Covivio (COV) Earnings Call Transcript & Summary

Hello, everybody. I'm happy together with Paul to welcome you to this conference call to commence Covivio's 2022 annual results. I will first give you some introductory comments on robust performance and strong positioning, then Paul will enter into more details regarding 2022 achievements and growing financial results. And I will end this presentation by commenting on key priorities for 2023. So first page, let's start with the key figures of 2022 that will provide a good overview of our performance. On the operating side, we gained momentum in 2022 with strong performance across all our businesses. This resulted in strong overall performance, as you can see on the left side. An historic plus 13% like-for-like growth in rental review, a 96.6% occupancy rate, together with a maintained long lease maturity of 7 years, and flat like-for-like value growth in '22 despite the evolution of the environment. This strong operating performance drove growth in financial results, plus 5% growth in adjusted EPRA earnings and plus 10% growth in EPRA NDV. At the same time, our balance sheet remained healthy with an LTV ratio of 39.5% and an average cost of debt of 1.24%, thanks to our hedging ratio. To enter through the presentation, let me start with the new environment, Page 6. There has been changes in 2022. On the negative side, there is an increase in interest rates, but also the structural change in office demand, having a strong impact on peripheral assets. On the positive side, we are benefiting from higher indexation and strong fundamentals in central areas for each of our asset class. In this environment, Covivio's main strength is to own a EUR 17.4 billion quality portfolio diversified by geography in the major European countries and by asset class with 55% offices, 30% German Resi and 50% hotels. Its high quality is improved on a regular basis through 3 strategic pillars. First, centrality with a focus on major European cities. Since 2015 we have increased the centrality of our portfolio by more than 25 bps. Second, a focus on high-quality buildings. Our office pipeline, 80% in city center and 67% pre-let is welcomed by tenants and drives the growth in the greenification of our portfolio. And third, client centricity with clients very satisfied with all assets and services across all businesses. Our ESG ambitions are also another strength in this environment. Our strategy in ESG is based on 4 axes sustainable buildings, well-being of end users, development of talents and high governance standards. It enables us to get continuously maintain strong ratings from ESG agencies. Another major strength to face this new environment is our balance sheet, which benefits from high diversification by type, by asset and by geography, high granularity with more than 100 lines, high available liquidity at EUR 1.5 billion and a strong hedging profile. These trends give us a high degree of comfort to face the new environment.

Thank you, Christophe. Hello, everyone. So the best illustration of the solidity of our business model is the acceleration of the operating performance in 2022 across all the business lines. Starting with offices on Page 11, we signed for 134,000 square meters of new leases in 2022. This success comes from our development, as you can see on the right part of the slide, with 88,000 square meters pre-letting, which leads the pre-let ratio up to 67%. This has also enabled us to increase the occupancy rate of our operating portfolio with 46,000 square meters of new letting. In addition to that, we also renewed 138,000 square meters of leases for 5 years and slightly above the previous rent. So how did we get this performance? Three ways you can see on Page 12. Captures the reversionary potential, improve the occupancy rate and follow our tenant growth. If we go through those 3 key asset management achievements. The first one, we have been able to extract reversionary potential on our core portfolio, as you can see with the example of the slide. The second one, we improve the occupancy rate, and we put here the example of CB21, the tower we own in La Défense. We improved the occupancy rate from 83% to 93% at the end of '22, and we are now at 97% at the beginning of '23. And the third example is the partnership with our tenants. Thales is a long-standing tenant in Vélizy. We signed with them in '22, a new turnkey development with a 7% yield on cost. And we increased the maturity of the existing lease by 15 years at passing rent. This asset management work participate to the acceleration of our rental revenue growth you see on Page 13. This increase comes also from the accelerated indexation, as you can see with the blue lines. Indexation is progressively increasing, and it will continue in 2023. Moving now to German Residential. It has also been a good year in this business line, 3% like-for-like rental growth, thanks to indexation, thanks to the reversionary potential and thanks to the modernization. and as you can see on the right part 99% occupancy rate, which shows the quality of our portfolio, but also the lack of offer in the cities where we are. So in German Residential, we were active to extract rental growth. We were also active to extract value, as you can see on Page 15, in the development pipeline, first, with the delivery of EUR 122 million of projects and a margin we obtained of 46% for the build-to-sell. And on the privatization side as well, with 108 apartments sold for EUR 42 million and 42% margin. Last but not least, hotels. Performance has returned to 2019 level more rapidly than what we anticipated initially, as you can see on the Slide 16. Remember, we have 3 kind of revenues that we described on the left part of the slide. If we go through the different kind of revenues. The first one is a variable lease, mostly with Accor in France. Revenue is already above 2019 since June. The second one for our operating properties, we have here the EBITDA of the hotel. It is mostly in Germany and in France. After first half, still impacted by COVID, we had a strong recovery in H2, and we are above 2019 since June as well. And the third type of contract, fixed leases. We also benefited from good performance with a 9% like-for-like revenue growth versus 2021, thanks to indexation, as you can see on the right part, but also thanks to the positive reversionary potential we obtained through asset management deals. We give you 3 example on Page 17 on this -- those asset management that enable us to boost the performance. On fixed lease, one asset in Madrid has been delivered to a new tenant, and we have increased the rent by 50%. In the middle, you see also on the variable leases that we change the hotel operators, and we strongly increase the rent significantly by signing a new fixed lease with B&B. And the third example on the right part, it's on the operating portfolio, 3 CapEx program we put with a 20% yield on the CapEx. So to sum up on the operating trend, it's good on all our business line, and this is a driver of the growth for our financial results. That leads me to Page 19 with, first of all, the disposals. We signed for EUR 485 million of new disposals in 2022 with a 2% margin above 2021 appraisal value. You'll see all the details on the slide. Offices represent the bulk of it with EUR 390 million. I already commented German Residential with a good performance, thanks to the privatization. It was also the case of the block sales with a 9% margin. And in hotels, we sold EUR 24 million of assets alongside hotel operators and benefited from a 9% margin as well. More importantly is what we have done very recently. As you can see on the right part of the slide, we managed to sign EUR 200 million of disposals since November with a 3% margin. This level of margin on disposals demonstrate the attractiveness of our portfolio and its resilience, as you can also see with our appraisal values on Page 20. So we are flat on the appraisal value at the end of '22, with a decrease of minus 2.5% in H2, being offset by the growth of the first half. We give you some details on the right part of the slide. In offices, we benefit from the success of the developments. We benefit from the resistance of the city centers, thanks to the increasing rents. On the other hand, on our noncore portfolio, which is 8% of the office portfolio, we see the effect of the working-from-home with a minus 11% decrease. In German Residential, the decrease in the second half is limited, and this is thanks to the quality of our portfolio and thanks to the low-average value of EUR 2,900 per square meters. And in hotels, we registered even better with stable values at the end of the H2 2022 on the back of the recovery and despite the minus 2% in the U.K. As you can see, quality of the portfolio makes the difference, and we intend to continue to increase this quality. One of the driver, you can see it on Page 21, is our ambition to reduce our carbon emission by 2030. To get there, we plan to invest EUR 32 million of green CapEx per year by 2030. The large part is actually embedded into our regular CapEx plan. This enable us to continuously improve our assets. As you can see on the right part of the slide, 93% of our portfolio is certified green, and we increased progressively the part of the very good and above certification, 63% for the office. And this also enabled us to reduce the cost for our tenants. We estimate that 6% is a yield on cost on those green CapEx. Moving to the revenue, Page 22. Let me just focus on one number, plus 12.7% like-for-like rental growth. This is record level. Roughly half of this comes from the variable revenue in hotels, but the other part, 6.2%, comes from indexation, acceleration, rental reversion across all our different business line and from the increase in occupancy. You can see the plus 5% in the office like-for-like rental growth as an example. This rental growth is a strong driver to the performance of the EPRA earning for the year 2022. And on Page 23. We end the year at EUR 430 million, EUR 4.58 per share, up by 5% over the year, slightly above the guidance actually. You can see the different effects. We have the vacation of noncore offices with an impact of minus EUR 13 million. Development margin were also down, but it is due to the fact that we have less ongoing project in offices. And disposals has an impact of minus EUR 28 million, mostly linked to the agreement we signed in 2021. But this negative effect are more than offset, as you can see with the blue graph, by the deliveries in city center projects, by the rental growth and the accelerated indexation and by the strong recovery in our hotel business. Second important KPI for us is the net asset value on Page 24. Our net disposal value is up by 10% over the year, thanks to the mark-to-market of our hedging instruments. This illustrates the quality of our hedging policy with a EUR 1 billion positive mark-to-market. You also see on the right part of the slide that the other NAVs are stable versus the end of '21. So this quality of hedging leads me to the balance sheet, Page 25. Christophe mentioned it earlier on. We have a high quality of debt, and we kept it sound during 2022 by starting to reduce the debt, minus EUR 220 million. We have 39.5% LTV at the end of '22 by containing the cost of the debt, 1.24%, very close to '21 and by maintaining a high hedging ratio at 87% for 2023 with a long hedging maturity of 6 years. And despite this environment and despite the bond market, which was closed large part of 2022, we had a very active financing activity during the year, as you can see, Page 26. We signed for EUR 1.1 billion of financing in '22, most of it actually in the second part of the year, with margins that are, on average, in line with what we had previously. This is thanks to the diversity of the debt that Christophe mentioned and to the long-term relationship we have with our banks. Two criteria that will that we will use for 2023, working on our maturities '24 and '25, as you can see on Page 27. Those maturities, 2024 and 2025, they are well spread between products, bonds, mortgage loans, corporate credit lines. They are well diversified, and they are highly granular with no individual debt, which is above EUR 350 million. So to sum up and before leaving the floor to Christophe, very strong good year on the operating side and the financial side as well.

Thank you, Paul, for commenting the strong activity and good set of results. As mentioned, as introductory comments, there is a new environment we face. During your Capital Markets Day last December, we shared our priority in this context with a clear focus on balance sheet. That means, as you see Page 29, EUR 1.5 billion disposal plan to refocus our pipeline for lower CapEx and scrips option for 2022 dividend to accelerate net debt decrease. Starting with disposal, Page 30. Last December, we announced a disposal plan of EUR 1.5 billion, which aims at financing our pipeline, decreasing leverage and will also enable to keep on increasing the quality of our portfolio. As a reminder, we intend to execute this disposal plan by the end of '24. We already signed EUR 200 million since its announcement, slightly above 2021 appraisal values. On top of that, we have EUR 100 million under advance negotiation and also EUR 300 million under preliminary discussions. Today, the investment market continued to be slow. So we expect disposal to come more in the second part of the year. And I'm confident that we will achieve this disposal plan by the end of 2024 for 3 main reasons. The high diversification of our portfolio because they are located in 12 countries and 3 asset classes. The high granularity with an average value of EUR 15 million of asset and the diversity of buyers, the buying assets institutionals, developers, private or end-users. Second priority in this new environment is on pipeline. In offices, we reduced the pipeline to EUR 2 billion of assets, mostly in city-center and have today a high-quality pipeline and mostly pre-let. Second, our programs of transformation of French office into resi are focused on a build-to-sell strategy. As of today, it's a EUR 260 million pipeline, mostly presold, with margin around 9%. In German Resi, we adjusted our pipeline strategy by switching from build-to-rent to build-to-sell strategy. Projects are mostly in Berlin where demand is high, and scarcity of projects is highest. All these actions are expected to generate a cumulated CapEx saving of roughly EUR 100 million per year. The first 2 priorities will enable us to reduce debt, but we want to accelerate the trend. That's why the Board decided today to propose a dividend of EUR 3.75 per share, the same amount as last year, which means a lower payout ratio. And to add to it scrip options, this decision received the support of our largest long-term shareholders presented as above who committed to opt for scrip dividend option, meaning that 51% is already secured. That means an improvement of the net debt between EUR 175 million and up to EUR 350 million. We also see rising opportunities on the major part of our portfolio, thanks to our relevant strategic pillars. In the office sector, following the health crisis, there were structural changes. We now see the structural impact of working from home with the demand focused on well-located, green servicing and flexible assets. Today, we are surfacing a 2-speed office market. Let's take the example of Paris market. You can see here the difference between Paris CBD vacancy rate decreased to a historical low level implying a new increase of the rents, while on the other hand, vacancy increased in the 1st Ring with flat nominal rent but even worse in economic rent. 65% of our office portfolio is made of assets in the city center, mostly in Paris, Milan and Berlin. It's a portfolio, which is 97% occupied with a 5.5 years lease maturity, which will mostly benefit from high indexation. For the asset with break option in 2023, which represent EUR 30 million, 60% are related to assets that can be related without major works with a 15% reversionary potential. The remaining 40% are related to assets that will be redeveloped with a higher reversionary potential from above 60%. This asset to be developed are mostly from as I said in Paris city center. As the opposite, the structural change in office demand impact negatively the noncore part of our office portfolio, which represent 8% of our office portfolio. It's EUR 800 million of assets, 92% occupied at the end of last year with 2.6 years of lease maturity. It's EUR 45 million of rents, and half of these rents will expire in 2023. To cope with this situation, we have 3-level strategy relying on increasing occupancy rate, dispose some of these assets, vacant or following occupancy increase. And for the ones in dense residential market will transform it into resi. One good example of the way we will manage our noncore offices is Rueil Degrémont. It's an office asset, 100% let to Suez, delivering a high yield for years, and that will be vacated this year. Degrémont is located in one of the nicest suburb of Paris at the border of Rueil Malmaison and Suresnes that is to say an area with office oversupply, but clearly lacking of good quality housing. Here, the idea will be to redevelop the asset into 140 flats with high standards and with an increase in green area by 40%. The current value we have to have a positive development margin at the end of this operation. We expect to open the building permit by the end of '23 for delivery that is expected by the end of '26. Then in German Resi, housing shortage kept on increasing in 2022 given the increase in population in parallel of declining constructions. The consequence is that over 1 year, we still see rents and price increasing by, respectively, 6% and 10% for existing flats. In this shortage context and given its central positioning, mostly in Berlin, Covivio has several growth drivers. First one on rental growth. So indexation with an expected increase in the next Mietspiegel to be published in '23 in Berlin, also through relettings with an already high reversionary potential of 15% to 20% and through modernization for which we realized 5% yield on cost on average. Second, we also intend to capitalize on our privatization potential with 62% of our portfolio being divided in Berlin and with a margin between our block value and selling price of more than 40%. Then we also intend to deliver our build-to-sell pipeline for which we still target margin of above 25%. Last but not least, hotels. Recovery was strong in Europe in 2022, especially over H2 with RevPAR up by 11% on average, thanks to strong pricing power and occupancy closer to its 2019 levels. These positive trends are expected to continue in 2023 and will support growth. Indeed, looking at occupancy in France, it was only 1 point below '19 levels in Q4 2022, meaning that demand was already back at the end of last year. And on top of that, there will be major events for us in France, for example, Rugby World Cup in '23 or Olympic Games next year in Paris. We also noticed that supply is decreasing in hotels. On the one hand, because of the regulation of Airbnb offer and also looking at the European construction pipeline. These positive trends will be positive for hotels activity in 2023, thanks to our strong positioning, partnership with the main operators and diversity of contract types, Covivio will benefit from the high indexation on its fixed lease, the pursuit of the recovery in variable rent and operating properties, further asset management opportunities. An example is what we signed over last day, the new lease agreement in Spain on 3 hotels, increasing rent by 30% and with a 9% on CapEx. Considering those priorities, let's move to the guidance for '23. On the one hand, we will have the negative impact of lease expires on vacated noncore offices in periphery. The increase on financial costs also that is highly hedged, but first part which is not hedged. The impact also of disposal linked with deleveraging. On the other hand, we will benefit from the acceleration indexation, the positive reversion in each asset class and the continued recovery in hotels. Overall, that means that we expect 2023 adjusted EPRA earnings to be flat without the effect of the deleveraging, that mean an amount of around EUR 410 million. So to summarize what we said today, first, strong operating performance, which is driving the growth in 2022 results. This was realized while reinforcing our healthy balance sheet with below 40% LTV that we want to maintain through disposal, refocused pipeline and scrip dividend. In parallel, we'll continue to benefit even more from our strategy -- 3 strategic pillars, which are even more relevant today, centrality, high-quality buildings and client centricity. Thank you for your attention. And now with Paul, also with Olivier Estève and Tugdual Millet, we'll answer your questions.

We have a question from Mr. Afonso of Invest Securities.

So the first one on the office division. Could we have an idea of the reversion in 2022? And if possible, could you give us more granularity by localization? And in addition, regarding your 2023 guidance, could you elaborate a bit more on your main assumptions, in particular in terms of indexation, occupancy and the cost of the debt that you target? And just to be clear on your guidance of for EUR 410 million, does it include or not the disposal that they are coming? And finally, one question on the ongoing review of the Paris [indiscernible]. So to what extent are you exposed to this review?

Paul, would you like to start with first part of questions.

So on the reversionary potential, Stéphane, we are roughly at plus 2% with positive reversionary potential on -- in the city centers, as you see in the slide, positive as well in part of the 1st Ring especially Vélizy and partly compensated by some negative reversionary potential in La Défense. Then on the guidance of EUR 410 million include the disposals, if it was your question. And on the...

And on the value, Olivier will answer directly.

Yes. For the value, what we can say that there are ongoing discussions with the city, and it's not totally finalized at this stage. Anyway, probably your question is tackling the question of housing, on office building and obligation to do some housing in case of redevelopment. We have to say that our portfolio in Paris is mainly extracted from the former Orange portfolio and Orange building. I am not at all, I would say, easy to transform in residential. It's more impossible, in fact, due to the high you have and also the wide of the building. So no major stress on our side.

And on your main assumption on your guidance in terms of indexation, occupancy and the cost of debt.

Basically, as of today, in terms of indexation for the offices, we take an assumption of, let's say, between 4% to 5%. Of course, this index stay as the ones that were published. It could be even better. And then we have a slight increase in the cost of debt, roughly 1.5%. So this effect, as Christophe mentioned, the increase of the cost of debt, the fact that we have noncore offices that will be vacated this year is offset by indexation, by the good like-for-like rental growth that we expect on the other part of the business line and then we have the effect of the deleveraging.

Our next question comes from Mr. Laroche-Joubert of ODDO BHF.

Could you hear me?

Yes, yes.

Okay. Yes. I would have maybe similar questions. So first one, maybe this is a follow-up question on the guidance. So if we -- if I understand well, so you already include the disposal of 2023 in the guidance, and we are only in February. So does that mean that you are really not confident to dispose further assets in the year? Or does that mean that you already include further disposals in the guidance? So this will be my first question. My second question, so you just -- if I understand well, you say that you justify the fact that you will do a scrip dividend to accelerate the deleveraging. But if I look at your LTV ratio, so it's below 40%. So why to be so cautious today? And maybe a last question on hotels. So could we assume that your performance in H2, 2022 could be a good benchmark for 2023.

Yes. Thank you for this question. On the disposals, the main impact is actually the full effect of the 2022 disposals that we have full effect in '23 and also on the EUR 200 million of agreements that we just reached that will be there. We have -- and we take into account EUR 500 million of new disposal assumption for the second part of the year that will have a full negative impact, but will have full negative impact also on the results this year. That's the assumption behind the guidance. And the question, why to be so cautious? We are in a new world, I have to say, compared to where we were 1 year ago before the war and before the evolution of the interest rates. As we see today, the markets, in terms of physical markets, there are very few transactions. So we don't know exactly where we'll grow the values. And for us, the question is to be prepared for the future and not to be in a hurry if there is a strong decrease in the evaluations. That is not what we expect today. But that's why we consider that we need to be ready, to be ready for the future rebounds of the market. And that's why we put in place this plan with this EUR 1.5 million of disposals, the fact that we reduce the CapEx and the fact that we want to preserve the liquidity of the company in this environment. On the hotel side, yes, what we can consider, Tugdual, if you want to add some -- say some words on the results.

Yes. On the hotel side, we had a very, very strong second half, and it's probably a good starting point to figure out what would be '23 given the fact that probably the better performance that we should expect -- should materially crystallize in H1 '23 because in comparison, H1 '22 was still impacted by low performance. So that's why we consider and we expect that the growth for '23 versus '22 will be quite decent in France and also in Germany.

Our following question comes from Ms. Huynh from Barclays.

Christophe, Paul, can you hear me?

Yes, yes. We hear you.

Super. I have 2 questions for you. The first question is on the reduction of the size of the committed pipeline. Regarding the scheme that you canceled, was it because of the yield on cost that was too low? Or was it because there were too many operational risk on the letting side? And also, can you confirm how much CapEx you intend to spend this year? And then my second question will be on the build-to-sell pipeline. Can you confirm that the targeted margin has materially come down in Germany and slightly in France? And what is it attributable, to, please?

Could you repeat the second question, please.

Yes. So I'm looking at the margin on the build-to-sell pipeline. Looking at Germany, looking at France, it seems like it's come down. So is it because of house prices are coming down or because of construction cost going up? Any color on that?

Okay. On the reduction side of the pipeline, the first questions, at the end, what we have decided is to postpone 2 operations that are in the -- that are back in the managed pipeline today. Perhaps they will come back in the future in the committed pipeline. It's 2 operations where today, we consider that the KPIs were not enough appealing for us. And as it was operation where we don't buy the land before, it was a possibility to postpone these 2 acquisitions. On the CapEx, the full amount of the CapEx, including modernization that we expect for '23, is around EUR 400 million. That means CapEx development, but also CapEx in terms of modernization. And third question, the margin build-to-sell. I don't see, but I need to check the figures. And Paul, did we see that anytime?

If you refer, Celine, to the property development margin decrease in the revenue in the results 2022, it is linked to the fact that we have less projects on the office. As you remember, we share a certain number of office developments with investors. And in this context, we kept fees and margins. As we have less project, we have less margin. It's not linked to the price at all.

All right. So on a like-for-like basis, it would have been flat.

I think it -- what -- in terms of following, yes, I have to say today, we don't see any impact today on the build-to-sell on the evolution of the environment on the resi part.

And our last question comes from Mr. Kulessa of Bank of America.

Just last question on the guidance. So to make sure the disposal is signed as of today coming into '23 are included can you confirm. And that on -- if we keep the number of shares stable, this would be equivalent to EUR 4.35 EPRA EPS, just to make sure we have the right number of shares. And following up on the number of shares, the 2023 guidance for dividend of EUR 3.75 will be also with scrip.

Okay. I will attend the dividend. I also..

On the guidance, so the EUR 410 million fully includes the disposals, including the 2022 disposals. On the number...

And '23 disposal.

And '23. On the number of shares, we will come back to you precisely so that you have the exact number of shares that you need to take. And on the scrip?

On the dividend for next year, it's really too early to speak about that. So we'll see the results. Specific decision for this year linked to what we see on the environment and the fact that we want to continue to protect the balance sheet and to be prepared for the future, but there is really no view on the future dividend. What is -- what we have done -- what we have decided this year is just for this year, and there is no other commitments in the future.

Okay. So you didn't guide EUR 3.75 for 2023 dividend?

The dividend for '23, yes, we -- what we can say today we consider that we keep the level of dividend at minimum level that it is today, that means EUR 3.75 also for next year.

And last question on the office transaction market, the assets you sold in office, if I read it correctly, are around 5.5% net initial yield. Your portfolio -- and your portfolio for offices are at 3.6% net initial yield so EPRA net initial yield. So to see how the redev costs from your disposals into where the values of the cap rate of your portfolio could do -- could go and if you see any transactions in France and your cap rates.

There is 2 different questions. First, on the transactions. It was done -- and mostly, I have to say, in Italy with assets in -- Telecom Italia asset with, in fact, high yield, and that represents this level of the yield. So Paul will check the point that I think is the main reason of these figures. And on assets in the French regional cities where the cap rate is a little higher than in the Paris CBD market, for example. Today, what we see in the Paris market, there are transactions in the CBD at really impressive pricing, last transaction, but made by end users at a price per square meter above EUR 30,000 per square meter. That means really if you transfer that into yield, roughly around 3% yield today. So that's what we see today in the market. But as I said initially, there are a few transactions today in the market. The market is continuing in a wait-and-see position, and we hope that will change in the coming months. But as of today, that's what we -- you can see mostly in the market today in Paris, but also in the other countries.

Another question came in from Ms. Dormeuil.

Can you hear me now?

Yes, we hear you.

Apologies. Just a couple of questions on my side, still maybe regards to your guidance first. As part of the noncore office portfolio, how much -- if you can give us an indication -- you mentioned on Slide 36, EUR 45 million of rents that are part of the noncore office portfolio. How much is that actually factored into your '23 guidance? And maybe another question with regards to putting together the scrip dividend, additional disposals holding on your pipeline. What's the leverage level that you're comfortable with? If you can give us a sense where you're heading.

I will let Paul to try to answer your question as to the first question.

On the first question, it's roughly a little bit less than EUR 10 million that have an impact in 2023 out of the EUR 22 million that you see in this slide. The second one, Marie, I didn't get it. Sorry. Could you repeat?

Yes. Trying to understand what's your leverage target in a way given all the initiatives you're taking to limit the pipeline, the scrip dividend, the disposals. So what's your ideal leverage where you feel comfortable in this current environment?

We continue to stick to a target to be below 40%. That's what we want. As we -- we don't know exactly where we grow the value. The question is to reduce the amount of the debt as of today. We'll be less than that. And clearly, with all the actions that we have taken today, so we're doing that. We are -- we want to keep our BBB+ rating also, which is important for us, and our capacity to keep the same level of cost of debt in the future. So what we can say today, we don't change this target to be below 40%. If we can be more close to 35%, we'll be happy. I think there is no more questions on the phone. We have 2 questions that are written. Why are you not increasing your dividend like other operators such as Gecina? And do you intend to acquire additional properties in Berlin? I have to say for me, these 2 questions are related to the same thing for us as our main target is to strengthen our balance sheet. That's why we have decided not to increase the dividend, to reduce the payout also. And we don't forecast at this stage to acquire new properties in Berlin. We will see at the end of the year if the market will change. If there is any change we will change the strategy. So thanks, everybody attending this call, and I hope we will see some of you during the next road show in the next date. See you soon. Bye-bye.

Bye-bye.