Ladies and gentlemen, thank you for standing by. I am Sabrina, your call operator. Welcome, and thank you for joining PATRIZIA's 2022 preliminary annual results 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 touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Martin Praum. Please go ahead.
Good afternoon, everyone, and welcome to our preliminary 2022 annual financial call. This is Martin Praum speaking, Head of Investor Relations and Group Reporting. I'm happy to have our CFO, Christoph Glaser, with us today. He will present to you an overview of the business development and our preliminary financial results for the business year 2022, as well as further details on the guidance for the fiscal year 2023, followed by the usual Q&A session. During today's call, we will refer to the preliminary results presentation, which you can find on our website in the section shareholder under most recent publications. The presentation includes the preliminary financial results figures and details about our guidance for fiscal year 2023. Any case of questions you know, the IR team is more than happy to help you.
As usual, this call will be recorded and will be made available on our website, and we'll also offer a call transcript for further reference. With that, I'd like to hand over to Christoph to start the presentation. Christoph.
Thank you very much, Martin, it's a privilege for all of us to be here once again today with all of you. I would like to start our presentation, sharing with you what's top of our minds, if you could go to the first slide. I highlighted here a couple of key themes. First of all, and not surprisingly, we're still in a fairly volatile environment with multiple challenges. We've been seeing what we would probably best describe as mixed financial results, in parallel to that, a very successful transformation of the company. As a combination of those two observations, we're really moderately optimistic going into 2023, which will still be a year with a significant degree of volatility.
All of you are probably familiar with the geopolitical and global and inflation and interest rate shift-related challenges that surround us. What I'd like to highlight here maybe is that volatility will continue to be us, at least for another six to nine months, probably. That said, we do feel good about one thing coming out of 2022, which is our strong growth of assets under management. We obviously feel less good about a certain compression of our EBITDA. All of that looked at in context, you know, high quality AUM growth organically and via M&A in combination with the growth of recurring income are two very positive things to highlight.
Contrary to that, obviously, less of client activity has led to reduced transaction and performance fee income. There's also been a temporary expense inflation and a bit of restructuring cost in the mix. Notwithstanding that, cash flow has been quite strong for us, and we are very pleased to communicate today that we're gonna pay a cash dividend again, an increase on the back, and that we're gonna continue for a little bit of time our cash share buyback program as well. I already alluded to the point that the company has actually fared tremendously well from a repositioning point of view in 2022.
It's really kind of summarized best by saying that, you know, leaving 2021, we were a 10-year team, real estate investments company, but leaving 2022, we are really a global real assets, investment manager. That is something that is very important for us because it positions ourselves very well, for the years to come. That in combination, with a new leadership set up, a recurring cost base reduction, legacy issues being retired, the ability to do a lot more in the infrastructure and multi-manager space, and a couple of brand new blue-chip APAC partnerships, and strategic focus really round out the picture. Going in 2023, there's one more thing that is important to note, which is that our balance sheet, remains very strong.
Liquidity remains very strong. We have more than EUR 4 billion of firepower to grow AUM. Even if capital raising activities will remain a little bit subdued for the short term, at least, we're able to grow AUM regardless of that. If and when opportunities arise in an environment where people will have to start to sell, we're there with a certain ability to buy and to make the company bigger. That's really what's top of mind. If you take it from there and go to the next slide, we've summarized for you once again sort of the essence of the company transformation, which is really happened in line with our strategy despite the challenging environment in 2022.
As I already alluded, organic and inorganic growth have really led us to close to EUR 60 billion AUM. We are particularly proud of a couple of new large mandates. We have one in Asia Pacific with large sovereign wealth funds, as well as very large local players. That gives us a tremendous base to grow in partnership, which is really essential in the Asian environment. The infrastructure capabilities are clearly there now with a strong focus on decarbonization, digitalization, and also social infrastructure, which is very much in line with our sustainability and ESG focused company strategies. ESG and sustainability really being built into every aspect of our business model these days.
That in combination with debt offerings as well as listed securities being in the mix now and enhanced by the ability to also go with wholesale channel into more of a semi-institutional and high net worth individual customer base, something that we value. That coming out of 2022 and going into the midterm into 2023 is really something we feel good about. Now, some of the resilience of the company and ongoing managed transformation is also visible in the broader diversification of our AUM, which you can see on the next slide, which can be looked at from a geographic point of view, a sector point of view, and a risk side point of view. Most of you are familiar with this chart, and all of these graphs are continuing to develop in line with us implementing our strategies.
Asia Pacific is now 5% of AUM. North America as well, close to 5%. We've seen a lot of organic growth in Spain, Scandinavia, and also the Netherlands. A lot of the new deals that we've done have been closed outside of Germany. In fact, the number is somewhere around 70%. So the share of German-based assets is actually gradually declining, reflective of our continued diversification geographically. The sector split is equally increasingly diversified, and you can see the makeup in the chart in the middle. Risk-style wise, we continue to be very much focused on core investments, around about 2/3. Then you see roughly 50/50 core plus and value-add activities. Of course, in the market as we are facing it in 2023, there may be more value-add plays at hand.
As I alluded to before, with the cash we have and the equity position we have and investment grade rating we enjoy, with our partner banks, we're very well positioned to operate at the picture level if and when opportunistic plays arise. We can also do the same at the fund level where we have a lot of firepower embedded, as I mentioned before. With that, as an introduction, I'd like to transition to slide seven, where we're gonna start to talk a little bit about financial performance to maybe round it out, a little bit of guidance into really 2023. Perhaps one of the most appreciated facts is that we managed to grow our assets under management from EUR 48.6 billion to EUR 59.1 billion.
The organic portion of that accounts for about a third of the reflective growth. The inorganic or M&A-driven growth accounts for about 2/3 of it. This is really reflected for us doing what we've always said, we will continue to grow even under tough market circumstances and to execute our M&A strategy as planned. There's really nothing more to be added to that. The fact that we've still been seeing positive valuation impact in 2022 is really reflective of the quality of our asset base. I'm gonna allude a little bit more to that perhaps in the Q&A session. The M&A executed not only added AUM under our belt, but they rather also represent a door opener for accelerated and continued growth.
In particular infrastructure will be a space in which we will be able to grow and probably faster than in the real estate space, for the foreseeable future. Both of them will have to grow, and therefore, we're very happy that with the acquisitions we've made in 2022, we have not only added size, but also added what we refer to as door openers for future growth. Perhaps one more important point to make, is the last one on the page, that our so-called flagship funds, both on the real estate and the infrastructure side, account now for almost 50% of our total AUM. A lot of these vehicles which are in place today really can be grown and can be grown at higher speeds, in particular when we choose to make co-investments when they're strategically, meaningful.
With that, I would like to go into a bit more detail with regard to AUM growth in the fourth quarter because it's interesting to talk a little bit how in the last part of the year. Interestingly, we see a very similar picture here, albeit maybe slightly more subdued, but still positive in nature. Again, about 1/3 of the growth being organic in nature and about 2/3, the EUR 1.3 billion being M&A-driven, in this case linked to the Advantage acquisition we did in early December 2022. Growth was still there, albeit a little bit less relatively speaking. There is still very small positive valuation effects, again reflective of the resilience or quality of our AUMs and the acquisition which I already alluded to, rounded out the picture.
It is perhaps, again, important to note, and that's what the last point on the slide refers to, that we are facing a very equity-rich AUM base with very limited loans to value level at 32%. With a firepower of EUR 4 billion in our structures, we really differentiate ourselves along two criteria quite well from competition locally and regionally in particular, i.e., the low or outside [audio distortion] a power or dry powder that we have in structures. With that, I would like to transition to slide nine, where we're talking a little bit about the revenue side of the P&L. There is basically a very positive message here, and then two sort of market environment driven negative messages.
The positive one being that our management fee revenue has grown from EUR 209 million to roughly EUR 241 million, which is very solid double digits growth. It almost managed to compensate for the decline we were seeing with regards to transaction fees and performance fees. The transaction fee decline was particularly severe from EUR 51 million to EUR 22.5 million, but all of you know that the transaction activity last year was, except maybe for the first quarter, quite weak and there was an absence and no season in late 2Q and early 4Q 2022. With regard to performance fees, the decrease has been relatively smaller, at 25.3%, which essentially just means that we continued to reap from our benefits from our high quality portfolio here.
That trend is probably gonna still continue going in 2023. From a forward-looking point of view, I would maybe add two comments, which is that we do expect the transaction fee income profile to bounce back over the course of 2023, most likely in the second half, even the third quarter or fourth quarter. You will have to wait for a little bit longer for the performance fee profile to come back to 2021 or 2022 levels, because that will probably only happen towards the end of the first half of the next cycle, so kind of three, four years from now. There's gonna be a distinctly different dynamic here, with transaction fee profile coming back earlier than performance fee profile of the past. With that, let's go to the expense side of the P&L.
Our net operating expenses have, in essence, grown due to acquisition consolidation, but also integration efforts. M&A acquisition or M&A activities we have already talked about, with that cost has basically been added. There has also been an integration effort which we have already talked about in previous calls. On top of that, we have done quite a bit of reorganization and restructuring in the fourth quarter to address the absence of a transaction season and to make sure we balance cost and revenue appropriately. Given the ongoing volatility in the market, we have probably taken on certain legacy exposures, also a slightly more conservative stance than in the past just to be prudent. All of these factors have played a role in the development of our cost base.
If you go into a little bit more detail here, staff cost has in essence been driven by the acquisitions that were mentioned. Other operating expenses increase has been driven by special effects from strategic investments and integration efforts I already mentioned. There's also been a little bit of a clean up with regard to historical VAT exposures and so on and so forth. One thing that is worth to mention to provide a balanced view is that like in the past, certain favorable project development have helped us in a positive sense with our net operating expenses. In this case, it was in particular a project called Circus One in the city of Hamburg, which we have alluded to already on prior calls as well.
For purpose of transparency here, we have singled that out to show you the gross picture on both sides. There's been a lot of questions already asked about our reorganization expenses. We've spent round about EUR 10 million here to rebalance for growth. What we mean by that is that we have essentially looked at our cost base from three angles. Number one, we have looked at what is essential to execute our business as usual in good quality, and whatever else was not falling into that category was earmarked for removal. Secondly, we have looked at what five to 10 highly critical strategic activities we need to support in terms of resourcing in the short and medium and long term.
Then we have, in step number three, we looked at what of the freed up resources we can reallocate to what we call rebalance for growth. All of that has happened over the course of October, November, and December, and we are very pleased that we have put this behind us. At this stage, we are not planning to do any more of this in the foreseeable future. With that, we're entering 2023 with a streamlined recurring cost base. All our strategic focus areas are being fully resourced and the company transformation enabling us to take opportunities as they arise. With that, I would like to go to the summary chart covering the entire EBITDA evolution.
Here you can see that a combination of market inertia and proactive reorganization efforts obviously has led to a not so insignificant compression of EBITDA. As I already mentioned, recurring income growth almost managed to compensate for non-recurring income compression. Then there has been a bit of a temporary cost inflation due to reorganization I mentioned and us taking a conservative stance in certain exposures. Yes, we have been seeing a 38.3% EBITDA compression. On a positive note, having transformed the company over the course of literally 12 months, we feel quite good going into 2023.
It's been a mixed year with a mixed financial picture throughout the period, but it's been a very successful year from a repositioning point of view, and in that sense, we're ahead of competition. If you go to slide 12, you can see that we have managed to either meet or exceed our latest guidance for fiscal year 2022 due to recurring income and cost containment. We are equally proud of both of those. The active life investment management platform has demonstrated its resilience. The shift towards recurring management fee income has continued, and the platform cost profile has been whipped into shape.
On the topic of management fees, we've been at the upper end of the guidance, transaction fees are somewhere just in the middle, performance fees slightly above the upper end. Overall, total service fee income in good shape. We are obviously particularly pleased by our effective cost containment in the latter parts of the year, which ended up at EUR 250.1 million, which was actually beating our guidance. EBITDA AUM and EBITDA margin outcome mentioned and commented at the bottom of the page. That's the overall picture with regard to the total EBITDA situation.
Maybe a couple of more facts, as usual, to the strong balance sheet position, summarized on slide 13, which provides for security and the ability to make opportunistic moves, which is of particular interest for the months to come. An equity ratio of 61.5% and a net cash position of EUR 172 million, which is probably a slightly conservative perspective because the bank loans of EUR 91.7 million are really temporary in nature and are just there to enable us to host temporarily certain assets in our PGK platform in Germany. Then there's treasury shares on top of this. The true picture is actually even better than EUR 172 million, and the net equity ratio north of 70% is obviously something we are really proud of.
Total available liquidity stands at EUR 375 million. That is really a lot of liquidity to work with. Again, as I mentioned, at the level below PATRIZIA as a corporate, across our 140+ vehicles, we're sitting on EUR 4 billion of dry powder. Therefore, we have the capability to opportunistically move at the PATRIZIA level if it's required, also of course at the fund level, which is what we would normally do.
Our ability to make co-investments to further charge the growth of some of our flagship vehicles, our ability to make opportunistic moves is really there, and that's one of the main reasons for why we're going into 2023 with a good degree of optimism and in a, how shall I say, perhaps, relaxed fashion because the balance sheet is so strong. I've already alluded to the P&L, so maybe a couple of words on cash flow on slide 14. Operating cash flow has been quite strong at EUR 120 million+ . Investment cash flow has also been positive. The financing cash flow, negative. Overall, a very solid picture.
Because of that, we are very pleased that as a result of having a very high level of retained earnings in PATRIZIA SE, as well as a very positive operating cash flow despite the compressed EBITDA and earnings before tax profile, we can pay a dividend again, and that's why we will do so. We will once again, I think for the fifth time, increase that dividend paid. Again, we believe that this is a clear differentiator, vis-à-vis our competition in the market. Last but not least, if we turn it to slide 15, we would like to take a moment to provide a little bit of guidance, vis-à-vis 2023. Once again, like, I would summarize it by saying that we're taking a moderately optimistic stance.
We do expect AUM growth to a level of somewhere between EUR 60 million-EUR 65 million. I've mentioned already that the incremental new capital we have to raise for that is not really a challenge for us because we have so much dry powder available that we can grow AUM even if and when net capital raising continues to stay a little bit subdued. We should have the opportunity to make moves here, in particular if other market participants will have to sort themselves for different reasons. Secondly, at the EBITDA level, we're going into 2023 with a relatively wide range, saying that we're gonna land somewhere between EUR 50 million-EUR 90 million.
The key question here is really when the normal transaction behavior of market participants will come back and when there will be a more active transaction market. Timing is really of the essence here, which is why we've purposefully left the range a bit wider. Secondly, obviously there's hopefully less of a favorable tailwind to be expected from project development. On the other hand, we will not have the headwind of restructuring expenses in 2023. There are puts and takes here. Again, as I already mentioned, the key question is when markets will normalize and then us being in a more position of a buyer than a seller for sure, we're quite optimistic.
The EBITDA margin, similar to the EBITDA range, so not much more comment is needed here. Perhaps one last comment. If you really peel the onion on all of this, we expect the decent upper single-digit revenue growth, and we expect a subdued lower single-digit cost growth. Overall, probably something ballpark, 2x of operating leverage, which is kind of the right profile to go through 2023 with. That's on guidance for 2023. I guess with that, I would like to hand it back to, I think, to Sabrina, to open the session for Q&A. Martin Praum and myself are very happy to take your questions.
Ladies and gentlemen, at this time, we'll begin the question and answer session. If you wish to ask a question, you may press star followed by one on your touch tone phone. 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 leave 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 Andre Remke of Baader Bank. Please go ahead.
Yeah, good afternoon, sir. There's a couple of questions from my side, please, and thanks first for the presentation. First question regarding your guidance on AUM. Is the range, the upper end of the range, the EUR 65 million without any external growth, i.e., only a mix of disposal, acquisition and valuation movements?
Yeah, thanks. Happy to have you on the call, Andre. Look, the AUM guidance is EUR 60 million-EUR 65 million, roughly. With the dry powder we have in place, and the market as we believe is to come back, we think we should be able to play within the entire range on a purely organic basis. If and when, you know, opportunistic portfolio moves will be possible, you know, there's a chance that we could blow through that. I would just say for now that the EUR 60 million-EUR 65 million is purely organically based. Just as a matter of fact, we actually never planned for M&A in this type of guidance. That's the answer to your question.
Yeah. A follow-up question on that with regard to the valuation. You mentioned you expect some limited valuation pressure here. Is this just a kind of a disclaimer or being based on more concrete look into any vehicles or asset classes?
Look, we're hosting something between 1,500 and 2,000 assets on the real estate side. We do that across roughly 150 vehicles, and we do something like 3,000-4,000 valuations a year through external appraisers. We do have quite a bit of experience here, and we obviously simulate for, let's say, the next rolling 12 months what the world could look like going forward. If you ask us with regard to our portfolio, we see something between 4% and 7% of the downside scenario across our entire portfolio.
Depending on the sector and the geography and the type of asset, it could be anywhere between sidewards move or marginally positive moves and also, negative moves, in some combinations. In aggregate, across the whole AUM base, I would say 4%-6%, 4%-7%. All of that should be possible to be outperformed by organic growth. We do believe a net positive effect. That's kind of what we're referring to with regard to that statement. I do know that that compensation is probably directionally on average in not as good shape, but that's again, because the quality of our assets is, tends to be very good. And we also quite a bit of an operator, in addition to just being an investment manager.
We probably had a little bit of upside there benefits, proactively in that consolidation period. That's it on that front.
Yeah. The, let's take 4%-6%, let's take 5% downside risk. Is this, should be on EUR 60 billion, it is EUR 3 billion, right? Is this included in your in this guidance, or is it just a maximum risk approach?
Now look, when we talk about that range of, 4%-6% or 4%-7%, this is what we would consider the maximum in terms of, how bad it could get. Yes, it is included.
Okay. That's clear. Okay, thank you. The next question on your discussed EUR 4 billion firepower, dry powder, could you indicate where the funds have to be invested in terms of regions and asset classes? You talked about real estate in Japan, as well as in Asia Pacific and infrastructure. Could you provide us with a rough split? Is it even more in Asia Pacific, rather than in Europe, so to say?
Yeah.
Any indication on that.
Yeah, happy to do that. Maybe just one more add on to your previous question. Just be mindful that out of the six you have to back out EUR 8 billion or so of infrastructure to get to the real estate as AUM base, across which you have to do the multiplication with that 4%-6% downside potential. The number is probably more like EUR 2.4 billion versus EUR 3 billion, just as a little clarification here. Now to your last question. We do, we don't see a big concentration of the AUM growth that we envision across any specific geography or any specific asset class.
It's probably fair to say that infrastructure will relatively speaking, see maybe a bit faster growth or relatively speaking, a bit more growth because the spreads are better, there's more indexation, there's more appetite for this in the current environment. The infrastructure related AUMs have a chance to probably grow faster than the real estate related AUM base. Now, secondly, it's probably gonna be a little bit more international than historically. We are continuing to nurture our German business and there will be growth there in certain flagship vehicles. Some of them we will position more in a value add fashion than a core plus fashion, so there will be growth there.
I would say that relatively speaking, again, probably the Pan-European vehicle growth will probably be a little bit more pronounced than the German key vehicle growth. In Asia, there will be growth, and it could be quite rapid, but bear in mind that we're starting from a relatively low base there, yeah. In the grander scheme of things, I would not wanna overemphasize the Asian potential from an absolute size point of view. From a, from a speed of growth, yes, it's gonna be, it's gonna be a key area. I would not be surprised if there's gonna be a bit of movement also across the Atlantic.
Perhaps the most intriguing sort of topic beyond Europe is that, as you may have heard, we've started to partner with some blue chip entities in Asia Pacific. One large sovereign wealth fund in Southeast Asia and a very large Japanese blue chip player. These partnerships are exactly how we want to grow there because there is potential. There is appetite with slightly better margins. We have the power to do co-investments somewhere around 5%, 7%, 8%, which is kind of very well received in the Asia Pacific region. Asia Pacific will see rapid growth. It will be very much partnership based, which is also good for a player of, let's say, a still relatively small stature in Asia today.
With a license now, in Singapore and very strong partnerships. We feel good about that. In the absolute grander scheme of things, I would not yet overemphasize that, for in the probably, 2022. The Pan-European flagship funds will grow quite a bit. You know, we have a very well-known cap series in place, for instance, Trans-European, which will continue. And there will be others that will receive growth potentially, we believe.
Okay. Thank you. The next question refers to, I think page nine of the presentation. When you talked about the transaction fee, there is a remark below the chart. That there are a number of transactions with all-in management fee structures. We talked about this in the past. Is this a materializing trend, a general trend, i.e. could we expect management fees as a rate of, as is under management to improve over time and transaction fee income ratio will go down over time?
The answer in short is 2 x, yes. There is a trend, a continuing trend towards the all-in fees, which in turn means that the relative weight of our management fees is going to increase. It'll still take some time. Of course, it depends a little bit on the type of vehicle going through 2023. Some of them will be almost entirely all in management fee focused. Some of them, especially if they have a bit more of a core plus or value add character, could see a continued mix of transaction fee income.
We're actually looking forward to what that mix will look like because if you mention doing a EUR 500 million or a EUR 1 billion transaction, let's say in this regard to a value add fund, you know, there could be an instant boost in transaction fee income and a pretty decent management fee attached to it. Equally, if I do that on a core fund with an all-in fee or core plus fund, you know, I may just have a differently timed Revenue recognition associated with it. This is something that we will see how it develops. As I mentioned before, we're sort of in a visual flight regime now for the next, let's say, three, four, or five months. Too early to call out probably.
What does it mean to the performance fee? Is this also the same as with the transaction fee? It's also applied here?
I would, well, in the guidance we have assumed that performance fees will overall be of a more moderate level than historically. If I recollect from memory, I think we were seeing something like EUR 80 million+ of performance fees in 2021. We're seeing around about EUR 60 million or so in 2022 now. In 2023 it's probably going to be less than that. The trend is kind of pointing us more towards the level of EUR 40 million-EUR 45 million of performance fee, which is kind of natural because as I mentioned before, you know, as we're transitioning between cycles right now, the moment transactions come back, transaction fees will come back. That will be short term in a way.
Performance fees will take a few years to come back at the level that we used to see them in 2021 or 2020. The ones we do have on the radar for 2023, and which are part of our guidance, are pretty much locked in, and we have good line of sight into those. We are going with a high degree of substantiated planning security into that part of the P&L. There will be a limited amount simply because it will take a couple of years for the next cycle to get traction.
Okay. Not to overstress my questions. Very last question is on the operating expenses of EUR 97 million for the year. For last year you mentioned integration costs, VAT effects especially, many, many one-offs. What kind of magnitudes we are talking about here? Will the number be lower than next year, i.e. this year?
You, you mean, you mean, operating expenses as a whole?
The other operating expenses, apart from the staff. You already talked about the staff costs, but there is a block of EUR 97 million other operating expenses. It went up very strongly from last year. Within this block an increase by 11%. You mentioned in the presentation it's driven by special effects, so one-off costs, et cetera, et cetera.
Yeah.
I was curious to see, what could we expect for next year?
Yeah. Let me answer the question, taking first a step back and then I'll answer the question. On the revenue side, we're going from EUR 329 million to a guidance range from EUR 323 million- EUR 370 million. If you take the midpoint of that, we're talking around about 7%-8% growth on the revenue side. Okay? Now, on the cost side, from a reported point of view, you see EUR 250 million going towards a range of EUR 273 million- EUR 280 million. Now, what you have to do to put the EUR 250 million into perspective, you have to basically back out the project effect of Silver Swan, and you have to back out the reorganization expenses, which are not gonna repeat themselves. Then you have to look at also the other income of EUR 10 million.
When you net that all out, you basically normalize 2022 at roughly EUR 268 million, EUR 269 million or so. From there to the midpoint of the guidance, you're talking about 3% of cost growth, which is something what I alluded to before, is that we're actually gonna see a little bit less than half of the revenue growth on the cost side, which is why I was referring to about the 2x operating leverage, which is something we feel good about. We will continue to enhance that going into 2024, 2025. Ultimately the operating leverage needs to reach a level of 3x-4x between revenue growth and cost growth to lead to a margin-accretive situation.
And there's maybe one more comment on what you're not going to see any more in 2023. M&A integration or consolidation effects, you're not gonna see. The run rates or the standalone costs, when you really peel the onion, excluding the cost we've consolidated from the M&A activities, when you look at that, and you normalize it, we're actually flat. That's pretty good in an inflationary environment to the tune of, I guess, 4%-8% depending on what market you take. Yeah. So that's really it.
Okay. Understood. That's from my side. Thank you very much, Christoph.
Oh, you're more than welcome.
The next question is from Kai Klose of Berenberg. Please go ahead. Mr. Klose, your line is open. Sorry, Dave withdrew his question. The next question is from Philipp Kaiser of Warburg Research. Please go ahead.
Yeah. Thanks a lot. Thanks for the presentation and for taking my question. Just, a couple of questions left from my side. You already, pointed out, what the effect for the valuation for this year. What are the particular driver for your valuation without, back in 2022, so like sector-wise or country-wise?
Yeah. Thanks for your question, Philipp. You know, looking back, I would say that, let's look at it from a geographic point of view first. There's been probably a handful of countries where we've seen a positive valuation trend throughout 2022. For instance, Germany, Japan, Switzerland, to just name three. On a more sort of headwind side, you have seen single digits, 4%, 5% deteriorations in markets like Ireland or the U.K. or Finland, just to name three on the other side of the coin. When you look at it from a sector point of view, interesting, the logistics has been faring quite well. Healthcare as such excluding residential as well.
When you look at the other side of the coin, mixed uses, i.e. mixed use between commercial and residential. I'm not referring to mixed commercial use, but rather really mixed commercial and residential use. They have been suffering a bit to the tune of 4%-5%. Clinics as a special sector on the health side has been suffering a bit. Then, of course, not surprisingly, the hotel sector, although the deterioration there has been quite low, more like 1%-1.5% or so perhaps, which is after some of the hits they've taken in the past, maybe kind of expected. So it's sort of a sideways trend, with a slight moderately negative trend. That would be the backward looking perspective.
Looking forward, as I said, we see at the moment a maximum of maybe 4%-7%. That said, we don't believe that the German market, at least from our angle, will be as badly impacted as some of the international investors believe. Again, it's flight to quality, development is stopping, demand is gonna be high, population is rising. There's gonna be quite a few positive counter trends. We're not bearish on Germany, as much as some of our competitors or international investors.
Okay. Okay. Understood. Thanks a lot. My next one is on M&A. You were quite active recently, but you still have, like, 6 million treasury shares and ample liquidity. Are there still any interesting targets out on the market in short term, and if, in which, sectors they would be?
Yeah, maybe again, one step back before I answer your question. I mean, our capital allocation strategy probably first and foremost centers around turbocharging the growth of our key vehicles in the foreseeable future because we have the products that we need pretty much. A very strong focus is on strategic co-investments to accelerate growth where others can't. That's point number one. Point number two is probably centering around opportunistic plays if and when they shall arise with different degrees of PATRIZIA engagement. After that, we will always look at M&A opportunities if and when they come along. There's gotta be a strategic angle to it. I don't think we're gonna make moves just because of price on that front.
That's probably more reserved for asset plays. If something interesting comes along that gives us an additional consolidation opportunity in the geographic focus area, whether that's Asia Pacific or the Americas, we would probably look at it, or if it's something that gives us an instrument that we are missing, like, say, maybe on the front of real estate debt, we would probably look at it. We've done that in the past and we're, we continue to be a bit conservative there. Also please bear in mind, I mean, we have, you know, we have consolidated a lot in Germany in seven, eight years ago. We have completed the Rockspring acquisition in 2018.
We've just now bought Whitehelm Capital in early 2022 and a much smaller Advantage business in December. For a company of our size, we've done a lot, and I think we've done the right things. We need to be mindful of not overextending ourselves. If the right thing that we can acquire comes along, we will make a move. We have a lot of opportunity based on balance sheets that we're running and also based on the investment grade positioning choice of partner banks. I think we can move if it makes sense, but I wouldn't put it into the foreground of the discussion right now.
Okay. Understood. Very helpful. I mean, as you kind of pointed out, for yourself, like, with the turbocharging of your funds, how is that going? How much cash you already invested and are kind of, some positive effects already seeable? What we can expect for this year?
We have, you know, when you really look at our capital allocation as of December 2022, and I think it's somewhere on page 60 or 65 in the annual report, there's about 113 co-investments out there, of which around 80 are in the real estate space and around 30 to 40 are in the infrastructure space. The infrastructure related co-investments will probably grow faster than the real estate related co-investments. Of course, there is the development position to tune up around 180, which is sustainable, and the performance will be related to that. 113, 80 real estate, 30 to 40 infrastructure right now, that mix will probably shift in favor of infrastructure.
In particular, infrastructure debt, sustainable investment vehicles in Asia Pacific, Europe, European infrastructure, there will be a lot of activity there. Maybe important to note is that some of these co-investments will be relatively short and medium-term in nature, so we'll recycle that capital once some of these vehicles will have reached critical mass. We're looking at not as necessarily in all cases as a long-term commitment, but rather a short or medium-term commitment to get growth going and establish confidence and then and then move on. But, you know, if there's a big portfolio that's gonna be available, either on the most important in the real estate side, you know, and we won't find a vehicle to specialize into, we're probably gonna think about making also a move ourselves.
Um, so- ou may end up seeing a few moves in that context, maybe not in the very near term, but like later in the year. Let's see.
Okay. Thank you very much. That's very helpful, also on my part.
The next question is from Jochen Schmitt, with Metzler. Please go ahead.
Thank you. Good afternoon. I have three questions, please. Firstly, management fee income in Q4 seems to have been down quarter-on-quarter when comparing the full year figures with the nine months results. Secondly, do staff costs include a release of a provision in Q4? Thirdly, could you please briefly comment on the financial result in Q4 because it seems that there were some non-recurring items included. These are my questions.
Could you repeat the third one again?
It's on the financial results. I think there were some non-recurring items included in Q4. Could you please comment on that? Thank you.
Okay. Yeah. Okay. Okay. Well, let's tackle it. First of all, thanks for your question, Jochen. Good to have you on the call. On the first question, with regard to management fee income in the fourth quarter, there was less in there stemming from project development than in the quarters before. That's the short answer. Management fees linked to project development activity done by the real estate development team that we have in-house as a service for investors has been lower than before, and therefore, there has been less of a contribution from that part of the business to the management fee income line, which is kind of not surprising, knowing where the trend on project development has been going.
Secondly, on the topic of staff costs and one-time effects in the fourth quarter, as you may appreciate, the mixed financial performance of the year, leads to a situation where management will not enjoy a target bonus pool allocation, as historically planned, but a significantly lower variable compensation level, which is why we have reduced the respective accruals accordingly, which I think is a sign of good governance and really shared responsibility. As a result of that, you have a releasing effect on staff costs in the fourth quarter, which is kind of nice to see from a cost management point of view and obviously hard for the team, but the right thing to accept under the conditions.
The last question on financial results and non-recurring income, there was a technical impairment booked in the financial results, which has impacted it, and I think we have commented on the details of that in the annual report. That would be the short answer on that one, and it's not that material, if I'm not mistaken.
Thank you.
You're welcome.
The next question is from Manuel Martin of ODDO BHF. Please go ahead.
Thank you very much. Three questions from my side, if I may please. First question is on page 15 of the presentation. I'd like to come back to the EBITDA guidance for 2023. The range EUR 50 million-EUR 90 million seems to suggest that the downside in your guidance is quite high, while the upside is relatively low. Maybe you can share with your thoughts with us, how did you construct that guidance? Hello?
Oh, sorry. We had a technical issue here. We still had you on mute. I apologize for that. I'll restart my answer. The guidance for 2023 oscillates between EUR 50 million-EUR 90 million. The midpoint is about EUR 70 million, which is slightly between the actual of 2022. If you make the assumption that the transaction fee income, if and when the market normalizes in the second half, comes back to a level between 2021 and 2022. You're talking about adding or not adding roughly EUR 20 million of transaction fee income. When you play with that number, starting at the level of EUR 70 million, you know you're playing in that range, yeah. There can be upside, there can be downside.
The, that's the main driver for why the range has been chosen the way it is. I would not say that the downside outlook is outweighing the upside outlook. Not at all, because as I mentioned before, there can be opportunistic transactions which we are not necessarily planning for aggressively, which could take you in the upper end of the range or even beyond that. That is that's a bridge we're gonna cross when we get there. I look at that range really in a, in a relatively neutral fashion. It would be, it would be not appropriate to say that the upper end is in the bag, because if the transaction behavior revival occurs in the later part of the fourth quarter, we may see another sort of, partly disappeared season.
It's still too early to talk about that. A note of caution here is important. Secondly, we obviously get tailwind from not having to incur restructuring expenses again. We're probably not going to see favorable project development impacts anytime soon. Really it boils down to what's going to happen on the transaction side and whether opportunities will outweigh the risk associated with another subdued season. That's really the logic there. We may end up ignoring that range as we go through the year. We'll see.
All right. Okay. My second question would be on Q4 and the full year results were a bit better than expected and maybe down there also it seems that Q4 was a bit more favorable. Could you give us in short words what has been better in Q4 than expected? Maybe just a feeling for that quarter.
No. The fourth quarter, on the revenue side has seen, let's say, a little bit of embedded downside on management fees because of the development fee adders disappearing. It has seen a little bit of upside on performance fees, and transaction fees have been very subdued. That is the short answer on the revenue side. On the cost side, we have managed to do more cost containment than we were originally planning to do. That's good news in a way. We feel good about that. Obviously, the bonus accrual reduction has helped that, which we kind of feel mixed about, but it is what it is.
We feel good about the cost upside, and on the revenue side it's been plus and puts and takes between management fee income and performance fee income.
Mm-hmm. Understood. Okay. Very clear. Thanks. My last question refers to page seven of the presentation, of, it's regarding the valuation impact. There was a detail which I didn't completely understand. In brackets, there's ex Dawonia, so it means the valuation impact of 0.4% to 2.5% per annum. That does not include effects from Dawonia. If it is that case, can you say something about the Dawonia valuation effect?
Now the effects highlighted here are essentially giving you an average feeling for the portfolio excluding Dawonia. The Dawonia portfolio itself actually saw a favorable valuation development to the tune of, I think 4%, give or take, because the total AUM base there has shifted from December 2021 at a level of EUR 5.1 billion to a level of EUR 5.3 billion as of December 2022. That's around about 4% of upward valuation, which was actually more than we expected. Nowadays, we're probably expecting to see more of a sidewards movement in the foreseeable future.
For the portfolio, excluding Dawonia, it is the numbers that we've highlighted on the page, which is ranging from 0.4%-2.5%. Long story short, if you would add Dawonia to that, the range would be 0.4%-4.1%.
Mm-hmm. Okay. Okay. Thank you.
Dawonia is a very high quality, portfolio which is, very precious. In that sense, there's no surprise there. For purposes of being clear on the more normal, let's say, portfolios we have, we wanted to focus the common element.
Yeah. I must say + 4% valuation, that is, that's a strong number, I must say.
Yeah. As I said, I think going forward, it's going to probably be more of a sideways move for the time being, we will see.
All right. Thank you.
Some of the valuation development are time lagging in Germany because the appraiser's assumption of what is a normal market difference, from the perspective of international appraisers who have more current market perspectives, is a bit of a time lag between the different market footage.
Mm-hmm.
I'm gonna address, it's Martin. If I may add, Manuel, that the 4% that Christoph Glaser just mentioned is we mentioned that as a range. In that range over the last 10 years, it's really between 0.4% and 4%, but seldomly we hit the 4% in upward valuation for Dawonia. It was more look at certain years between 1.8% and 2% area.
Hmm. Okay.
The next question is from Kai Klose of Berenberg. Please go ahead.
Yes. Hello, good afternoon. I've got three quick questions on AUM. The first one, could you explain again why transaction fees have come down by 56% where transaction volume has come down by say 11%? Put it differently, how much of the decline was coming that we have seen more all-in, that we have more all-in contracts rather than transaction-related fees?
Look, Kai, good to have you on the call. The transaction volume has been pretty decent, somewhere around EUR 6 billion. As we mentioned before, transaction fee income, in terms of development didn't go lockstep with transaction volume because we did a lot more transactions inside vehicles which are featuring all-in management fees. Basically no transaction fees upon signing or closing an acquisition of assets. Again, the biggest example is our Living Cities fund, where we did a very large deal, for instance, in Barcelona. There's that's in essence the main explanation here, first up.
Okay. Can you quantify how much of the decline of transaction fee was due to the change in structures that was more all-in?
Not from the top of my head, but I can get back to you on that one.
Okay. Second question, could you indicate of the EUR 2.2 billion of equity waiting to be raised in the last year, how much will be on real estate and how much on infrastructure investment? Where will it raise from, are you doing?
There was equity being raised across the board. I would say the vast majority was on the real estate side. It probably follows directionally, the mix of the portfolio, if I exclude the co-investment related activities.
From which region? From-
Oh, sorry. Yeah, sorry, I forgot that part of your question. More international than domestic. Probably 70% outside of Germany, 30% inside Germany. Which is not surprising, honestly speaking, because our position inside Germany is quite strong really.
The last question, is that you mentioned you sometimes do warehousing of properties on your balance sheet. Have you set yourself a limit how much you want to warehouse? Or how much you maximum you want to warehouse?
The honest answer is we haven't set ourselves a hard limit, but we're obviously watching on a monthly rolling forecast basis how much of our positive cash flow or cash balance at any given point in time, we are planning to absorb. We're gonna leave a healthy margin for operational purposes and eventualities. We haven't set ourselves a hard limit. Secondly, you know, depending on what we see, we will play with our own cash or we will make choose to partner or also maybe in some exceptional cases lever up. We'll see how that goes so, but no hard limit, which I think would also not be appropriate, because there may be larger opportunities coming along, so.
We are watching very carefully, cash positions, so.
What is the maximum period you may consider?
Sorry?
Yeah. What is the maximum period you are considering warehousing of properties or assets? Three months, 12 months, 15 months, 24 months?
Hard to say. Not long term, I would say, but rather maybe anything between six months and probably 24 months, somewhere there. Somewhere around the 12, 18 months. Yeah, 12 to 18 months maybe sort of mid-point. Hard to say. D epends a little bit on the speed of growth in some of the infrastructure vehicles could be shorter, could be a bit longer in the more strategic Asian partnership vehicles.
Okay. The last question is on page five. When we look into the AUM by risk style, how does the infrastructure assets should be classified by risk style? How much of the portfolio is in value add?
I would say, maybe directionally a bit, like a bit inverse. No, inverse would be too much. I would say maybe 50/50. It depends a little bit. On the real estate side, you know, we had 1/3 value add and core plus and 2/3 core. I would say on the infra side, it's probably balanced mix. We can get back to you on that because I have to honestly say I don't have the details there at the top of my head. I'm not even sure whether the classification is the right one to choose here.
All right. Perfect.
Directionally, a bit less conservative probably. I think.
Sir, I have no further question at this time. I hand back to Christoph Glaser for closing comments.
Look, thanks everybody for joining. A lot of questions, very much appreciated. I hope we answered them in a satisfactory manner. I guess I'll limit my closing remarks to what I said at the beginning of the call. The environment has been volatile. We're entering a second year of market consolidation or second, so another half year of market consolidation, with a lot of volatility. We feel more than strong enough to weather that. That's point number one. Point number two, we are acutely aware of the fact that our results have been mixed, we are moderately optimistic for 2023 and we have the capabilities and the balance sheet power to move proactively, unlike many competitors.
We have enough dry powder to make EU and growth-related moves across our vehicles. That's kind of how we're going into the year. We feel good. We feel moderately optimistic, and we will see how the markets come back. We'll probably know more next time we talk. Thank you very much for your attention today. I guess with that, Martin, we can conclude the call.