PATRIZIA SE (PAT) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the PATRIZIA's First Half 2024 Conference Call. I am George, the Chorus Call operator. [Operator Instructions] At this time, it's my pleasure to hand over to Martin Praum, CFO. Please go ahead.

Good afternoon, everyone, and welcome to our analyst and investor call for the First Half of 2024 results. I'm happy to have our CEO, Asoka Wohrmann; and our COO, Christoph Glaser, together with me in the room today. We will present to you an overview of the operating business, the strategy, about the market environment, and the financials for the first half and we'll give an update regarding the guidance for the full year. And certainly, there will be a Q&A session afterwards. We will refer to the results presentation for the first 6 months, which you can find on our website in the IR section home, and the most recent publications. The presentation includes figures regarding the first half, details about the guidance. And as usual, in case of questions, the IR team is more than happy to take your calls. This call will be recorded and will be made available on our website, and also, there will be a call transcript for further reference. With that, I'd like to hand over to Asoka to start the presentation and give you an update on our strategy.

Thank you, Martin. Welcome, everyone. You have waited patiently for strategy update. Let me assure you that I wanted to get to know the organization first very well. Past 1.25 years have been a period of intense focus and dedication for all PATRIZIANs and every changing market environment. With our strategy project fit for future, we opened the hood of our company analyzed strengths and weaknesses, and explored opportunities for growth. Today, I am here to share with you the outcome of this effort and our strategic direction. Also, we have learned from the past, and we are committed to making this truly transformational for the company. Looking ahead, our vision for 2030 is ambitious and inspiring. And let me share with you our road map for the next phase of our journey. Our new vision is clear to become the go-to manager for smart real asset. And we have a clear ambition to grow to EUR 100 billion AUM manager in 2030. We want to become a partner of choice for the large institutional investors worldwide, and we need to become bigger, but with a clear focus. Looking at Section 1 of the first slide, you see that we want to grow with the CAGR of 9.3%. While we will grow faster than the market, PATRIZIA has conducted a comprehensive market analysis to determine its corporate strategy 2030. In real estate, residential and logistics are highly preferred sectors for our global client base, particular in Europe. Furthermore, we have identified significantly appetite for higher-risk return strategies in this period. By focusing on the 2 identified growth areas, living and value-add real estate, which offer particularly growth potential for PATRIZIA's real estate business. We are confident to grow faster than the overall European real estate market covering all risk classes and in line with the global market. For infrastructure, we see a particularly strong market growth in Europe until 2030. With the investors clear preference on digital, renewable, and energy infrastructure in all of these areas of PATRIZIA has strong capabilities and long-lasting track record we can build on. In contrast, the market [indiscernible] covers all regions and sectors. Furthermore, we have identified a huge growth potential for PATRIZIA in RE-Infra, an area which is not fully reflected in the infrastructure market forecast. By focusing on the identified growth areas, we are confident to grow stronger than the global market and to arrive into our growth target. But how do we want to grow? Our strategic priority is to focus on 5 key growth areas shown in Section 2 of the first slide. And let me make clear here what has changed from the past. We are prioritizing our thoughts to 5 key investment strategies for smart real asset solutions where we plan to raise EUR 30 billion of equity with the following focus: advantage investment partners, our scalable fund of funds platform, Real Estate Value Add, European Infrastructure, Living and Infrastructure and Smart Cities. We plan to raise a mid- to large single billion-euro amount in each strategy over the course of the next 5 years. I touched on this briefly now, but we will explore these focus areas in more in depth shortly on an upcoming slide. I'm sure you are interested in understanding how the EUR 100 billion AUM goal in 2030 translate into annual AUM growth shown in Section 3 on this slide. Our strategy assumes lower equity-raising targets for 2024 and 2025, and aims for a steeper growth rate starting from 2026 onwards, in line with the market recovery over the time period until 2030. On the back of a strong fundraising of our 5 focus areas for Smart Real Asset Solutions. We aim to increase the share of the Advantage Investment Partners fund of funds business significantly amounting to around 10% of total AUM by 2030. And we aim to increase the share of infrastructure assets to around 20% by 2030. Also, we plan to further diversify and manage real estate assets across Europe and Asia Pacific region. The new focus is in fundraising goes hand-in-hand with our continued ambition to enhance earnings quality shown in the Section 4. Even to our management fees are growing, we, at this point, don't cover our recurring costs. This means we are only profitable with performance and transaction fees, and therefore, too dependent on the market of [indiscernible]. We need and we will change the structure of revenues and focus on optimizing our cost base. This is an important point, and I will elaborate on this in just a few slides. With that, foundational understanding of our new strategy in place, let me once more emphasize that our growth objectives will only be determined by organic growth, not involving any M&A scenarios. Let me, therefore, shed a little more light on our 5 key growth areas and introduce these to you on the next page. Let's start with Advantage Investment Partner called AIP. AIP is the international business that occurred in 2022. AIP is pivotal to our growth strategy for 2030 with enormous cost potential. Let me tell you what AIP does. AIP forms and manages investment clubs, which consists of institutional investors and high net worth individuals and family offices. These investment clubs invest into funds raised by general partners as a single larger investor. Asset classes covered by AIP include infrastructure, credit and private equity. The club concept is currently backed by Nordic institutions and provides high scalability across additional regions. We plan to expand capital raising into mortgage geographies and to attract new investors. Furthermore, the AIP fund of funds platform can provide comprehensive wealth management solutions also for existing clients, enhancing our distribution channels and attracting additional deal flow. Moreover, there is a sufficient flexibility to pursue further investment opportunity across sectors, PATRIZIA is active. The second area of Real Estate Value Add. Secondly, the Real Estate Value where we are targeting to raise mid-single-digit million-euro amount. Value Add as higher return strategy will be a right in preference by investors. Based on our strong track record that we have in value-add real estate investments, we are confident that we can leverage our position as a leading European value add player to take advantage and drive market change towards value-add investments. We have a great track record in relevant vehicles and best precondition to capture capital for market opportunities. Additionally, we kept new regions outside Europe, for instance, Pan-Asia. But last but not least, this also includes significant opportunity stemming from the de-carbonization major trend, flipping stranded assets into modern ESG-aligned buildings, meeting the need for lower carbon footprint assets. The third focus area is European Infrastructure. With the acquisition of Whitehelm, we have deep experience across infrastructure equity and debt for over 26 years. This sector bears enormous potential with regards to the green transition and delivering sustainable transformation. We will make this trend investable for existing and potential new clients via equity and debt strategies focusing on attractive investments with strong ESG credentials. The fourth focus area is Living. Here, we have a market-leading position, a strong track record and strong skills and expertise across the value chain, asset management, transactions, fund management, and real estate development. This will help us to further leverage our sector excellence and deliver attractive products across the market cycle for different risk appetites. Furthermore, our great track record in value add, our development capabilities build a great basis for our growth ambitions. Last, but not least, we will accelerate our impact investing activities. RE-Infra, this is by far the most exciting new investment strategy as of currently, it is an untapped asset class. Let me explain to you what RE-Infra is and why is this so interesting for us? RE-Infra will combine real estate and infrastructure investments in the one product offering, enabling real estate investors and infrastructure investors to invest. Our Smart City Strategy, for instance, is one strategy building block to initiate and scale. I will come back to this later and give you a couple of examples what the RE-Infra strategy can look like. And let me conclude on this slide with the following takeaways. We now have a dedicated focus on thematic strategies and flagship products. This is the clear path for growth to deliver success. RE-Infra is an entirely new asset class combining real estate and infrastructure investment in one product offering, tackling investors for real estate and infra and enabling cross-selling opportunities. Investors currently only have the choice between either real estate or infrastructure products. We know investors look both ways to find the right mix to maximize their returns while minimizing their risk. For RE-Infra, PATRIZIA has an opportunity to identify opportunities for how it can reinforce an argument and differentiate PATRIZIA's existing products in parallel, laying the foundation for it as a new product and service offering to the market. Let me give you some examples. We have the unique opportunity to lay the foundation for this emerging growth segment and develop first RE-Infra products and services for our clients, bringing massive opportunities unlock higher and differentiated value for our investors in PATRIZIA. The last cornerstone of our strategy is to regain shareholder value for our investors and for us by enhancing our earning quality. Follow me on to the next page, please. To restructuring in the recent years, we have already set cost-cutting measures into practice. And we already evidenced the first improvement in the cost base. Now we are focusing on a sustainable improvement of earnings quality. First, by improving the revenue mix on the back of new thematic investment strategies just presented to you. It is an overarching goal to promote consistent revenue streams to reduce volatility of our income streams and transition into a sustainable recurring fee-earning business model. A clear focus on growth areas aligned with market expectation and supporting recurring fee income. And to further internationalize the asset and revenue pool to more balanced asset mix in line with overall growth scenarios. It is imperative to lift cost discipline. Additionally, we will introduce a more active management of our product shelf, reviewing our products with regards to profitability and performance on a continuous basis. Furthermore, we will set up the organization for scalability to reduce operational complexity, enhance data delivery, and substantial platform productivity improvement in every growth scenario. Having that said, I'll come to the management changes we announced a couple of weeks ago and outlined in the next page. To effectively execute our new mid-term strategy of PATRIZIA, PATRIZIA has established a new Group Executive Committee. Our new Group Executive Committee will drive our investment process end-to-end across all our asset classes while continuing to enhance client centricity, efficiency, and innovation for the benefit of our clients and stakeholders. The Group Executive Committee replaces the previous Executive Committee and consists of 6 Executive Directors all internally sourced. Alongside the 3 existing Executive Directors being Christoph Glaser, Wolfgang Egger and myself, Martin Praum, James Muir, and Konrad Finkenzeller have been appointed as additional Executive Directors. James Muir is appointed as the Head of the Investment division being responsible for fund management, investment management, and investment strategy and research across all asset classes of PATRIZIA. Konrad Finkenzeller will have the newly formed Client Division, hence full focus on our clients and their needs on our new committee. Martin Praum, well known to you is appointed to Chief Investment Officer. In this position, he will succeed Christoph Glaser, who will focus on his role as Chief Operating Officer. Thank you, Christoph, for your exceptional work and dedication over the 2 years in your role of CFO, you make a fantastic job for PATRIZIA and for our clients. I'm sure you want to say some words on your new role and your new focus. I hand over to you.

Thank you very much, Asoka, for your kind words. It's obviously been a privilege to lead the finance function for almost 2.5 years. And it's also been a privilege to talk to our investors for that same duration of time. And I'm going to miss those calls maybe going forward a little bit. But that said, I had the opportunity to lead the operations division already in an acting capacity on a couple of occasions during my CFO tenure. And given the significance of the division for the company's success as well as the importance of its productivity and its contribution to profitability, it is quite important and relevant to give it the attention it deserves. With focus on creating what I would call a future-proof platform in support of the strategy, as just outlined by Asoka, and that's what I'm going to focus on going forward, and I look forward to doing so to leading operations and also in addition to that, take responsibility for European business matters outside of Germany. So that's really it. And I'm quite happy to hand over to Martin Praum, our new CFO, who will lead you through the second part of the call. Thank you.

Thank you, Christoph, and hi, everyone. Let's continue on Page 10 of the presentation and start with our key KPI Assets Under Management. You can see that AUM went down by 2% year-to-date and 3% compared to the last year. We did buy for our clients, especially in the infrastructure, logistics, and residential area and also in the AIP fund of funds business, but at the same time, also disposed on behalf of clients, especially in the commercial real estate area. So these 2 acquisitions and disposal activities offset each other nearly. So the drop in AUM is actually driven by valuation, which is round about slightly below 2% impact on AUM. You might ask what is the outlook for further valuation. I think we can stick to our guidance for the year that we continue to see some valuation pressure probably in the full year by 3% to 5%. So the guidance on that is unchanged, quite moderate. At the same time, we see first signs of a stabilization in certain market areas, and we might actually have the chance to come in at the lower end of this guidance, but we'll keep you up-to-date as the year progresses. So overall summary of this slide is that our AUM continued to be relatively resilient and holding up quite well. On Page 11, we show you the usual split of AUM by geography, sector and risk style. And I want to focus today on the sector split. You can see that PATRIZIA meanwhile has a bias towards 4 key sectors, which is residential as the largest contributor to AUM, office, infrastructure, and logistics. And I want to reference to what Asoka just said. I think we have a quite diversified AUM, and we have a lot of, if not all, the expertise already in-house that we need to deliver on the new strategy 2030. So we don't need any additional M&A to deliver on the plan that we've just published to you into the market. We go to the next page to profitability. We'll show you on Page 12, management, transaction, and performance fees. Let me start with management fees, they are down 4.2% year-on-year. This is primarily driven by lower AUM valuation, but also by a lower contribution from development service fees. Around EUR 2 million of the decline is due to these lower development service fees that don't come in as equally distributed as management fees over time, but they depend on the progression in the developments that we manage for our clients. If you look at management fees quarter-on-quarter, you'll actually see a stable development, which is good and supportive. Management fees now reflect 84% of our fee income. Going to the next one, transaction fees, which is currently only 4% of fees. We have here a very positive development compared to the last year, up almost 20%. But to be honest, this is a very small level in absolute terms. And we don't want to get overexcited because the majority of the fees came from disposals, not from acquisitions. Lastly, performance fees, down almost 40% year-on-year. And if you look at the absolute numbers, it's down EUR 10 million, and this basically explains the drop in EBITDA. It is somewhat expected from a management point of view, given a limited amount of realizations for our clients. So in total, we continue to see revenue pressure on our business with roughly revenues down 10% compared to last year. Looking at the cost side on Page 13. The good news here is that we start to see first effects of the reorganization activities, which was so far overshadowed by inflationary developments. And I want to focus especially on staff costs, which are down 2.5% year-on-year. I'll come to that later. We also have a related positive item in other operating income, which is also related to staff costs. Secondly, other operating expenses are down 2.4%. In this cost block, there is a one-off item of close to EUR 4 million. And if you would adjust for that, then other operating expenses would actually be down more pronounced by minus 12%. Other expenses, EUR 8.4 million, down 2.3%. These are the usual label fund expenses end up pretty stable. So to us, the direction is right. The absolute levels are not satisfactory, and that's why we'll certainly keep focusing on cost containment and everything we can do to optimize the efficiency of the company, especially in the current market environment. Going to Page 14, where you'll see the overall split of revenues, costs and EBITDA. Here, I want to focus on 2 items, actually a smaller one, which is net sales revenues and co-investment income, which is a positive EUR 1.4 million, but down 50% year-on-year. Here, you'll see the effect of negative impact from temporarily consolidated funds and assets that we have on our balance sheet, and that did have an impact on our EBITDA year-to-date. Secondly, you see that EBITDA has been significantly supported by other income. But this is not simply that we released liabilities or hidden reserves. It's also, to a large extent, driven by the release of staff cost provisions that we had in our books. So basically, costs that we booked last year that we did release this year as part of active cost management by the management of the company. So overall, if you look at the EBITDA quality, it is still driven by one-off items, especially by consolidation effects and also by other income. To give you a feeling these consolidation impact on our P&L was round about in total EUR 3 million negative in the first half of the year. Another important thing to look at, if you look in the half year report in the segment reporting, you can also see that the asset management business of PATRIZIA continues to be profitable and a lot of negative items come from balance sheet exposure and temporary consolidation of assets and funds. If we move on to Page 15 of the presentation. Let's look at the balance sheet. Also here, we had some changes to previous quarters. First of all, what is unchanged is a relatively stable equity ratio, close to 58%. But if you look down further, then you've seen that we've invested together with our clients and also as preparation for further funds via seed investments for future clients in certain assets with the balance sheet capital that we have. At the moment, where we talk about EUR 400 million of assets that we have consolidated, and some of them have debt attached. That's why you see bank loans of close to EUR 228 million in this overview and also, this means that for the first time in several quarters, we have a net debt position rather than a net cash position. But again, these are from a strategic point of view, temporarily consolidated assets, where our fundraising team is working hard to attract new clients. And at a certain stage, these assets and funds will be deconsolidated from our balance sheet. This would then also have a positive impact on the net equity ratio, which is now down to 64%. You might remember, we came from 69% to 70% and certainly, the target is to go back to these levels. In terms of liquidity, also due to the investment activity with it, we have a somewhat reduced liquidity. Available liquidity now is EUR 133 million and the bank balance, cash and term deposits is EUR 216 million. Don't be confused. If you look at our balance sheet, you will see cash of EUR 181 million only. And don't forget that we have part of the cash invested in term deposit also to optimize our interest income. In terms of financial flexibility, also don't forget, we have treasury shares of PATRIZIA of around EUR 44 million on our books, which is in total, 6.1 million shares. So summarizing here, the balance sheet has changed a little bit, still solid with a good equity ratio, and we still have good available liquidity. To give you more transparency on our [indiscernible] and seed investments, which is on Page 16. Not a lot of change here compared to the last quarter. We have 4 major investments on our balance sheet, a logistics portfolio in Sweden. We have an infrastructure fund consolidated in which we recently invested in a waste management company in Italy. Then in terms of warehousing, we have 2 office assets in Hamburg and in Cologne on our balance sheet and a residential project development in Augsburg that was actually just finalized and handed over to us on 1st of August and leasing activity is quite active because it's a very good location right to the major railway station of Augsburg. On top of that, as you all may know, we have other participations, especially Dawonia on our books. If you look at the balance sheet, EUR 588 million of that, if you look at after-tax numbers, around EUR 160 million is the 5% stake in Dawonia, and around EUR 290 million, the performance fee claim. So a lot of balance sheet activity and balance sheet flexibility going forward. Lastly, on Page 17, to give you an update on our guidance for the full year. You might have seen that we have not changed the guidance. We left it relatively broad. Reason for that is if you look at what we have achieved so far in terms of EBITDA with EUR 19.2 million, there is a little way to go to reach the lower end of the guidance, the EUR 30 million, upper end is EUR 60 million. If we look at the business at the moment, I think it's fair to say that we rather operationally are acting in the lower end or lower to mid-range of the guidance. But there are certain signs of market stabilization and also some indications for higher client activity, which is why we left the guidance unchanged. Another point is -- which makes guiding a little bit complicated, and we mentioned that also in our release, we have these consolidation effects that have an impact also on our EBITDA can be positive and negative. And it depends on the timing of fundraising and timing of deconsolidation, how and if it impacts our EBITDA. That's again why we also left the guidance range unchanged. Lastly, perhaps to summarize, I think we have a very strong platform and a very solid balance sheet. We have a lot of work ahead of us to improve profitability, no doubt about that. And as we have a clear strategy, we focus on important enablers for scaling our business in key product areas, as Asoka mentioned in his introduction. With that, I'd like to hand over back to George, the operator, and start the Q&A session.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Andre Remke in Baader Bank.

Let's say, thank you, Asoka, for the presentation. Thank you, Christoph, for your CFO time and congrats to Martin for your new position. Unfortunately, I also have some questions. Starting with a question on EBITDA for the first half, EUR 19 million. Martin, you mentioned several one-off positive negative, what would be an adjusted EBITDA without those effects to sum it up?

Andre, if we look at what we achieved in the first half in terms of EBITDA, then EUR 19.2 million certainly includes a one-off legacy item, which was EUR 4 million, which we would classify as a one-off. So bringing the run rate EBITDA rather in the 20-plus area.

Okay. And you only expect further, let's say, one-off or consolidation effects, no further tax effects, et cetera, for the second half, right?

Well, the tax effects depend on the profitability of certain subsidiaries. If you look at PATRIZIA, we have currently consolidated 134 different subsidiaries and some of them are highly profitable and some of them are not. And we unfortunately can't offset the gains and losses with each other for tax purposes. And this is why you also actually in H1 see that we had a low profitability, but a relatively high taxation. So guidance on tax at the moment is that we'll have an extraordinarily high tax rate for the year. So don't expect a significant reduction there.

Okay. Then you mentioned the EUR 400 million on balance sheet investment at the moment and you indicated to turn them into funds to increase the liquidity again. But could we not see this as such a number, let's say, usual business? Or will you stop warehousing and seeding investments?

Well I think we'll certainly continue to use our balance sheet to enable products at PATRIZIA. The special thing about the current environment is that some of these consolidated assets are highly profitable and some of them are rather in a start-up phase and create losses. It is actually not unusual that a fund in the first year of business creates losses due to start-up costs. And these losses or negative earnings do actually impact our balance sheet and especially the P&L at the moment, given the low absolute profitability we have, it is actually very transparent has a major impact. You wouldn't feel this or see this if we will talk about the profitability we had in 2020. Also, technically these accumulated losses would typically turn into profit once we deconsolidate these funds from the balance sheet. So a large part of that is actually timing when it hits the P&L and not an economic question, per se.

Another question is on the last call, I think Christoph mentioned that you stated to be inactive discussions with the Dawonia investment consortium, concerning a new contract, anything worth to mention here? Is this steady in negotiations or?

Look, Andre, thanks for following up. As I mentioned before, we are in a very constructive dialogue with all the relevant 27 investors. And the one thing I would say is that we are very close to an agreement regarding the future of our strategic relationships and this is in line with the timeline we are following. So that's really it. So we're in a good track.

Okay. Then some questions on your strategic agenda. Well, in general, go to have some long-term goals and numbers even if a 9% to 10% growth rate seems to be very precious to me after a decade of market growth. However, my questions, first on the target does not include any [indiscernible] and the North American market. What are the reasons for the exclusion of both?

Andre, thank you for the question. I think it's too complex. First of all, we all -- there's a disparity in [indiscernible] between U.S. market as well and compared to Europe or Asia. We have been not active in the real estate in U.S., and we have also not intentioned recently to be there organically. Nevertheless, smart cities, the vintage series are looking for U.S. clients. And therefore, we are tapping the market but through a different approach in the new strategy piece through external client channels. And therefore, you will not see that the U.S. will appear as a region in the strategy but like a placing agent in the U.S. for our infrastructure strategy, and also, let me say, high obtained real estate strategy will be welcome. And we have also, in our strategy, this items in place, so that will be a part of the distribution strategy to look which kind of opportunity that will open up, which sleeves can be placed in the U.S. through via external consultants, but also, I think, placing agents. So that is exactly what we are working on. But nevertheless, we will not build up huge sales forces in the U.S. It's always -- I'm skeptical on these things.

And a question on M&A. While you, I'd say in the past, you focused on both a combination of M&A growth and based on the strong balance sheet also taking over expertise via M&A, why is this explicitly excluded?

Yes. Sorry, Andre, I don't want to avoid this first part of your question. You're right. PATRIZIA has been successful doing acquisitions in the last 15 years grown from more or less a low single or double-digit player today, more or less EUR 57 billion player. But I do think, first of all, we feel we have to consolidate now all that and we have to take the time and also so let it be the market muted period to consolidate the platform that is important, that is a start for scalability, and we have to focus now organically on our expertise-based area sectors to propel the growth is relevant. And I think even we have a rich balance sheet we feel we should do first organically, not means that on the way to 2030, we will see opportunity and not touch opportunities. But this strategy is pure first organically, and this can change over the time. But at the moment, also Andre, I want to say that on my career, I think I don't want to solve a problem of others. We have to solve our problems, become profitable, become recurring fee driven organization and create shareholder value really consistently and also adverse organically. As I said, it's not a per se, let me say, no go M&A, but at the moment, not focused. I want to also give a clear message to the organization we will now grow ourselves with our expertise and with all the M&A transactions we've done, and we've done a great one in the last 12 to 15 years.

Brings me to the last question. You partly already answered that, but to rephrase this, well, the transition towards higher earnings quality. Well, simply saying, over the last 10 years or so, AUM accelerated from EUR 10 billion to EUR 60 billion, expecting based on the assumption of scale effect of the EBITDA margin as well as net profit for a cliff, so to say. Why should it be the case that you improved margins with the management of additional EUR 40 billion -- what is the difference?

Yes. First of all, we are now really focusing on 5 growth areas. We are really designing these growth areas product by product. That's important that we have this focus in and also build the expertise and reallocation resources into these growth fields, at the same time, protect our -- the base what we have reached today, the first. The second thing is important, in my opinion, Andre, is absolutely relevant to understand in the new strategy is the movement in the last year's very transactional-driven model to more recurring, that means the discretionary sizable, scalable products are less transaction fee-driven, and we have to understand the scalability and efficiency will be important. That is why we have to focus on our internal efficiency measures, at the same time, focusing on the growth pockets in the fields where we can be, let me say, superior to the market, and that is why we have chosen these 5 areas. And we said exactly in these fields, we have to go, and we want to grow. By the way, there is also a valuation effect in the EUR 40 billion from today's jump-off base in real estate, by the way.

And if I may add to that, Andre, I think we can be transparent that every M&A has a certain degree of integration pain attached. And we did these M&A transactions and despite a perfect cultural fit, there are always issues that need to be aligned, adapted, ranging from regulatory requirements, et cetera, to really create a well-oiled machine. And so we think we have a completely different starting point today than a few years ago. And as Asoka mentioned, I think the difference with the new strategy is really focus, that we focus on key areas as a driver for growth. And we're not going to do everything for everyone in the future.

Yes. But honestly, also in the past, I would assume that the former management focused on growth areas and not on borrowing areas, which less with low prospects. But I will not judge it. I wish you all the best for that.

Sorry, Andre, I'm not disagreeing, but the difference is really about the scalability of the platform and their focus plays the main role.

Our next question comes from Manuel Martin with ODDO.

2 or 3 questions actually from my side, maybe one by one. The first question is on the new strategy that you have. It's a growth strategy well understood. However, maybe you can give us a bit of flavor of the competitive environment in which you are moving because I assume that other asset managers want to grow as well. And maybe you can tell us whether it's easy to grow the AUM where there's a lot of money or whether the competition is becoming more fierce. So just the attempt to have an impression of the competitive landscape in which you are moving?

Manuel, if I allow to take the question, you're absolutely right. It's never easy to grow and not to also grow in some way in ambitious numbers to EUR 100 billion. But again, in 6 years means '25 to 2030, 6 years, that's the foreseeable time. That is a long -- let me say, it's the longest plan I created in my career at always 3-year phases. But in light of the market cycle, especially in illiquid and also, in my opinion, mood of this let me say, in general, market alignment, we feel that reasonable to look for this mid-term strategy up to 2030. First of all, the competition will be also further high. But I want to say, and Manuel, it might be you disagree or agree with me. Last 15 years to the quantitative easing cycle, many, many players performed. Normally normal cycle create winners and losers. And I have the feeling, last 15 years to the very, let me say, propelling Monterey policy has created a lot of winners. I'm expecting next cycle, this coming cycle. We don't know exactly the recovery of the illiquid markets, real estate and infra and in some other strategies, alternative strategies when that's going to pick up. We are expecting end of the year, beginning of next year, mid of latest next year that will start. But this next cycle will create winners and losers. The reason for that is, I do think to run a business, cost of business for many small players, if they're not specialized will be very high. The regulatory cost, but also in platform cost, inflation, all that will stay. This cycle is completely different to the last part of the last cycle. So therefore, in my opinion, that will require us that we have to be competitive with others. We have to become efficient and we have to create a scalable platform. That's the one thing. The second thing is for us is to be in areas where not everyone can be. In my opinion, RE-Infra is to try and start to say, I am seeing and we are seeing the convergence of the 2 asset classes, infra and real estate very much. Especially the team like Urbanisation 2.0 will require not only new living approach. That is a little bit -- the tech will be a part of living in the future, but also the alignment and the Urbanisation will require the convergence of the both asset classes. So I'm seeing really opportunities there where we are in already, and we have to see that. That's why we are also bringing the both platforms under one investment platform to create the synergies. Second, in my opinion, PATRIZIA is coming, the heritage of PATRIZIA is managing their own money, but also developing-- was a real estate developer that move more for 20 years ago into investment manager, but we have a still development specialists on our platform compared to many other players. Like decarbonisation needs what we are seeing massively what today can't be funded by our clients will come, in my opinion, much more to play in the next years, and we are well positioned because our value chain is deep. It was always costly to take to maintain these things, but that will play very much with our whole value chain, what we have in real estate, but also now the infrastructure itself, bringing the RE-Infra into play, but also the high-octane strategies like value-add real estate and logistics all that can play very well into our growth ambition, and that's why we are confident that we can differentiate it from others. The question is absolutely valid. We are not alone. We have to differentiate from others. And especially in decarbonisation, with all our experience and heritage, we have to differentiate very much. And tech and data can play-- also our data analytics team, what has been built for 12 years ago and today is an asset in our pitches with our institutional clients, our global institutional clients can be a differentiator against others. So I am very positive on that value proposition.

And this leads me actually to the second question. As you say about the RE-Infra investing. When I have a look at Slide 5 of our presentation, maybe I'm old fashioned. I understand how to invest in data centers, smart buildings as well. However, is it the case that this RE-Infra idea is also a kind of investing in start-ups, which are active in these fields? So partially maybe being a kind of private equity fund?

Again, our infra teams are more PE-type infrastructure players, while our real estate, except of Dawonia, where we are the investment manager and partially owned. We are normally investing into direct investments, but also our PGP group in Copenhagen very successfully investing in impact investing. As you know, last year, we closed one of the investing our final -- or first close, in fact, investing last year, what we've done with EUR 280 million close was more PE-driven real estate. But again, to your question, we are investing in infrastructure, more PE driven. I do think the RE-Infra will be more PE-driven investments than direct investments. So that is, I think, answer to your question.

Last question from my side. It's regarding one of your 5 pillars strategy, the AIP, the fund of funds. Can you tell us a bit about the fund of funds fee structure because it might be different to compared to the other funds that you have? And how do these funds count in your AUM counting? Is that equivalent to other funds in your accounting? So for example, suppose you have EUR 5 million AUM, which you advise through fund of funds does it count with EUR 5 million or EUR 1 billion in the AUM? Maybe you can give us some background here.

Manuel, on the fund of funds business, you will only see in our AUM, the equity that we've invested. So there's definitely no double leverage that we used to show in our AUM.

And fees structure or something?

Fee structures, it's nearly half of our normal average fees for our direct investments.

Ladies and gentlemen, there are no further questions. I hand back to Martin Praum for any closing remarks.

Thank you, George, and thank you for everyone who listened in to our call today. We very much look forward to seeing many of you on one of the coming road shows and conferences. And as the next contact point for financials, we refer to the Q3 results, which we will publish on 14th of November this year. Have a good time, and thank you very much, everyone.

Thank you.

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