TAG Immobilien AG (TEG) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the conference call of TAG Immobilien AG regarding the publication of their annual report 2020. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Martin Thiel, CFO, who will lead you through this conference. Please go ahead, sir.

Yes, many thanks, and good morning, everybody. This is Martin from TAG. Welcome to our conference call for the full year 2020. Thanks for dialing in. As always, let's start with Page #4 of the presentation, that's the highlights slide, to summarize the main developments of the financial year 2020. Looking at the operational performance and starting in Germany, you see that we had a good development in vacancy reduction in the fourth quarter 2020. Vacancy was down by 30 basis points in the fourth quarter and ended up with 4.5%. That's a reduction by 60 basis points over the course of the second half of the year. In the total portfolio, vacancy stands now at 5.6%. The difference between the 5.6% in the total portfolio and the 4.5% in the residential units is mainly the reason that we acquired portfolios with high vacancy rates in 2020. Like-for-like rental growth, including vacancy reduction, came out at 1.5% compared to 2.4% in the previous year, so weaker industrial and also honestly a little bit weaker than what we expected. Reason or main reason for that was clearly the pandemic, our voluntarily waiver on rent decreases for several months during the course of 2020. FFO I came out at EUR 172.6 million, so at the upper end of the already increased FFO guidance, which was between EUR 170 million and EUR 173 million. Comparing this with the previous year, that's a year increase on the -- from the FFO by 7%, not only in absolute amounts, but also on a per share basis. And also, the dividend will increase by 7%. So the dividend proposal to the AGM, which will take place in May this year, will be EUR 0.88 per share. Looking at bottom of Page #4. You see the portfolio valuation results. As every year, the portfolio was fully valued by CBRE. And we achieved a total value growth of 7.5%. The 7.5% splits up into a 6.2% pure annual valuation uplift and the remaining difference of 1.3% is due to investments. The valuation remains from our side at still conservative levels. So the TAG portfolio is now valued at EUR 1,100 per square meter or 5.7% gross yields. Moving on to Page #5. First of all, looking at acquisitions and disposals in Germany, we have acquired nearly 4,600 units in Germany at an average gross yield of nearly 7%, so from our side or from our point of view, clearly a good acquisition year. Most of these acquisitions have already closed. A smaller part of these acquisitions, so I think something around 150 units, will close in the first half of 2021. We've been also active on the selling side. So a little bit more than 1,000 units were disposed in financial year 2020. I will come to the details a little bit later. Now looking at Poland. 2020, you know that was the first year we have been active on the Polish residential market. And in 2020, the business in Poland was still a purely disposal business. The first rents will kick in from 2021 onwards. So 2020 was a year where we had sales revenues purely. The revenues from sales of properties came out at EUR 73.4 million. That was below the guidance of EUR 80 million to EUR 85 million. But that's nothing to worry about. We simply had some handovers that were originally scheduled for December 2020 now in January and February 2021. You see this a little bit below the table. 719 units were handed over in total in financial year 2020. 143 units originally scheduled for December have been handed over in January and February. So that's not really an economic difference. That's more something technical. Reason for this postponement of the units were some permissions that we needed to finalize the handovers that were granted later than expected. But even though the revenues, as I said more technically, were a little bit below guidance, the results from operations in Poland were within the guidance. So EUR 9.1 million was here the final result. And that shows from our point of view that the business in Poland is very stable and that prices in Poland, so the disposal prices, have even increased in 2020 despite the pandemic. Yes, talking about the pandemic, please forgive us that we have not a separate slide as in the previous calls regarding the outcome of the pandemic. From our point of view, the situation is unchanged. So nothing really new. The business is very stable, very resilient. Rent deferrals are still of minor impact, so the number of tenants in our residential units, who is not -- who are not paying the rent currently as an outcome of the pandemic, is still something at 0.1% or 0.2%. And you've seen that the vacancy rates have been reduced in the third and fourth quarter 2020. So the business is clearly on track. Talking about ESG. Perhaps you are a little bit missing more details on ESG targets or on ESG reportings. We will do this with the Q1 results that we will publish in May 2021 after we have published our new sustainability report on the 22nd of April 2021. I'm now moving on to Page #7, that's the income statement, and just some remarks from my side about main developments. First of all, I want to point out the strong improvement in the net income from services that grew year-on-year by EUR 5.1 million. You will see the details a little bit later. The main growth here as in previous year coming from the energy business and from the multimedia business. If you look at the net income from sales, you will see a figure and a total gain in 2020 of EUR 46.5 million. That's substantially higher than what we had in 2019. Out of this EUR 45.2 million, a little bit more than EUR 41 million is coming from sales in Germany. And here, this nearly completely refers to the closing of the first stage of the commercial project in Munich. Perhaps you remember that we reported with the full year figures 2019 that we have signed the contract for the disposal of the first stage of this commercial project. It has, in total, 2 stages. The first project was a hotel that was now realized, so construction was finished. The hotel was handed over. And that led to this quite significant disposal gain of around EUR 40 million. The second stage of the project, by the way, will be completed in the course of 2021. This will be an office building. It's not yet decided when we start the selling process, so we expect the signing of this disposal in 2021 or in 2022. One comment on the personnel expenses. You see an increase here year-on-year by EUR 8.3 million. EUR 5.0 million is coming from the first-time consolidation of Vantage, so our new acquisition in Poland. An additional EUR 1 million is also coming from what is called a kind of corona bonus, so voluntary payment that we did to all our employees in the fourth quarter of 2020, who did really a great job in these difficult times of the pandemic. You see increased other operating expenses of EUR 4.3 million year-on-year. The main reason for that was already announced by us, I think, with the Q3 results. It is a one-off effect of EUR 3.6 million. We established in 2020 a new foundation, the TAG Miteinander Stiftung, who will do social projects in our regions. That's also, if we want a kind of increased engagement, that we do as a result of the pandemic in social projects in TAG's regions. Moving on to Page #8 that shows the EBITDA, FFO and AFFO calculation. And first of all, looking at EBITDA, the EBITDA for the full year 2020 grew by EUR 7.6 million. Reasons for that is, on one side, the higher net income from services that I already mentioned, and also clearly the higher net rental income of EUR 4.5 million. A good result is surely that also the EBITDA adjusted margin increased and stood now at close to 69% after 68% in the previous year. Looking at the FFO. I already mentioned that the FFO I increased by 7% year-on-year. If we look at the development quarter-on-quarter, you see a reduced FFO I in the fourth quarter, which is mainly driven by higher income taxes in the fourth quarter. So if we look in more detail on Page #8, you see that the EBITDA in the fourth quarter increased compared to the previous quarter by around EUR 500,000. But on the other side, we had EUR 1.4 million cash tax expenses in the fourth quarter compared to EUR 1.8 million tax income in the third quarter. So it was not unusual high cash tax rate that we had in the fourth quarter, but more a positive one-off effect in the third quarter 2020, where we had tax benefits from the repurchasing or the partial repurchasing of the outstanding convertible bond 2017/2022. On Page 8, on the right side, you also see how we calculate the result operations in Poland. That's the EUR 9.1 million that I already mentioned. And you see the bridge from the net income from Poland, where we add back the results or the effects from the purchase price allocation. So these results from operations in Poland is a purely cash result from disposals in Poland after taxes, after minorities and without any more technical impacts or effects from purchase price allocation. Moving on to Page #9. You'll find more details on the balance sheet. Just to summarize one or two points, you see the cash balance at the year-end is quite rich with more than EUR 324 million. The financial debt, the total financial debt in the noncurrent liabilities stands now at EUR 2.9 billion. Just as an addition or as a comment, you see this also on the right side, we had further cash settlements of the convertible bond 2017/2022, which we already have repurchased by 50% in August this year. And the outstanding nominal volume at year-end 2020 was EUR 82.8 million. And we repaid some of these outstanding convertible bonds in January. So as of today, the outstanding nominal amount of this converted bond is only EUR 17.5 million. On Page #10, you see the EPRA NTA calculation, which shows, from our point of view, a good development and a 9% increase year-on-year. And the EPRA NTA stands now at EUR 21.95. You see in the footnote that we did not add back transaction costs when calculating the EPRA NTA. We know that there is currently a discussion and there are differences within the peer group if you add back this transaction cost, which is mainly real estate transfer taxes, or not to arrive at the EPRA NTA. We decided to do it not because we consider the situation about real estate transfer taxes, especially the discussion around RETT-free share deals in Germany is very uncertain. So if you want sort of a more conservative approach, that's we're doing here. If we would do that, so if we would do this adding-back of the transaction cost, you see this in the footnote, the EPRA NTA per share would stand at EUR 25.23 per share, so just if you want to compare this with other comp regulations. Page #11 shows the financing structure. The average maturity of the total financial debt is nearly unchanged and it's close to 7 years. The average interest rate for the total financial debt has been decreased to 1.49% and there's still refinancing potential. So looking at the years 2021 and 2023 at bank loans that are maturing over the interest terms that are ending, the average coupon of these bank loans still stands at 2.7%. And as we're today financing new 10-year bank loans below 1%, we will see further interest cost savings in the future. Page #13 shows you an overview of the portfolio, Germany and Poland. The total GAV stands now at close to EUR 6 billion. The very largest part of that is still coming from the German portfolio. So the GAV of the Polish portfolio is EUR 150 million at year-end 2020. But as you know, this will grow significantly over the next years. 88,000 units in Germany and the units in Poland that are already secured, so our total contractually secured pipeline in the meanwhile adds up to 8,742 units. Page 14 shows the rental growth and the CapEx allocation. I already mentioned that the rental growth was -- or the total rental growth stood at 1.5%, including vacancy reduction. You'll see a detailed split on the bottom left of Page #14, how this rental growth is composed. Total maintenance and CapEx in euro per square meter was slightly increased from EUR 20.4 per square meter to EUR 21.6. But that's more or less in line the development that you have already seen in the course of the year and also unchanged. If you look at the full year results regarding the regions where we allocated our CapEx, Chemnitz and Berlin regions were still clearly in the focus of our investments. Page 15 shows the vacancy development. And as I already mentioned, good development in the third and fourth quarter 2020. So 4.5% was the vacancy rate at year-end 2020. On Page #16, you'll find a detailed split of our service business. Looking at the total results, the FFO contribution from all our service businesses achieved more than EUR 10 million after roughly EUR 8 million in the previous year. So it's more than 6% in the meanwhile that the service business has contributed to the FFO -- total FFO. And as in the previous years, the main FFO contribution is coming from energy services and from multimedia services. On Page #18, you'll find more details on the German portfolio valuation overview. As I said, the total value growth was 7.5%, 1.3% from investment. And here on Page #18, we analyze a little bit more detail the pure valuation uplift, which was 6.2%, after 8.6% in the previous year. Comparing the second half with the first half, you see that the results were very similar. So the semiannual valuation uplift was 2.9% after 3.3% in the first half of 2020. If you ask us what you should expect for the first half of 2021, I mean, it's clear as of today, we don't know any valuation results or we don't -- or we're not able to give a concrete figure. But everything that we hear from our value -- everything that we see in the market should point towards the direction that valuation results for the first half of 2021 should be somewhere in the range of the second half of 2020. So that's, from our point of view, nothing that should change this positive development. Page 20 shows a summary of the acquisitions in Germany in 2020. We were very happy with the total acquisition volume of close to 4,600 units. As I said, most of these units have already closed in the course of the financial year 2020. A smaller acquisition of 168 units were closed in the second quarter of 2021. On Page 21, you see more details on our disposals in Germany. In total, we disposed 1,009 units. You can divide this disposal into 2 groups. The first group is the disposal of non-core assets. So around 800 units were disposed in several regions with a vacancy rate of 22%, where we consider these assets as not good enough from the location or from their construction quality. And on the other side, in Berlin and Kiel, we sold around 213 units at a multiple of more than 26x. So this is something that you perhaps already know from us from the last years that we're also selling here in somewhat higher-priced markets. From the Pages 23 onwards, you see the current development of our portfolio in Poland. On 23, there's a summary. In the meanwhile, in Poland, we have 3 locations, so not only Wroclaw, this was the starting point, also Poznan and Lodz were following locations in the course of the financial year 2020. The total current project, so that means really contractually secured or acquired, made up now to 8,700 units, out of which 5,700 units are designated for the build-to-hold projects. So that means after the first year of our operations in Poland, we have already secured land banks and projects which are also at least partially under construction for 5,700 units. So we are already quite close to our mid-term target, which stands at 8,000 to 10,000 residential-for-rent units in Poland. Page 24 shows you more details on the build-to-hold pipeline. And looking at bottom left of Page #24, you will see that the first rents were kicked in, in Poland from 2021 onwards. Of course, in 2021, the results will not be very significant. But looking at 2022 and especially 2023, you will see that our portfolio in the build-to-hold segment in Poland will grow quite significantly. So Poland for us is a clearly mid-term project but very visible. So it's not the case that we are now talking about a lot of years that we still have to wait until we see results. So if we want, so 2021, and to a certain part also 2022, is a kind of transition period, where we are investing. And from 2023 onwards, we expect that we already have a portfolio in the build-to-hold segment of around 5,500 to 6,000 units in Poland. And this will then, of course, lead to a material FFO contribution. On Page 25, we'll give you more details on the build-to-sell pipeline. If you look at the annual handovers on the bottom left of Page #25, you will see that from now on, as planned, the number of handovers in the build-to-sell pipeline or in the build-to-sell segment in Poland will be something at around 300, 400 or 500 units. So that will be more or less a continuous business that we will keep beside the resi-for-rent business. But the last one, the resi-for-rent business, will be the clearly focus of the future. Page 27 shows you more details on ESG ratings that we achieved in the course of 2020. And we're very happy that nearly in every rating agency, we achieved significant improvements. As I said, you should expect more details on ESG targets with our Q1 reporting after we have published the sustainability report in April 2021. And finally, on Page 29, the guidance for the financial year 2021, which is unchanged to what we have published in November last year. In total, we predict now an FFO growth of 4%, not only in absolute amounts, also on a per share basis, and also a dividend growth of 4%. This FFO I guidance for 2021 is based on the current portfolio, so without any further acquisitions. And as I said, it's based on the German rental business as the rental activities in Poland will start in the year or in the third and fourth quarter 2021, so we expect here in Poland. In future years, clearly FFO contribution for 2021, that's still purely the German business. That's it from my side as an overview of our financial year 2020 results. Thank you so far already for listening. But now I'm, of course, very happy to take your questions.

[Operator Instructions] And the first question received is from Andres Toome of Green Street Advisors. So we go on to the next question, it's from Thomas Neuhold from Kepler Cheuvreux.

I only have two actually, and it's more on the regulatory environment. Firstly, I was wondering if you can share your thoughts on the impact of the upcoming EU taxonomy on your portfolio modernization and construction strategy. And the second question is also regarding regulations. There's a new federal funding regulation for energy-efficient buildings in place in Germany. You might also be able to get up to 45% of your investments back as a subsidy. Can you give us an indication what impact that could have on your business, especially the modernization business?

Yes. Thank you, Thomas, for the questions. I mean, honestly, we are, of course, looking carefully at that. But at the moment, we have doubt that this really materially changes our strategy. And materially changing our strategy would mean that we now really rethink about the possibility to do new constructions in Germany. I mean, at the moment, the answer is very clear. Contrary to Poland, where we achieved gross yield in the new construction business between 7% and 8%, you know that in Germany, this is materially lower. That's still the primary view that we have. But I mean, of course, this could clearly help in the volume of energy-efficient modernization programs that we're doing also for reducing vacancy. And you know that this has always been the focus of our modernization strategy. So please understand that we can't give you any details. But as of now, I would say you should not expect a material shift in our strategy, but perhaps a slightly increased volume in modernization programs. But it's now too early to give you concrete numbers.

So we try again with Andres Toome of Green Street Advisors.

So I was just wondering if you can maybe add some color on the rental market in Poland. And given that it's become a bit softer, how does that affect your underwriting for build-to-hold developments? Is the initial letting going to result in the lower end of the guidance, 7% to 8% gross yield?

Thank you for the question, Andres. And I think it's important to analyze why has the rental market in Poland, especially in second year, been a little bit softer. This is not an outcome of, let's say, underlying trend of a change in demand. It's simply an outcome that a lot of short-term leases came to the market, short-term leases that were normally done by students or tourists. So all these apartments in cities that are were rented out by the Airbnbs and so on, of course, as a result of the pandemic, were not let in this volume as in the prior years. We expect -- or when we see it to a certain part already that this is just something temporary. So if we do underwriting today, if we do calculations for new projects, we're absolutely convinced that our yield that we expect between 7% to 8% is still the right number.

Okay. Fair enough. And I'm just wondering on the reported like-for-like as well, it seemed that back in third quarter, you were quite confident that you will achieve above 2% for this year. Is there any specific reason that didn't come through?

I would not say that there's a specific reason so that we can say, "Well, especially in this field, we've been behind what we expected regarding rental growth." It's coming from basically every cluster. So yes, the vacancy reduction was good. In the fourth quarter, we were down 4.5%. We initially hoped that it was even a little bit better. If you look at the like-for-like rental growth from tenant turnover, which was 0.6%, we hope that this number was also a little bit higher, so -- and also some rent increases for existing tenants that we did were slightly below that what we've been doing before. Also honestly, we've been a little bit more careful with rent increases in the current environment. You know that in this time of the pandemic, getting rent increases is perhaps not really by everyone. So there's nothing specific, yes, but it's clear, like-for-like rental growth at 1.5% is weaker than in the year before. But also looking, I would say, in the peer group in total, that's not really a completely different picture to what you see in the market today.

And the last question on maybe transactional activity in your core markets, what are you observing year-to-date in terms of pricing? I know there have been a few quite possible transactions in your own markets.

Well, in Germany, it's clearly unchanged. The market is very competitive. We've been very happy that we were able to acquire 4,600 units last year. The market is competitive. And that requires, to some extent, an opportunistic approach. So we're really working hard on that. And if we have opportunities, we will clearly try to get them. It's also clear that the times where we were able to acquire in Germany at 8% gross yields or perhaps over, I mean, the average gross yield in 2020 was 6.8%, still attractive, so something around this number. So anything between 6.5% and 7% gross yield should be a realistic pricing for today's acquisitions. As in years before, we're not giving concrete guidance on the acquisition volume in Germany. In Poland, I think we have here more visibility. Here, the market is also competitive but not that hard as in Germany. And we clearly try to make use of that. Also, the zloty is at the moment, compared to the pricing 1 year ago, a little bit weaker, which is good for us because this enables us to buy and to invest at a more attractive price in euro. So when we have this 5,700 resi-for-rent pipeline today, getting that to a number that is then already in our target range of 8,000 to 10,000 units by year-end, that should be a realistic assumption.

[Operator Instructions] And the next question received is from Kai Klose of Berenberg.

I've got two questions. First one is on Page 32 of the presentation. Could you give us a little bit more details on the evolution of the position of the change in vacancies across the portfolio? Just curious, you spent almost the same amount in Rostok for CapEx as in Berlin, but vacancy rates went up. And just in that context, is it fair to say that except some changes on a regional basis, the current [indiscernible] the 4.5% is a level what is a kind of floor from which further reduction might be lower or only be achieved by spending higher CapEx on a regional basis?

Yes, starting with your second question, that's clearly not our assumption. So this 4.5% that we currently have is, from our point of view, definitely not a kind of structural vacancy rate. The structural vacancy rate should be more something at 3% or perhaps 3.5%, I mean, depending then on the individual region. And also with the investment volumes that we're doing today, which is something around EUR 20, EUR 21 per square meter, it should be possible to get that. And so it's not the case that we're now at a kind of minimum vacancy rate already. It's true. I think you see the details on 33, perhaps -- Page 33 perhaps a little bit more clearly that we have regions, and this is mainly true for Rostock, where we have also increased vacancy rates. But that's not an outcome of any structural change or fundamental change here in Rostock. Also included is not only the city of Rostock, also the city of Greifswald, where we normally rent out quite a significant number of apartments to students. And this is clearly a sector, which is a total for the whole group, not that material, but for that region, material, which has suffered by the pandemic more than others.

And then the last question on Page 7 regarding the other OpEx, the other operating expenses. Beside of the kind of special contribution or special event from the foundation, is there anything from COVID or, let's say, anything specific for the setup of the operations in Poland, which was driving the uplift in the other operating expenses?

No, that's not the case. So the total uplift was EUR 4.3 million, out of which EUR 3.6 million is coming from the establishment of the TAG Foundation. So the difference is 700,000. And this is mainly the effect from the first-time consolidation of Vantage. So there's nothing in this number that is anything that is worth mentioning regarding corporate impact or any special cost development from my point of view.

The next question received is from Manuel Martin of ODDO BHF.

Three questions from my side, if I may, please. First question -- maybe one-by-one. First question, on your valuation results, are there any regions in particular outstanding when it comes -- in regard to your valuation results, any regions producing especially a lot of valuation results?

Yes, Manuel, if you see in the appendix on Page 34 of the presentation, a detailed split of the valuation result based on the regions, not very much change to previous years, especially in the Berlin region, which is, in our case, not the Berlin city, but the commuter base around Berlin. And in Dresden, Leipzig, Hamburg regions, the valuation result was stronger compared, for example, with Chemnitz or with Gera. Every region had a positive valuation result. That should be clear. But kind of focus, not materially, but if you look at Page 33 -- 34, you see this kind of focus was in these regions that I mentioned.

Okay. My next question would be concerning Poland. It's a bit maybe looking forward in terms of COVID, slightly tricky. But I have an impression that COVID-19 in Poland is somehow a bit more nasty than in Germany. Do you see any signs or indication that COVID-19 might hamper construction progress, for example, or any other impact on your new market there?

Well, looking at financial year 2020, not only in our group but also on the market, in general, looking at the results that other developers that are listed in Poland published, it seems to be that the market is very resilient also in Poland. So none of these developments -- developers really had significant reduced sales numbers. None of them reported about reduced sales prices, especially. What we see in the market is still enough demand, especially demand for the resi-for-rent product. I mean, just commented on some developments in the short-term leases that were clearly a result of the pandemic, which is then attributable to students that are not renting apartments or to people who are normally on vacation in the Airbnb apartment and so on. Also interesting perhaps, there have been some results published on M&A transactions in Poland, where listed developers were sold, like [indiscernible] or like Budimex, that's all public. If we look at the pricing there, you see that partially significantly about what we have paid for our acquisition, which gives us the feeling that we are on the right way. I mean, also other people are looking at the market and not only at a pure development market, also on the resi-for-rent market. But we are a little bit ahead of the curve, if we want so. So it's not that the case that TAG has the only idea to enter this market. But we're very happy that we're now really very close to renting out apartments in Poland. We are still convinced that this business will have a very attractive future.

Okay. My last question, just a bit on acquisitions and disposals. I mean, given the market situation in Germany, do you remain confident to be still a net buyer in 2021?

I would say that's a clear yes. I mean -- but you know us that we are here acting disciplined and would also have no problem with a year of being a net buyer from our point of view -- sorry, net seller, that's from our point of view, nothing negative. I mean, if the market is really that competitive, the prices are materially higher than today, and on the other side, there are disposal opportunities, I mean, why not taking this into account? Again, we don't see this for 2021. But we're really here in 2 different markets. In Germany, it's not a target to have a growth in absolute terms, which is honestly, contrary in Poland, where we need a certain portfolio to really have efficient platform to really have a certain volume. That's already done in Germany. So therefore, as in the previous years, you will see us disciplined on the acquisition side. But again, if you ask us, would we be a net seller in 2021, that's nothing that we expect.

[Operator Instructions] And the next question is from Marios Pastou of Societe Generale. So we take the next question is from Simon Stippig of Warburg Research.

I have a couple of questions, if I may. And the first one would be regarding FFO per share and EBITDA adjusted margin. And as we can see in the full year 2020, the margin 69% and Q4, it was 66.4%. I know there is seasonal effects always coming in Q4. I just wonder, is there anything else, any impact, any reasons to it that the margin was that low at 66.4%, below Q3 and below the full year average?

No, that's not the case. So we have -- I would perhaps say not really a seasonality but a kind of swing in EBITDA margin, depending mainly on things like maintenance that occurs in 1 quarter or also quarters where we do more service charges or not. So from our point of view, it makes more sense to look at the full year development. And here, you see the improvement from 68% to 69%. That's from our point of view, the better way to look at that. There's nothing especially in the fourth quarter behind the EBITDA margin.

Okay, great. And just one more question, especially your Slide #8, you also have a higher capitalized maintenance. Could you also -- I mean, compared to full year 2019, is there any explanation for that as well, please?

That's -- you're right, there's an increase by EUR 1.9 million, which is in part of the total CapEx of around EUR 70 million. But again, if you ask me, do we hear more in this category? I would say not. I mean, for us, honestly, how do we look at that? We don't look when we decide on investments so much is this from an accounting perspective, maintenance, is this capitalized maintenance or is this CapEx, is it in general capitalized or not. We look at that really from a cash flow perspective. And therefore, that doesn't make any difference. And also, if you follow our reporting, how we handle that, we are always talking about in this year, EUR 21 per square meter total investment. And this includes everything. So from time to time, it's more an accounting question. If you ask me, is there anything behind it regarding any strategic decisions? That's not the case.

So no categorization, it's just higher capitalized due to your cash flow view and accounting view, but no underlying changes that capitalized maintenance is higher.

That's correct. And we always decide on a project based on the, let's say, cash-out. And then the second question, this is the more something technical. Can we capitalize it? And is it from the category, capital maintenance or amortization CapEx, which is that's also something which is not white and black? We try to be as accurate as possible, but it's not always clear how to separate that.

Okay. And then maybe another question in regard to the valuation of your portfolio. it's lower than H1 '20. And maybe if I compare it, for example, to LEG's, a little bit [indiscernible] of CapEx. Is there any reason for this, especially because the share of yield compression is higher? So in regard to the operational effect, is there -- is that driven by COVID-19 impact? Or do you have any other reason for that?

Well, how do we look at the valuation result in the second half? And how do we compare it with the first half? You're right, if we look at percentage-wise, we have now 2.9%. And I think in the first half, it was 3.2% or 3.3%. That's a difference in absolute amounts, if I remember correctly, of around EUR 20 million out of a EUR 6 billion portfolio. For us, that's not really something different. And I think it's not correct to get into that. It's extremely detailed to try to find out are there any specific developments behind it. We simply see here, as in previous years, a continuous positive trend. So as I said also for the first half of 2021, we are optimistic. Why is that? If we look at the acquisition markets in our regions, I mean, you don't see here any pressure on prices. To the contrary, I mean, the markets are competitive. You also see this in our acquisition gross yields, which are still on a very good level with 6.8% in 2020. But the development is clear there. And then it's for us -- or from our point of view, a question of time until this has then been fully shown in the valuation result.

Okay. I'm just asking [indiscernible] the argument that there could be a lagging effect of operational efficiencies or growth, what we saw in, for example, rental growth and a little bit maybe lagging vacancy reduction. Then you could have a catch-up effect in H1 '21. That's the background to my question of the split between yield compression and operational performance. But it's all answered. But I would have another question in regard to sales. And in Q4, you sold some assets. I would categorize it into one part, which is Berlin, Kiel, which is quite strong locations with higher rental growth, Berlin, [ EG ], Eberswalde, Strausberg, et cetera. But I wonder that on the one bracket of higher vacancy, you show actually high book profits. But on the other side, where you might have larger expectations of growth, you do not show any book profit. Could you -- is there any inference I could draw as to the reasons of this?

I would say in this group of non-core assets, there was especially one very successful portfolio of sale of, I think, 300 units in quite small city in East Germany. Please understand that I can't give it a name because that could perhaps hint to this transaction, where we achieved the very largest part of the total book profit that we have shown. So in general, we are selling today with a slight book profit, I would say. Often, we have kind of technical effect that we sign that then leads then towards a very small book profit. This is the case when we sign a project or sign a disposal. And then there's the next balance sheet date, for example, the end of a quarter. Then automatically, we do a valuation uplift to this disposal price. And then if we hand it over and if the closing occurs, then the book profit is 0. So it's basically part of the valuation result. I mean, looking at the total valuation result, this effect is not material. But that leads often in the group or in our figures to the fact that the book profits are quite small. But in general, we're selling above book value. Here, in these non-core assets, I think there was one very positive transaction.

Okay. And -- but then referring to what you just said in regard to the Berlin, Kiel disposed assets, did you have a book profit then, which you showed in an earlier revaluation or in the revaluation of H2 '20?

Yes. This was included, but that was not material. But I just wanted to make it clear. Because I think if you look at the slide, there's even a small loss of EUR 100,000. So that's seems to lead to the picture, are we selling below book? Well, that's not the case. I mean, the book profit is not based on the fact that it's just 200 units, something material. If I have it right in mind, perhaps something around EUR 1 million or something around that. But we're selling not below book value. That's just [indiscernible] I wanted to say.

Yes. Okay, great. And maybe just the last question in regard to Poland, is there -- could you give me the definition between the current and planned projects? And second part of the question would be on Page 23, the difference of total projects to Q3 is exactly what you sold.

First of all, the difference in the definition is that the current projects that's really acquired or at least secured and the planned projects, these are projects where we're concretely looking at, so where we are perhaps already in a kind of due diligence process, where we are really perhaps in some negotiations or we have really a concrete view on that. But it's not yet signed and not yet 100% sure. We are publishing this figure to give a kind of overview where will this total portfolio growth end in rough numbers. So that's more a mid-term outlook. So the really secured projects and the really acquired projects, that's defined as current projects. And then perhaps you can repeat your second question, this was something different...

Yes. The second question, maybe, I guess, is more -- I also give you a figure to that, it's on Page 23 and you show the total project is 14,400. And you showed in Q3, you showed 14,900. So I assume you sold those 500 assets.

Yes. Even a little bit more, I mean, now let me think, that could be correct, but it would be more coincidence. So the total handovers in 2020 have been 719, the very largest part of that was in the fourth quarter. And that's then something that leads to a reduced number in total projects. But on the other side, we had also some smaller acquisitions in the fourth quarter. That could -- would be a coincidence if this is exactly the same number.

Yes, okay. Sure. Because I mean that's a net number. Then -- but just that will also translate to accounts receivable changes within your Q4 cash flow statement so that I can tie those 2 numbers. Those 420 units you potentially sold in Q4 is exactly tied to your accounts receivable changes in your cash flow statement of Q4. Is that right, which is, I think, around EUR 82 million?

That would also be a coincidence. If this is the case for the disposals in Poland, that should be a very large part, I would say, nearly 100% cash in our balance sheet. That's a small amount that is deferred, where we handed over the apartment for December and we received the final payment then at the beginning of January, for example. So that's not really the reason. And also, all the disposals in Germany, especially the first project, the first stage of this project in Munich, the cash inflow was in 2020.

Yes. Well, just differently asked, what would you say is the cash-in -- your sales number is 100% cash-in literally from your sales in Poland.

Yes. And I assume, Simon, that perhaps we can analyze this for you a little bit more detailed, this number that you're pointing out in the cash flow statement is not only, if I have that correct in my mind, account receivable but also includes change in other short-term assets [indiscernible]. So that could be a mix of several effects.

As there are no further questions, I hand back to Mr. Thiel for closing remarks.

Yes. Many thanks also listening to our call. As always, if there are any questions left, please feel free to contact our IR department or myself. Wish you a good day, and talk soon in the next days and weeks. Thank you very much.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.