Dear ladies and gentlemen. We lcome to the Instone Q3 2021 Results Conference Call. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by the zero on your telephone for operator assistance. May I now hand you over to Burkhard Sawatzki, who will lead you through this meeting. Please go ahead.
Thank you. Good morning, everyone. Welcome, and thank you for joining our Q3 Results call. Our CEO, Kruno Crepulja, and our CFO, Foruhar Madjlessi, will walk you through our presentation and give you more insight into our current business performance and our updated outlook. As usual, this will be followed by a Q&A session. I will now hand over to Kruno Crepulja.
Yeah, good morning, everyone. I'm glad you could join us for our Q3 2021 Earnings Call. Our management team and I are pleased with the overall good business performance also in the Q3 . You have seen our news from yesterday evening. Due to headwinds from supply shortages and also from the approval side, we expect a somewhat lower top-line growth for this year and also for the next year. On the other hand, with sustained high margins, we believe that we can reach at least the upper end of our earnings guidance for this year, and a similar earnings result also for next year. Moreover, also very important for us, we are proud that we are making strong progress with our ESG strategy. We'll come back to these topics later during this call.
Let's start our presentation with a summary of the highlights of the current business performance on page 5. The key message remains unchanged. The secular growth trend for our business is fully intact. The demand for our product and our asset class remains very strong from both private as well as institutional investors. There's quite a high seasonality in our business, mainly due to the rising share of the institutional business. However, we are currently witnessing the expected very strong sales momentum, and we can even raise our sales target from previously more than EUR 900 million to now more than EUR 1 billion. In this sound demand environment, also the positive price trend for German residential persists. One of the most important issues in recent months across many industries have been the global supply chain disruptions with the corresponding supply bottlenecks and cost price inflation.
It's fair to say that we are comparatively very well-positioned, but we still feel a certain impact that cannot be ignored. The shortage of certain building materials has reinforced over the last weeks, and we are seeing delays in our construction processes, as well as unforeseen delays in building permit processes of two large projects where everything was pre-approved by the authorities with the corresponding adverse impact on our expected full year revenues. With regards to costs, yes, the costs are rising. We have seen a strong jump in prices for many materials year to date. However, the continued positive price trend still outweighs these cost effects. We have already locked in some 50% of the planned construction work for 2022, providing decent visibility on the cost side.
Accordingly, we are also feeling comfortable with a sustained high gross margin target of some 26% also for 2022, and we do not see the risk of a margin squeeze. To support the envisaged step change in growth, we are also working very actively on the further expansion of our project pipeline, and we are delivering on our targets. Acquisitions with a GDV of around EUR 1.6 billion, including at-equity investments, have already been signed year to date. Last but not least, we have recently achieved an important milestone of our ESG strategy, which is a key element of our overall business corporate strategy. In our inaugural ESG rating by Sustainalytics, we have been ranked among the 2% of top global real estate developers. This is very encouraging. We are committed to improving further.
We have set ourselves the ambitious targets to be a leading player in our industry. Let's now take a brief look at our financial KPIs for the first nine months. Up to EUR 405.6 million. This reflects a strong growth of more than +39% year-on-year. As already mentioned, due to the strong seasonality of our business and backed by our current strong sales momentum, you can expect an overall very strong Q4 despite the headwinds from supply bottlenecks. Our gross margin stayed at a very high level of nearly 30%, also compared to other peers in our industry. This is clearly a reflection of the robust demand situation or good cost control. As already pointed out during our last calls, there's also an impact from the individual sales mix.
In this respect, we expect some lower margins in the final quarter, but we are still well on the way to beat 26%-27% for 2021. Finally, with support from lower interest expenses, our adjusted earnings after tax saw a strong increase of almost 62% year-on-year to EUR 40.3 million. Coming to our outlook. As already mentioned, due to the supply chain disruption, we anticipate slightly lower revenues of EUR 780 million-EUR 800 million, but we are also confident that we can reach earnings at least at the upper end or slightly above the previous range. Therefore, we are expecting adjusted earnings after tax of EUR 93 million-EUR 96 million. Also, our dividend policy remains unchanged with a target payout ratio of 30% of EAT.
We decided to already give you a first earnings guidance also for the next year. For 2022, we have to face reality that speed of approval processes is still slower than before the start of the pandemic. Moreover, the situation on the supply side with shortages for certain materials will still likely have a negative impact on construction progress. Consequently, we are taking a somewhat more cautious stance with regards to the expected top-line growth. We are now expecting adjusted revenues in the range of EUR 900 million-EUR 1 billion. With sustained high margins, we expect an adjusted earnings after tax of EUR 90-EUR 100 million for 2022. To provide some more insight into the current demand situation, we have provided you on slide number six an update of our retail sales ratio.
This chart clearly demonstrates that the demand after the recovery from the first lockdown period in spring last year remains at a high level, constantly above the long-term mean of 2%. After a spike in July, which was influenced by a block trade, we saw some temporary slowdown in late summer as we had a preference for margin optimization over sales speed. The current number of reservations and notarization appointments are clearly also pointing to a very strong year-end business with high expected volumes in our B2C business. On the following slide number 7, we again collected some data points from recent market surveys. Although there's quite a wide range, all results point to the same directions. German residential property prices continued their upward trend.
We find it difficult to comment on the individual results, but according to our own experience with our own larger projects, we would also feel comfortable with the assumption of mid-single-digit price increases of some 5% year-on-year. Financing markets remain, of course, highly supportive to our business. German ten-year mortgage rates saw a moderate increase recently from an ultra-low level, but are still around 1%, contributing to still high affordability for owner-occupiers. Simultaneously, the residential remains a highly attractive asset class for institutional investors. An overall pronounced scarcity of defensive asset classes and the still very attractive spread to bond market yields also in the historical context are pushing demand.
Let's move to slide number eight and give you some more insight on how we look at the current supply situation, which has become an increasingly critical topic for many industries over the last month. According to our observation, the upward pressure, especially on material costs, has not yet come to an end, but the momentum is decelerating. For steel, for instance, we are now seeing stagnating prices on an elevated level. Overall, we estimate that construction costs increased by some 6% year-on-year with a stronger rise in material costs of some 9%-10%. The cost increase is not eating now into our margins so far due to the unchanged sound HPI growth. The sharp rise in material costs is also mitigated by a more moderate increase in labor costs.
Due to the still sluggish demand for commercial projects, our negotiation power vis-à-vis the construction companies has improved year to date. Despite the very robust residential demand, the overall German construction PMI is still in contraction mode, as you can see on the chart on the right-hand side. The more important risk factor for our business than the cost development is, as discussed, the availability of material. It is, of course, essential for us to avoid delays in the construction process and the postponement of the related revenues. Due to our strong management focus, we can and we are doing comparatively well due to our established network with long-lasting supplier relationships and our leading market position. Instone's decision of awarding orders at an early stage is also clearly paying off, but we are still not completely immune to those global frictions.
We are monitoring very actively the current situation, and as a part of our forward-looking approach, we have already locked in the terms for some 50% of our expected construction costs for 2022. Finally, also for your understanding of the relationship between revenues and construction costs, it is essential to understand that cost increases will only affect us to a very limited extent. Due to the fact that construction costs on average only account for some 40% of sales, a cost increase of 2.5 percentage points above the previously budgeted 3.5% can therefore be compensated by an additional price increase of only 1%. German residential is a highly regulated market and therefore the outcome of the coalition negotiations is of course being followed with great attention.
On slide nine, we provide an overview of the key items for our industry, which have been addressed during the exploratory talks of the potential traffic light coalition. In a nutshell, we are clearly seeing more opportunities than threats for us. There is the ambition to provide more affordable housing. We believe that we are well positioned for this business with our market positioning as a forerunner in the mid-market segment. Moving to our portfolio section on slide 11. As you know, we have committed to a step change in growth with a midterm annual revenue target of EUR 1.6 billion-EUR 1.7 billion. Instone will therefore continue to expand its project portfolio significantly in 2021 and also in the coming fiscal year 2022. We are delivering on our targets.
As of today, we have signed land purchases for projects which are spread over the key German metropolitan areas, with total GDV of around EUR 1.4 billion or EUR 1.6 billion, including at-equity investments. This also comprises a decent share of value-home projects. Until today, including the recent transactions which have been approved after the reporting date, the GDV of our portfolio climbs to a level of around EUR 7.2 billion, another significant increase year-to-date. Slide 13 illustrates a breakdown of our current project portfolio as of the Q3 reporting date, i.e., excluding the last acquisitions. The portfolio is made up of 53 projects with nearly 16,000 residential units. 86% of the GDV is distributed to the most attractive metropolitan areas of Germany and the remaining part in very attractive B cities.
On the right-hand side, you can see the usual breakdown of the current development status of our portfolio. Of the nearly EUR 7.2 billion of GDV, which is shown here, around EUR 2.7 billion is already under construction or pre-construction, and thereof, EUR 2.3 billion or 87% has already been sold. This secures a high level of visibility for expected sales and earnings growth in the years to come. With that, I would like to hand over to Foruhar Madjlessi for the financials.
Thank you, Kruno, and good morning everyone from my side. Let's go through our financial results and our outlook in a bit more detail. Let me start by saying that against the more consistent delays we are now seeing in terms of the supply bottlenecks as well as selected delays in building permits, we are satisfied with the way Q3 has evolved and the outlook for the rest of this year. In particular, our continued strong customer sales activities and the margin development do provide comfort. Supply chain and permitting issues must, of course, be carefully managed. Page 14 summarizes our adjusted results of operations. Revenues are up almost 40% for the nine months to September 30. While revenues for the period are a bit short of our expectations, the 30.5% growth margin for the quarter is stronger than anticipated at the start of this year.
Both these trends have continued into Q4. I will talk about the resulting changes to our guidance in a few minutes. Platform costs are in line with our expectations, and we continue to see around EUR 80 million in aggregate for the full year. Interest expenses have benefited from lower project debt owing to our strong cash position. However, we expect the figure to increase materially by year-end. Finally, earnings after tax for the nine months to the end of September are up more than 60%, reflecting both revenue and margin increases versus the comparable prior year period. Over the page, you see our concluded customer sales contracts and revenues for the nine months to September 30, as well as the bridge to our full year expected figures. Focusing on the left-hand side, we have achieved roughly EUR 380 million in sales contracts by the end of Q3.
In line with previous guidance, we expect the majority of Q4 sales to come from institutional clients. More than EUR 150 million worth of forward trades with institutions have already been signed. In addition, LOIs are in place for the balance required to our revised and upgraded 2021 sales target of above EUR 1 billion. Turning to the right-hand side, you see how sales translate into revenues. Once again, the majority of outstanding Q4 revenues will come from institutional clients. Revenue recognition associated with already signed contracts together with the agreed LOIs will get us to our revised target revenues. Turning to page 16, our balance sheet remains solid. Leverage remains very moderate, with 16% loan-to-cost and 1.6x debt-to-EBITDA. That means we have ample capacity to execute our growth plan and acquire new projects.
As we have previously pointed out, the strength of our balance sheet has proven to be a competitive advantage when it comes to, in particular, larger size acquisitions. Page 17 shows strong cash flow generation for the nine months to September. Our operating cash flow for the period amounts to EUR 112 million. Pre-new land investments, this number increases to EUR 185 million, which is a reflection of the strong and attractive cash generation our existing project portfolio generates. In terms of corporate and project debt, we are well funded with undrawn corporate facilities of EUR 120 million and EUR 230 million of cash as of the reporting date. In addition, we have EUR 110 million undrawn project-related lines. Page 18 shows our prospective NAV.
The 37.87 per share figure reflects the NAV we would generate, assuming development to hold of our entire EUR 7.2 billion pipeline. The increase versus year-end 2020 reflects the value embedded in our newly acquired projects. I'd like to spend a moment on our ESG achievements and roadmap on page 19. As we had communicated at the start of the year, we have completed our inaugural external ESG rating with Sustainalytics. Our risk rating score of 13.2 puts us firmly in the low-risk category and among the top 2% of the rated 284 developers globally, as well as within 6% of the rated universe across industries. With our clear commitment to further expanding our ESG-related reporting, we expect continuous improvements in our rating.
Specifically, with our fiscal year 2021 figures, we will publish an audited sustainability report in line with current EU regulation as applicable to larger companies. This will include Scope one, two, and three reporting on greenhouse gas emissions as well as our net zero pathway. In addition, we will expand KPIs and data in relation to social and governance topics. We also aim to start EU Taxonomy-related reporting by the end of fiscal year 2022. We do consider ESG topics and associated reporting as strategic. We are convinced that ESG will become ever more relevant across our value chain and markets. In fact, we see opportunities for us to generate a competitive advantage versus a highly fragmented market with mostly smaller players by addressing the needs of private individuals and institutional clients for ESG compliant product.
In addition, in the medium term, we do expect access to capital and cost of debt to benefit from a sound ESG strategy and clear, transparent reporting. Turning to page 21, I would like to make a few more comments regarding our revised 2021 as well as our first time 2022 guidance. Over the last month, we have started to see more consistent delays across our construction sites. The previously anecdotal evidence of slowdowns in construction activity related to supply chain bottlenecks has since become a more consistent observation. In addition, we've had to cope with two projects where building permit approvals and therefore construction starts have been delayed. As a result, the overall amount of construction expenses incurred is lower than anticipated. As you know, the construction progress is linked directly to revenue recognition. Therefore, we have adjusted downwards our revenue expectations for 2021.
The supply chain constraints as well as the slowdown in approvals are now likely to continue well into next year. I'd like to emphasize that we do see the market for our end product absolutely intact, and sales activity is so strong we have now increased our sales target by more than 10% to above €1 billion. Structural supply demand imbalances drives HPI, and despite strong material price increases, the net effect is margin enhancing. Therefore, for fiscal year 2021, we now expect the gross profit margin to come out above our previous guidance at around 28% and our adjusted net income at or above our previous guidance range at €93 million-€96 million. That is despite the lower revenues. We have also initiated guidance for 2022.
As opposed to our earlier expectations for corona related delays in building rights and building permit approvals by city parliaments and municipal authorities to go away and fully normalized by Q4, we are actually observing the strongest wave of infections the country has seen to date. Against both these observations, i.e., building material supply bottlenecks and corona-based implications for relevant approvals, we have taken a more conservative approach to fiscal year 2022 guidance with adjusted revenues and adjusted earnings after tax expected at EUR 900 million-EUR 1 billion and EUR 90 million-EUR 100 million, respectively. Our midterm target remains unchanged. With that, I'd like to open the call for Q&A.
Thank you. We will now begin our question and answer session. If you have a question for our speakers, please press zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question has answered before it's your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. We have the first question, it's from Philipp Kaiser, Warburg Research. The line is now open for you.
Yeah, hello, gentlemen, and thanks for the presentation and for taking my question. I have a couple of questions, so we might go through them one by one. Just starting with an understanding question, could you shed some more light on the mentioned two large projects which now you see some delays? You mentioned that they're all pre-approved. Could you give some color on that?
Yeah, sure. Both we finalized the master plan, and it was approved by the city government. What was surprising for us that one of the authorities without, let's say, without the agreement with the leading authority, made up issues, which came for us really surprisingly. Led to the situation that the initial construction start planned for October has to be shifted to January. We are currently, let's say solving the things, and they will be solved. There is no issue really, but we have a delay in timing, which came for us as a surprise in October.
Okay. What's like kind of the magnitude of this effect, is that kind of the reason behind the adjusted revenue guidance, or it's like not that much?
It's one significant part of it. Approximately more than 50% due to the fact that we have big projects and with huge revenue recognition till end of this year. This is one of the reasons, yes.
Okay. Perfect. The second question is regarding the 2022 outlook. You guided for an increase in revenues, but kind of, you know, EAT or net income adjusted at almost the same levels like this year. Could you shed some light on kind of the margins you are expected are the reasons behind a growing top line and a flat bottom line. Is it the product mix, or could you elaborate a bit more on that?
Sure. I think what we've put out there is pretty much in line with what so far. In terms of margins, we had said 25%. I think there's up 25% gross margin. What differentiates the results versus the revenues to 2021 is that margin impact, which is gonna be lower than the 28% we're now expecting for this year. Plus, we have about EUR 10 million of increase in platform costs, which we had also previously announced, versus this year we'll be at EUR 80 million this year and EUR 90 million next year. Then there is a final effect. We will probably have a bit more of interest expenses next year as well versus this year, which explains the balance. In aggregate, I think that explains the why earnings after tax remain at a similar level to this year versus the higher end.
Just on the gross margin, I mean, you mentioned the favorable house price inflation effect multiple times through the presentation. Why is it kind of this year 28% achievable and next year around about 25%-26%? Is it due to the product mix which differs from this year? Or are there other effects?
One reason is that we have extremely, let's say, high profit margin projects still in the revenue recognition this year. Like, for example, our Marie project in Frankfurt and a few others which have gross margins above 40%. This is the main driver for this difference.
Okay. Perfect. Understood. My last question is regarding the financial ratio. You mentioned the very low net debt to EBITDA of 1.6x . Can we expect to increase these number by year-end due to the acquisition of new products? Or will it remain on those low levels at least for 2021 and respectively for 2022?
Yeah, I think we can expect the LTC to go up slightly, but not massively for this year. The EBITDA, the debt to EBITDA figure will probably remain around these levels because while debt is going up, our EBITDA will benefit from the strong Q4 revenues and EBITDA contribution. On an LTM basis, the number will likely be roughly on the same level.
Okay, perfect. Maybe one last question. Is it right you mentioned that you already locked 50% of the material cost for 2022? Got that right?
That's about right. Yeah. 50% is about what we have secured already.
Okay. One last one on the guidance 2022. Could you elaborate more on which of those mentioned effects you already experience and which one you expected to see coming in the next couple of weeks, maybe months, due to the increased corona pandemic? To get a feeling of the guidance, there might be some upside potential.
Yeah, there are two main effects why we reduced the guidance for 2022. One is the material scarcity, which is currently the case and we expect to be the case in the next year. The second is that our initial guidance for 2022 was that the pandemic has no impact anymore into 2022. This is when you look at the current COVID numbers, I think the authorities will work as slow as in this year if the pandemic is going forward as it is currently.
Okay. You already see some slowing down in the approval process, like building permits.
No. Yeah, it's the level of, you know, speed is the same, but it's of course.
Okay. Yeah.
You know, slower than before the pandemic. Yeah.
Yeah. Okay. Understood. Thanks a lot. Very helpful.
You're welcome.
The next question is by Emily Biddulph, Crédit Suisse . The line is now open for you.
Good morning, guys. I hope you're all well. I have two questions, please. The first one was just on the definition of medium term. Obviously, sort of guidance there is unchanged today. However, just wanted to confirm that if our definition of medium term is sort of 2025, 2026, does that still feel reasonable? Or as we look at this today, is it possible for you to sort of step up year-on-year growth in sort of 2023 to sort of 2025 to still get there on the same basis? Do you think the sort of capacity limitation issues, both sort of within your own business and from a planning permitting perspective that might mean the sort of the definition of midterm is maybe a year or two, sort of further away than we thought it was? Then secondly, just on 2022 revenue guidance.
I just wanted to get a bit more of a sense of what you've assumed in there in arriving at that number. Are you assuming that sort of planning offices sort of normalize by Q1, or are you sort of thinking there's sort of more disruption beyond then? From a sort of materials perspective, is that the same? Are you sort of assuming that things get back to normal by sort of the spring or in the middle of the year? Sort of what should we think about sort of the way that you've assumed kind of next year looks? Thank you.
Hi, Emily. Let me take the first question. Our medium-term guidance remains unchanged, and our medium-term reference year is also unchanged as 2025, 2026. Why is that unaffected? If you think about the trajectory and our growth targets, ultimately, what's gonna happen in five years' time depends on what we acquire this year, next year. Those are gonna be the major drivers. I think we are on track with our acquisition targets for this year. We've always said we want to keep revenues at EUR 1 billion+ for our core business, and we're ramping up our value-home business to about EUR 400 million-EUR 500 million in revenues.
In aggregate, we're gonna get to the target levels with both of these. For this year, we can say we have achieved our acquisition targets. We are optimistic that that will also hold true for next year. We have the balance sheet to achieve that. Short-term changes to our business wouldn't affect that midterm target.
Your second question, let's start with material scarcity. What we see on the ground and you know that we changed or let's say we adjusted our strategy to address material orders still earlier than before the pandemic to compensate potential delays. Our expectation is that the material scarcity will normalize until the mid of next year. This is one assumption. Regarding the authorities, we are starting, I would say, in 2022 on a good base because approximately 80% of the projects, the master plan is already accomplished. From the master planning process, we see minor risk here. Of course the building permit process are still lasting longer than before the pandemic. This is reflected in our 2022 guidance.
That's great. Thank you, guys.
Welcome.
Thanks.
The next question is by Thomas Mordelle, Stifel. The line is now open for you.
Morning. I was wondering if you could talk a bit more about the competition. Obviously, you're in a relatively strong position, but we've been reading in the press about some of the smaller names, how they've been struggling, and I wondered what that meant potentially for you. Do you see potential bargain projects available in the market, distressed sellers? A little bit of color there would be helpful, please. Thanks.
Hi, Thomas. I would say that we commented last time that we see strong competition for the very big projects. You've seen in the portfolio update that we have purchased one big, which is clearly showing that what we said that for the bigger projects we see less competition because of this aggressive competitors are currently not really acting. The smaller ones, I think for resi, they are not really struggling. Where we see the one or the other is, let's say, initially commercial use projects. Here we see the one or the other chance upcoming in the market. I think we are well positioned with already having reached our acquisition target for this year and we are working still on the significant acquisition portfolio. We are very confident here to reach the acquisition targets also for the next year.
Great. Thank you very much.
The next question is by Thomas Martin, HSBC. The line is now open for you.
Yeah, good morning. Just a few questions from my side. First of all, regarding your price cost spread, I mean, the margins is going up a bit this year, which you have guided. How confident you are going forward, and given the strong cost inflation we have for different materials that you can keep that high, or that quite solid and attractive price cost spread? That would be my first question. Given the cost inflation but on the other side also due to slightly rising funding costs, how does that impact the dialogue with your buyers, with institutional buyers and then also with retail investors? My last point, just on the portfolio, maybe could you remind me what is the current average sales price per sq m for the different product types? That's it for me.
I start with the first one, or we can say something to the second. Price cost spread and our confidence here. Looking at the current calculation, you know, we already implemented in our gross margin assumptions the cost price inflation we've seen up to date. Going forward, our assumption is that cost price inflation is eating up HPI. There's a neutral if you want to say a neutral overall result of it. What is from my perspective, looking at the demand, the demand supply imbalance, the strong appetite of investors, is still very conservative case. When you look at, you know, 2% or 2.5% cost price inflation is compensated by 1% HPI growth.
Okay.
I think on the average sales price, the number across our entire portfolio is EUR 5,400 per sq m. On your second question, I wasn't quite clear what you were referring to.
It's just, I mean, it's basically. It's a bit similar to the first question, but just how the dialogue or the discussions you have and negotiation with your investor, how this is changing currently. Because everybody's aware of this massive cost inflation in the sector, big uncertainty how this will develop in the future. Of course, from institutional buyers' perspective, you have a certain required initial return on an asset, and you have funding costs for that. It's just to get a bit of a feeling what you see, what you hear and, yeah.
I can give you, let's say, an actual picture of the ground. The very strong gross margin of 28% this year is and the increase of the gross margin in comparison to Q2 is underlined by stronger prices we are generating from both institutional buyers and also owner occupiers. We have raised the prices in comparison to what we initially calculated. I think this is the best feedback to your question. It's an extremely strong demand in the market. We are currently, let's say, adjusting the prices upwards. I also think that, you know, when you look at overall the market and the supply-demand imbalance, I don't believe that the situation will change in the near future.
Yeah.
I think maybe one addition in terms of the gross rental yield that people are pricing. It remains above 3%, and there is potentially a bit of scope for further yield compression. If I look at the broader market of standing properties with the new build benefits of requiring a lot less maintenance, many existing properties in similar locations are already at 3.2%, 3.3%, 3.4% gross rental yield. So I think for institutions it remains attractive. The second point maybe to make is that all of these institutions are increasingly ESG aware. Our new build delivers what is gonna be very costly to implement for the standing portfolio. I think our product will remain extremely attractive for institutions and the structural demand supply imbalance is a fact that's not gonna go away in the next five or maybe even ten years or so.
Maybe one follow-up. You have also the feeling that because of the ESG theme and the clear advantage of having or investing into a new build product, that this, your product deserves in the end a certain premium and investors accepting a lower initial yield on such an asset because of the ESG part?
Well, it's not just because of the ESG part itself, but because of the combination of the ESG compliance and, secondly, the lower maintenance and investment required for the new product over the next, let's say, at least five to ten years.
Yeah. Okay.
Yeah.
Okay. Thank you.
Welcome.
We have no further questions, and so I'd hand back to Burkhard Sawazki.
Yeah, thank you for your participation. If you have further questions, please feel free to contact the IR team also after this call. Thank you and goodbye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.