We have seen that rates has come down and despite that, the transaction market hasn't really accelerated. What do you believe will be the trigger to really start this transaction activity again? And can you also talk about the expected impact on variable and performance fees given that you expect a gradual increase of transaction activity from here into 2025?

But this is a gradual improvement as you see in the market, especially here, as I mentioned, in the Nordics. And we have seen now that credit margins are decreasing. We see that the bond market has opened up and so making -- it more of a liquid market. And also one other evidence that we have seen is that the yields has flattened out or even started to decrease again in the most sought for segments such as prime logistics and residential. So that is the evidence you see and it's not -- it's going to be a gradual improvement as always in these turns in the market. And of course, when buyers and sellers are having easier to meet, it will also translate into transaction-related fees for us, both within Corporate Finance and also, of course, we are being able to make transactions with our Investment Management business. Exactly how much, it's extremely difficult to predict, but it's gradually going to improve. And as we mentioned, we have strong positions in all markets. We are -- if not market-leading, we have strong positions where we will be able to take the benefit of the market upturn coming -- going forward.

I see. And sticking to Investment Management, Germany is your largest region, but that is also geographically a market which is having some tough times. Can you talk about your expectations of any impact to Catella from this? Or is this not -- its 2 separate areas in your view? Or can you elaborate a little bit on that, please?

That market will also continue to improve, of course. I think cycle-wise, I think Nordics are a little bit ahead. So the market will start coming back earlier here, and it will gradually move southwards, so to speak. And of course, when the market also gets better in Germany that will also affect our German business in terms of being able to make transactions and so forth in our investment management. But it's impossible to put a figure on it, of course, since it's very theoretical at this point.

I see. And then your background is in Corporate Finance, and we have seen that the segment has delivered negative operating profit contribution now for 3 quarters in a row, unfortunately. Is this long-term sustainable? Or isn't it opportunity to make more adjustments to that segment in order to turn around profitability a little bit better? Or how do you view this?

We have done some rightsizing, of course, and we are -- the most important is to have the right people on board when the market turns. And of course, over a cycle, this business area should be -- have high margins or higher margins than average, of course, because that is how the business model works since we are working on a success basis. So the most important thing is now going forward going into 2025 is to have the right teams in place, which we think we have. We have done some new recruitments, and we have a strong position in all our markets. So we are optimistic about the coming year or so going into the next phase of the cycle.

Sounds good. And as my last question, you're currently the interim CEO. How do you view being CEO as a permanent position?

Well, I mean, it's not for me to decide about that. But I mean, it's the Board that manages and process the recruiting of the new CEO, and I have, of course, no influence in that. So if I would have been asked to -- if I personally would be interested, I will, of course, consider it carefully. Yes, so let's see what the future brings.

Sound slight optimism there. Perfect. Thank you so much.

The next question comes from Martin Wahlstrom from Redeye.

To start, in the CEO comments, you're right that the majority of capital inflows were generated in asset management through the growth of new mandates. However, when looking at the absolute levels, it seems there was a decline in AUM against Q2 and a slight increase in property funds. Could you elaborate a bit on this dynamic? Is this a result of larger outflows as well in asset management? Or is it revaluations impacting?

Yes, sure. So at the same time, as we had larger inflows in asset management mandates, we had some asset management mandates that ended. But altogether, that balanced out. And as we discussed earlier, I mean, looking at quarter-over-quarter as well as over the last 12 months, you see that the inflows basically have balanced the outflows in AUM, and then you see the revaluation effects and as well as FX effects. And that's the main decrease in the delta in the AUM quarter-over-quarter and year-over-year.

Great. And in terms of the one-off costs of SEK 13 million, could you elaborate a bit on this, what this was related to?

Yes, it's basically severance cost and cost adjustments across the organization.

All right. And so the severance costs are those related to the CEO departure or to all employees?

Part of it is related to the CEO departure and other parts are across the organization, both in Investment Management and Corporate Finance.

I see. And just a clarification here. In conjunction with Christoffer leaving the company in September, your Head of Communications in an interview that this was a component in Catella's ongoing transformation. And if you could please just specify what you mean by transformation in this case. To us, it seems like the large transformation was carried out with the divestment of the banking component and so on.

No. I mean the Board and Christoffer, they mutually agree that he will step down from his role and also, the Board expressed their satisfaction with his work and commitment that he has done over the leading transformation of Catella over the last years. So that is what we communicated around that.

And my final question related to Kaktus. There was a footnote in the investment or in the principal investment part of the report, where the last part of the construction is expected to be finished in 2025. Could you provide some color on this? I guess you have said previously that perhaps the project doesn't need to be fully completed before being divested, but kind of how should we think about the timing of the divestments here?

No, I think what you should focus on is what we communicated in the last quarter is that all leases have been signed, which then leads to future NOI, which a potential buyer can take into account. And of course, constructions will continue through 2025, but that's less relevant for a potential buyer as you calculate the value of the asset based on the NOI basically.

There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Some written questions. 6 questions coming from Kim. Kim, a long time and I just wanted to say whenever you want to, you're welcome to the office for a new lunch, I think it was 2 years ago. But the first question is, when is the Catella Logistics Fund Plus planned to launch? And when do you estimate the fund to reach its target volume of SEK 500 million? And how large is the committed capital now? So to start with, we have received all the -- all the licenses are in place for this fund, and we are building up capital commitments. The number is nothing we have shared today. But it is, of course, in this market, it is a positive sign that we attract interest into this fund. And as Daniel started with, through this downturn over the last 2 years, logistics have held up pretty well, both when it comes to demand as well as yields. The next question is Catella European Residential opened to new investors for the first time in years during Q3. Can we expect to see larger subscriptions than the SEK 10 million that occurred during the quarter? And why does the fund choose to open up now while the fund still has SEK 285 million in cash and are well above the 5% cash to NAV compliance rule. I think by simply answering the last part of the question, I answered the first one as well. So we see interest from investors to invest in this fund, and that's why we've opened it up again, basically. And so besides the EUR 285 million in cash, we see additional commitments going in and new potential investments into this fund. What are your near-term priorities regarding capital allocation up until capital needs to be deployed into the larger projects that are planned to be finalized in 2026 and 2027, Salisbury, Mander Center and K. Well, as we started with, we have managed our liquidity and capital position prudently through this downturn in the industry, and the projects that we have and continue to invest in, we've had the opportunity to hold on to these and continue our commitments and continue our investments. And I mean, in the longer run, it will, of course, generate the IRRs that we are seeking as well the shareholder returns, which you're, of course, interested in. Then how much of the SEK 90 million in cost savings are related to fixed cost? Well, the majority is related to fixed cost. As you see, when you look at our full-time employee numbers, there's been a significant decrease in this. And then -- yes, so the majority is related to fixed cost. And what are your estimates on the profit of selling Polaxis? I think we already answered that one. Where are you in the process of Phase 1 in SSA? Are there any plans when Phase 1 will be divested? Are there any active discussions about regarding a sale?

No. I mean we are looking at the project, of course, and we will review that during the next half year going into 2025. So there are no active dialogues going on right now.

Good. I hope that answers your questions, Kim, and as always, happy to take a call or if you want to follow up via e-mail. Then we have one last question from the web from Christoffer Milson. Could you elaborate on what you mean by cash adjustments amounting to SEK 261 million on Slide 17? Why are you adjusting the cash position? Well, once again, it's to be prudent. We have 20-plus subsidiaries across Europe. They, of course, need some working capital. We also make bonus accruals. So that's the reason behind the adjustment. And no further questions from the web.

So with that, we'd like to thank you all for listening and look forward to speaking with you soon again. Thank you.