Ladies and gentlemen, thank you for standing by. I am Maria, your Chorus Call operator. Welcome, and thank you for joining the LEG conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press Star, followed by One on your telephone keypad. Please press the Star key, followed by Zero for operator assistance. I would like to turn over the conference to Mr. Frank Kopfinger, Head of Investor Relations. Please go ahead.
Thank you, Maria, and good morning, everyone from Düsseldorf. Welcome to our nine month 2023 results call, and thank you for your participation. We have in the call, as always, our entire management team with our CEO, Lars von Lackum, our CFO, Kathrin Köhling, as well as our COO, Volker Wiegel. You'll find the presentation document as well as the quarterly report within the IR section of our homepage. Please note that there is also a disclaimer, which you'll find on page three of our presentation. Without further ado, I hand it over to you, Lars, for the presentation.
Thank you, Frank, and good morning also from my side. As always, I will kick off today's presentation by summarizing the key highlights. Afterwards, Volker and Kathrin will provide you with more details on operations and financials. We continue to operate in an environment of substantially increased geopolitical risks, prolonged uncertainty regarding the new sustainable interest rate level, as well as the new valuation level for real estate assets. Therefore, we are convinced that the cash-focused steering of our business is the superior strategy to manage this volatile and challenging environment. Cash remains our North Star, not only for the remainder of 2023, but also for the coming year, so we stick to AFFO as our leading KPI. The macro environment for German affordable residential is characterized on the supply side by a strong rise of cancellations of residential construction projects.
According to the monthly ifo survey, published in October, 22.2% of companies reported canceled projects. Even 48.7% of companies are complaining about a lack of construction orders. In comparison, a year ago, only 18.7% of companies were affected by a lack of orders. As there does not exist any quick fix on the supply side, and as Germany expects further strong immigration by skilled workers, as well as refugees for the full year 2023 at the same time, demand for affordable living has increased and will increase further. In this environment, we successfully leveraged the outstanding strengths of our platform to deliver on our ambitious operational and AFFO targets. Already, after nine months, we generated an increase of the AFFO by more than 50% and increased the operating cash flow by more than 18%.
The AFFO stands at EUR 176.9 million. For the full year, we expect the AFFO to come in at the upper end of the EUR 165 million-EUR 180 million guidance range. As always, the last quarter will be impacted by a higher level of CapEx spending. As the investments will be fully funded by the generated cash, we expect to keep at least the current AFFO level. Internal cash generation is driven by strong operations. For most, the net cold rent grew on a like-for-like basis by a strong 4%. On a reported basis, net cold rent grew even by 4.5%, as growth from new build units more than offset the effect from disposals.
Although, having reached already a record occupancy rate by mid of the year, vacancy rate was successfully reduced by another 20 basis points to just 2.4%. Not only Volker and his team, but also Kathrin and her team, did a tremendous job in the current environment. We already refinanced our 2024 maturities and are now fully financed until mid of 2025. In 2025, we plan to again just roll forward the secured part of our debt book. The remaining EUR 400 million of debt are attributable to the convertible bond, which matures September 1, 2025, i.e., in almost two years from now. As of today, our debt book carries an average maturity of 6.6 years, with an average interest rate of just 1.65%.
As of September 30th, our LTV stands at 46.8%, an increase of around 290 basis points, driven by the revaluation of our asset base per mid of 2023. Although the LTV currently is above our internal target, this had no effect on our ability to refinance, as just described, and we do not expect any impact in the near future. We adapted our LTV target to the current market environment and aligned this now completely with Moody's ratings methodology. To restore the former Baa1 rating, we need to bring the LTV to below 45%, which we consider to be a medium-term target due to the low transaction volumes currently. To keep our LTV under control, we enforced our disposal activities successfully.
Over the first 9 months, we managed to sell around 1,600 residential units, as well as some commercial non-core units, for a total of around EUR 130 million. Overall, the transaction prices meet our book value. Continuously matching book values and transactions give us all the confidence to remain very disciplined and to keep us away from distributing shareholder value to third parties by false volume or structured deals. Transfer of ownership is expected to take place over the coming months, and cash realized accordingly. With just 6 weeks of business activity to go until year-end, we also provide you with our valuation expectation for our residential assets. For the second half of 2023, we expect, as of today, a further devaluation in the order of 4%-6%.
Compared to H1 value decline of 7.4%, pressure on pricing is losing momentum, especially as our portfolio runs already at a 4.6% gross yield. Further rent increases and H2 devaluations will shift our portfolio gross yield more into the 5% region, which provides an attractive spread over the risk-free interest rate. Based on our portfolio split, we expect a higher share of the devaluation to weigh on the high growth markets, which currently bear a gross yield of 3.9%. Inversely, the assets in the high-yielding markets will be less impacted, as those already show a gross yield of 6% as of today. Looking ahead, which, due to the higher than normal geopolitical risks, comes with more uncertainty than in the past, we expect our very resilient business model and highly performing platform to increase the rate of cash conversion.
Therefore, we feel comfortable to provide you with a fully quantified guidance of our core KPIs for 2024. For next year, we expect the AFFO to grow further to EUR 180 million-EUR 200 million. This is driven by, again, increased rent growth momentum, i.e., an expectation that rents will grow by 3.2%-3.4%. That growth will not come on the back of an increase in spending. Even the opposite, we will remain very disciplined on all our maintenance and CapEx activities. From our perspective, the current market environment just does not allow for a more aggressive approach on spending. Once the macro situation improves, we will recalibrate our spending activity, and our flexible setup will allow for it. Finally, let me highlight another very positive result: the approval of our targets by SBTi.
Being the first company in the market to have received that approval, we hope this approval gives you all the confidence that we, while being tough on spending volumes, are very serious about our decarbonization path. Therefore, we continue to optimize not only the financial return on every euro being spent, but also the CO2 reduction impact. So we continue to work on smart and innovative solutions, like the air-to-air heat pump or the thermostat technology. Please follow me to slide seven, so that I can provide you with a short review of our strategic setup, introduced to you by November last year. As you might remember, we introduced our cash is king strategy exactly a year ago. We anticipated the now so very visible and not less dramatic shift of the market, and focused the entire company purely on cash generation.
By doing this, we introduced the AFFO as our core KPI. We are convinced that this was and still is the best way to reflect cash generation. At the same time, we picked that KPI to allow analysts and investors likewise, to model that figure accordingly. We identified four key levers to increase cash generation and delivered on all of them reliably. Firstly, we strengthened the operational performance by increasing rents rigorously. We upgraded our guidance over the course of the year due to better than market dynamics, and continued to see a strong increase of 3.8%-4% for the full year 2023. We are also on track to deliver on our reduced investment ambition of EUR 35 per sq m. Additionally, we are on track with our ambition to cut costs wherever we see potential.
Secondly, we put our entire new development platform into run- off. It was very clear to us already back in November, that we will not start any new development projects. At the same time, we started to work hard to cancel all plans, but not yet started development projects. Having had more success in canceling unprofitable projects than initially assumed, we increased our AFFO guidance at H1 by EUR 17 million-EUR 20 million. Thirdly, we promised to become, and by now are, a net seller in the market. Year to date, we disposed around 1,600 units, as well as non-core commercial units for a total of around EUR 130 million. We did that in smaller, direct transactions, but matching book values. And finally, we continued our innovation journey.
We see substantial business opportunities in our industry to provide green one-stop-shop solutions to third parties by leveraging our extensive know-how. In the meantime, we founded RENOWATE, Youtilly, termios, and dekarbo, all of them promising ventures which address digital and ecological, but foremost economic opportunities. We continue to optimize our spending going forward, but will certainly stick to invest in those growth areas. And with this, I come to slide eight. Without any doubt, times remain challenging. There are parameters which we have in our hands, but unfortunately, there are others which are beyond our influence. For the latter part, we all witnessed an historic increase in interest rates, which dried out the transaction markets, including affordable German residential. That market has not yet opened again, and we will not take a bet on when this is going to happen.
Therefore, we pulled all levers to adapt the organization as quickly as possible to a higher-for-longer interest rate environment with a non-existent transaction market. By doing so, we created the freedom to keep our discipline with regards to all transactions, i.e., neither doing structures nor voluminous deals, but stick to smaller transactions at book value. Operationally, our focus was on delivering on rent increases, and we will continue to execute on this accordingly in 2024. In 2023, we benefited from the cost rent adjustment for our subsidized units with 80 basis points out of the 4% reached in the first nine months. As the next cost rent adjustment will take place in 2026, the like-for-like rent growth of 3.2%-3.4% in 2024 represents an additional 20 basis points of rent growth. We will keep costs under strict control.
Therefore, and despite a still quite substantial inflation rate, we expect only a moderate cost development. On the investment side, we continue to bring down our spendings on a square meter basis to 32 EUR. This translates into a savings of another 9% in nominal, and certainly into a double-digit saving in real terms. To make that ambitious target work, we will make use of the newly implemented subsidization regime following the GEG legislation. Due to the successful refinancings in 2023, we face the next maturities mid-2025. This provides us with substantial freedom to further optimize our debt book going forward. With all those measures, we continue to strengthen cash generation. All of that translates into a guidance for the AFFO by around 10% more, comparing midpoints of both guidance. Again, this is a cash-driven figure.
We do not steer our business based on the much more accounting-driven KPI, FFO I anymore. On the next slide, we provide you with our AFFO bridge. I am now on slide nine of the presentation. There, we provide a bridge from our current 2023 AFFO guidance to the 2024 AFFO guidance. In 2024, we need to offset two major headwinds: firstly, higher net cash interest costs, and secondly, the one-off profit from the forward sale of green electricity. More than offsetting the headwinds will come from increasing net cold rents, freezing the operating as well as admin cost base, saving on maintenance costs by another round of cost cutting, leveraging the subsidization regime. While we do neither focus nor steer the company on FFO I, we added a highly preliminary and indicative number for the FFO, for the FFO I.
We expect the FFO I in the range of EUR 440 million-EUR 470 million. Please take a note that the FFO I is not part of our official guidance. With this, I conclude my presentation and hand it over to Volker for more details on our operational successes.
Thanks, Lars, and good morning to all of you. I will start on slide 11 with our transactions year-to-date. On a reported basis, i.e., transfer of ownership has taken place already, we disposed year-to-date 831 units for around EUR 50 million. However, this number somewhat disguises our disposal efforts, as it does not reflect the transactions signed, but not yet closed. As of today, we additionally signed disposals for roughly 800 units. Transfer of ownership will take place over the coming months and will then be reflected in our balance sheet. Including the disposal of some non-core commercial units, we will generate another EUR 18 million of disposal proceeds. All assets sold were part of our 5,000 units portfolio and considered non-core.
The relatively low disposal price per unit underlines that we remain focused in selling assets in regions with subdued structural development potential or assets in weak technical condition. Overall, we sold around 1,600 units for about EUR 130 million. Total transaction volume equals the book value of the disposed assets. We show our full commitment to not waste shareholder capital by that very disciplined sales approach. That makes life more difficult for our sales team, but safeguards every single euro of value for our shareholders. I'm now coming to slide 12. With our like-for-like rent growth of 4% in the first nine months of the year, we are at the upper end of our guidance.
While our like-for-like rent growth at half year already reached 4.3%, we clearly stated already back then, that this were purely timing effects regarding the implementation of rent increases, and we are not steering rent growth on a quarterly basis. The in-place rent for our entire portfolio stood at EUR 6.55 per sq m at the end of Q3 2023. The rent increase of 4% is below the inflation rate of the last quarters and also below many of the newly agreed wage increases by workers unions in the German market. To shed some more light on the affordability of living in Germany, we have included a chart in the appendix of our Q3 presentation. In a nutshell, LEG offers a more than affordable product in the market.
Rent table increases contributed 1.8 percentage points to the total rent increase of 4%. Modernization measures and relating make up for 1.4 percentage points. The cost rent adjustments for our 32,000 rent restricted units contributed 80 basis points. The cost rent increase, which is at least partially CPI linked and can only be implemented every three years, translates into an increase of 5.5%. On a like-for-like basis, the in-place rent for the free finance part of our portfolio increased by 3.7% to EUR 6.87 per sq m . The strongest rent increase, with 4%, was executed in our stable markets, followed by the high growth markets with 3.9% and the higher yielding markets with 3.1.
The rent increase for the free finance units was positively impacted by dynamic rent table increases in locations with a bigger number of LEG units located there. This includes Kiel, with an increase of 15.6%, Münster, with an increase of 13.3%, and Dortmund, with an increase of 5.8%. You might want to spend a second on slide 35 in the appendix. We provide you with an informative overview of expected new rent tables for our top locations to be published by the municipalities sometime between today and end of next year. Some cities will finally change the type of rent table from a simple to a more scientific-based qualified rent table. As an example, Hamm, a city in Westphalia, has released for the first time a qualified rent table.
Due to the 3,800 units we hold there, it is a relevant location to us in our higher yielding markets. The rent table showed an increase in the mid-tier segment of the rent table at 26%. While we are happy to see the market development much better reflected in the qualified rent table, please do not assume that this headline number is anywhere close to the rent increases being executed by LEG, as we certainly have developed rents also in the past by using a group of comparative apartments. You can see on slide 13 that we decreased our spending significantly in the first nine months of the year. The adjusted investment per square meter declined by 22.6% to EUR 2,232 per sq m.
This corresponds to a total savings of roughly EUR 70 million and was the main driver for the strong improvement of our AFFO. Adjusted investments, among others, do not include new construction activities, own work capitalized, subsidies received, as well as internal profits and connections with in- investments, reflecting our cash focus steering approach. The new construction costs remained at around EUR 20 million, which is close to the previous year's level. When it comes to the development of adjusted CapEx and adjusted maintenance, there is no change in the trend compared to the first half of the year. Adjusted CapEx per square meter , the larger part of our investments, declined by 40%, while adjusted maintenance per square meter increased by roughly 25%. This adverse development is a pure accounting effect, as the capitalization ratio declined significantly from 74%-57%.
Due to our new cash focus steering approach, we gave up steering on the capitalization ratio as it led to higher spendings. After nine months, our investments are still below the guided level of EUR 35 per sq m . As always, investments will pick up significantly in Q4, i.e., reach a level of roughly EUR 13 per sq m , while the average level per quarter has been only EUR 7.50 so far. Payouts for investments are driven by the completion of work, and a higher share of those completions are expected towards the close year. Therefore, AFFO in Q4 will be much lower compared to the previous quarter. With this, I hand it over to Kathrin.
Thank you, Volker, and good morning to everyone, also from my side. I will continue with the development of our key P&L items on slide 15. In the first nine months of the reporting year, net cold rent was up 4.5% to EUR 623.5 million. This was mainly driven by our strong organic growth, which contributes 85% of the EUR 26.9 million increase. The remainder is net effect from additions to our portfolio, especially new build, less disposals. The recurring net operating income was slightly positive and increased by 1% to EUR 516.9 million. The prior year figure of EUR 511.7 million has been adjusted to the calculation method that we have applied since the beginning of the year.
Maintenance expenses for externally procured services, as well as own work capitalized, are therefore no longer included, but are considered further down in the P&L in the FFO I and AFFO. On this basis, the NOI margin declined by 290 BPS year-on-year. In line with the first half figures, this is mainly due to higher operating expenses. These account for EUR 11.6 million, and include higher non-transferable operating and heating costs, such as CO2 costs that cannot be charged to our tenants. With an adjusted EBITDA margin of 81.4%, we are well on track to meet our full year target of 80%. This reflects our steady pursuit of efficiency in both operating and admin divisions. Furthermore, the line item, Recurring Other Services, contributed EUR 11.7 million, driven by our forward sale of green electricity.
Finally, the AFFO, our most important KPI, developed strongly with an increase of 54% to EUR 176.9 million. Obviously, we must consider this number against the background of the still low level of investments. Catching up on our full year investment target of EUR 35 per sq m, will surely be reflected in a considerably lower AFFO for the fourth quarter of 2023, as Volker also explained. All in all, this will lead to a full year 2023 AFFO at the upper end of our guidance range of EUR 165 million-EUR 180 million. Now please turn to slide 16, where we have prepared a more granular overview of the AFFO drivers of the reporting period.
Just to sum up, the positive effects in the first nine months clearly came from our sustainable organic growth, reduced investments, and the forward sale of green electricity. This was partly offset by higher operating expenses and higher interest expenses. Moving to slide 17, which gives an overview of the current portfolio valuation. As always, there was no revaluation in the third quarter. Therefore, the gross yield of the residential portfolio stands nearly unchanged at a sound 4.6%. This translates into a multiple of 21.5. The net initial yield, based on the EPRA definition, is 3.7%.
The gross asset value per sq m for residential properties is EUR 1,677 on average, ranging from EUR 2,299 per sq m in the high growth markets, down to EUR 1,166 in the higher yielding markets. Certainly, interest in our outlook for the portfolio valuation as at end of December, is much higher than on current numbers. However, it is currently not easy to come up with the guidance, as the transaction markets do remain very challenging. Nevertheless, having looked at the market intensively over the past few months, and discussed a lot with our appraiser, CBRE, we now feel comfortable to provide you with a forecast for the H2 valuation of our assets.
As of today, we expect a further devaluation in the range of 4%-6% for the second half of 2023. This reflects our expectation that the downward momentum eases somewhat. We certainly must differentiate between market segments here. In our higher yielding markets, the current gross yield of 6% offers sufficient spread towards the 10-year German bond yield. We therefore assume that the pressure will be more on the high growth market segment, and anticipate stronger devaluations in these areas. I am now on slide 18 to provide an update on our refinancing, another important topic and my top priority since taking over as the CFO as of April 1st. Numbers on the slide are pro forma, meaning they already include all of the refinancing we signed as of today.
If you look at the bar chart on the left, you immediately notice that we are now through with all the maturities for next year, except for the small amount of EUR 30 million. We redeemed our EUR 500 million bond, which was originally due in January 2024, early at the end of October. The next maturities of secured financings are now upcoming in May 2025, 1.5 year from now, followed by the convertible due in September 2025. All in all, we agreed on financings for over EUR 900 million at a blended 3.89% for 8 years. We used a mix of roughly 90% secured financing and around 10% unsecured debt. The latter is a EUR 100 million tap of the 2031 sustainable bond, which was already executed in July.
As a result, the average interest cost amounts to 1.65%, 39 BPS up on nine months, 2022, with average debt maturities of 6.6 years as of November, making it roughly comparable to nine months, 2022. Thus, our average interest costs are only rising slowly and remain clearly manageable. Another positive outcome of our refinancing activities is the release of secured assets with a total book value of more than EUR 760 million, following repayment of around EUR 185 million of loans. Taking all refinancings into account, this provides a headroom of more than EUR 1 billion on additional secured financing. We could bear a valuation decline of more than 25% until the unencumbered asset test is reached.
At the reporting date, we had a cash position of EUR 326 million, including short-term deposits. We extended our revolving credit facility by another three years until October 2026, at unchanged conditions, and added an additional RCF of EUR 75 million. Furthermore, as another financial cushion, there is still our commercial paper program of EUR 600 million. Our interest hedging rate of around 94% is unchanged compared to both financial year 2022 and Q2 2023. Our LTV at September 30, 2023, increased to 46.8% from 43.9%, as at year-end 2022. This was driven mainly by the devaluation effects in our property portfolio. We have now set a new medium-term target level for the LTV to better reflect the changed market environment and aligned with Moody's rating methodology.
It has been set medium-term at 45%. Our cash flow steering approach will certainly help to reduce the LTV number, so would disposals. But let me reaffirm, we would neither sell assets at substantial discounts, nor would we rush into structured deals with an asymmetric risk-return profile. In terms of further refinancing, I want to highlight that we are not dependent on bond markets in the short- to medium-term. Hence, the recent rating downgrade to Baa2 by Moody's has no consequences so far. Our existing bonds are not affected, as they don't have step-up clauses. And finally, with a Baa2 rating, LEG is well positioned within the investment grade rating. And with this, I hand it over to Lars for the outlook.
Thank you, Kathrin. I'm now on slide 20. For 2023, as of today, we expect to reach the upper end of our guidance range for the AFFO of EUR 165 million-EUR 180 million. We confirm our adjusted EBITDA margin guidance of 80%, our rent growth guidance of 3.8%-4%, as well as the investment target of EUR 35 per sq m. As just explained by Kathrin, we adjust our medium term target level for the LTV to 45% in the medium term. All other parts of our guidance remain unchanged. Let me conclude today's presentation on slide 21 with our 2024 guidance. As always, we provide you with a full-fledged guidance, although the geopolitical risks have increased substantially.
However, convinced of the resilient nature of our business and excellence of our operations, we feel comfortable to share that set of numbers with you. For all of 2024, we will continue to follow our strategy of cash is king, and AFFO remains our dominant steering metric. We expect AFFO to increase to EUR 180 million-EUR 200 million. This implies that we further increase the cash generation of our business by offsetting the negative effects from higher interest rates, the normalization of the profitability of our green electricity production capacity, as well as general cost effects. We expect the EBITDA margin to decline to 77%. The decline results from the one-off gain of the forward sale of green electricity in 2023.
We expect rents to grow by 3.2%-3.4%, which represents a 20 basis points increase on a like-for-like basis over 2023, which saw already the strongest rent increase in LEG's history. We reduce investments further down to EUR 32 per sq m, a driver for further optimization of the cash generation of our business. Certainly, we will make use of the new subsidization regime. Those are unfortunately still uncertain when it comes to magnitude and timing, but we are confident to see a decision until year-end. Obviously, we stick to our new medium-term LTV target level for 2024, as well as our dividend policy. We also provide you with our new ESG targets. As you see, for the short-term target, we continue to strive for a CO2 reduction of 4,000 tons.
Despite bringing down our investment level, we do not give up on our decarbonization path. This is the effect from gradually substituting traditional refurbishment approaches by new technologies, as well as nudging activities. We also provide you with a long-term target when it comes to our air-to-air heat pump initiative. We aim to install and commission 2,000 heat pumps by 2027 with LEG, but also for third parties. This is a lower level than originally assumed when we introduced the initiative and aimed to install around 7,000 heat pumps by 2027. One reason is that we want to get a clearer picture on the local district heating planning before starting substantial investment activities ourselves. The other reason is that we continuously enlarge our toolbox when it comes to CO₂ reduction.
One of our latest tools, offering an even higher CO₂ reduction per invested EUR, are the smart thermostats of termios, where we make substantial progress. In a situation of limited financial means, we certainly allocated more money to that initiative. I hope those explanations bring some more insight regarding our guidance for 2024. With this, I hand it over to Frank. The complete management team and I are happy to answer your questions now.
Thank you, Lars. With this, we begin the Q&A session, and I simply hand it over to you, Maria.
Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Thomas Rothäusler with Deutsche Bank. Please go ahead.
Hi, morning. One question actually on rental growth. I mean, you expect only a slight acceleration of rental growth, for next year if, if you focus on the freehold space. I mean, one of your peers sounds much more upbeat, I would say. Actually referring to better rent table outcomes. Just wondering how, how you look at this, at this wide gap between you and one of your peers, and, and also maybe more specifically, what is, what is basically your expectation for rent table growth for next year?
Well, Thomas, thanks. I take this question. I think if you look at peers, you always need to first look at how everyone does this calculation. We include in our rent growth guidance only pure cash effects that we can execute next year, and we do not include any effects from new build buildings. So it's only based on a like-for-like basis, i.e., on the existing buildings as they stand today and what we expect to grow rents next year. So that's, I think, very important to keep in mind. And with regards to the rent growth, we expect the rent growth momentum to pick up once the new rent tables come in. If you look in the past, you always have that gap when inflation starts, and it's reflected in the rent tables from two to four years.
We expect that this will also hold true for the future. So we are very positive on picking up rent momentum in the future, but this will need some time.
Okay. I mean, you referred to Hamm as an example, with, I think you said 26%+ as a result of, if I understand, first time detailed rent table. I mean, is this, is this something we should expect in general for, for cities which have to come up with a, a rent table for the first time?
Well, Thomas, I think that's a very, very difficult question to ask, because these qualified rent tables are based on more science-based calculations, and they are made by experts there. And we have a view on the local markets, and we rent, well, when we have churn, we rent the flats at a higher price. So we expect that there is momentum in these markets and that there will be a substantial positive impact from new qualified rent tables. But we also need to keep in mind that we managed to increase rents sometimes above the rent table, the existing rent tables, by using comparative apartments.
Yes, there is expected rent growth from these, expected from the new qualified tables, which is significant, but it will not be the same percentage. We cannot increase our rents by the same percentage as we are often already above the existing rent tables.
Last one, again, on rental growth. I mean, if you look into next year, would you say there is more growth for higher, you know, for your higher growth product versus the higher yielding? Or what is your view on that?
Well, I think that, the high growth markets, the name of the high growth markets is, the high growth markets, because we expect a higher growth there. So that's why we labeled the markets as they are. But you see that the trend is in all three markets, more or less the same. In the first nine months, we saw a very strong increase in the stable markets, so we see the spillover effect from the very tense, high growth markets, where it's hard to find new flats and where the churn rate is lower, and we see the spillover effect in the stable markets and also in the higher growth, higher yielding markets.
So, yes, I think the overall rent growth in the high growth markets will be the highest, but it will be in all markets, and you always have to have in mind that in the high growth markets, you have the mid-price brands then.
Okay, thank you.
The next question is from the line of Jonathan Kownator with Goldman Sachs. Please go ahead.
Good morning. Thank you for taking my question. Numbers question, sorry, but can you please help me reconcile your guidance for 2024? You're guiding to EUR 180 million-EUR 200 million AFFO. I know it's not part of your official guidance, but you're also guiding to EUR 440 million-EUR 470 million for FFO I, right? Which implies a CapEx of around, say, EUR 260 million-EUR 270 million, and you've also said that the capitalization ratio should be lower now that your CapEx is lower. But if I calculate that ratio implied by that guidance, that would mean around 76% of capitalized ratio, and that's based on EUR 347 million total maintenance and CapEx. So, what am I missing here?
Is the capitalization ratio assumed for next year higher at 76%, or should the FFO one guidance be lower than at, you know, below EUR 440 million? Yeah, that would be my first question, please. Thanks.
Yeah, and, and thanks a lot for the question, Jonathan. So once again, so please, what we try to do was really just give you a bit of a flavor around the FFO I, because we know that a lot of investors, a lot of analysts still look at the, at the FFO I. But once again, we do not give a guidance on that number, so it's. That's definitely not a guidance. We are guiding on the AFFO. Therefore, with regards to the capitalization ratio, that will be just the result of the decisions being taken on the ground on a day-to-day basis, on where to spend the next euro. And that might certainly impact the capitalization ratio. And that is the reason why we will have and need that flexibility between the maintenance bucket and the CapEx bucket.
What we can definitely tell you is that we make sure that finally we will end up with a positive result on the AFFO and an increase of around 10%. What we cannot tell as of today is whether we will really meet that full 40 to full 70, because that is the flexibility which we have newly implemented, and therefore that will have some flexibility. And please also take into consideration that certainly the subsidies being received still depend on the GEG and the BEG, which is to follow that, and the subsidization regime has not been finally decided on. So therefore, that also might have an impact on the numbers which we are presenting as of today.
Okay, that's clear. To just clarify, so that ratio is not something discretionary. It depends on how much you can capitalize the subsidies. I mean, how does that work exactly? Sorry, it's not entirely clear, actually. Or is it fully discretionary?
No, it's not. So as always, it depends on certain investment thresholds you need to meet or not to meet, and then it will either be capitalized or not be capitalized. And as well, certainly with regards to the subsidization regime, certainly you will need to meet certain investment requirements until you will be entitled to apply for a certain subsidization. So all of that, therefore, just is more moving parts than in the past, and therefore, it is even more to give you any flavor around the FFO one.
Okay, understood. So effectively, if that ratio comes back to last year, then that's the guidance, and then if it's more in line with next year, FFO I would be lower. Okay, thanks. Just on the margins for next year, just trying to understand the guidance as well, you're saying you're getting to 77%. So the difference between this year and last year, sorry, the difference between 2024 and 2023, will only be the electricity part, the one-off gains on the electricity. There's no further impact to expect from what we've seen in 2023 on higher operating costs?
No. So what our expectation for next year will be, is that we keep a strong and strict view on all the costs, and-
Mm-hmm.
- meaning that we try to freeze admin cost base, we try to freeze the operational cost base, while at the same time, and once again, that's unfortunate, but very lucky, I think for this year-
Yeah.
We have taken a brave decision in 2022 to pre-sale all of that electricity at a very attractive price. But that is something which definitely will not be repeated in 2024. So we needed to pull out that part, and I think it's already quite ambitious to make up for all the interest rate increase, to make up for the inflation and all the other cost pressures-
Mm-hmm.
and also to make up for that 22 billion EUR, which we are expecting up to 22 million EUR from that forward sale of green electricity, but still come up with an AFFO of +10%.
Sure, so-
But that is the impact on the EBITDA margin, to be precise, Jonathan, is exactly losing that additional profitability on the green electricity. That's the main driver there.
Okay, so you're effectively improving your margins by cutting some costs, but then there is also inflation elsewhere, so ultimately you're expecting it to be flat?
Exactly.
Perfect. Thank you so much.
The next question is from the line of Marcus Quinones with Bank of America. Please go ahead.
Thank you very much. Very good morning, everyone. I have only one question, which is still around your strategy, which is cash in is king. In that consideration, on the basis of that consideration, why would you keep your dividend guidance unchanged and even think about distributing the proceeds from disposals? Because if I try to square a circle here, on one side, you have a 45% guidance LTV, which with another 10% capital value decline ahead, will potentially force you to raise EUR 1.2 billion of equity. On saving about EUR 200 million of dividend, if it's the math I'm calculating, would mean a pretty substantial portion of that EUR 1.2 billion needed just to be at 45% loan to value, if capital value were to be down 10%.
Assuming obviously no disposal, which so far has been the hard reality. Can you just help us having a view on what sort of dividend we should expect for this year?
Yeah, very happy to do so. And once again, just to reaffirm, so what we did today, we reaffirmed the current dividend policy, Mark, and what we didn't do is to say that we are paying out the dividend as of April or May next year. So once again, the decision will be taken March next year. As of today, we feel comfortable to say that we are prepared to run along the dividend policy, because I think we made substantial progress wise. We're working along the lines of a clear cash steering for the complete organization, and therefore, that was what we reaffirmed today.
That, and that's for sure, we need, and part of the proceeds coming from the sales in order to keep our LTV under control, and it's quite obvious that this is the only means which really helps with regards to LTV. So therefore, please do not assume that we are talking a big share of the transaction proceeds being put into the dividend as of next year, if we come to decision in March 2024 for that.
Yeah, I, I get that, but it's about EUR 2,200 million of saving, so I can't, I can't see why, while you might need EUR 1 billion+ of equity just to keep your LTV flat, you would take the option of paying a dividend. I'm just trying to... While you've cut your dividend last year, so why not this year again, while capital values are continuing to decline and most likely they're gonna continue to decline next year according to CBRE? I'm sure you're aware of that, so we're all aware of that.
Yeah. Mark, I think I share all our thinking around that as of today.
Yeah.
Let's wait and see what happens over the course of the next five months.
Thank you very much.
Thank you.
The next question is from the line of Andres Toome with Green Street. Please go ahead.
Hi, good morning. Yeah, I guess I just had to follow up on Mark's question as well. And, you know, just coming to the fact that it's quite contradictory that you're still thinking about potentially paying a dividend, whereas your LTV clearly is on an upward trajectory. And then it doesn't really sound like you're going to ramp up disposals as you're sort of excluding big sales and then also structured sales. So what, what is the actual game plan here to keep the LTV under control? And maybe against that, what's the sort of next threshold from Moody's for downgrade, and where is it the threshold for you know, on the LTV to fall into junk territory on Moody's basis?
Yeah. Thanks a lot for the question, Andres. So I will shed some light on the disposals. Honestly, that's the only way we can keep LTV under control, and that just requires hard work. I think Volker already outlined that during his presentation. So what we do is being in the market with our 5,000 units, which now certainly has been reduced a bit to around 3,500, and certainly we will take another review of our portfolio at year end, and perhaps also add the one or the other asset again. And that is what we are working on, Andres. We are in the streets and try to really realize direct divestments on a regular basis.
If we do not and then are not able to agree on reasonable pricing, on reasonable terms and conditions, like yesterday night, we just unfortunately broke apart from a deal which was worth around EUR 20 million, then it is just our decision to not do that, if we are not able to reach book values and reasonable terms and conditions for our shareholders. And that is exactly how we will continue to work on it, by just realizing small, direct divestments.
Maybe in terms of your question regarding Moody's, I mean, of course, we are not happy about the downgrade that just happened, but from what we understood from Moody's and from what you could read from the Moody's report about LEG, we are now in a pretty stable Baa2 rating. So, they were quite upfront, even in terms of further devaluation of up to 8% for this and next year combined. And then we will still be very, very stable in our Baa2 rating. So, here we feel quite comfortable given the current situation.
... And, yeah, my second question is just around the politics maybe. Certainly there's been a rise in AfD in Germany, so trying to also understand how does that going to affect immigration in your view, as we're also seeing the coalition parties sort of taking a more anti-immigration stance, as it, you know, as it comes to protecting their positioning against the AfD?
Yeah. Andres, it's difficult to read from the outside. You might have seen that the minister presidents of the states met with the chancellor beginning of this week, and there seemed to be an agreement, at least with regards to financings of refugees coming to Germany. But that was pulled apart immediately afterwards by the Christian Democrats. So therefore, even between the two biggest democratic parties, the Social Democrats and the Christian Democrats, that does not seem to be a joined view on how to handle the current migration into Germany. So therefore, it's quite difficult to predict how this will continue. I think all parties have understood that we need to have migration of skilled workers continuously into Germany.
You know, the number which runs around 400,000 people migrating into Germany on a yearly basis. That seems to be common knowledge, and, therefore, yes, that might impact the number of refugees coming into Germany, but I doubt that it will impact the number of skilled workers coming into Germany, regardless whether the AfD gains more votes, voting support in the German market or not.
Thank you, and that's it from-
Thank you.
The next question is from the line of Florent Counneau with Bank of America. Please go ahead.
Hi, good morning. Thank you for the presentation and taking my question. Can you please explain why you changed the LTV medium-term target from 43% to 45%, please?
Yeah, Florent, very, very happy to do so. So it was in the midst of the range being set by Moody's for us, and we are now going to the upper end.
Okay, so this change was driven by Moody's downgrade?
Yeah. So it was, it was not driven by Moody's downgrade, but it just tells you that, while earlier on, having the 43% being well within the limits of Moody's rating methodology for a Baa1 rating, we are now going to the upper end of it, and therefore aligning it with also Moody's approach towards rating LEG within their credit rating spectrum.
And, therefore, should we understand that you're not aiming at going back to Baa1 over the medium to long term?
No, you shouldn't read that from that. It is just adapting to the current situation, where the transaction markets are once again very, very silent. Therefore, what we didn't want to do is to give you the impression that medium term, we can reach the 43% quickly.
Okay. Understood. Thank you.
Thank you.
The next question is from the line of Manuel Martin with ODDO BHF. Please go ahead. Mr. Martin, your line is open. Can you hear us?
Oh, sorry, I was on mute. Excuse me. Two questions from my side, please. One question is a follow-up on divestments. What is your feeling on the divestment market? Is it are you still very far away, so wide gap between the buyers and the sellers, and what they think a fair price could be? Maybe you could give us some flavor on that, please.
Yeah, very happy to do so, Manuel. So with regards to divestments, you've seen that there has been more movement, at least on our end, and there has been more deals being really papered. That is something which we can see in the market. So there is strong interest for affordable living in Germany by family offices, by smaller companies, et cetera. So it's not that you do not have regular talks. The pricing pressure, that was something we also tried to share during this call from our perspective, is easing, that downward pressure is easing, so it's less a discussion around pricing. But what we can see is a very tough negotiation on every part of the terms and conditions, and also there, I think you need to be careful to not agree on things you do not want to agree to.
Therefore, once again, we are also willing to break apart if we are not able either to agree on the price or the terms and conditions which we consider to be market standard in the German market.
Hmm, okay, I see. And so also in that regard, when it comes to disposals, could you share kind of of yield range where you dispose your assets? Is that possible?
... Honestly, that's very difficult, Manuel, because what we are doing, we are very much focused on the lower end of the spectrum, quality spectrum, but we are also willing to give access if we have direct incoming calls for high end, higher priced assets, also in high growth markets. It's been more single assets, but therefore we have a wide range. Therefore, that range, I think, doesn't help you to really make up your mind, Manuel. So you can still sell assets with a multiplier above 30, and that is possible. But at the same time, you also sometimes sell off with a multiple of 8, if you really have a non-core commercial asset, which just needs to be torn down.
So that is the broad range of multiples I can offer, which I think is at always a broad spectrum of whatever quality you can have on your books.
Mm-hmm. Okay, I see. Last question from my side, on the investments that you're doing in your portfolio. So you will decrease the investment of next year from EUR 35-EUR 32 per sq m . I think that's A, that seems to be the major driver for the increase in AFFO, if I calculate EUR 3 times 10 million sq m . And B, is there more headroom to the downside in the investment program? That means, is 32 the end, or is there still a bit of room to maneuver to the downside?
Well, Manuel, I can maybe shed some light on this. We think that the EUR 32 is a sweet spot in growing rents at the same time, and keeping the cash discipline on the other hand. So these are both communicating tubes, yeah? You also have to take this into mind and account, so of course, it could be lower, but it has an impact on the other goals. So the EUR 32 is the figure we aim to steer the investments for next year.
Okay. Thank you very much.
Thank you.
The next question is from the line of Paul May with Barclays. Please go ahead.
Hi, everyone, thanks for taking my questions. I got a few more, which I'll come to at the end. But just... Well, I mean, the main thing is transactions, valuation movement, and leverage, which I think, you know, leverage is going up, continuing to go up. Transactions are coming down. Those you're selling tend to be at higher yields. I think average selling price, EUR 58K, implies somewhere around a 6% gross yield, probably 6%+ average gross yield on your disposals. So what gives you the confidence on the sort of various metrics that, one, the transaction market will open up at sub-5% or around 5% gross yields, i.e., why is the valuation of 4%-6% right when nobody knows, nobody has any idea, CBRE, CBRE have no idea, on that?
So what gives you confidence that is the right number that will unlock the transaction market, when actually disposals are more coming in the 6+ range, not the 5, sort of level on a gross yield basis? Leverage continues to move higher. I think you'll be somewhere around 50 LTV, possibly knocking on the door of a further downgrade, potentially, if you look at the sort of metrics that Moody's is looking at. And those sales, as I say, seemingly quite difficult to come by, other than at very high yields, which isn't the majority of your portfolio.
Just trying to get an understanding as to how you reconcile everything, and how you basically get out of this situation that you're in, which is leverage moving higher, values coming down, transaction volumes not really being there, other than at materially higher yields, which is quite punitive on an earnings basis. Thanks.
Yeah, very happy to take that question, Paul. So we get out by hard work, so we certainly will increase rents. We will get down vacancy, so we will do operationally whatever is possible, keep costs under control, lower spending, in order to increase the cash conversion of the company. At the same time, I think we are also working hard on the transactions. That, and you are rightly assuming so, it is hard work doing those transactions. Our assumption, once again, and this is what we can see in the market, and we also realize those prices, it is a big difference in, of which type of assets you are selling. Our, and that was always in our intention, to be with high-yielding in the market, and that is exactly what we sold in majority, higher-yielding assets in the market.
Therefore, from our perspective, and that is why, because we are in the market every day with the assets, we are doing negotiations on an everyday basis, we have the confidence that at the current situation, we are seeing less pressure on prices, but more pressure on the terms and conditions. Which gives us the feeling that we are seeing a bottoming out of the market, and that should enable normally then, as a next step, more transactions being done really on the current level, which we assume to be around another, after another devaluation of 4%-6% of our assets.
Just on that, you say you're selling high yielding, which is, I think, fair, at 6, 6-ish on a Gross Yield seems reasonable, given the rental growth in the high-yielding markets is not massively different to the other markets. I think you mentioned the presentation, greater valuation decline in lower-yielding assets. I think that's a step change relative to what we've seen previously. I think the valuation decline has been broadly similar across the different yield ranges. So you're now saying that there is a sort of convexity point coming, where lower yielding assets are just, you know, not attractive to buyers, and therefore the valuation decline is not gonna be 4-6 there, it could be double-digit there to get those yields higher. But you're comfortable that the 6%, the high yielding markets, are not gonna see much valuation decline.
Is that the right way to think about it? And then sort of allied to that, you say continuously, and I think you said all the way through the process, you will not sell below book value. But book values are down, give or take, 18% from peak, if you assume your second half valuation decline, probably more so in the high growth markets. I mean, what is book value really, other than an arbitrary number that somebody has chosen to guess at any given time? Surely the book value is the market value, which is the price you can sell, and if that price is 20% below what your theoretical book value is, but that's just the market price. You need to sell assets at the market price, not at a theoretical book value, in order to deleverage.
I'm just trying to understand all of those different dynamics, because obviously your portfolio has a broader yield spread than maybe some of your peers. Thank you.
So maybe just to start off, you, you were saying that in the higher yielding segments, we had a higher revaluation, a higher devaluation. So just, just to, to clarify, so in, in H1, our devaluation on the high growth markets were much higher than on the stable and higher yielding markets. So we devaluate our high growth objects by 9%, while in the stable markets only with 6.3, and then in the higher yielding markets with 6.1%.
With regards to the second part, it's certainly a very difficult question, but from my perspective, as we do a mark to market with regards to IFRS, that should reflect the current market value. In declining situations with declining prices, as you know, Paul, it's difficult to convince the one or the other to take a step and sell and buy into assets. Currently, we feel that there is more interest in those assets, and therefore we also gain more interest, and that is something which we then finally, hopefully can paper in the one or the other deal until the end, year-end. We are in good and constructive talks with the one or the other parties, so there are more portfolios to be signed until the year-end.
That is something which gives us hope that with regards to the difference you are referring to between the accounted for numbers and the market values, that is narrowing in now quickly.
Okay. And just—sorry, just, just to finalize on the point, just so I'm clear in my own mind. You're saying you're selling high yielding, so value declines are likely to be less there. You can't sell high growth or low yielding. It's not really high growth, because the growth is the same. Let's say low yielding assets, 'cause the valuation just doesn't make sense for buyers. So is it fair to say that you'll see a closing of that yield gap between your high yield and your high growth markets? Is that kind of what you're expecting over the coming twelve months or so? Is that a fair assumption? Which has happened already a bit, as you say, it's, and you expect that to accelerate.
Exactly. So at least we expect this to happen within H2.
Okay. Thank you. Sorry, a couple of minutiae bits. The... Are you able to expand on the cash? I think you mentioned the cash cost of interest at 3.89. What's the all-in financing cost on those deals? Because I think a number of them are bonds that effectively have a payment in kind built into them. So the coupon is low, but the all-in costs will be higher. Just wondering if you had a number there as the all-in financing cost.
Yeah. So the 3.89% is obviously the cash interest costs that go into the FFO I and the AFFO calculation. And the all-in yield on all the refinance that we did was 4.4%.
Thank you very much. And, the last one is on, I think CapEx has been coming down. It's guided to come down further. I think only... Am I right in saying any 13% of your portfolio was, was grade, was above grade C from an EPC rating? I think as at the year-end, but maybe it might have been the half year, but I think it might been at the year-end last year. Obviously, you need to improve that, I'm assuming, moving forwards. How does that reconcile with the lower spend year on year and, moving forward, versus the need to invest in those sort of energetic modernization or, the green, or the sustainability, or the improvement?
I appreciate you've got your targets on sustainability, but I just wondered how those things are reconciled. Is it just more of your spending is going into that investment and less into the traditional modernization? Just to get a sense. Thank you.
Yeah. It and you already gave yourself the answer, Paul, so-
Okay.
Thank you for doing so. Apologies for just taking that, but that's exactly the case. So we are not at all steering investments according to the EPC classes, so please be not so focused on EPC classes. They do not help anything, because some of those EPCs are as old as 10 years. They differ very much, so there are some which are consumption-based, some which are based on the building shell and the requirements of energy to be put into it. So therefore, what we do is certainly, and as always, and to drive down the decarbonization within or the carbon footprint, is by really doing the smartest investment with the next free EUR into the measure, which reduces CO2 the most.
That is why we always show that decarbonization path with which is CO2 per square meter , and therefore, we are so much about that innovation, and we are also willing to reallocate funds quickly if we see that there is a new option to bring down CO2 quicker by a means which comes at a lower cost. So that is exactly what you were referring to, and that's certainly a huge help, especially for the buildings at the lower end of the EPC spectrum.
Great. Thank you very much.
The next question is from the line of Neeraj Kumar with Barclays. Please go ahead.
Morning, everyone. I have a bit of a direct question, which I think Paul and Mark were trying to ask indirectly. So my question is, would you consider a rights issue if you were to feel that there is a risk of downgrade to Baa3 by Moody's? And the reason I ask that question is because Moody's is already forecasting a 50% debt-to-assets ratio, which is the downgrade threshold to Baa3 rating.
So thanks a lot for the question, Neeraj. Look, we have just been downgraded to Baa2. We are very, very comfortably within that range. We do not, at the current moment, see any need to do anything about capital. We are working hard on the operational side. We are working hard on the refinancing side. We are working hard on the transaction side, so therefore, we are feeling very comfortable within that Baa2 range.
All right. Thank you. And I think probably the second question is, are you considering getting rating from any other rating agency, given you just stated that you are not happy with the downgrade?
Yes, so, and always that's an option, and you're right, but we, that they currently do not consider that. That always comes with an additional cost, and I think we have very constructive dialogue with Moody's.
Okay, that's helpful. Thank you.
The next question is from the line of Veronique Meertens with Kempen. Please go ahead.
Good day. Good morning, gentlemen. Thank you for taking my question. Just one follow-up question and just to check if I understood it correctly. I believe Kathrin mentioned something about an 8% write-down that's currently incorporated in Moody's assumption. Is that correct?
Yeah, just follow up.
If you read the Moody's report on our downgrade, then you read that they already anticipate a further 5% for this year and a 3% valuation decline for next year. This is not what we see, but this is what they see, and if this were to happen, they would still see us comfortably in the Baa2 range.
Okay, but another -2% for next year still seems quite conservative, conservative if you're right, so because you just mentioned that you're very comfortable still in the Baa2 level, but as you also mentioned, that probably some write-downs on the lower yields is still necessary. Is it really that comfortable then?
So we—I mean, we were hardly able to give you a guidance for this year, so we do not feel comfortable to give you a guidance for valuation developments next year. Sorry.
Okay, that's clear. Thank you.
The next question is a follow-up question from Florent Counneau with Bank of America. Please go ahead.
Thank you. Just to follow up on the difference in yield between the cash yield and the all-in cost of 3.9% and 4.4%, can you please explain the gap again, please?
Sure. Happy, happy to reiterate. So we did refinancings of over EUR 900 million, around 10% of those were on an unsecured basis, which was our sustainable 2031 bond, that had an all-in yield of 5.448% and a cash coupon of 0.75%. The other EUR 800 million were secured financings and were obviously at a higher cash coupon of around 4.28%. So on average, this makes 4.4%.
Okay, thank you. So the difference is really explained by the tap?
Yes.
Thank you.
The next question is a follow-up question from the line of Paul May with Barclays. Please go ahead. Mr. May, we cannot hear you.
Hi. Sorry, apologies for that. Just to follow up from my colleague, Neeraj's question, and I think you mentioned a number of times through the presentation, the not wanting to do asymmetric structured deals in terms of a risk-return profile for the buyer and seller. I just wondered, had you considered raising capital and being the buyer of those asymmetric deals? Because you mentioned the buyer, from what you're saying, is getting a better deal than the seller. I just wondered if you had considered potentially trying to be the buyer of those deals. Thank you.
Okay. So you cannot see us, Paul, but you can see, unfortunately, not the worried face of Kathrin as the CFO. So I think as quickly as we make progress on the transactions in the direct market, and if we would have had enough free money, I definitely would feel tempted to look into such transactions, because they offer quite a decent return. So therefore, unfortunately, we cannot, but if we could, we would look into it.
... That was the question following on from the equity raise to do it, but we can happily discuss that one another time. Thank you very much.
Thank you.
The next question is a follow-up question from Jonathan Kownator with Goldman Sachs. Please go ahead.
Hi. Sorry, just, another number questions, but this time for full year 2023. Obviously, getting to EUR 35 CapEx and maintenance is still a substantial gap. I think you lead it to AFFO, potentially being quite low for Q4. Just to understand the maintenance component of that, are we talking about another close to EUR 50 million of maintenance, i.e., not quite exactly what you spent to date, but close to that? And as a consequence, are we expecting effectively AFFO to be close to zero for Q4? Is that what we have to think about? Thank you.
Jonathan, I actually have to disappoint you, but we steered on an AFFO basis. So, we look at the investments as a total and not into the split of maintenance and CapEx.
That is for full year 2023, but okay. Appreciate that follow-up. Thank you.
There are no further questions at this time. I will now hand back over to Mr. Frank Kopfinger with any closing comments. Thank you.
Yeah. Thanks, Maria, and thank you all for your participation and your questions. As always, should you have further questions, then please do not hesitate and contact us. Otherwise, please note that our next scheduled reporting event will be on March 11th next year, when we report on our full year results. With this, we close the call, and we wish you all the best and hope to see you soon on one of our upcoming roadshows or conferences. Thank you and goodbye, everybody.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day!