Good morning, and Welcome to One United Properties Conference Call for Presenting the Results for the First Half of 2022. My name is Zuzanna Kurek, and I am Investor Relations Manager at One United Properties. I am joined on this call by Victor Căpitanu, Executive Board Member, as well as Cosmin Samoilă, CFO at One United Properties. Together, we will present to you our results for the 1st six months of 2022, as well as answer any of the questions that you might have. Before we begin, I would like to mention that this call is being recorded and that the recording of this call will be updated on our website later this week. We will issue a current report announcing this. As stated in the call invite, by joining the video conference, you automatically and implicitly consent it to being recorded.
If you do not wish to be recorded, please leave the call. In terms of the organizational aspects, let me present to you 1st the setup of the call. We will start with introductory remarks from Victor Căpitanu. We will then move to the next part of this call, where together with Cosmin Samoilă, we will deliver a brief presentation of the results for the 1st half of the year and the key events that happened since our last call. During our presentation, feel free to type any questions you might have in the chat box, and we will answer them during the Q&A. After the presentation, we will start the Q&A session. First, we will answer the questions that we received via email prior to this call.
Secondly, we'll answer the questions received via chat in chronological order. Please note that all the participants will be put on mute, and that if you want to ask questions, you can only ask them through the chat window. Finally, I would like to mention that we might be making forward-looking statements today during this call regarding the future performance of One United Properties and that the actual results may differ materially. We encourage you to review the disclaimer that we have included in the presentation, which you can see right now on the screen. This disclaimer applies equally to all the statements made in today's call. I would like now to proceed to the 1st part of this call, and I'd like to invite Victor Căpitanu to share some highlights with you regarding our performance in the 1st half of the year. Victor.
Good morning, everybody. Thank you for joining. I will start with few remarks. I would like to tell you 1st that 2022 is a year of opportunities for One United Properties, and we are very happy of the performance so far and the perspectives ahead of us. The stock exchange does not always show the real market opportunities, but today is a real moment of opportunities in real estate. The balance sheet of the company is very strong, especially after last capital raise, and we are in a very good position in the market. Competition is low, and real estate market in Bucharest continues to be one of the most undervalued markets in European Union, compared to the purchasing power.
There are some challenges, and some of them we have addressed continuously in the last six months, but I would like to underline again two of them. One is on the cost and the inflation. It seems that the impact of the cost increases this year is not as high as it was expected earlier. As you all know, the pressure on the cost starting with 2015 has been 5%-10% every year upwards. This year we expect to be also in the range of 10%, which is less than expected previously. More or less this year will be in line with the previous years in terms of the inflation of the cost of construction, so will not be higher.
Another challenge is on the permitting and zoning in Bucharest. As you know, in the last two years, the administration of Bucharest, general and sectorial, has issued much less building permits and generally permitting is slower than normal, and this has pressure on supply. What you can see also to our company is that we don't have enough stock available to match the demand in the market. This we see from the fact that 85% of the units under construction are sold. Also we can see when we launch a new development, like we recently launched One Herăstrău Vista, immediately there is a queue and people line up to buy the apartments.
There is this general pressure on supply, which probably will continue this year and maybe next year. Nevertheless, we have three big developments under permitting and everything is filed. The permitting of these developments would boost a lot our supply. In the pipeline, we mentioned that we are working on 10 new deals, for which we raised also capital and we think this will be very profitable for the company. Three of the lands are already purchased. Seven are under memorandum of understanding. But probably even with memorandum of understanding will take around 12 months to close the transactions. Transactions generally for acquisitions in real estate are not so fast and take some time to close in the good conditions for the buyer.
These are like some initial remarks. I would like to just as a another mention to underline again how we make the profit as a company. It's important to know that One United Properties is both a major real estate investor and developer. We continue and will continue to make a big part of our profit both from investments and developing. On the investment side, we are making profit and will continue to make profit from rental, from office, commercial and residential, and from discount purchases when we find opportunities, and it seems we find all the time. From development, which now is covering three segments of the real estate market, not only residential, but also office and commercial. We'll continue.
We are making profits on all these segments, and we'll continue to grow our profitability on all of them. Now I would like to invite Zuzanna and Cosmin to continue with the presentation, and I will come back from time to time and also to address the questions in the end of the presentation. Thank you.
Thank you, Victor. Moving into the key financial highlights from the 1st half of the year. Before Cosmin dives deeper, I would like to just mention consolidated turnover increased 56%, reaching RON 676 million in the 1st half of the year. The revenue from the residential sales increased 16%, reaching RON 387 million. EBITDA more than doubled, reaching almost RON 400 million. The gross profit increased 114%, reaching RON 390 million. If we look at the 1st half of the year, we have outlined some of the key highlights per segment of activity. When we look at the residential, we are talking about, of course, the most important 167 apartments sold and pre-sold in the 1st half of the year.
As of the thirtieth of June, 80% of apartments under developments were sold out. If we exclude the development which was One Lake Club Phase II, which was added in the very last day of the 2nd quarter, then we are talking about 85% of the apartments sold in the developments which are currently under construction. We have introduced in this report also the amounts due from customers, as we have previously communicated via current report. As of the mid-year, we are to receive EUR 170 million until the end of 2023 from our customers for apartments that were already contracted.
In terms of the office, this is the 1st period when we actually see a very significant increase in the rental revenue from the commercial segment. 34% increase driven by One Tower, which has reached 100% occupancy as of the end of H1 2022. One Cotroceni Park delivered at the end of last year, currently leased 85%. Here I would like to mention again that still not all the tenants have moved out, so not yet the full potential of this development has been reached. As well as Bucur Obor, which is consolidated as of February. For the 2nd half of the year, we expect the rental revenues to increase quarter-on-quarter.
I would like to also mention the recent transaction with One Victoriei Plaza, which will be also consolidated as of Q3. In terms of retail, in the 1st quarter of this year, we have finalized the acquisition of Bucur Obor. We have also acquired the former Ford factory, and this will be renamed One Gallery. The construction works have begun in the 2nd quarter of this year. It's going to be a retail development with GLA estimated at 13,000 sqm . Delivery completion is estimated two years from now. Now I will invite Cosmin to discuss the financial results for the 1st half of the year.
Thank you, Zuzanna. Good morning, everyone, and we are very glad to have you participating at this call.
We are presenting the company results for the 1st half of this year. It was very good results and very good performance of the company. We increased the turnover, consolidated turnover, up to RON 676 million. This meaning 56% increase compared to last year. The turnover is including mainly the revenues from the sale of apartments. Here we had RON 387 million. We have gains from office buildings under development. This is mainly related to One Cotroceni Park office phase two, which is under construction and under pre-lease operations. With the plan to be finalized construction during this year. We have gain on bargain purchase. This is related to the acquisition of Bucur Obor that we started consolidating from February this year.
Gains from completed investment property. These are related to One Cotroceni Park, phase I, that was completed in December last year, and it's currently leased at 85%. One Tower that is currently leased at almost 100%. We have also rental revenues. You will see later that it had a significant growth and other operating income. The gross profit reached almost RON 390 million , more than double compared to last year, and in the same time, the net profit increased to 136% to RON 347.8 million . If we are speaking about the residential segment, we had 16% increase of the revenues from residential sales up to RON 387 million .
At the same time, the net income from sales increased even more. First, due to the fact that the revenues also increased, and 2nd, because the net margin has also increased during this 1st semester of the year. Margin increased due to the fact almost all of the developments that are included in this calculation and that for which we are recognizing revenue are either completed or they are going to be completed in the next six months or next year. They are very mature developments. Due to the way IFRS 15 is computing the revenue recognition, in the beginning of the development, the margin is usually lower, while at the moment the construction is progressing and reaching the finalization or even reaching completion, the margin increased gradually.
If we are speaking about the commercial segment, we have the most significant growth in the profit and loss account of the company from the rental income that increased 30% compared to last year. We have impact here from One Tower that is generating rental income almost at full capacity. We have also One Cotroceni Park that it started to generate income from quarter two of this year. As of now, it's not at full capacity as even if it's leased out 85%, but there are still tenants which are doing fit-out works and preparing to take over the space. We also have the effect of Bucur Obor that is generating rental income from the retail sector.
If we go on the next slide, we have the G&A expenses that had a growth of 345% to RON 60 million. This is an impact here in the G&A expenses of RON 42 million from the non-cash stock option plan allocation of the Executive Board members following the performance of the company and the fact the criteria was met. This expense is not affecting the equity. It's non-cash, as mentioned. Without the effect of this stock option plan, the increase of the G&A would have been only 35% compared to last year. It's basically in line with the growth of the company and the larger scale of operations.
If we are to compare with last year, currently, the equity of the company is more than double compared to the pre-IPO equity of last year. Basically, in the progress of this one year, the equity of the company increased significantly. On the other operating expenses, we have RON 11.6 million. This is mainly driven by CSR activities, sponsorship, donations, and related activities. All these expenses are fully deductible from profit tax. If we are referring to the asset side on the residential property, the value is approximately the same as it was on the year-end. Basically, on one side, the value of the residential property is increasing with the construction progress and with the investment during the half year.
On the other side, it's decreasing due to the revenue recognition. Basically, these two factors maintained almost at the same level, the value of the inventories. In 2nd quarter, we started also the construction of One Lake Club. On the assets, office and land bank, investment properties. This is the main caption under the balance sheet of the company, and we have here a 42% increase since the end of last year, reaching RON 2.1 billion.
Here the main items are referring of course to One Cotroceni Park, both phases that, due to the investments, in the half year due to the, rental, activities, and also due to the, progression of the, of, these assets, there was an increase in value. Also we have new additions, Bucur Obor, that, as I mentioned, we started consolidation from February this year. We have 29 apartments in One Mircea Eliade, which are designated for rental purposes and long-term appreciation of the value. If we are speaking about the cash position, cash position maintains almost at the same level as last year. It's a marginal decrease of 8%.
This is mainly generated by the investments in the progress under construction of the developments under construction, and also by the dividends that were paid for last year. As we are speaking today, there is another impact which will be reflecting the Q3 from the share capital, from the capital increase that was finalized in Q3. It's another RON 250 million. This will boost even further the position of the company. If we are considering this capital raise, basically the net debt of the company is negative. We have more cash in the account than financial liabilities. Also to express the strong balance sheet position of the company, the loan to value of the company, it's only at 25%, so it's a very low leverage. This gives trust for the investments and operations that will continue.
Thank you, Cosmin. Now moving to the business updates from year to date. Sorry, 1st the sales trends, which are for the 1st half of the year, then we cover the events year to date. In terms of the sales, in the 1st half, in the 1st semester, we have sold and pre-sold 167 apartments with a total surface of 16,000 sqm . Sales presented on this slide represent sales, pre-sales as well as pre-sales to the early clients. The latter meaning lower margin sales that help finance land acquisition. The total value of these sales in the 1st half of the year was EUR 8.7 million.
When we look at the trends from the 1st half of the year, we can see a slight decrease in the sales of the units compared to the same period of 2021. As Victor has pointed out, this has been driven by the lack of available stock and the fact that only a limited number of apartments are available at each of the developments. Nonetheless, we can see continuous strong sales for One Cotroceni Park and One Verdi Park, the two largest developments that are currently under development. What I wanted to mention in the comparative period of last year, so the 1st half of 2021, there was an extraordinary event.
124 units were sold at One Cotroceni Park in a single transaction to ACC Investment, which is an investment fund purchasing apartments for rent or resale. Excluding that one-off event, we have registered a 22% increase in unit sales in the 1st half of this year. When we look at the type of the apartments sold, again, as in the previous quarters, the most sought after apartments were two-room primarily at One Cotroceni Park. The 2nd most sought after apartments were three-room at One Verdi Park and One Cotroceni Park. I would like to also mention we sold two penthouses in the 2nd quarter of this year at One Verdi Park.
As of 30th of June, 80% of apartments currently under development were sold out, excluding One Lake Club phase two, which was added to the inventory at the end of the 2nd quarter. We are talking about 85% of the stock under development being sold out. Now moving to the key business and governance highlights year to date. The current land bank is 217,000 sqm with total above ground construction rights of 750,000 sqm , where 5,200 apartments and commercial spaces will be built. In the 3rd quarter, we have acquired lands for One City Club, where there will be built 200 units, as well as One Herăstrău City, which will hold 900 units.
The location you can see on the 1st photo on the left. In July 2022, we have also acquired a new office building, which is now renamed One Victoriei Plaza, which with GLA of approximately 12,000 sqm , this building is fully leased to First Bank for the remaining period of 12 years with a break option after seven years. Annual income this building generates is EUR 1.9 million indexed with annual inflation. We will see the effect, this rental effect as of the 2nd half of the year. A very important event from August 2022. We have successfully closed the share capital increase operation during which we have raised RON 200...
Over RON 250 million capital, which will be used for further land acquisitions. As it was previously mentioned, the target is to acquire 10 lands with that capital. Two transactions were already announced publicly, as I mentioned, One Herăstrău City as well as One City Club. The others are to follow in the next 12 months. Regarding the share capital increase, the shares that were subscribed in the operation by the existing shareholders as well as new investors were loaded in the investors' account last Friday on 19th of August, and they are currently fully tradable. About the 2022 outlook, I would like to underline that the management maintains the budgeted profitability as approved in the general meeting of the shareholders from 26th of April of this year.
As of 30th of June, we have been on track with the realization of the budget. When we're looking at the EBITDA, the EBITDA was 11% above the value budgeted for the 1st half of the year. The gross profit was 13% higher, and the net profit was 23% higher than what was budgeted for the 1st half of the year. In terms of the evolution of the Bucharest Stock Exchange, in the 1st half of the year, we were the 9th most traded stock on the Bucharest Stock Exchange. The daily average traded value was RON 1 million , which is approximately over EUR 200,000 a day. In a volatile 1st half of the year, we delivered 1.6% share price increase versus 8.7% decline of the BET index.
Very important update from the evening of August 19th, FTSE Russell has announced that our shares will be upgraded within the FTSE Global Equity Index Series for Emerging Europe, moving from the small-cap to mid-cap category, which is reflecting our increased liquidity as well as good market capitalization. This index change will be effective as of nineteenth of September of this year, so in a month from now. Now, we will start the Q&A session. This, the last slide concluded the presentation of the half-year results. I would like to kindly ask you to type any questions that you might have in the chat, in the chat box. We will 1st answer the questions that we have received via email prior to this conference, and I will invite Victor to address them.
Thank you, Zuzanna. We have consolidated some of the questions, they are ordered by topic. First, questions are about the budget 2022 and 2023. First question, can you provide an update of the 2022 estimates for revenue from sales of residential property? What is your estimation for next year? Considering the new acquisitions and the rental income from apartments, what is the new guidance for 2022 rental income? What is your estimation for next year? Do you maintain the profit guidance for 2022? What is your estimation for next year? In your budget, you have RON 180 million for land acquisition this year. How much have you already spent? If you change your guidance, can you tell us the new one, please?
What is your estimation for next year? What amount do you estimate to spend for acquisition land and rental this year? What is your estimation for next year? Do you maintain the CapEx estimates for 2022? What is your estimation for next year? Basically, all these questions are on the same topic. There are a lot of questions about the budget for next year. The budget for next year, 2023, will be published at the beginning of next year. Until then, we cannot give any estimation on that. Regarding 2022, we keep our guidance for profit and, for the six months ended, we even achieved a 23% increase of the net profit compared to the budget.
Regarding the acquisitions, as I said, we have in pipeline 10 new acquisition of lands, out of which three we already purchased, and we have seven under MOU, we cannot know exactly which will close this year, which will close next year. Our target is to close all of them over the next 12 months. Regarding the rental apartments and the income coming from rental apartments, it's important to know that rental apartments is a very safe business, but is a low margin business. Generally, the equity of the company can be deployed much better by investing in other properties which we acquire or we develop. It is worth to do it just when apartments have also a good capital appreciation.
Let's say in the case of unique locations where apartments are more difficult to replicate, it makes sense from time to time to hold also some apartments for rental, which might be sold later down the road. We are not prepared yet for a full scale development of the apartment rental business, because we consider yet we do more profitability for our shareholders by other investments, right? Basically, rental apartments they will exist, but we don't expect it will be a very significant part of the business. Another question about rental. Can you tell us more about renting of apartments? What type of apartment? In which developments? The average rent per month? Number of apartments?
This is already answered from the fact that will not be a significant part of the business for the short term. Another question also for the same thing. Do you have a long-term target for the income generated by the apartments as a percentage of total rental income? For the time being, we don't have a long-term target, and will be a minor part of the rental income of the company. Question number nine regarding the sales of office buildings, there are two questions. The 1st is regarding Northgate. What is the One North Gate situation now? Basically, on the One North Gate, there are 23,000 sqm GLA, plus around 500 parkings. It is a deal that was acquired in a very low price by the company, so already equity is recovered.
We keep majority of the building, more than 60% in ownership. We had an MOU, an understanding to sell the larger building. We extended for more than six months, but we decided not to extend it anymore since we ran some calculations and it seems it's more profitable for the company to reconvert the building in apartments and to sell the apartments. This comes in a good moment because anyway, we have, I would say a lack of enough supply. Most probably we'll proceed with the conversion of the larger building, which is 18,500 sqm above ground. We will build apartments there, since it's more profitable for the company, and we have the demand for that.
The small building we'll either keep or rent. It is already almost fully leased. The 2nd office building for which you have a question is the One Herăstrău Office. Why do you want to sell it, considering the fact that it now has 100% occupancy? I saw the news in the press. One Herăstrău Office is a building where we have only a 20% minority interest. It was a building that we acquired after the start of COVID. We didn't know exactly how things will unfold, so we decided to do just a minority investment at that stage. At market yield of 7%, which is today, probably it would make sense to keep it if it would be 100% ours or at least control.
Because we are only 20%, and the other investors would like to cash on the exit, we decided to give a mandate to Jones Lang LaSalle to run a competitive process and to maximize the selling price for the company. They have a few good offers, and we'll enter exclusivity with the most interesting of them and try to dispose by the end of this year. Anyway, the impact is not material on the company. Next question is about One Modrogan. Can you put more color on it? What will be the financial impact if in the end the construction is not completed? Will the court's decision in September be the last, or will there be other stages in the process?
Will you return the advances received until you get a final decision? If so, what is the financial impact? It's important to know that One Modrogan, we did not have any litigation yet. We have a litigation with the 1st term in September this year. The works are suspended until the court litigation, but nevertheless, the buildings are almost completed. They were fully built respecting all the legislation. We have worked a record six years for the building permit and the construction is according to the law. We have discussed in the board, but we decided not to take any provision, so we expect not to have any financial impact. About the clients, they love the location. They like to keep what they purchased.
Even if, let's say, one of them would change their mind, this would be more profitable for One United Properties since they mostly acquired at historical prices which are lower than today market price. They all decided to keep their apartments and some of them, they have reviewed the building permit and our litigation, and they decided to keep. Zuzanna, we have one more question from the Bucur Obor. When you acquired Bucur Obor, you said that you want to increase the income from dividends of One United Properties, but you decided to put the profit in other reserves. Will you decide for next year to give dividends in Bucur Obor?
If not, how you explain the not awarding of dividends with the statement that One United Properties acquired Bucur Obor for increasing the income from dividends? Basically, I think there is a misunderstanding here. Our statement was that we acquired Bucur Obor for both reasons. It was a very discounted price on the asset, and we wanted to increase the profit from rental, not the income from dividends. Basically, this is the case of Bucur Obor. We are investing to upgrade the property. We are renegotiating contracts to optimize the rental income. We are improving the flows and we make sure that we increase the value of the property and the rental on the property for medium and long term.
We also have another question that came recently via email. What is the position of One United Properties in top REIT companies in Bucharest and in Romania?
Yes, I saw this question, Zuzanna. The fact is that there is no REIT legislation in Romania yet. From the companies that generate rent on owned assets that are listed on the stock exchange, this would be, let's say the most closer explanation to comparison with the REIT. Probably we are the largest. If you look to listed companies that generate rent from owned operated assets listed on the stock exchange in Bucharest, most probably we are the largest owner.
Now we have received the questions in the chat, so perhaps I'm gonna read them out and then we take them one by one. Can you remind us the link between the share-based payment recorded in the P&L, some EUR 8 million-EUR 9 million, and the value of the shares the founders were eligible to receive based on the stock option plan, 70 million shares in total worth some EUR 80 million at the current share price? I will ask maybe Cosmin to take this one.
I will.
Okay. Great.
I will do. There are more questions. You read only the 1st one, right?
Yes.
Okay.
Yes.
Basically on the stock option plan, we have approved at the beginning of 2021 a plan with the shareholders to increase the value of the company over the next five years, 2021-2025, with some targets which include a growth of 15% per year in order to double the value of the company in five years. Up to now, we have achieved a part of this goal. The nomination committee and then the board proposed for approval and then was validated by the meeting of the shareholders the eligibility for a part of the stock option plan for 60% of the stock option plan.
Basically the criteria was to double the value of the company in five years and to increase with a minimum 15% per year. I will read also the next question, Zuzanna, yes. Can you talk about the funding needs of the business in the next 18 months until the end of 2023, assuming that the proceeds from the equity raise will be largely invested into new project acquisitions? How much bank debt do you expect you may need to raise in the next 18 months? Thank you, Jakub, also for this question. Basically, the company has a very strong cash flow. In the next 18 months we have also receivables from contracted sales with clients of EUR 168 million on top of the existing cash.
Basically, we don't have too much funding needs outside the existing cash flow of the company. Also, the proceeds from the equity raise will be invested more in development than in acquisitions. Just as a reminder, basically the new acquisitions from the pipeline, the 10 new acquisitions don't need too much equity to invest, so most of the deals are done with little equity and exchange with a part of the future development. This means we can focus the equity on the construction phase of the 1st construction phase of these developments. Basically, on the equity side, I think we are and on the cash and cash flow side, we are very well-funded. On the bank debt, we will raise from development to development.
I don't have a total estimation, but we can provide you one after the call. Cosmin can provide you an estimation of the debt for the next 18 months. In any case, we are looking for low leverage. We are always looking for low leverage, so I think we never financed more than 50% loan to cost residential development. Generally, residential developments, we are looking to finance between 25% and 50% loan to cost. This is normal for residential because for residential you need to have strong sales to develop and to finance. For the office properties, which have also rental contracts, probably you go up to 60-65% loan to cost also, which again, loan to value will be much lower in the end.
Basically we expect to take more debt. I think we can improve the profitability for the shareholders by taking a bit more debt. We don't want to have too much leverage, and we are very cautious with the debt level. The 3rd question from Jakub. In One Tower you mentioned the occupancy reached 100%. Can you remind us what is the book value of the building? What is the rental income, and what is the gap between the effective and the headline rent? I would like to ask Cosmin if he has this data from the accounting, because I know it, but
Mm-hmm
Just not to give approximation, to be more precise. If you have at hand the-
Yes
Book value of the building today.
The book value as we included in the financial statements for 30th of June, it's EUR 85 million.
The-
Very important to mention that, according to the valuation report, the exit value is EUR 102 million. Due to the discounted cash flow and the model that is applied in assessing the fair value, we are recording EUR 85 million, the value of the building.
Yes. Regarding the headline rent, we are now signed at around EUR 6.1 million before this year indexation, because this year we'll have a strong indexation because of the inflation index. We are at EUR 6.1 million and EUR 85 million booked. The difference between effective and headline rent, the largest gap is in fit-out contribution and in some months of free rent. Fit-out contribution is done fully in the beginning of the contracts. The difference disappears between effective and headline, and most of the free rents are given in the beginning of the contracts. There are a few remaining during the contracts, but mostly it's in the beginning.
It's important that the gap between effective and headline, the effect of the gap is mostly in the beginning of the operation of the building. If I didn't answer. If you need more details on that, Jakub, please ask. The idea is that the more we advance in the contract, let's say one year after a tenant is moved and into the contract, the difference between effective and headline becomes minor. The 4th question, can you remind us the economics of the Ford Factory? The expected total CapEx, how much rental income you expect the building to generate? I'm not sure we made public the data on Ford Factory. We only made public the gross development value, so the value in the end.
What I can say is that it's a highly profitable deal for the equity of One United Properties, and when we will decide, when we'll have a more exact estimation of the profitability and of the figures, we will inform the market. But still, we don't have the final business plan. We just know it's a highly profitable business for the company. There is a question from Mr. Patrutsy. Thank you for the answers. Will you maintain the guidance for 2022 regarding the revenues from the sale of residential properties, considering that in 1st half you achieved 32% of the budget? If yes, what will be the main driver for achieving the budget? Still we cannot comment on this.
What I can say is that we keep the guidance for the profit, and the profit is the most important, let's say, criteria for our business. For the revenues, this will be highly influenced of the permitting of the developments that we have now under permitting process. I think it is too early exactly to comment. What is very important is that we keep the guidance on profit, and in terms of net profit, on the 1st half, we are even 23% above the budget, budgeted profit. Also, what I think is interesting to know, and maybe in one future presentation we'll present it also more public, is that on the sales of residential, typically there is seasonality.
More or less, the 1st half of the year sells, like, 40%, and the 2nd half is, like, 60% on the residential sales. Of course, this differs from year to year, but there is a seasonality. In our case, specifically, the biggest influence will be from the issuing of building permits of new developments. Basically in case of our company, this is the trigger for increasing a lot the sales. For Adrian, Cosmin, and for Jakub, if you need more clarifications on the questions, please let me know.
We have a new question from.
Yes
[guess]
Cosmin.
The question is, does the high gross margin reflect also the lower development costs for the apartments sold in the semester? Can we expect a lower gross margin for future quarters given the higher input costs seen this year?
The revenue recognition and the costs that we recognize are reflected 1st in the budgets that we did for the year end. In the developments that are under construction, most of the cost is already contracted as we are speaking now. We have a good visibility of the cost already. The impact is not so big. While for the developments that we are going to start in the near future, when we will start the revenue recognition in the future quarters, we will use the budget updated as of the date of the start of the construction. In case at that time the budget will be higher than estimated, this will have an impact on the margin.
Basically, just to add up on Cosmin. We expect our margin to be in the range of 38%-40% as we give indication in the past. This is the margin of our business. Also, for Jakub's. Sorry for skipping the question. It was not on purpose. I saw I skipped this, "How many apartments do you expect to sell this year and during 2023 approximately?" Basically we are now under permitting with around 4,000 units. Is correct, Cosmin?
Yes.
We have around-
4,000.
4,000 units under permitting, so they are already filed and the authorities are delayed to issue the building permit. Once we have this permitted, we will start the full sales on them. How many apartments we budget, Cosmin, to sell out of those this year and next year? I think maybe like
It depends when we'll start the sales.
Around-
We need to know when to start the sales.
Yeah. It's a bit difficult to estimate before we get the building permits. After we get the building permit, we start the full sales on those new 4,000 units.
I would like to add something here. You see in all our reports that we publish, we are also writing about the sales in every stages of the development. I have to add that in the moment we will get the building permit, we will recognize partially the revenue from this sale. At this moment, we don't recognize any revenue from the sales where we don't have the building permit.
Yes.
It's very important to understand that in the moment we get the building permit, in the end of that quarter, we already have some revenue from the specific development, immediately.
Yeah.
Thank you. That concludes our call for the 1st half of the year. Thank you all for the questions. We hope to see you all soon face-to-face. As you know, we convene general meeting of the shareholders twice a year. We will also have another shareholders meeting in September, so we hope to see you all in person. Other than that, I wanted to mention that the next results call is going to take place on 12th of November, after we publish the Q3 results on 11th of November. If you have any questions to ask, please do not hesitate to reach out at investors@one.ro, and we'll be happy to provide you any further information. Thank you so much, and see you soon.