UBM Development AG (UBS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining the UBM publication of the third quarter report 2022 conference call. [Operator Instructions] It's my pleasure, and I would now like to turn the conference over to Thomas Winkler. Please go ahead, sir.

Thank you, Francia, and good morning to everybody. Thank you for dialing in and your interest in UBM. Because there has not been a lot going on in Q3, as you could already imagine from a lack of news flow, all eyes are now on year-end. We shall see a photo-finish. Regarding results, Q3 was neutral as a function of the perfect storm in which we got earlier than expected and as predicted. Good news, we go into the crisis cash-rich and equity-strong. And maybe most importantly, our positioning is sustainable in the best sense of the word. With timber construction, we have hit the bull's eye and get confirmation by our rating agencies. Let us turn immediately to Slide #4. The best news I have to report is that we have been granted permission for Europe's first urban quarter built in timber, the LeopoldQuartier in the heart of Vienna. With 75,000 square meters of floor area and several hundred million euros of sales volume, this project is becoming UBM's largest scale development. It is carbon-neutral, generates its own energy on-site and meets all criteria required for certification and taxonomy point of view. The LeopoldQuartier is also a good reminder for the unpredictability of timing, which ties in the nature of our business. However, this is not necessarily a bad thing. Instead of having developed the largest hotel ever, we are now developing the best located new office space in Vienna, while Vienna will suffer from an undersupply of new office space in the next years according to CBRE. And we shall provide the market with the most advanced apartments in Vienna City center, when it comes to carbon footprint. More generally speaking, we are on track to become the #1 and leading developer of timber multistory buildings in Europe. Please turn to Slide 9. What you can see is the timber pipeline worth almost EUR 1 billion and with more than 100,000 -- 80,000 square meters. This results in a reduction of our carbon footprint of more than 20,000 tonnes. This also represents an outperformance of our top ESG goal to develop more than 100,000 square meters of timber construction by 2025. With the 45% to 55% mix of resi and office, this is also an extremely balanced portfolio, not putting all eggs into one asset class. Today, the first question on every real estate investor's mind is what is going to be the value of my investment in 10 years from now. With the timber construction project, the answer is almost self-explanatory. It is future proof. This is not only appreciated by the investors, but also by the rating agencies. Please have a look at Slide #6. ISS ESG confirmed our undisputed industry lead. UBM is the only company in the DAC region's real estate and construction industry, which can boast of B- rating, just have a look at the league table on the left-hand side. UBM is also among the top 1% of companies with a platinum rating of all companies assessed by EcoVadis worldwide. We made it into the Austrian Sustainability Index, VÖNIX, and expect a good rating from CDP before year-end. I hope I do not sound overly self-confident, but I'm proud of UBM and our team. In UBM, sustainability is not... [Audio Gap]

Thank you, Thomas. Welcome to our call today. [Audio Gap] Slide #7. As the title already suggests, cash at hand will be the key factor [Audio Gap] cash out like the repayment of hybrid capital totaling EUR 25 million and the payment of a dividend and hybrid interest so far this year. Compared with the pre-corona year-end 2019, cash increased by almost EUR 145 million. As already mentioned several times in other calls, this financial buffer makes us independent of bank processes, guarantees and time lines, and puts us in a favorable position for opportunity hunting. Timber [ port ] is an example for this. On the right-hand side of the slide, we give you an overview of our redemption profile. In October, the remainder of our 3.25% bond was repaid. As you can see from the shaded areas, more than 35% of our financing is already green. This is a result from the highly successful placement of our 2 sustainability linked bonds last year. Let me also remind you that we tapped the Schuldscheins market this year with the value of EUR 40 million right before markets closed. And right now, we are continuously screening the debt market in order to get into action. On the one hand, we take a look at repurchase possibilities, which is not as straightforward as it seems given this limited liquidity of our bonds. On the other hand, we want to be ready as soon as possible for any window of opportunity when it opens up. Please have now a look at Slide #8. By the end of the first 3 quarters of 2022, equity amounted to almost EUR 492 million. As already mentioned before, we repaid a hybrid of EUR 25 million in June. One effect we need to flag is an error correction of the OePR, the Österreichische Prüfstelle für Rechnungslegung, which is the Austrian financial reporting enforcement panel. OePR identified an error in the annual financial statements for 2020, which indicated that the risk associated with the expected procurement of building rights of a project was not sufficiently reflected in the fair value of the property. The recognized fair value should have been EUR 39 million lower, which subsequently influenced the acquisition cost for the initial and equity recognition of the investment and led to a correction of EUR 27 million to equity. The correction of this error has neither an effect on the consolidated statement in our P&L for 2022 nor on any cash position. Despite this correction, we still report a healthy equity ratio of 33.4% and are clearly committed to our target range of 30% to 35%. Net debt slightly decreased compared to half year and is still comfortable, not only in absolute terms, but even more so compared with the balance sheet total. We continue to be conservatively positioned with our LTV, which is well below our target limit of 50%. At the end of the first 3 quarters, our loan-to-value stands at 32.2%. Together with our liquidity situation, this provides UBM with enough headroom and reserves for uncertain times and opportunities. Please turn now to Slide #9. Our half year report indicated that we were heading towards the perfect storm. It has however arrived faster than expected, and the real estate industry is currently in a crisis mode, a real turning point after 12 years of a steady upward trend and a situation that will probably not come down in the near future. The investment market remains in a state of shock paralysis, and at EUR 16.6 million EBITDA for the first 3 quarters of 2020 was on the level of the first half year without significant changes. The rising interest rates undoubtedly increased investment costs and trigger higher yield expectations with real estate investors. The same applies for still incalculable in construction costs. Rising energy prices caused headaches for many, and the affordability of living has all of a sudden become a subject again after decades. The pandemic came to stay, and the International Monetary Fund called China's non-COVID policy 1 of the 2 biggest threats to the world economy. However, as I have already stated on the previous 2 slides, we see ourselves in a good financial position to ride the perfect storm and wait for less volatility. Further success in 2022 will be determined preliminary -- primarily, sorry, by 3 quarter -- 3 factors in the fourth quarter. First, on the public authorities in Munich, where our largest scale project, Baubergerstrasse, is nearing the end of the approval process. And second, on the timely completion of the F.A.Z. Tower in Frankfurt, and it's transferred to the owner before year-end. Third, we are heading towards the assessment season, where the industry, the real estate appraisers, have to come to a conclusion how rising interest, rising rents and volatility influence the valuation of assets. Now back to Thomas for more details on our outlook.

Thanks, Patric. From all Patric has already presented, I can only summarize the following. All eyes are on year-end and a lot will depend on the last 5 weeks in terms of reporting and track record. Fundamentally, however, it makes little difference if we are able to close the F.A.Z. transaction and obtain provision for Baubergerstrasse by end of this year or beginning of next year. Both will deliver the respective financial results in due course. What I'm more concerned with is the state of the real estate industry and the impact of a change in interest rates going forward. To quote them English saying never waste a good crisis. We shall see a significant number of special situations, which will lay the foundation for our future profitability. You only "have to be in the right place at the right time." Do not invest too early. And at the same time, do not miss the opportunity. As it stands right now, 2023 is the year of truth for many, particularly private developers. With interest rates still on the rise, many competitors will struggle to refinance. Delayed projects will provide additional equity required because of construction cost overrun. Banks will be left with stranded projects, and neither have the willingness nor the expertise to execute them themselves. We believe that those will be rewarded. We have shown a solid business acumen in the days of boom and stayed away from scandals and false fame. With EUR 0.5 billion of equity and high cash reserves compared with the overall size of our business and, in absolute terms, UBM feels well positioned to participate in the opportunity hunting and have the resources and expertise to do so. I hope, of course, you join us in this view. There might be still a number of questions on your mind, and I'm delighted to answer them together with Patric. May I therefore open the lines for your questions, and thank you once again for your interest in UBM.

[Operator Instructions] We have the first question from Simon Stippig from Warburg Research.

First question would be in regard to Q4 '22 and the guidance, and you already mentioned a little bit that it's highly dependent on the F.A.Z. Tower and the Baubergerstrasse. But maybe you can elaborate what could be potential impediments, what could be potential time delays, et cetera, in the last 5 weeks? Or also where do you stand right now?

Okay. Of course, I can. And a good question, Simon. Look, without any doubt, the F.A.Z. Tower is a very complex and a big scale project, right? It is comparable with the headquarters that we've built for Zalando. Now with Zalando, there were no hiccups or whatever. But in between the Zalando headquarters and the F.A.Z. headquarters, there was a pandemic, and we all are currently witnessing how this pandemic seems to have, forgive my English, screwed up every process. And that starts when you go to a restaurant. You have the same waitress as there were in the past. It's the same menu. It's the same chef. And still, it doesn't work as it used to work. Now not to be meant as an excuse, and we've never complained and clearly stated that in terms of raw material supply, okay, we could help ourselves. But we find out now that when it comes to handover of this project, of course, all -- whatever you want to call it, all bits and pieces must link to each other and work, and that's very important for us as well. We do not want to put any tenant or whoever at risk because it's not done 100%. But it turned out, with the issues that we are having, that they seem to be more numerous than we have originally expected. And yes, it is also a complex project because you have the timber pioneer right next to F.A.Z. Tower, and they're linked even with an underground parking and. The Timber Pioneer is going to be completed end of first quarter, beginning of second quarter of next year. And -- but don't underestimate the complexity. And we want to be clear with you and give you a heads up on this one, I would have loved to report to you already, okay, that the handover has happened. And I don't know, November 30 is a pure formality. So that's to the one point, and I hope it answered your question. To Baubergerstrasse, we have a similar issue when it comes dealing to -- with public authorities. And now I'm the last one to do a public authority bashing because I think they do their very best. But from your own experience, you're not immune that somebody gets COVID, and that processes are delayed. And what we do not do, as a matter of principle, we don't intervene, okay? We don't try to put some kind of pressure on the public servants that try to do their best. Again, I would have loved to report to you that the permission is granted for Baubergerstrasse and everything is in the green and motherhood and apple pie. Unfortunately, it is not the case, as with many other aspects of our life. And I think we all have underestimated, to a certain extent, how difficult it is to get an engine really going again. And this does not change the December 31. The December 31, okay, with or without COVID is coming in 5 weeks' time. No way around, and that makes it very challenging. Of course, we do everything that we can do to the best of our ability because I think we have an immaculate track record built over the last 6 years. And I would hate to come back to you and ask for your understanding that we are still in an extraordinary situation. I simply cannot out rule it. Does this answer your question, Simon?

Sure. I would have 2 small follow-ups. So as I understand, in regard to the F.A.Z. Tower, so is it due to -- I mean, surely, it's a huge project that's linked to the Timber Pioneer, and there are a lot of complexities. But I just wonder, is it because there is not enough labor? Or is it because there are eventualities that, as you said, for example, the parking garage is -- just to understand it a little bit clearer on the F.A.Z. Tower if the...

No. Look, I understand. It's even more difficult than this. Because at the end, everything must -- and forgive me, but I think most of the listeners are German-speaking anyway, we've seen an [Foreign Language]. And we have kind of interrupted the process simply because of the aftermath of what we've seen at COVID. And every sub-supplier of us is struggling from this problem. You have changing teams. You have still an extraordinary situation. And I think our people and also our suppliers have done an excellent job. I was really pleased and delighted when we had the [indiscernible] at Timber Pioneer to see how much craftsmanship went into it. But at the end, everything must be in place, and that's the good thing about Germany. You don't get a permission until the very last document is in place. And it's in the interest of everyone, including us, because we don't want to run the risk that something is not working flawlessly, and that is what we are currently facing. We get a lot of understanding from F.A.Z., I must say, okay? We, at the same time, also enable -- F.A.Z. is already moving in, okay, so we try to improvise to the best of our abilities. And as you know, the Austrians are not really bad in improvising. But at the end of the day, you can't improvise the permission. It is a clearly set process, and it is what we always said, what we like about the markets in Germany and in Austria because they are 100% leading markets. So I can't kind of say it's a lack of labor. Of course, it isn't because at the end of such a process, you throw every resource on the project that is necessary. But to get the pieces linked to make the ends meet, I can't think of a better English terminology, it takes also a bit of, how shall I say, luck and -- luck in the sense of nobody must fall ill and everything, okay?

Okay. Yes, that's understood. And maybe just in regard to the Baubergerstrasse and the -- and also in relation to the adjustment, so now when you're getting the approval and you're obviously getting the approval, it just takes a little bit more time, why did the regulator not see that and would then actually not adjust historically, but just say, "Okay, we are seeing there's visibility on your receival of the approval in the Baubergerstrasse?" And I assume that it is Baubergerstrasse because, I mean, you sold back then 40% to a partner in Q2 2020. That was the only project. But -- so I still don't know going forward in Q2 -- Q4 '22 if you get the approval, then obviously, there will be a one-off gain, which probably you had a part in the past. So I -- can you just elaborate a little bit about that, and -- so I understand it a little bit better that the regulator couldn't see the visibility? You had the visibility. It's probably just a delay of the authorities. And how that -- how do you put that together?

Yes. Maybe, Simon, let me try to shed a little bit more light into this one. You pointed it out correctly, it was Baubergerstrasse -- or this [ Baubergerstrasse ] are we talking about, and we have to go back now to the year 2022. And we sold it on the basis of the assumption that we get the building permission -- the preliminary building permission, I think, the right English expression for that. And in the near-term future, that was the assumption when we signed the contract together, and [ any ] of the 2 parties who signed the contract and half of that was already paid at this year, have seen that as the most likely scenario that it will come within the foreseeable future. So we all know that at the beginning of 2020, we were running into COVID and everything else, and the authority process was taken much longer than expected. And now you have to see when the [ heir ] is coming to the table and saying, "Yes, but in your contract, there is also a clause saying if it is not coming, which we don't see as a most likely scenario, what is happening then and the contract would then have a different value." And they were saying, as long as you are not sure, I mean sure meaning that you have it black and white on paper, and that can be taken the view that you should have reflected that differently in your numbers. And in the end, after the discussion, we have to accept that this is also a valid view, as the view we have taken at that point of time. And that was the reason why we were saying, okay, as long as we don't have it, we correct the numbers back in 2020. We -- it's roughly half the gain we got from this -- from that contract, the legally contract we have signed. The contract is still in place. And we are hoping that this will be yield soon because we are waiting for this permission. And as Thomas has pointed it out, we had the authority process. We are hoping that we can get it until year-end. We are not sure if this can happen. And if it comes next year, it will turn out to be the value, which we have expected at least. So you are right in what you were saying, but we have to accept and we, as the management team, also had this discussion quite intensively. We have to accept that there is a different view you can take. And in the end, we have taken a view as well.

Okay. Great. That is all understood. Just if I may, I have 2 short questions and 2 short additional questions. So one is in regard now to your -- what you elaborated, and thank you very much for your Q4 '22 expectations, et cetera. Just what it also means is that your earnings per share, including the hybrid payments as a basis for dividend will be a lot lower. So is then -- what -- if I [indiscernible] current levels, then the dividend policy of paying out a certain share, let's say, 50% of EPS would be a lot lower. Is that -- would you then adjust it? Or can you comment on the dividend in some way?

Well, look, Simon, I think it's a bit early to talk about the dividend if you're not sure what the year-end result is going to be. I mean, we have a clear dividend policy where we say we want to participate our shareholders in our profitability. And we have a clear dividend policy in the respect that we are saying. We want to adjust the dividend policy according to the earnings expectations going forward. This doesn't change, and this hasn't changed even in COVID times where many of our peers, as the first action that they took, slashed the dividend. We didn't. And we came out pretty quickly and had our AGM in May and not in October to keep all options open, [indiscernible]. And we will continue to do so. So again, all depends on what the profit is going to be at year-end. And from this profit, we derive a dividend that is in line with our policy.

Okay. Great. That's understood. And one short last one. In the earnings in May, in regard to a project start in H1 '22 presentation, you indicated that you will start 2 projects and volume of EUR 40 million. Can you elaborate on that and if those projects has -- have been started? And also then going forward, what do you see with the -- In regard to cost inflation? Do you see more of your [Foreign Language] that they -- now I'm using also German word, do you see -- do you have more visibility on the cost inflation?

Sure. I can do, and you see big smile on Chris Rainer's face because he's delighted that people really read what we are writing in our reports and presentations and circle back to it. The 2 projects that we had in mind were Thulestrasse 48. We had already 1 project in Thulestrasse in Berlin. And the other one is the Adler Lodge in Kirchberg -- near Kirchberg. We haven't started Thulestrasse and refrained from it because the prices that we've obtained were not in line with our budget calculation. And we said better wait and see how price -- what prices are doing. And I yet to forecast the construction costs are not going to go up in the future. So if you can afford to do so, and we have a 50% partner there, he also agreed with us in this. And we didn't start it. The other one is the Adler Lodge in Kirchberg, a different animal, okay, because the Adler Lodge in Kirchberg is a bit extraordinary for us because it's luxury, okay? And the buyers are coming with their [ purse ], and they are not allowed to pay it in cash anymore. And don't get me wrong, but they paid in equity, okay? So these are equity payers. It's 16 apartments, and there's independent chalet. And we believe the market for this is always there because there is a need for people to kind of invest their money, so that the value of their money is not disappearing over time as it is on their bank account. For this reason, we have accepted that the price levels were higher than we originally expected, okay? And we have adjusted our sales price expectations. I can't prove until it's finished and sold that our reasoning is right, but there are good indications from the interest that this project is getting -- that this is the right decision. These are the 2 projects we had in mind. One started, one not started. The one that we've started for a reason because we believe that you want to ride the storm, as we put it in our presentation, and that means you want to make use of the situation that people say, "I have a 10%-plus inflation rate, and I wanted to invest in real estate, and I want to invest in real estate in my favorite ski resort."

Okay. Great. All understood. And just maybe -- I mean, you somehow answered already, but the visibility of construction cost inflation is still tricky.

Well, -- but they are good indications that particularly the subcontractors of the construction companies are already suffering from lack of labor. And it's usually the first sign that it's going the other direction. Will cement prices go back to where they were before Corona? No. You see yourself what steel and aluminum prices have done. And I don't want to talk about the halving of the wood prices or lumber prices because I said this has nothing to do why we are in timber construction. We are in timber construction out of the conviction. But we see an easing of anything that has to do with no energy intensive production. And we see a certain willingness on the construction company side, maybe not the very big ones, because they have record backlogs, but the medium sized ones and the subcontractors that lets us be cautiously optimistic.

The next question comes from Stefan Scharff from SRC Research.

My first question is about the hotel market and the hotel performance. You opened the Andaz in Prague in March or April, I guess, and also The Hague is quite new and also in Germany, Potsdam and Düsseldorf. Perhaps you can say a little bit more how did you like the first 9 months of the year and what you expect -- or what is your feeling for the hotel market in the next year. And might there be a deal here? Or is this too early to say?

Well, we have to distinguish between the operations and the prices that we can achieve on the market for the real estate. On the operations, we are doing better than forecast, which doesn't mean the same to you. But the most important one is that the average room rate increase, okay, was significant. And that couldn't have happened if the industry as a whole wouldn't be very disciplined. But they all see that they can't control the cost otherwise, and the occupancy rate is also on the upturn, but it's second most important after the average room rate. We are very happy with the Andaz because now with [indiscernible] being in the presidency of the EU, we had your Chancellor Scholz, even though I know that you have certain feelings about him, yes, and we had the U.S. Defense Secretary as our guest because it's a freestanding hotel. And from a security perspective, it's easy to control than any other 5-star hotels in the Czech Republic. For you, maybe an important side information is that also Machine Gun Kelly stayed at our place. And we seem to be the place for the celebrities at the moment. And we have a terrific Director, [indiscernible] and she does an event every week almost from Jimmy Choo pop-up store in a [ suite ] to welcoming artists and everything. So I can only recommend see it with your own eyes. But I think we have even been voted best hotel in Prague, and you know that there is a very good Four Seasons Hotel there as well. The occupancy, of course, in a 5-star hotel takes time. So we are not talking about 80%, we're talking about 50% occupancy rate, let me also be straightforward with you on this one. Now you've asked about the future. We believe there are a couple of good arguments in favor of the future positive development of the operations. We see that people accept the new price levels and even business travelers, okay, who usually have frame contracts, except this, because they have the same argument with their customers. And don't expect hotel prices to stay the same. And you might have noticed it yourself. The days where you could stay at a nice 4-star hotel for EUR 150 are over. And they won't come back from it. Now on the real estate side, I have no good news for you because at the moment, the honest answer is that if you want to sell a hotel, okay, you don't sell it really substantially above 20x annual rent, okay? It's really depressed, it's a 5% yield for the Austrian listeners. Now there are -- maybe here, there are exceptions. But generally speaking, we don't buy the interest that is shown for these hotels and have taken them off the market. So when you have a look at our outstanding assets, and they have grown to EUR 500 million, I'll give you a rough figure, EUR 300 million are in hotels at the moment. And the only good news that I can give you is we can afford it, okay? It [ locks ] the balance sheet capacity, but we can afford it. And we will put the hotels on the market when we see an indication that people appreciate that they might come -- may come too late if they don't buy right now. The time is not there yet.

Okay, okay. So next question would be the bond market. You have a rather undemanding debt profile. I think it's EUR 120 million, but at the end of next year, November '23, perhaps, what is your best guess or your expectation now for the bond market to be more open throughout next year? What are your plans, your strategy here on your debt side?

Yes. Stefan, thanks for this one. So what I can tell you is, currently, the bond market is closed. I mean, we are not the only one with this observation. It is market phenomenon. And my read of that is that most of the reason why the bond market is closed, at least for companies who are in the unrated sector, is because there's so much volatility and unsecurity in the market. So as long as we have that, we won't see bond markets to come back again. As you were pointing out, we are looking at that one a bit relaxed. We are monitoring that because the moment it might be possible, we will go back to the market and use whatever is possible to be used. So saying that, my best guess currently would be that it will take at least the first half of next year to get the volatility and uncertainty out of the market. Maybe I'm wrong, I hope so, and that it is quicker. But I would say from today's point of view, the window of opportunity to come back to the market and try a bond issue is second half of next year.

I see, I see. So my last question is about the upcoming opportunities in this distressed market. So can you tell us a bit more about the expectation of the sellers about the multiples? And what offers do you get at the moment? And what offers might you get? Or what could be interesting at the beginning of next year?

Well, you are better aware than me regarding the listed German companies that are in deep troubles, and I don't want to mention them. It's sad for me actually to witness this. We always have been aware of these kind of troubles that they have at an early stage. Unfortunately, the industry is an industry where people tell you 3 weeks before they file for bankruptcy about their future plans and what they wanted to do. And I think this attitude must change because you have otherwise an unbridgeable gap between what you are prepared to pay in the new era and what people have to accept to digest. What we are talking about right now is how much they discount their book values. So at half year, I would have told you they still try to achieve book values, okay? They have appreciated that this is unrealistic. And now we are just talking about how much loss can they digest, so that they can sell it off. Because if you don't get it in, it will fall to the bank, and their equity and mezzanine is completely gone. Now these are very abstract words. We are having contact with all the known and also some of the unknown market participants. Everybody kind of plays this up a lift. But I think the moment of truth is coming now at year-end, and year-end is 5 weeks from now.

The next question is from Philipp Sennewald from Hauck Aufhäuser Investment Banking.

To wrap it up here, a quick one from my side. I would kindly ask you to give us a bit more color on this opportunity hunting you aim for next year regarding what volumes can we expect there. Also I mean, your pipeline is quite diversified, quite balanced between commercial and residential. Will that continue regarding future acquisitions or may it be that you focus on one of the more at least in midterm?

Yes, good question -- or good questions. Let me start with it, and I think Patric also wants to add something to it. It's a fine line that we are walking, and I tried to make this point in my presentation. When I said on the one hand, you don't want to buy too early, that's actually the problem that we have with real estate investors. They all hold back, and this is why we are in a shock paralysis because nobody is buying, because everybody is afraid the market could go down by another 20% or so, okay? And that's the number that we are looking at right now. On the other hand, things can change pretty quickly. And no macroeconomist, not from the real estate arena, but from outside believes that it is a long-term structural issue. Everybody believes that the market kind of gets a big shakeup and then will come right simply because the asset class is too attractive, and it's becoming even more attractive at the end of the year because at the moment, it's slightly overrepresented in that portfolio of investors. But the only reason for it is because you knock off the value of your share every day, and that's different to the real estate arena. And I guess, that was the point that Patric also wanted to make. You asked me about the volume. It's more than we all can chew, I can promise because, I mean, we are talking about the perfect storm. And people come up to me and say, "Why are you so pessimistic? Or why are you so dramatic in your language?" And I tell them that I think I'm realistic in my view. I could also talk about the existential crisis of a lot of our competitors, okay, particularly the private ones because they have completely cut off any source of equity. The mezzanine investors all try to get the money out, and they have almost disappeared or asked for 18% to 20% interest rate, which kills every project. And they have been undercapitalized traditionally for a long period of time because what you did in the boom phase is you reinvested the equity that was freed up immediately in the next project. So I predict that the year 2023, as mentioned, is going to be the year of truth. And the important thing is that everybody gives you enough credit that you will be able to carry a project through and not so much -- how much money you could make with it or if you'll get it for too low a price. It's more a question of [Foreign Language] Wait, Patric -- I turn to Patric.

Let me add a little bit because I got your question also in the direction that you were asking, what is our appetite maybe. Also on this one, we have to say that depends on a lot of factors. One is the refinancing capability. But from a balance sheet point of view, from an equity point of view, from the LTVs and also from the cash cushion we have, we are able at least to shoot for a good opportunity. And then the question is how many opportunities are coming and which time frame, because taking an opportunity on board will probably eat up quite some cash. And then we need a restructuring phase in order to free up the cash of the acquisition we have taken to get to the next one. So if the expectation of the market is we do 5 acquisitions in 2 months, that's probably impossible for a company like UBM. But if we have a little bit time to digest, we can, I think, participate quite well on any opportunity the market is giving to us. And what Thomas tried to tell you and to tell everybody is we will see in the year 2023, it will start. But I don't expect that this will come in as a huge way. It will more be an increase in the fee level, meaning that we see projects coming over time into the market, which are promising.

There are no further questions at this time, and I hand back to Thomas Winkler for closing comments.

Thank you, Francia, and thank you for all of you who have been bearing with us. Thank you for your interest. Very good questions, all to the point. I hope we didn't sound too pessimistic on the market. And please keep our fingers crossed or pray for us, whatever your preference is. Have a good day, and all the luck with the next conference call, I think, which starts at 11 [Foreign Language] Bye-bye.

Bye.

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you very much for joining, and have a pleasant day. Goodbye.