Vonovia SE (VNA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining Vonovia SE Interim Results for the Nine Months 2023 Analyst and Investor Call. Throughout today's recorded presentation, all participants in listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Rene. Please go ahead.

Thank you, Sandra, and welcome, everybody, to our earnings call for the first 9 months of 2023. Your hosts today are once again, CEO, Rolf Buch; and CFO, Philip Grosse. I assume you have all had a chance to download today's presentation. In case you have not, you will find it, as always, on our website under latest publication. Rolf and Philip will now present the results and also give you a general business update. And of course, we're looking forward to your questions afterwards. With that, let me hand you over to Rolf.

Thank you, Rene, and welcome also from my side to our earnings call. I want to start with the highlights on Page 4. First, let's talk about disposals. Year-to-date, we have now sold a total of EUR 3.7 billion, of which EUR 1.7 billion were signed since we last reported in early August. About half of the total has already closed this reminder expected at a later stage. We will have more detail on disposal progress on the next slides. Second highlight, financing, cash flow and leverage. Since the beginning of the year, we have signed EUR 2 billion of new bank loans and rolled over EUR 0.8 billion of existing bank loans. We also have extended our RCF commercial paper recently by two more years and at unchanged terms. Our total pro forma cash position is EUR 3.8 billion. All of our unsecured maturities are now covered until the end of Q1 '25. Pro forma, our LTV is at 45%. Turn too high for this interest environment, but clearly, we have been able to manage against the headwind in this environment. And it is my understanding that Moody's acknowledged these efforts when they confirmed our rating last month. Make no mistake, our focus remains on the delevering through disposal. Third, our 9 months results, rental operations are as strong as ever. Organic rent growth was 3.8%. Vacancy was low at 2.1% and rent collection was virtually in full with 99.9%. As Philip will show you a bit later on the other segments are still more difficult, and that is why our positive rental performance was diluted by the other segments. All in, our total EBITDA was down close to 5% and group FFO declined by a bit more than 8%. After portfolio valuations at the end of Q4 last year, as well as Q1 and Q2 this year, there was no triggering event for portfolio valuation as Q3. And as you can see in the transaction we did, they were all around fair value. And last, our guidance. For our final guidance for '23, we expect a 3.7% to 3.8% organic rent growth, the lower end of our EBITDA range and the midpoint of our FFO range. For our initial guidance for '24, we expect rental revenue in line with the '23, even through low, there will be a negative volume impact from the massive asset disposals. Adjusted EBITDA totaled in line with '23 as well and a moderate decline in group FFO, which is due to higher taxes comp sales and full year effect from increased interest costs. And we guide an additional signing of above EUR 3 billion gross proceeds from additional disposals. On Page 5, I would like to zoom on our disposal progress so far. Before I go through the update, however, let me take a step back and look at the bigger picture. When I joined this sector a little over 10 years ago, one of the fundamental things I learned in the beginning was that there are two ways to make money in real estate. One is through the net initial yield and the other is through value growth of the assets. That is still how we look at the sector and how we make our portfolio management decisions. In the current environment, however, many players don't accept this fundamental concept. Most investors and potential buyers look at net initial yield only and ignore a growth element, not because they are stupid, but often, banks don't provide adequate finance for growth potential. That is why disposal, which are difficult per se these days are currently very difficult for portfolios where this growth still needs to be realized. What works better is new constructions where the rent is already at market level or assets where the net initial yield is high because assets are unlikely to see much more value growth. Coming back to our view of the world. We believe that the net initial yield should not be the sole criteria for making the sales decision. We must take the longer-term expectation for our assets into consideration. And we are not selling to deliver price discovery to the market to prove or disapprove certain price points. We are selling to manage our leverage. In this context, I think it is fair to say that as far as the sector goes, we have been comparatively successful so far. Year-to-date '23, we have now signed EUR 3.7 billion of disposal. That's not bad compared to our initial disposal target of EUR 2 billion and also compared to transaction market in general. However, it is also clear that we remain committed to pursue further disposals to repay upcoming bond maturities and to ensure that, that KPI is moves back into the respective target range. While we show you all the disposals on Page 5, I limit my remarks to the disposals we have agreed since we last reported in early August. Since then, we have signed another EUR 1.7 billion. We sold 361 apartments interest to a family office marginally above fair value. Second, you probably saw last week that we sold 1,200 apartments to the city of Dresden for EUR 88 million and at fair value. The only reason you saw a press release from us for this transaction was that the mayor and I did a press conference in Dresden because it was a big news for the mayor. In spite of our press release, there seemed to be some confusion about this transaction. So let me give you the facts. Yes, the deal was smaller than the 3,000 or even 6,000 that has been reported in the press. But the Dresden holding company doubled its size with this deal and this was probably enough for them. What is clear is that this transaction further strengthens the partnership between the city and Vonovia. And this is important because Dresden is our second largest city behind Berlin. The EUR 88 million purchase price reflects the fair value of both the asset and the land was sold. And by the way, the land does not have building out. Comparing it to the average interest makes absolutely no sense because the portfolio we sold is of much lower quality with unrefurbished old East German blood and bow in weak micro locations. Our average fair value interest is EUR 1,955 per square meter. The average square meter value for the assets we sold was EUR 1,130 so almost half of the average. At the press conference, the mayor announced the city plans to invest EUR 100 million into this portfolio, which is probably a good indicator to the current quality. More than 50 years ago -- 15 years ago, when the citi sold its mobile portfolio to Gagfah, these assets were actually earmarked for the evolution. Third transaction. We sold another EUR 1 billion common equity to Apollo in our northern portfolio last week, and I will show you the key terms on the next page. EUR 209 million came from selling 958 apartments in individual transactions for our recurring sales channel. And finally, a total of EUR 377 million proceeds in a series of smaller transactions in which we sold development to sell low-yielding multifamily homes and residential noncore, all around fair value and commercial assets around 7% below fair value. We sold 1,200 new constructions to CBRE for EUR 357 million yesterday and at around 4% discount to fair value and a gross yield of a little over 4%. These are new constructions located in Berlin with a square meter value in excess of EUR 4,000 and rent at the high end of the market with limited growth potential going forward. Given the size of the transaction with Apollo, I want to touch on the main elements of this deal on Page 6. We signed an agreement with Apollo who will invest EUR 1 billion in exchange of 30% minority stake in the asset holding entity of our northern portfolio. So EUR 1 billion of additional equity for us at terms much more favorable than we observed in our share price. You will probably recognize the key terms of the transaction because they are so similar to the [indiscernible] deal. We will continue to control operate and consolidate the portfolio, and Apollo will have limited minority industry protection rights. Apollo will receive a higher than their pro rata share of the dividend. Correspondingly, we keep a long-term call option that gives us the right to repurchase the participation and a pre-agreed IRR. The IRR range is purely related to the timing of the call option exercise at our discussion starting at 6.95% and reaching a maximum of 8.3%. The IRR takes into account any dividend paid, so it reduced the call option price over time. We will amount for the value of this call option as our financial asset in our accounts. Because of the call option, our cost of capital is capped at the IRR range. We retained 100% of any additional upside or outperformance on the portfolio compared to the business plan. There is no obligation for us to exercise the call option. Maintenance and operating expenses are paid from the cash flow generated by the portfolio and hence, shared between the parties. And with this, over to Philip.

Thank you, Rolf, and also a warm welcome from my side. Let's move to Page 7 on the segment overview. As Rolf said, our rental EBITDA is as strong as ever and grew by 7%. The drivers were higher rent growth, continuously high occupancy and virtually full rent collection. Further EBITDA support came from a lower cost base for maintenance and operating expenses. And finally, the Deutsche Wohnen synergies are being realized as planned. So for 90% of our business, we had a very good first 9 months. Unfortunately, the other segments are still impacted by the low transaction volume, our reduced investment program as well as overall market environment. Let's run through the different segments and start with rental on Page 8. While the portfolio was marginally smaller than last year, rental revenue was up 2%. On the expense side, maintenance was well under control with minus 4.7%, and the synergies from the Deutsche Wohnen transaction helped us to cut operating expenses by more than 15% as the key driver to operational profitability. On to some of the key operating figures on Page 9. Year-on-year organic rent growth was at 3.8%. And you can see how the market-driven rent growth has effectively doubled as we have been guiding for. This underlines our conviction that market rents are picking up, even though this is happening at a moderate pace due to Germany's rules-based system. The fluctuation in 9 months annualized was 7.9%, down a percentage point from the end of last year. And vacancy was at 2.1% unchanged compared to last year at this time. And also very unsurprising, I would add, as the imbalance between supply and demand keeps shifting even more in favor of those who have the supply. Rent collection remains extremely high, and we also view this as a very reliable indicator for affordability. To be clear, these numbers include not just the net cold rent, but also all ancillary costs and energy costs. And finally, maintenance, you can see how we have been managing capitalized maintenance downward. And that, again, with a view towards optimizing our liquidity. Let's move to Page 10, and let me give you some more color on how the accelerating Mietspiegel growth is reflected in our numbers. For this view, I'm focusing on the rent growth we get from adjustments in the Mietspiegel or the OVM, which is the German acronym for local comparable rent. For those who attended our Capital Markets Day in September, you will probably recognize this term. Put it in simple terms, the OVM is the absolute rent level to which you can adjust the rent for sitting tenants without any investments. As we have been reporting, there is clearly an acceleration of Mietspiegel rent growth following the rise in inflation and in the context of supply-demand imbalance. The momentum has reached a point where not all the rent growth can be implemented at once all the time. So the acceleration of Mietspiegel and OVM growth has started creating a bow-wave for part of the rent growth that comes with delayed cash implementation. Because the rules-based rental system does not allow for the full implementation right away. Instead, the portion of the allowed rent growth is often delayed. And the main reason for this delay are a local maximum rent increase over 3 years, that is 11% in Berlin, 15% in markets, which are defined as tight and 20% elsewhere and the 15 months hates between 2 rent increases. So we have additional rent growth that is irrevocably linked to each specific apartment but it can only be implemented with a time lag. We are not talking about maybe or potential opportunities, the maximum level is already marked in our SAP operating system apartment by apartment and the remaining step-up will be automatically implemented immediately after the restriction period have left. You see the impact in the chart on Page 10. Again, this first occurred in 2022 and carried over into 2023. You have two effects. On the one hand, you add the bow wave through the new Mietspiegel. On the other hand, you reduce the bow wave whenever you can raise to the full Mietspiegel or OVM because the restriction period has ended. The Bow wave indicated by the green block will be much bigger in 2024, a year for which we don't quantify the individual rent growth drivers just yet. The main reasons are Berlin is expected to do a detailed Mietspiegel for the first time in a long time, plus you still have the catch-up in rent levels following the highest court ruling that the rent freeze was unconstitutional. Detailed Mietspiegel are mandatory for all larger cities starting January next year. And across the board, we do see stronger Mietspiegel growth in 2024 compared to 2023. We expect the trend of a larger bow base to last beyond 2024 and until the full step-up in Mietspiegel and OVM can again be implemented cash effective in one go within the boundaries of the local 3 year maximum. To avoid misunderstandings in the interpretation of this number, the Mietspiegel or OVM growth still to be implemented of any given year will not all be implemented in that same year. We will have two effects, new Mietspiegel will add to the bow base hence the apartments have reached the end of the restriction period the bow base becomes smaller. After that detailed explanation, let's move to Page 11 and the EBITDA from value add. The EBITDA reduction in this segment is primarily driven by challenges in our craftsman organization coming mainly from the reduced investment volume. Increased costs for material and energy further impacted profitability. The reorganization process for our craftsmen organization is underway, and we are confident to be able to get this back on track also helped by higher investment volumes at attractive returns we envisage for next year. On the positive side, external revenue was up and mostly driven by energy and photovoltaic installations. Page 12 for recurring sales. As you can see, the fair value step-up in this segment remained high with 43%, so comparable to last year. But the challenge in the first 9 months was the volume. We are seeing more interest in this product again, and the level of reservations has been going up lately, which is clearly a positive indicator. In the first 9 months, however, we sold half the volume of the prior year generating some EUR 170 million of free cash. Our focus in this segment is currently cash generation, more than price optimization. So we may well have seen the peak of fair value premiums in this segment for the time being. And finally, the Development segment on Page 13. Development continues to be an attractive business. But here too, the volumes were lower than last year. As you can see on the lower left-hand side, we have been shifting more projects towards development to sell in line with our revised capital allocation policy. We only have about 4% of the balance sheet committed to development to sell. One final remark on development. We expect the second CBRE transaction we just signed yesterday to lead to a moderate negative EBITDA impact in Q4. Here again, the focus is on liquidity over profitability. Given, and that is moving to the next page, the steep discount of our shares. The NTA is maybe a bit less of a focal point. But of course, a relevant KPI nonetheless. After the first 9 months, 2023, the NTA per share was down 12% to EUR 50.51. The main driver were, of course, the valuation results in Q1 and Q2 and the 2022 dividend. Let's talk about our investment program on Page 15. And as a reminder, this includes essentially three buckets: A, optimized apartment, this is apartment renovations after tenant share; B, upgrade building, this is investments in decarbonization and building modernization; and C, space creation, this is new construction for our own portfolio. Space creation, as you know, is on hold, and we are essentially only finishing the projects that had already been started, and that will require about EUR 300 million in 2024. The focus for the time being is clearly on the other two. Optimized apartments delivers net initial yields of around 10%. And the main problem we have here is that fluctuation is going down, so we are not getting back as many optimized apartment opportunities as we would like to have. An upgrade building is, of course, important, not just for the overall quality and value of our assets, but also for the climate path. We see high single-digit to low double-digit IRRs for our projects. And in the case of heat pumps, even net initial yields of around 10%, thanks to the recent change in regulation. We have said recently that the drastic cuts we made for the 2023 investment program was overdone, even though it was the right thing to do at the time. Going forward, we are looking to increase the investment program again, and you can see the first signs in our plans for 2024. And finally, a note on development to sell. This is not included in our investment program. We manage development to sell as a self-financing entity. In other words, new projects must be funded with proceeds from development disposals. And this also applies to the around EUR 700 million targeted to be invested in 2024 to finish projects currently underway. Page 16 is the familiar page on our debt structure. There is one number in particular, I would like to point out, and that is our average interest rate, which stands at 1.7% for an almost 7-year tenor, and that compares to 1.5% at the end of December. Unsurprisingly, this number is increasing, but I think it's worth mentioning that it is increasing less rapidly than most people have anticipated. So far, at least, we have been able to manage it pretty well in my view. The table on the left-hand side of Page 17 shows the debt KPIs, as reported for end of 9 months. For LTV and net debt to EBITDA, we have also included on a pro forma basis for the impact of the EUR 2 billion disposals signed but not closed yet. On that basis, the LTV, as Rolf mentioned, was at 45% and the net debt-to-EBITDA multiple at 15.2x. At the right, hand side, you see the bond covenants and the very comfortable headroom we have. On Page 18, a we want to remind you of the progress we have been making on the banking side. Year-to-date, we rolled over or signed new loans for a total volume of EUR 2.8 billion. We also extended our EUR 3 billion RCF commercial paper for 2 years and this at unchanged terms. Our general strategy of rolling over secured debt and repaying unsecured bonds that disposal proceeds will continue. We use the additional bank financing is back up as we capitalize on the spread between unsecured debt and less expensive bank debt. Our total pro forma cash position is EUR 3.8 billion, and that is coming from the EUR 1.1 billion cash on hand as of the end of the quarter, EUR 750 million loans signed but which are still undrawn and EUR 2 billion disposals signed but not yet closed. All our unsecured maturities that are now covered until the end of Q1 2025. The secured maturities we will simply roll over in a banking market, which enjoys strong appetite for our name and product. Let's move to Page 19 for the guidance. We have narrowed the range for organic rent growth to 3.7% to 3.8%. This is a step-up from 2022 and even more so, when you remember that the contribution from market rent growth is higher in 2023 while the investment driven rent growth is expected to be lower. One major driver to rent growth is fluctuation. And here, as I said before, we are facing some headwinds as churn keeps coming down further and further. We show the evolution in the appendix, and we are now at below 8%, which is a record low and clearly a reflection of the lack of available apartments in our markets. So supply-demand imbalance is always two sides for us. And while we expect to reach the upper end of the range for rental income, the headwinds in our other segments weigh on total EBITDA, and we expect to end the year on the low end of the guidance range. For Group FFO, we expect to come out very much at the midpoint of the range. Our expectation for the SPI at this point in time are higher than initially planned, we think we will land in between 105% to 110%. Q3 in November is the time when we give you also the initial guidance for next year. And this year is no different. However, the level of detail, as you may have seen, is different from previous years. In the current environment with limited visibility on timing, volume, and type of further disposals as well as the trade-off between profitability and liquidity for our disposals. We are not in a position today to provide the same quantitative guidance as in prior years. We do expect the general direction of our business along these lines. We expect our rental revenue next year to be in line with 2023, and that in spite of the negative volume impact from asset disposals, I think a very good outcome. And the same goes for adjusted EBITDA total, also in line with 2023. Driven by higher taxes due to sales and increased interest cost. We expect a moderate decline in group FFO and group FFO per share. Our investment program will see a moderate increase compared to 2023. And as always, the higher SBI targets are calibrated to our target achievement of 100%. We intend to give you a quantified organic rent growth for 2024 with our year-end reporting. And finally, we target more than EUR 3 billion of gross proceeds from further disposals we aim to sign and to be very clear, this is on top of the EUR 3.7 billion signed year-to-date, adding up to a total of EUR 6.7 billion plus for the years 2023 and 2024. Before I hand it back to Rolf for a quick wrap up, let me give you an update of the investigation on Page 21. I probably do not need to repeat the background bit, you all know that our offices were searched by the authorities back in March. And you also know that Vonovia is an injured party not the defendant. The internal investigation by Hengeler and Deloitte is almost concluded. As you should expect the investigation is thorough and comprehensive the forensic analysis included a large set of data with several million e-mails and hundreds of individual business processes. And this data analysis has been followed by individual interviews to further support that. But before we are able to submit the final assessment, though, we want to exchange our state of knowledge and discuss our findings with the respective public prosecutor's office. And we expect this to take place in the coming months. That is a brief update. And with that, I hand it over to Rolf for the closing remarks.

Thank you, Philip. And my wrap-up will be brief, but I would like to have a bigger picture first. There is never a good timing to face more difficult times. But beginning of the crisis in Q1 last year came at a particular unfortunately point of time for us. We have just acquired Deutsche Wohnen, and we have stretched the leverage to a higher point than where it should be when you go into a higher interest rate environment. However, it is what it is, and we are now working our way back in a more difficult environment than we had anticipated. The relevant question is, how does the company act in such an adverse environment. Our cost of action is actively work on disposal to try and stay on the front foot regarding our leverage. Clearly, we have more work to do, but it is equally clear that generating EUR 3.7 billion in cash flow in a market that many people considered as shutdown is not a bad interim result. We remain fully committed to our disposal efforts to further strengthen the balance sheet and bringing the debt KPIs back into the target range. As we have shown in our disposals transactions are possible in spite of market challenges, but they need time, careful preparation and execution. We now have all unsecured maturities covered until the end of Q1 '25. Our headroom allows us to continue to act from a position of strength, and we are not forced to take drastic measures that would be detrimental to the long-term nature of our business and or destroy long-term shareholder value. As we move on, we do so on the back of a rocket, solid core rental business that continuously delivers a strong performance and sustainable growth. And this is not by chance. But because the long-term fundamentals are extremely positive as we have repeatedly pointed out, largely as a result of the megatrends. And business, thank you very much.

All right. Thanks, Rolf. And Philip, I'm going to hand it back to Sandra to open up the Q&A for us, please.

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question comes from Charles Boissier from UBS.

I have three questions. So first on guidance. As Philip mentioned, you usually provide quantified guidance and not this time, but the only place where you did provide quantified elements is on the disposal where actually you usually abstain from it pointing that it can hurt pricing power. So my question is essentially what I'm trying to understand, is it driven by ongoing discussion on which you have very strong clarity and strong confidence of closing? Or is this more of a commitment to rating agencies? I think looking at the Moody's report, they seem to expect at least EUR 4 billion by the end of 2024.

So to be very clear, you know our breakdown, I think we have not shown it today in the main deck, but in the backup. We still have a lot of noncore disposals ongoing. Which has to be sold anyway. So this is actually a commitment of us that we will continue to get rid of the disposals. And this is, of course, still the nonresidential part, which we have in our portfolio, which doesn't belong to Vonovia, and which has to be sold anyway. We have a bunch of noncore portfolio, which has to be sold. There is also the intention still of Deutsche Wohnen to sell the health care portfolio. So it is just to underline that we are highly committed to get rid of these noncore portfolios to improve the quality of our portfolio.

Charles, let me just add on Moody's. Based on the rating opinion, it was EUR 2 billion disposals for this year still to come, which we have largely overachieved and EUR 2 billion for next year.

Okay. Still on disposals, having signed EUR 1.7 billion in a rising environment as Rolf mentioned, when the market is essentially shut down, how should we think about the potential for disposal once rates stabilize? And would you do more than to reach your targeted leverage metrics?

So to be very clear, I think the disposal program is getting easier. It's not easy, but it's getting easier. And nobody knows what will happen with interest rates, so I do not give you a guidance for interest rate. But of course, it will come -- if it will come easier, it will be easier for us to get rid of our noncore and other things, which I just mentioned. And of course, it is in the interest of the company to finish the disposal program as fast as possible because we all know that disposal for longer term is not the solution. We have to fix our balance sheet. We have to get rid of our noncore and then we have to go on to close the company back again. So that's why we all have the interest to finish the disposal period, which will be not finished today, but it will be finished one day. And we all have the interest that this pad will be finished as soon as possible. So that's my maximum speed on disposal.

Okay, clear. And to build on what Rolf you mentioned about it getting easier in terms of disposal. It is also in this context that we should understand that you mentioned Vonovia does not intend to pursue additional joint ventures of this kind because -- on the face of it, you mentioned to us all the merit of the JV deal relative to your cost of capital. So the question could be, why would you not consider them if there was interest for further JVs. And is it because right now, you're seeing that it's getting easier and you don't need to do this kind of JVs anymore?

No. The main reason why we said we will not have this more -- this kind of structured JV is because to make a structure JV like this, you need a very specific combination of different elements as is possible. One of it is that you need a legal structure, which combines asset in one region. And to be honest, the northern portfolio was probably the last structure, which completely fits into the criteria. So the main reason why we are not doing it anymore is because we don't have enough available products, not enough product available, which is easy to structure. But of course, it is still clear that we are ready to do traditional joint ventures with real crude determination and normal dividend distribution in -- especially in Sweden. And we do not exclude traditional joint venture in other parts of our portfolio. Of course, Sweden in the moment is not the best time. So don't expect us to do joint ventures in the foreseeable near future because we have to wait until the Swedish market has stabilized, especially 2 of our competitors, which need to solve some issues. But it is not forgotten. It is a way how we can close the company. That is some additional joint ventures.

The next question comes from Bart Gysens from Morgan Stanley.

I had a question regarding your FFO guidance for 2024. You're guiding to a moderate decline in group FFO and group FFO per share compared to 2023. Traditionally, the group FFO you quote, is before minorities. Can I just clarify that that's indeed again before minorities. And I wanted to understand that, in particular, given the accounting for the Apollo deal, does that have an impact on minorities?

The answer to both question is yes. We are guiding the group FFO minorities. And for the two Apollo transactions, you will see higher minorities as of next year. where we essentially account for the dividend payments under the JV agreements.

And so can I follow up on that? Would you still say that the decline in FFO? Because I think we all appreciate that investors buy the shares after the minorities and that a group FFO before minorities is somewhat suboptimal, right, from a valuation perspective. So would you still say the decline in FFO will be moderate on an FFO that is relevant for shareholders, i.e., after minorities?

I mean just to put something straight, we, as a reminder, have signed fairly significant amount of disposals, EUR 3.7 billion, and we are targeting another EUR 3 billion next year. So that these disposals have somewhat a negative effect on EBITDA and FFO should not come as a surprise. And not all of that, we are able to compensate to higher rent growth. And second, you also have the situation that the accounted book values for tax purposes are lower than our disposal prices. So you also have increases in tax-related disposals. Now specifically on the JVs, yes, we've done EUR 2 billion of JVs. This is comparatively cheap equity, but it remains equity with the cost initially of 7% growing to 8%. And what we do is initially or essentially using this equity to replace financing, which would be otherwise necessary. So yes, there is a cost embedded in that. And that is essentially the price we have to pay to delever our balance sheet, which, I guess, we all agree should be our key priority. Is that sufficiently answering your question?

Well, I mean, to be honest, no, because, I mean, the shares, if we try to determine the value of the shares, we need to understand the direction of the earnings that are relevant to the equity that those shares represent. And so therefore, when you say there will be a moderate decline in group FFO, it would be more helpful to guide on the FFO after minorities that actually applies to the shares that investors can trade, right? So that's why I asked. Is it still only a moderate decline? I think we all appreciate that degrowth in your balance sheet and selling a lot of assets is, of course, will have a dilutive impact. But we're trying to determine how dilutive that is and what the impact is. And therefore, being more explicit on the increase in minorities would be helpful. But if you call...

I take that on board. But I think kind of a rough estimate is easy to make because Deutsche Wohnen currently is accounting for the vast majority of our minorities. And here, you have separate disclosure. And the JVs, we published the gross asset value. You know about the dividend distribution. So you can fairly simply apply that on an assumed net cash flow, and that gives you a very good estimate on the additional minorities to come for next year.

The next question comes from Marios Pastou from Societe Generale.

Just a couple of questions from my side. Maybe I'll ask them one by one, if that's easier. Just firstly, on the EUR 2 billion of disposals, you've signed but not actually yet closed, I mean, included in the pro forma LTV. Is there any foreseen risk of noncompletion here from your side?

No.

And just to add, I also expect 3 quarters of that to close by the end of this year.

So of the EUR 2 billion, there is some lag that will happen in...

As a big point as a package is a CBA we sign yesterday night. So it is not closed, it's signed. And Apollo, we signed a week ago. So that's why it's signed and not closed, but the closing conditions are nothing which are on risk.

And no risk potentially of maybe the buyer pulling out at all maybe across some other deals?

No, because it's only closing. So closing is just based on some conditions, which are, in both cases, actually just Technical.

Okay. Very clear. And just secondly, I know you mentioned about your organic rent growth guidance with your full year reporting. I'm siding just the visibility here you have over the future rent growth. Is there not a way you can quantify just a high-level expectation of the direction for next year? And what is stopping you from being able to give guidance for the organic rent growth coming through in full year '24?

If you look for high-level expectation, you go to the page, which is Page 10, very right-hand side, and you see a number beyond 5%. But we are not able to quantify as of now the split in the various constituencies in terms of Mietspiegel OVM, implemented cash-wise in 2024. And which is laying on the contract and the investment rental growth. And that detail is to come with full year numbers.

Okay, very clear. Is it safe to say that the green portion of that '24 estimate from this still to be implemented would be higher within [ map ] about bar that column?

That is fair to assume, yes.

So if you take a rule, it's always a good way to look at the figures.

The next question comes from Rob Jones from BNP Paribas.

5.65% was the height when I measured it with the rule of this morning. Two questions for me. One was in terms of the Berlin portfolio disposal, the CBRE disposal, EUR 357 million that you announced this morning. I appreciate 4% discount to book value. I think you also said the gross yield a little over 4%. The question was, is that not considered transactional evidence from an appraisal perspective, I get the point around some of the transactions have been equity deals, not portfolio deals. But why isn't that deemed to be a transaction given that, obviously, your Berlin portfolio is considerably lower yield or higher in-place rent multiples for that? That was my first question.

Yes. From an accounting perspective, we are looking at a triggering event. Which is typically the case if you do transactions with a discount in excess of 5%. Here, what you have to see is a that the deal we did with CBRE is only one of many. And the other ones we did in residential were all at or even slightly above fair value. and that is now outside recurring sales business, which is significantly above fair value, but obviously a very, very different product. And second, to be also very clear, in the CBRE transaction, we have also accepted some guarantees and some minor deferrals in the payment of the purchase price, and that has been discounted for in the numbers. So the EUR 357 million is reduced by that number. and all of that is no indication whatsoever for a triggering event or revaluation of our portfolio.

Okay. Very clear. And the final one for me was when I look at the right-hand side of that Slide 10 chart, and I apply a bit of a haircut to the height of that bar to the top line and think about top line for next year. Obviously, you're giving flat guidance. Obviously, the negative effect is asset disposals. I think I'm right in saying that the Apollo deals don't impact top line, obviously, the impact minorities. But how do we end up in a scenario where the non-Apollo transactions have, call it, EUR 1.7 billion multiplied by the average yield that you've sold that is less than some of that is less than the positive benefit of the like-for-like growth that we will see next year. So how do we end up with top line still flat rather than up?

Again, Rob, I mean, this is very much a function of the disposals outside the JVs. We get year-to-date, plus the additional disposals we are targeting for next year, which are embedded already in our guidance. So making the reference to the gross proceeds of another EUR 3 billion. And that is without JVs, we are targeting for next year. And against that backdrop, I must say I was actually proud that we have been -- are guiding to be able to achieve the flattish rental income, also considering that the rental growth we are indicating on Page 10, right-hand side is not all cash you can expect for next year.

Yes. Okay. Then I apologize. I hadn't appreciated that the guidance for next year was including the effect of planned or guided disposals.

The next question comes from Marc Mozzi from Bank of America.

I have essentially two questions from my side. The first one is on the dividend. I think it was relatively widely expected by the market that you would have provided a guidance for this year dividend? And my question is, do you think that the risk of the dividend cut has been reduced as a result of today's announcement on your disposals and the fact that you're targeting EUR 3 million next year?

Mark, let me answer this in a more comprehensive way. We have a well-established dividend policy and this is in general that we pay out 70% of the group FFO after minorities. But you also know that last time we deviated from this policy. So obviously, the dividend decision is not a foregone conclusion. We are not a REIT. So we are free to decide the dividend and we will take this freedom. What we always have to take into consideration all relevant factors for a well-informed decision. And therefore, we ask for your understanding that as last year because of lack of sufficient visibility we cannot determine yet whether or not we will pay a dividend for '23 at this point of time. And we don't want to come in the cell that people expect from us in November already a dividend guidance. right point for dividend guidance is the beginning of next year. But we will, of course, keep analyzing the situation. And as every year, we intend to make the decision on the proposal and we want to stay at this in March before the annual general meter. At that time, Last, we expect to have the necessary visibility on the parameters to make a well-informed decision. And as you know, it's particularly all about leverage, property valuations and successes in disposals. So it is just too early to give a guidance.

Okay. And did I hear you well when you said if we were to pay a dividend this year or if we will pay a dividend this year, that's what you said?

I haven't given you a guidance if we or if we not will not be going to pay a dividend.

My second question is effectively on those JVs and the impact on your financial statement, let's say, the consolidation of those JVs. So as that said, the impact on group FFO post-minority is going to be relatively huge. If we do basic math, 7% times EUR 2 billion, that's going to be equivalent to 8% of your group of FFO this year. So is there any other mitigating effect, we should take on board before 8% on top of your moderate decline, which would mechanically lead to kind of a double-digit decline.

Marc, as I said, I mean accounting-wise, we are consolidating the JV, so there's little change, except that we account for the financial asset of the call option with respective reflection on the equity side. But in terms of group FFO post minorities. It's essentially the dividend stream, which will be deducted if you move from group FFO to Group FFO post minorities. And again, I mean, it remains equity. Equity is comparatively expensive. If you compare it to debt, the equity we have chosen is comparatively cheap if you compare it to a more common equity raising through issuing shares.

Yes, clear. And then the other impact is on your LTV calculation. How should we look at it? Are you going to keep 100% of the assets on the left-hand side and removed EUR 2 billion of net debt on the right-hand side of the balance sheet? Is that the way we should look at it? Or you're going to have something relatively more proportional?

We are not doing proportionate accounting, so that's how we did the pro forma calculation, yes.

And that is the way you would assume being your targeted 40%, 45% range?

Yes.

Okay. And I have a final one. Can you give us a bit of basic trend, which are effectively which have helped you to create your guidance on FFO, meaning on tax rate because it's a very volatile number according to sales. I think on a recurring tax rate, you were at 7% last year, 7% over H1. What sort of magnitude should we expect in terms of increase here? And are you expecting improvement, stabilization, further deterioration in the non-rental businesses, i.e., privatization developments to sales and value add?

I mean first, if -- if I specify the moderate decline in FFO for next year, in rough terms, half of that is driven by increases for higher interest expenses and that predominantly, and Rolf was pointing towards that is driven by the annualized impact of refinancings we did year-to-date is roughly EUR 60 million. And the other bit is on taxes for our FFO calculation, that portion of taxes, which is attributable to recurring sales plus development to sell is being recognized for. And yes, we assume a step-up in these assets and as such, also a higher share in profitability compared to this year. And that goes back to also a stabilization and we've been providing some narrative around that in our value-add business and here, in particular, the craftsman organization where we are currently undertaking some restructuring to move that back to a higher profitability again.

The next question comes from Paul May from Barclays.

Just got 2 or 3 questions, 3, 4, 5 actually from my side. You mentioned -- and I think you mentioned at the half year as well that the transaction market is stabilizing but I think evidence would suggest otherwise, excluding the structured deals, which you say you're not going to do any more of and excluding the sale of brand-new buildings or yet to be completed buildings, which, again, I think you're coming to the end of the ability to sell those. So excluding those transactions, the transaction market is pretty dead or terrible according to most other data points. Just wondering what evidence you're looking at when you say the transaction market is stabilizing?

So first of all, I understand that we are not doing structured joint ventures. And you are right, we still have a lot of brand-new buildings available. So we have no lack of brand new buildings. Because they are still under construction or they are just supposed to be finished. So I don't agree on this point. And keep in mind, yes, we sold EUR 1 billion -- of the EUR 1.7 billion we signed in the last quarter only. We signed 350 CBRE, 1 billion, but the rest is traditional stuff, which is -- actually was criticized also on the lower end of the portfolio. which is, for example, for the Dresden portfolio. So there is -- as I said, there is a lot of potential on the brand new buildings and on the noncore, where the yields are relatively high because there's no value cost. So on both sides, we have enough sufficient products to be sold. And that's why we are able to give you guidance that we will sell another EUR 3 billion. Next sign another EUR 3 billion of sales next year. So I disagree with your analysis. What is difficult in the moment is to sell the assets where we are the best owners, these are assets where you can invest with a 10% yield, where you can increase rent. So these assets, we are the best owner. So that's -- it's also in our interest and the interest of our shareholders to keep these assets. So we are not worried if we cannot sell them because we would not sell them anyway. We are selling the left hand side and the right-hand side of our portfolio because these are not the best, what we should own. So -- and for this, we have enough material, and that's why we will clean up our portfolio and have a better portfolio, and then we can start going against the company.

And just on that, you mentioned the lower end of the scale in terms of disposals. I'm assuming those are at higher yields than the average yield on the portfolio. Is that fair to say?

Yes, because the initial yield is higher, the total IRR is lower. This is all the effect because I learned -- actually, you teached me 10 years ago or someone on the call teached me. Don't forget the initial yield only. Keep in mind the value uplift, which you are generating because rent is growing because you can do investments. Yes, and there are some assets where you cannot increase and where you cannot do investments or at least not investment is a return which for us, for example, is the case in Dresden. And of course, they are initially a little bit higher. So overall, IRR is probably lower.

And just you mention in terms of the ability to grow the business thereafter. And you sold EUR 3.7 billion of assets this year or pro forma and pro forma LTV actually hasn't improved at all. So you don't think it frees up capital to invest and proportion of LTV, given the Apollo structuring, I imagine proportion LTV has actually gone up quite a bit year-to-date? Just wondered where do you plan to get the capital from to grow the business moving forward?

So I think Philip has shown you last time in the half year presentation that we are generating roughly EUR 2 billion. So at the moment, is the deleveraging is done and our balance sheet is back into the shape where we want to have it, it is a EUR 2 billion investment potential, which we have. And if you do this EUR 2 billion theoretically with our 10% yield, it's a great investment. And we can deliver 10% yield at the moment on the optimizer partner and upgrade building and heat pumps. So I'm not worried about [indiscernible] the bigger boy I have is that we have enough construction capacity because the construction industry is dying at the moment, and it is difficult for us. And we have to bring our value-add organization, especially the governments' organization back on track because we have insured this organization by the decision to cut the investment so far. So in the moment, we are coming back. So if you look on probably 2 years' perspective, EUR 2 billion of investment were decent yield will bring the company back to on cost track.

Sorry, a few follow-ups. Apologies a few more questions. A couple of things in that. You mentioned the 10% return on investment. I think regulatory speaking, you're not allowed to achieve that amount, but maybe I'm wrong. And historically, you've achieved a lower return on investment than that, I think. And when you were spending a lot in 2021, it might be 2022, is that 4 or 5? Just wondered with construction cost inflation and labor cost inflation and still the rent regulation in place that limits the ability to capture rent. How are you planning on achieving 10%?

So first of all, we have achieved in the last 9 months. So it's not about if we can achieve, we achieve it. And the second is you now have seen that the regulations have changed in our favor. So all the heat pumps is now 10% and not 8% anymore. So it is clear that we will do 10%. And there, of course, also this investment gives us opportunity in combination with heat pumps and solar that we can generate an additional revenue which we can count on this by selling energy to the tenants. So all this combination actually allows us to go above the 8% for traditional investment and to keep the 10% for the heat-pump investment. So the regulation has changed in our favor. And the market has changed.

Okay. And just on the EUR 2 billion, is that fair to be saying you won't pay a dividend because that would be all of your free cash flow? Or actually more than your free cash flow given capitalize...

No, I think probably you can go back to the slides presentation, Philip showed you exactly how we broke it down and...

The logic essentially is that you use FFO as a cash proxy. And if you deduct assuming our usual dividend that is 70% of group FFO post minorities. Half of that as a scrip component is in rough terms, 35% cash out, so 65% remaining, and that 65% remaining opens up investment opportunities and then bearing in mind that these are investments in yielding assets, if you will. So part of that by keeping the capital structure neutral because you capitalize those investments, you can also free up some debt capacity without jeopardizing your capital structure. And this is the math. And the outcome of that is that we have an investment capacity, which is far exceeding our investment needs in our standing stock.

Okay. And then just sorry, one final point on clarification, separate question. You've mentioned a number of times that the Apollo transaction is an attractive form of equity injection, which I think we work out is around about a 7% to 8% NOI yield somewhere around there. Given your shares are trading at implied NOI yield of 4.5%, why is 7% to 8% disposal better than raising capital at 4.5%, given the -- on a like-for-like basis, your equity is a much tighter cost of equity on an NOI basis than the Apollo deal. I was wondering how you view that.

I'm comparing the cost of equity with the cost of equity and the cost of equity of Apollo is 7% to 8%, the cost of equity of our stock. If you look at Bloomberg is around 12% in my math. 8% cheaper than 12%.

But on a like-for-like basis, NOI yield basis, so NOI over EV versus NOI that you've sold, which is a fully like-for-like theoretical finance on the cost of equity.

OUr stock is not tradin Trading, but our stock is not trading at NTA.

It's not trading NTA, but it's trading at an implied NOI yield of 4.5%, so your NOI over your EV, which is an ungeared measure, and the JV is an ungeared JV, so you can't compare a geared cost of equity is 4.5% versus selling at 7% to 8%. I just wonder what makes you think that's better?

We can take it once again offline. But again, we are comparing cost of equity but cost of equity. And yes, the JVs are essentially debt free. But I'm looking at that from a consolidated basis, so it's freeing up capacity from a debt perspective on a group level. It's a very academical discussion we are having.

I appreciate it's actually quite important because it comes to a lot of the metrics that you put forward are not at the kind of underlying equity level, so it's group FFO, excluding -- including minorities, obviously, excluding would be better. It's LTV not on a proportional basis. So I'm just wondering how you're kind of thinking about it from an equity investor point of view because your reporting metrics on equity the...

The JVs make up a fairly small portion of our balance sheet. We are following here in terms of how we look at the debt KPIs, the except principles, also the rating agency supply. And yes, it's fair to say that if you look at dividend streams, expected dividend streams, this is going to be impacted, as we have discussed before by the higher minorities and therefore, reduce the basis of which dividends are being paid. And yes, again, that is the cost we have to bear in order to do our homework to delever the balance sheet. It's not for free, it's not a free lunch.

The next question comes from Andres Toome from Green Street.

I had a couple of questions on the CBRE portfolio. So first of all, just to understand the pricing. I mean you talked about concessions here as well. And just to clarify, the pricing you sort of called around EUR 4,000 per square meter. Does that sort of equal at then the development cost of these assets more or less and I guess when you talk about a 4% discount, is that effectively a discount to the cost of developing these assets?

Yes. So to be very clear, there is a portion, this is a mix. There is some buildings which are already finished, and there are some buildings which are under construction. So what we are mentioning actually is fair value is the costs which are in the books, plus the construction costs, the estimated construction cost in the original calculation where there is always a buffer. So in the end, that's why I mentioned, if you end up the calculation end of '24, if everything is finished, probably the picture will look a little bit better, but this is a figure which we have at the moment, and that's why we and the auditor will not allow us to change it. So this is a way how we look on it and this is actually partly also relevant because keep in mind that these buildings is mainly free rent, but there is also always like always, some limited rent as well in this portfolio.

And then, I guess, the amount of concessions, are you able to comment on that as well. So the EUR 357 million, as I understand, that's after you've accounted for concessions. So maybe you can quantify the amount of concessions here as well? And how do you derive that?

Yes. The concession in total is EUR 6 million. So headline price, and I think there is ought to be also a press release by CBRE is going to be EUR 663 million -- sorry, EUR 363 million, the EUR 357 million. I was quoting is less EUR 6 million deduction and roughly 1/3 guarantees, 2/3 delayed payments. And the delay payments are at the latest by the end of the year. It's a staggered payment schedule we have agreed and we have discounted with our current cost of financing of 4.5%.

Okay. So the concession, the guarantees, maybe just on that, is that sort of a fixed yield agreement then that agreed with...

Empty buildings and the letting is still done with our people, and that's why, of course, we give a guarantee. So if it comes, it is okay, and this is my expectation, it was on the last time we will not need this buffer. It's a buffer. But for accounting wise, this is the best guess, and that's why you put it. So we are good in letting, then the buffer will be smaller. And the discount and the discount.

Okay. Understood. And then maybe in terms of rent level, you sort of mentioned it the higher...

Again, one remark here, you are selling and the buyer wants to show also discounts and successes. So we are here a little bit in giving a good deal for both.

Understood. And then the rental level, you sort of mentioned in the higher end of Berlin, but that you also said there's some restricted units here, I guess. So what's the average rental tone in this portfolio? And maybe you could give some color around that.

I don't know. But in general, you know that you get a construction permission in a big city like in Berlin, only if you have 1/3 of respected, 1/3 of normal and 1/3 of disposals which you can sell. So in every portfolio, it's different. I don't know the exact figure. I just wanted to make sure that you do not compare the 4,000 to the completely free rent market.

Yes, fair enough. So free market is -- I mean, a higher and sort of EUR 25, EUR 30, I guess, per square meter per month. And then here, is it then below 20%, the average perhaps?

No, no, we are not -- we are actually -- I don't have the figure. I can deliver it, but I think it also has to be agreed with CBRE because this is now -- if we cannot publish it just on our side.

Understood. And then final question on that is just the capital value, as you said, sort of around EUR 4,000 per square meter. How does that compare with the previous CBRE deal? Obviously, that one included assets also in Munich and Frankfurt and capital value was on a blended basis, 6,000. But like...

But it was in Munich, and it was a different quality. If you look on the building in Munich, this was the highest end you can get.

Sure. But there were some Berlin assets in there as well, right? So maybe like-for-like in Berlin versus Berlin...

Not disclose the detail again. And I think it's all the same value method. So next time you're in Germany, then we visit with us Munich building, and you will understand what is the difference.

I'll take that invitation. But then also just the valuations you have today then, I mean I guess even you can't say the rental level, but let's assume it's around maybe 20%. I mean seems like the multiple that comes out of this is quite low. So -- and definitely lower than your average sort of valuation that you carry in Berlin. So how does that ultimately tie then with the portfolio valuations going into the fourth quarter?

But look, this is slightly above 4% in terms of gross yield, respectively, a multiplier of 27, 28. But again, I mean, for us, currently, the focus is on liquidity vis-a-vis profitability. And yes, if I look at the properties, in hindsight, it will probably the case that it would have been good to wait for a better moment to sell but we want to delever the balance sheet, and we do not want to currently optimize our profitability. And that is why we have on purpose accepted a small hit on profitability in that we have accepted for a large portion, which is still under construction, but is going to be finished next year. A small hit vis-a-vis our all-in construction cost we expect. Is it the best deal for us? No. Is it good in terms of liquidity, a clear yes. Yes. It's about prioritizing these days. And what we focus on is the product which works best in a still better, but still challenging market environment.

And to be very clear, in the end, it translates in the new buildings, we are not doing a margin. So we are selling for the costs we are building. The development margin in the moment in this case, as was put down to zero. On the covered all the cost, but giving up the development margin, which you normally should but we have decided not to do it.

Understood. I guess I don't really understand how the 4% gross yield comes together, but maybe we'll take it off-line.

The next question comes from Thomas Rothaeusler from Deutsche Bank.

A couple of questions. First, on rental growth outlook for next year, which I understand you indicated above 5%. And I mean, a key driver will be the Berlin rent table. Just wondering how did you consider this? Or what is your assumption here?

It is -- first of all, it is not wise for me to discuss now the burden rentable or the public phone. This will generate probably some political tension to be very clear. And second, nobody knows exactly. We are just saying this will be for a long time, a qualified Mietspiegel. The last time we have seen a city, and I don't give you a guidance with this, but not a city where we also had a long time, first time qualified while was Munich, which we have seen last year. So qualified Mietspiegel can come to very high results. But I don't give you a guidance. I don't want to press you on this, but it can be meaningful, but we have to wait.

Okay. The second question is actually on the [ Niapoli ] deal. Is it correct to assume that the terms are more or less the same as for the first one? And just wondering, if you haven't been in a better position nowadays compared to March.

To be very clear, this was, of course, a long debate. And in the end, the only outcome for both sides was to agree on the same terms. There was an argument on the other side saying that the cost of debt and the cost of equity in North America has raised dramatically in comparison to what it is now what it was 6 months ago. So we were confronted with the argument saying the conditions has to become better. And our argument was to say we cannot sign something which is worse there was more arguments to increase the figures then to decrease. And we have talked about this actually day by day.

Okay. The last one is actually on the Dresden deal. Just wondering if you could provide more color here. Specifically, can you provide the multiple and also what value was for the land block?

So the value for the land blood is marginal because it's land without -- and if you see the land, it is land which they want to -- they are doing Bundesverfassungsgericht region. So they want to plant flowers and all these things on this land probably. So it has no value. It's just because we got to Buwog and in this part, there was pieces of land included. So for the May, it was important for us. It's actually without value. But there was a small value and [ therefore ], of course, we got the value. Again, as I mentioned, these are buildings which were ready for demolition 15 years ago. So in the last 15 years, there was not a lot of invested in it. If you see it's -- in specifically, it's Polas and I visited this building because we sold it. It is in our interest because we have a lot of other buildings around it that the city of Dresden vest in these buildings and upgrade the whole. So there is a side effect that we sell it. It is not the sales price, which is for us important alone, but it is a fact that the municipality will invest an enormous amount of money where we never would realize the return necessary. And this will upgrade our whole cut because we have better building in the same CA, which is actually upgraded by this investment. And on top of it, the city of Dresden, which was also down in the press conference by the mayor has opened a new subsidy program for refurbishing apartments which are still in the price cap of social rent model. So this might be attractive for us as well because we still have some buildings in the same category. So overall, the benefit of this is not only to sell a book value, but the benefit for this is to increase the value of the remaining buildings as well. So this is what is a partnership of this.

The next question comes from Manuel Martin from BHF.

I have three questions, maybe one by one. The first question would be on the disposals. Looking back to the EUR 3.7 billion disposals signed so far. On average, I think you said it was more or less close to book value. Could you give us an indication of maybe the range of yields which you had in -- within your disposals?

I don't know it, but the most expensive we sold was a multiple of 50. So this will be a yield of 2% in the low-yielding multifamily homes and that defers -- so this is really difficult to answer. So this depends really much our business. So this is not unique buildings. It's a very different location, very different state of the buildings. What we said is actually -- and this, of course, is underlying our strategy. We are a little bit more flexible in the commercial building and that's why we accept their deviation to book value. while in the normal apartments, we are trying to sell only assets which are on book value. To be very clear, the negotiation, it's not a market like a stock market. It's all about negotiation. It is all about being tough and giving up some part pieces. And it is not somebody says I would like to have this price exactly and $0.02 more or less, is changing. This is a negotiation. And in the end, we can decide if we want to be tough or if we want to put preference on liquidity and we are doing it case by case.

Okay. Okay. Second question would be on your debt management. So you have a shift to cover your or to address your uncovered debt until, I think, end of Q1, '25. Could you give us maybe an idea about the amount of uncovered that left in 2025. Is that possible at this stage?

It is. And you basically see that on Page 16. In total, we have just in between EUR 4.5 billion to EUR 5 billion coming due in 2025 and the portion of Q1, which we have covered is EUR 0.5 billion. So there is still fairly significant to come.

Okay. Last question would be on property valuations. We are entering November, do you have maybe some words for us when it comes to potential valuation results at Vonovia or still a bit too difficult?

Look, I mean, we just published Q3, and we have done no revaluation in the absence of a triggering event. Triggered by our own behavior disposals, but also by the market. And that is another word in saying or another way in saying that we have not seen any meaningful moves. And I we actually don't consider our job to predict the next valuation move. So this is really to come with numbers.

The next question comes from Kumar Neeraj from Barclays.

My question is regards to your go from Deutsche Wohnen I understand that the balance has reduced to $370 million. But how should we think about Deutsche going forward in terms of its capability to provide petition liquidity if it was to dispose nursing home business or et cetera. Is it likely to win form of loans or asset transfer between two entities? Or do you think dividend can be a cleaner way of transferring the required cash in Q2?

We are probably the wrong people being addressed by this question because this is ultimately for Deutsche Wohnen management to decide, what I'm hearing from them is that this loan, which has triggered a lot of discussion and pressure on Deutsche Wohnen management team is unlikely to be repeated.

Got it. I mean I was just trying to understand from Vonovia's perspective, given that entity is quite low levered as compared to your leverage if you were to find financing, et cetera, that goes in the Deutsche Wohnen bucket, right? Like if you want to have access to that liquidity would your idea way of accessing that.

Then liquidity is really a function of distributions.

Are you mean dividend?

Essentially, yes. But again, I mean, we are probably the wrong audience for that. But at least if there's no loan any longer, this is probably how you would assess any potential excess liquidity. But however, also have to bear in mind is that Deutsche Wohnen probably has a different stance as to their ability to finance their investment program through capital markets. So by nature, it's probably fair to assume that they run at a lower leverage than what is true for the entire group.

The last question for today's call comes from Simon Stippig from Warburg Research.

Just 2 from my side or related and lots of questions already asked. First one would be in regard to regulatory risk seems that lots of risks have faded so far, given your share price reactions. But in regard to regulation, rental regulation in Germany, I would be interested in the [indiscernible] if you see that cap lowered by the current government as it was defined by the coalition treaty.

No. I think you know that the coalition agreement says that there has to be some changes. Actually, we are playing those changes already in Berlin was 11%. It is not clear what happens if you read the German newspaper and discuss the social democrats are pushing to get the realization of the 6 coalition agreement, but the Minister of Justice is refusing it. So no, nothing happens. So the realization of what is already agreed between the coalition that it will come law. I'm not sure. But of course, we assume that it will come law, but there is a chance that it will not come now, at least in the last 2 years, it didn't become law. And anything which is above this should be understood that the demands on the social Democrats should be understood that at least they want to have the realization but is increased in the coalition agreement. But up to now, they fail. And I think a good argument because they fail as the situation has completely changed. And that's why any more regulation, if it is increasing coalition agreement or not is probably not helping the sector. As you can see, we will know where we are fighting hard, and we are managing the challenges. There are others in the sector for them. It's much more difficult to manage the challenges. And that's why the politicians are well advised to do the right things at the right time. Less worried about regular victory risk at the moment, to be very clear. And you can see, for example, the heat pump, that they are now going the other way because they know they need investment. They know that without investment, they will never solve the big issues related to the housing crisis. So you see that they are slowly moving in the right direction, for example, increasing the percentage from 8% to 10%.

Understood. And the second question would be in regard to the nursing portfolio. Is that actually included in your expected disposals for 2024?

The northern portfolio is actually not a topic which we can answer. We understand that the Deutsche Wohnen management is pushing hard to sell it.

Okay. Are you -- do you actually know if there's any transaction process or any negotiations ongoing when you talk of the Deutsche Wohnen management?

This would be like if you would ask another shareholder to talk about what the management has told you, we should abstain from giving you comments on this. .

Ladies and gentlemen, there are no further questions. I'll hand it to Rene for closing comments.

All right. Another quarter, another long call. Thanks, everyone, for joining. We hope to connect with you over the coming weeks and months as we're on the road and attend conferences. A list of events, as always, can be found online or on Page 54 this time of the presentation. As always, questions left unanswered, please reach out to me or the team, and we will be happy to come back to you. That's it. from us for today, as always, stay safe, happy and healthy, and have a great day, everyone. Bye-bye.

Ladies and gentlemen, this concludes today's call, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.