LEG Immobilien SE (LEG) Earnings Call Transcript & Summary

Good morning, everyone and welcome to our earnings call. As always, we have LEG's entire management team on the call. Our CEO, Lars von Lackum; our CFO, Kathrin Kohling; and our COO, Volker Wiegel. You will find the quarterly report as well as the presentation in the Investor Relations section of our website. Please note there's a legal disclaimer on Page 2 of the presentation. And with that, I would like to hand it over to you, Lars.

Thank you, Karin. Good morning, everyone, and thank you for joining our H1 analyst and investor call today. Let me walk you through the 6 highlights on this slide. LEG is delivering on every dimension which we set out at the beginning of this year. First, rent. Like-for-like rent growth came in at 3.7% for H1, squarely within our full year guidance corridor. I want to highlight one quality element here specifically. 50 basis points of that growth came from cost rent adjustments. Further rent increases in the second half will push this number into our target range of 3.8% to 4%. Second, EPRA vacancy. At 2.3% on a like-for-like basis, vacancy declined by a further 20 basis points. This is a clear signal of underlying demand strength across our portfolio. It also tells you that supply remains the key issue in the market while meaningful new supply remains absent from the market. Third, adjusted EBITDA. Adjusted EBITDA grew by 2.3%, rising to EUR 368.1 million. This reflects the continued operational leverage of our platform, more revenue flowing through to earnings with cost discipline holding firm. With this, we are on track with our target of an EBITDA margin of around 78% Fourth, AFFO. AFFO of EUR 110.5 million for H1 puts us fully on track for our full year guidance range of EUR 220 million to EUR 240 million. Guidance is confirmed across all line items. Fifth, valuation. Portfolio valuation came in at plus 0.7%, a result in line with our expectation of up to 1%. The market is moving carefully and constructively in the right direction. Sixth, LTV. LTV stands at 45.5%, effectively at our target level of approximately 45%. Let me flag one item for transparency. We expect a temporary technical uptick in Q3, driven solely by the timing of our dividend payout. This is a known and mechanical effect, not a shift in trajectory. The underlying direction of travel on leverage remains unchanged, downward, disciplined and cash flow driven. This discipline is paying off, particularly in the current environment. Portfolio transactions in our current market are still at very low levels. Inflation concerns and rising interest rates amplified by geopolitical tensions have weighed heavily on investor sentiment. Overall, times are challenging. Against this background, we are in a comfortable leverage position. Therefore, we remain fully committed to our disciplined disposal strategy, selling only when pricing adequately reflects the intrinsic value of our assets. Let me now turn to Slide 6 and our capital allocation logic. The principle is simple. Every euro goes where it earns the most for shareholders. Today, that principle plays out in 2 phases. First, where we stand in H1 2026. Our LTV came down to 45.5% from 47.6% a year earlier. That is effectively at our target level of around 45%. Three levers got us there. Firstly, disposals of EUR 42 million, all at or above book value. Secondly, a valuation result of plus 0.7%, in line with our expectation of up to plus 1% for the half year. Thirdly, the take-up of the scrip dividend, which retains EUR 63 million of liquidity in the company. Our ongoing AFFO-driven steering avoids any overspending and with that, any need to take on additional debt. So the deleveraging path is on track despite the market volatility we have all had to navigate this year. As soon as we have reached our LTV target, we see four potential options for capital allocation. You find these options on the right-hand side of the slide, and we will reassess capital allocation priorities on a regular basis against market conditions. The first is organic growth, driven by modernization and by our Green Ventures. That is the lever closest to our core operating business. Next to that, we would look at acquisitions or inorganic add-ons, selective opportunistic entry points where the numbers work entered only once our balance sheet has the headroom fit. Then there is distribution to shareholders in addition to our existing dividend policy. And within this lever, our sustainable dividend policy carries priority. Share buybacks remain one additional option we keep available. With a substantial discount of the share price versus the NTA, this option forms a natural hurdle rate for alternative uses of capital within the firm. Finally, further deleveraging beyond the circa 45% range, their target. Rating headroom and refinancing flexibility have value in their own right, especially in a market that remains volatile. So this option stays on the list for resilience and balance sheet flexibility, and that is exactly the discipline that got us there. The point I want you to take away is this. Capital gets deployed where it earns the most, and that assessment stays dynamic rather than fixed. The discipline behind it is constant. The same FFO base steering that got our LTV down to 45% will govern how we use the next euro from here. And that discipline is also exactly what carries into the overview of our H1 numbers on the next slide. Let me now turn to the financial overview. The numbers on this slide confirm that we are fully on track for our 2026 guidance across every metric that matters. Starting with rent. Net cold rent stands at EUR 473.4 million, reflecting like-for-like growth of 3.7% in H1 and 3.4% on a reported basis due to effects from disposals. I will not repeat the details from the previous slide, but the key message is this. The rent trajectory is intact, predictable and structurally supported. On the EBITDA margin, we came in at 77.8%, which is fully in line with our full year guidance. AFFO of EUR 110.5 million reflects a decline of 12.7% year-on-year for H1. I covered the bridge in Q1, CapEx phasing and cash interest step-up and H1 confirms that reach. What matters now is the forward picture. With H2 expected to be meaningfully stronger, we are fully comfortable reiterating our full year AFFO guidance of EUR 220 million to EUR 240. The split between H1 and H2 is intentional and anticipated. The key levers will be slightly lower investments as well as subsidies, which we expect to materialize in H2. FFO I came in at EUR 230.5 million, down 4.4%. The same phasing logic applies. Our full year FFO I guidance of EUR 475 million to EUR 495 million remains intact and the H2 run rate implied by that range is clearly stronger than H1, which is exactly what we expect. On the key drivers, rent growth at 3.7% like-for-like and vacancy at 2.3% is the primary driver. The margin headwind from lower subsidies and higher investments is a pure phasing issue. The key takeaway from this slide is straightforward. H1 was solid. Guidance is confirmed and H2 will be stronger. Cash flow trajectory, margin recovery and rent growth, all point in the same direction. We enter the second half with full confidence in the full year numbers. And with this, I hand it over to Volker for the operational highlights.

Thank you, Lars, and good morning, everyone. I will start with the rent development on Slide 8. On a like-for-like basis, the average rent per square meter in LEG's portfolio rose by 3.7% year-on-year to EUR 7.21. This means we are comfortably on track to deliver on our rental guidance for full year 2026. Looking at the free finance segment of our portfolio, we see a particularly good performance in the stable and high-growth markets with rent growth of 3.8% and 3.9%, respectively. This clearly underlines the operating strength and resilience of our portfolio. 2026 is a cost rent adjustment year where we can also increase rents of our subsidized units based on the CPI development. As a result, the rents in our subsidized portfolios were up 3.2% compared to the previous year. Regarding the breakdown of drivers, rent tables and modernization reletting each contributed 1.6 percentage points, while cost rent adjustment added further 0.5 percentage points. As always, you can find an overview in the appendix, it is on Slide 26 of upcoming rent tables for top locations in our portfolio. And to give some color on most recent rent tables, the new table for Bielefeld in Westphalia implies an uplift of around 8% for a typical LEG apartment and the table for Gutersloh also in Westphalia of more than 7%. Finally, on vacancies. EPRA vacancy rate came further down by another 20 basis points to a low level of 2.3%, reflecting strong demand for our assets and our ability to quickly refurbish and relet vacant apartments. Moving to investments on Slide 9. In the first half, adjusted investments amounted to EUR 202 million or EUR 18.19 per square meter. This is well in line with our full year target of more than EUR 35 per square meter. It is also a more even distribution than last year, which was characterized by the gradual integration of BCP. Hence, the 10% increase in investments in H1 2026 compared to the previous year. In the first 6 months, CapEx accounted for EUR 112.3 million or EUR 10.11 per square meter, while we had maintenance expenses of EUR 89.7 million or EUR 8.08 per square meter. The cap ratio of 56% was unchanged compared to the previous year. Coming to Slide 10 and our value-add services. For LEG, these operations are both a strategic pillar and a growth driver. In the first half of 2026, the contribution to FFO I before consolidation was EUR 28 million. Please note that this number only relates to the services shown on the left-hand side of the slide, which include, amongst others, the management and steering of refurbishment projects, our technician and craftsman services and our energy and heating business. Our Green Ventures shown in the middle of the slide are not yet included in the FFO I number shown here, but they will become a meaningful growth contributor over the next few years. With these ventures, we also contribute to decarbonization, one of the main and most urgent tasks in our sector. One of these ventures is termios, and I'm pleased to say that the Fraunhofer Institute scientifically confirmed the effectiveness of termiuos Pro, the AI-supported thermostat. So far, only the basic functions of termios Pro have been examined. These are precise temperature control and adaptive digital hydraulic balancing. The study confirms an average saving in energy consumption of 14%. This corresponds to an average annual savings of about EUR 170 for the tenant. And this only applies to the basic version of the thermostat with the rollout of additional functions, further savings can be expected. Let's now turn to disposals on Slide 11. Year-to-date, we have completed or signed sales for more than 1,000 units with total proceeds of EUR 78 million. Of these, 237 units were transferred in Q2 for around EUR 24 million. The remaining 552 units with gross proceeds worth around EUR 36 million are due for closing in the second half of this year. On Slide 35, we have gathered external research figures on the German transaction markets in the first half of 2026. The market is still characterized by a comparatively low number of large volume deals and scarcity of international capital. Against this background, our ability to offer smaller portfolios or even individual multifamily houses sized to match buyer appetite is a genuine structural advantage. We also stick to our disciplined approach. We sell only noncore assets and only at or above book value. Our total program still comprises up to 5,000 units. With this, I hand over to Kathrin.

Thank you, Volker, and good morning to everyone also from my side. Let us now look at Slide 12 and the outcome of our most recent portfolio revaluation. The starting point is the market itself. The fundamentals of the German residential sector remain healthy, and our own portfolio evidences that with a vacancy rate of 2.3% and like-for-like rent growth of 3.7%. The valuation result of plus 0.7% or EUR 135 million is the fourth consecutive positive revaluation and confirms that the recovery in German residential values remains intact. The pace is more moderate than in 2025, and that is what we told you to expect. At the Q1 call, we guided to a flat to slightly positive result of up to plus 1% for H1. The outcome has come in within that range. The step down versus the plus 1.8% in H2 2025 is macro-driven, not portfolio-driven. Geopolitical tensions, higher inflation expectations and as a consequence, a higher interest rate environment. The operating parameters of the portfolio, such as rents and vacancy all moved in our favor over the period. Our average gross asset value per square meter now stands at EUR 1,735 up from EUR 1,710 at year-end 2025. The average gross yield amounts to 4.9%, ranging from 4.1% in our high-growth markets to 6.3% in our higher-yielding markets. Further details about the valuation results and our portfolio values can be found in the appendix on Slides 23 and 24. On H2, we are confident in the resilience of our portfolio and in the structural strength of the German residential sector. What we will not do is anchor you to a valuation number 6 months out in a rate environment that is still moving. We will give you our indication for the H2 valuation with the 9-month figures as we always do. Let's turn to Slide 13 and the AFFO bridge for the first half. AFFO came in at EUR 110.5 million against EUR 126.6 million in H1 2025. The main positive driver was higher net cold rents, which contributed EUR 15.6 million. Of that, EUR 18.1 million came from organic rent growth, partially offset by a negative impact of EUR 2.5 million from disposals. The operating and administrative result was EUR 5.3 million lower year-on-year, mainly reflecting higher personnel costs. The EBITDA margin of 77.8% we are reporting today fully absorbs that. Net cash interest increased by EUR 10.3 million due to increasing refinancing costs in combination with the lower interest income. This is a gradual upward reset of our funding costs that we have been flagging as we refinance into current rates, and it is fully reflected in our full year guidance. Other effects amounted to minus EUR 2.8 million, driven almost entirely by our biomass plant. The result of our subsidiary declined mainly due to higher prices for wood needed for the generation of energy. Finally, investments. Higher maintenance and CapEx, net of subsidies reduced AFFO by EUR 13.4 million in the first half. Roughly EUR 3 million of that relates to the phasing of subsidies. By this point, last year, we had already recognized EUR 3.3 million. This year, we are only at EUR 0.5 million. For the full year, we still expect to end up around EUR 10 million in subsidies with the bulk of it falling into the second half. Overall, the delta to last year is phasing, not earnings quality. We expect H2 to carry the subsidies and the lower investments in the portfolio. And that is why we confirm our full year AFFO guidance of EUR 220 million to EUR 240 million without qualification. Let's turn to Slide 14 and our financing structure, starting with loan-to-value. We stand at 45.5%, down 210 basis points from 47.6% a year ago. That is very close to our target level of around 45%, a target we set out publicly and are now very close on delivering on and the composition matters. This came from both sides of the ratio. Property values rose on the back of the positive valuation result in our CapEx, while net debt came down. One word on the scrip dividend. Given the geopolitical and market volatility, take-up on the scrip was lower than last year at 28.6% of the dividend. It nonetheless allowed us to retain EUR 63.1 million of liquidity in the company and contributed around 30 basis points to our LTV. And let me flag one mechanical point before you model the third quarter. The dividend was paid after the balance sheet date, so the cash outflow is not yet included in the 45.5%. LTV will therefore move back up temporarily in Q3. Our average interest cost now stands at 1.82%. While this represents a modest increase compared to prior periods, it remains at a very competitive level in today's market environment. The average debt maturity is comfortably at 5.7 years, and our interest coverage ratio stands at a solid 4.0x, comfortably above the level required by our bond covenants. We also have ample headroom on all other bond covenants. For those interested in more detail, we provided the full overview in the appendix. Our liquidity position remains strong at more than EUR 450 million as of H1 2026. In the first 6 months, we closed EUR 450 million of financing. These refinancings were closed at an average maturity of 9.3 years and an average interest rate of 3.9%. This was complemented by our new syndicated revolving credit facility of EUR 750 million. It replaces our previous facilities in full and it runs on a 5 plus 1 plus 1 structure, a 5-year commitment with 2 1-year extension options against 3 plus 1 plus 1 before. That is a 2-year extension of our committed backup liquidity agreed with our core banks. There are no 2026 maturities left, which need to be refinanced. The next upcoming maturities in Q1 2027 are already covered by our available liquidity. Overall, the 2027 maturities amount to roughly EUR 1.1 billion, of which EUR 500 million will mature at the end of November 2027. We will continue to take an opportunistic and disciplined approach here, depending on market conditions. So in summary, we said we aim to bring LTV to around 45% and at 45.5%, we are within reach of that target. Q3 will show a temporary uptick due to the dividend payment, but we are confident of reaching the target level by the end of the year. Our 2026 maturities are closed out. The 2027 profile is well structured and already partially covered. Our backup liquidity now runs up to 7 years, and we hold more than EUR 450 million in cash. We will continue to refinance not under pressure, but on our own terms. And with that, I'll hand it back to Lars.

Thank you, Kathrin. Let me close with our 2026 guidance summarized on Slide 15, which I am happy to fully reconfirm today. We expect a further improvement in cash generation with AFFO between EUR 220 million and EUR 240 million, continued growth on top of a strong 2025. FFO I is expected at EUR 475 million to EUR 495 million, supported by an adjusted EBITDA margin of around 78%. Our operational drivers, rent growth and investments are likewise reconfirmed. We made good progress when it comes to LTV and feel confident to reach our LTV target level of around 45% by the end of the year. Please note the negative but purely technical effect of the dividend payment in Q3. To sum it up, LEG remains on a clear and consistent path, generating reliable cash flow, maintaining financial discipline and building long-term value for shareholders and tenants alike. Cash flow remains king, and AFFO remains the right steering metric for this business. Our 2026 guidance reconfirms the strength and the resilience of our model, measured again in numbers rather than narrative. With that, we conclude the presentation and look forward to your questions.

[Operator Instructions] The first question comes from the line of Marios Pastou from Bernstein.

I've got 2 from my side. They are broadly related, so I'll ask them together. So just firstly, on disposals. I think earlier in the year, you mentioned discussions were progressing on a couple of portfolios that held back by the achievement of buyer financing. So can I check if any of those discussions have actually fallen away and if we should, therefore, anticipate progress through the second half, both in terms of portfolios and land sales? And then shifting on to capital allocation. So the options you have available and presented and considering where your shares are trading, is it fair to assume that if any larger disposal materializes from here that they will be considered and allocated towards a share buyback?

Thanks for your questions. So with regard to disposals and the portfolio transactions, which we are working on, unfortunately, the volatility, especially driven by the geopolitical tensions back and forth in the Middle East and then also their effect on interest rates was something which was really a big burden for transaction activity in the German market. So therefore, unfortunately, H1 2026 even looks a bit lighter than the transaction volume in 2025, and that unfortunately was also unfolding with regards to our sales activities. We did not see portfolio transactions not happening due to financings. But what we have seen is that willing buyers have not been willing to notarize deals. So therefore, we are still in discussions also on bigger portfolios with interested buyers, but unfortunately, we have not been able to notarize those. We still expect that if the geopolitical tensions are hopefully coming to an end and we see a cease fire or even better peace agreement being in place that certainly then the stabilization will also translate into more visibility with regards to interest rates, and that will hopefully then also give rise to those deals really becoming notarized. With regards to capital allocation, and you already pointed out the fact that, unfortunately, the share price is still very low compared to the NTA, it is a natural hurdle to be looked at with regards to capital allocations and buybacks. Please also take note that, firstly, and that was what we also try to get through to you is that we are working on getting our LTV to the target level of 45%. So on the other side, that is a natural limit to whatever we think with regards to disposals and the return of capital towards shareholders. And what we also wanted to get across is that highest priority is certainly also living up to our dividend policy. So yes, you're right. That is quite a high hurdle to be made. And therefore, if we have sufficient disposals being realized, and disposal proceeds that a share buyback will be definitely something which we need to consider.

The next question comes from the line of Andrew McCreath from Green Street.

Two questions from my side, please. Just firstly, following on from Marios' question, why continue with the dividend while you're still deleveraging? I mean that cash cost is a permanent headwind. If distributions are nonnegotiable, would you not be better served by a split between dividends and buybacks or just moving entirely to buybacks? That's the first question.

Thanks, Andrew. I waited for the second one. So therefore, apologies for the delay. So with regards to dividend, I think you've seen what happens to our share price in 2023 while we were deciding on not paying a dividend. We have a very strong investor base relying on a steady dividend to be paid. And that is something which we want to live up to. We have a dividend policy in place, and we were not willing to change that because we want to give and ensure the trust that we are living up to that dividend policy by paying that dividend also going forward. So we are not splitting the dividend now between dividend and share buybacks or anything else. We live up to the existing dividend policy, which says 100% of the AFFO to be distributed. And if we have disposal proceeds, you just heard us, it might make sense to use those disposal proceeds for share buybacks, but always taking into consideration the LTV, which we are wanting to get to a level of 45%.

Okay. That's clear. And then my second question, just on modernization. Is the yield on cost that you're achieving, is it accretive to your implied yield rather than your book yield, given the market is pricing your portfolio well below NTA. I'd just be interested to know if this is accretive at the moment.

Yes. As you know, Andrew, what we are not doing anymore is that full modernization approach, because that gives you the 8% on the cost and the costs are not the 100% of the cost, but it is mostly between 60% to 80% of the costs which you are incurring in a modernization exercise. So that mostly translates into a static return of around 5%. If you compare that at the current cost of capital, I think it's easy cross read that this is something which you shouldn't do. So therefore, what we have done is to take those financial means and investments and instead of going into full modernization, split them up more intelligently, I think Volker just gave you an example with regards to our Green Ventures and the thermostats, which from our perspective are coming with a higher margin, which are up and above the current cost of capital instead of sticking to the old world of doing full modernizations in our portfolio.

The next question comes from the line of Nicolas Vaysselier from BNP Paribas.

Hopefully, you can hear me. I just wanted to come back on the LTV. If I adjust for your dividend payment, I get to something close to 46.3%. Now I hear your confidence on reaching the 45% target. You have AFFO phasing in H2 that should accelerate. If I factor that in, I was wondering if reaching the target implies, a, that the buyer you have for the land plot, the development plot in the Dusseldorf region exercise this option. I think it has until September. And b, I was wondering what kind of asset revaluations you would be expecting then for H2 to reach that 45%? And my second question is on Green Ventures. In 2025 for the full year, you disclosed minus EUR 4.2 million negative contribution here. I was just wondering how it has evolved in H1? And how do you see 2027 and '28 unfolding on this item?

Yes. Thanks a lot for the question, Nicolas. So with regards to the LTV and what we have penciled in for H2. So on the one hand side, certainly, we are expecting that we are collecting some of the disposal proceeds and Volker has already lined out that with regards to the 552 units with gross proceeds of around EUR 36 million, those we are expecting for H2. Certainly, we also expect the land plot in Gerresheim to be transacted. So still the option is running, but we do not have any negative indication that Hines as the owner of that option is not making use of that until the end of September this year. With regards to revaluation, I think Kathrin has been loud and clear on that one. So we just came out and you know that we try to guide the market as quickly as possible. But we now and today come out with that 0.7% of a valuation uplift for H1. Now giving you a number for H2, while we have all that volatility around the geopolitical development, interest rates, et cetera, in the market, that's impossible So therefore, we are just a few weeks into H2. We promised once again to bring and deliver a proper guidance for H2 with our Q3 numbers in November. But unfortunately, and as of today, it is impossible to state a number which makes sense. And Secondly, with regards to Green Ventures, as you know, 2026 is the year of reaching breakeven. And certainly, Volker is very happy to be keen to give you some more details with regards to how we do that.

Yes, that's right. No, we guided for breakeven in 2026 on the Green Ventures. We are very well on track with those. bearing smaller investments like dekarbo and termios, and I pointed out to the Fraunhofer research piece, which shows the effectiveness of the thermostat system, and we are very comfortable to reach breakeven for these for the RENOWATE, which is more on the more heavy investment leaning side. And as Lars pointed out, the trend is not really shifting into these kind of modernization. It's more difficult to reach the breakeven there, but we are striving hard to reach an overall breakeven result.

And what was the contribution for Green Ventures in H1?

We are not giving that number. It's also at equity consolidated companies. So this line will -- you will see that at the end of the year with the final numbers.

Next question comes from the line of Veronique Meertens from Van Lanschot Kempen.

Perhaps first on the FFO guidance. Yes, you rightly point out that H2 is going to be a better half. However, could you give some more color on those different drivers? I appreciate EUR 10 million of subsidies and lower investments, but on your FFO, obviously, lower investment has less of an impact. So is it fair to say that you're going to reach more the lower end of the guidance for FFO? Or are we missing specific drivers for an acceleration in H2?

Yes. Thanks a lot for the question, Veronique. So with regards to the FFO I guidance, the same holds true as for the AFFO guidance. So if we would have assumed to reach only the lower end, we would have narrowed down that guidance range to the lower end, but we haven't done so. So therefore, we are fully in line with our expectation to reach something between EUR 475 million to EUR 495 million. And this is also holding true for the FFO I. You are rightly assuming that the lower investment with regards to FFO I has a lower impact compared to the AFFO because AFFO also includes the full CapEx. But as Kathrin has already stated, the subsidies of EUR 10 million alone, I think, show you of how much stronger H2 will be, and that is the main driver for the change certainly also with regards to H2.

Okay. But H1 is EUR 230 million. So if I would add EUR 10 million to that EUR 240 million and get to EUR 470 million. So that's still quite a big gap towards the midpoint of EUR 485 million, right?

It is. And therefore, you can once again be confident that due to other developments with regards to costs and others, we are confident to reach the EUR 475 million to EUR 495 million.

Okay. And then my second question comes back to probably a well awaited topic for a long time, your discipline around not selling below book values because you yourself highlight that there -- at the current levels, there's not really an investment market. There are inflation concerns, rising interest rates. So how comfortable are you with your own portfolio valuation and also the positive revaluation uplift that you just saw? And -- so what drives that discipline? And what does it bring you? Because you're currently trading at a 30% discount to GAV. So selling at a moderate discount would still be very accretive if you were to redeploy it at a share buyback, so -- and create shareholder value. So yes, curious to hear your view on that discipline.

Thanks also for that question. It's a very fair one, Veronique. So from our perspective, the values which we carry on our book are those values which are the right ones for the assets. Therefore, not selling at those book values would be just giving away shareholder value easily. So therefore, as we are not under pressure and we do not want to throw money out of the window. We want to stick to the disposal policy we have in place for the last years, which brought us now close to the LTV target level. And we do not see value into now selling below book value. If we would do so, please do not underestimate that certainly whatever you are disposing below the current book value would also have an effect on the full balance sheet. And therefore, that is something which you should take into consideration. We do not think that this is worthwhile doing, and therefore, we are not considering doing so going forward.

Okay. That's clear. And I appreciate the last point. But the question is, since that disciplined approach, there has been also an underperformance in LEG share price also versus your closest peers. So isn't then at some point a question if this is indeed the right track to create or to maintain shareholder value?

Yes. So unfortunately, I'm not responsible for the share price. What I can do is the best -- making the best use of the capital which shareholders are providing. We do not think to be well advised to once again, repeat that, sell below book value. And we are confident that at a certain point in time, market will get that message, and it will also be reflected in the share price.

Next question comes from the line of Thomas Rothaeusler from Deutsche Bank.

A couple of questions. The first one is on subsidies. I mean, you expect roughly EUR 10 million in the second half. Just wondering about the visibility here. Is it -- is this a given?

Yes. So happy to take your question, Thomas. So on subsidies, we expect [indiscernible] these are mostly things we have already applied for. Most of the times, we have already handed in the application. So we are in the midst of the process of being awarded the subsidies. It just takes time. Sometimes we still have to finish stuff in order to get the application process starting, but we have a very good visibility overall on this number.

The second question is on rental growth. I mean your run rate was 3.7% in the first half, which is close to the lower end of your guidance range. Just wondering if your upper end guidance range of 4% is still possible from current levels? And what would be the requirements actually?

Well, the upper end would require probably some uptick in the churn, which we also do not really see. So it's more unlikely to reach it, yes. But we haven't narrowed it down because it's steering and gearing the rent growth is quite complicated as it also depends on the rent table, on the dates of publications and on the churn, which also is very volatile sometimes and more comes down than goes up. So it's fair to say that it's not our basic assumption to reach the upper end.