Earnings Call: Q1 2021

May 10, 2021

Ladies and gentlemen, welcome to the conference call of TAG Immobilien AG regarding the publication of the interim statement of the first quarter 2021. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press the star key followed by zero on your telephone for operator assistance. May I now hand you over to Martin Thiel, CFO, who will lead you through this conference. Please go ahead. Yeah, many thanks and good morning, everybody. Welcome to today's conference call for the Q1 figures. Many thanks for dialing in. Today, perhaps you've seen already in the presentation, we wanted to structure the call a little bit differently. Quite brief and comprehensive overview about the Q1 results, and perhaps afterwards a little bit more time to talk about ESG topics. Perhaps you know that we have published our last sustainability report two weeks ago, perhaps a good time to talk a little bit more about our ESG strategy. Let's start on page number 4 of the presentation and look at the financial highlights for the first quarter 2021. The result development was definitely very positive. Looking at the FFO I development in the first quarter, FFO I increased by nearly 9% year on year. If we compare it with Q1 2020 and by 10% quarter-on-quarter, if you compare it with Q4 2020. On a per share basis, we saw the strong increase or similar increases like in absolute terms. Important to point it out that we're growing as well on a per share basis as in absolute terms. Looking at the vacancy development, well, what we saw in Q1 2021 was an increase of the vacancy rate in residential units by 60 basis points. This is more or less in line with the development of the first half of 2020. I will come back to that in a second. Like-for-like rental growth without vacancy reduction was unchanged at 1.4% compared to the same number in the last 12 months in 2020, including changes in vacancy, like-for-like rental growth was a little bit lower at 1.2%. This was due to increase in the vacancy rates that I already mentioned. Looking at the EPRA NTA and the LTV, perhaps not any spectacular developments. We saw a steady increase in the EPRA NTA, and we saw a slight decrease in the LTV now at 44.8%, which is slightly below our LTV target of 45%. No acquisitions in the first quarter of 2021. Some smaller disposals in Germany, roughly 100 units that we signed. Coming to the next page and looking at the operational performance in Poland. You know that we are still selling apartments in Poland. This is still the main business in Poland. This will now change over the course of 2021. We expect the first tenant to move into our portfolio in Poland in the third and fourth quarter. Revenues from sale of properties were quite strong in Q1. Perhaps you remember that we had some delayed handovers in the fourth quarter. Now they have been taking place in Q1 2021. That led to revenues from sale of properties to more than EUR 19 million compared to EUR 11 million in the same period of the previous year. The results operations Poland through the FFO impact was stronger than in previous year. Came out at EUR 1.9 million. Our total pipeline, which is contractually secured, grew by roughly 300 units quarter on quarter and by more than 3,000 units year on year to now almost 9,000 units, out of which roughly 6,000 units will be rented out in the future and a little bit more than 3,000 units should be sold in the future. That means in Poland we are well on track. Construction sites are all running, that's of course good to see for us. Maybe just to complete this on bottom of page number five, COVID-19 business update. Rent referrals are still of minor impact, that's an extremely small number. What we've seen is a slightly reduced like-for-like rental growth and slightly increased vacancy rate. We consider this clearly as something temporary, something that we have already seen in the last year, there should be nothing structural. What we clearly observe is that renting processes in times of the lockdown in our regions are more difficult than times where we have no lockdown. Good to see in this difficult time of the COVID-19 pandemic is that the rating agency, Moody's, increased its outlook or changed its outlook from Ba3 stable to Ba3 positive. This action was taken in April 2021, and that should be a very good sign of our financial stability. Looking a little bit more closely on like-for-like rental growth. That's on page number seven. On the bottom left, you see the components of the like-for-like rental growth. As I said, the basic like-for-like rental growth without changes in vacancy was unchanged at 1.4%, and the composition was also very similar to what we have seen in the previous quarters. Still the modernization surcharge has a very small contribution to like-for-like rental growth because we're investing most of our CapEx in vacancy reduction. The rent increase from tenant turnover and from existing tenants was quite on a same level as 0.6% or 0.0% respectively. In the first quarter of 2021, we saw also a little bit low CapEx. On the top right of page number 7, you see that we invested EUR 11.2 per square meter after EUR 14.6 per square meter in 2020. Please be aware that this is not a change in our CapEx strategy. This is more or less something seasonal. You should expect for the full year of 2021, a similar number like we have seen in 2020. Page eight shows the development of the vacancy rate. As I already mentioned, we saw an increase by 60 basis points. How should we think about this increase? Well, we have no concern that this is something fundamental, something structural. If you look at the last years, we really always saw in the first quarter of the year an increase by 30 basis points, especially after larger acquisitions with high vacancy rates, which was the case in 2020. Most of these acquisitions closed towards the end of 2020, these acquisitions in the financial year 2020 had a vacancy rate of more than 20%, that's nothing unusual. As a second thing to have in mind, what we clearly see is that reletting processes in times of the lockdown are a little bit more difficult. It's not the case that we cannot rent it out, clearly tenants in markets where we have vacancy rates really think twice whether to move or not in such times. What we expect for the remaining part of the year is to see a similar development like in 2020. Perhaps more or less stable vacancy rate in the second quarter, and then a clear reduction in the third and fourth quarter of 2021. Looking at page number 10, we're showing you the FFO and dividend guidance for financial year 2021, which is unchanged. I mean, looking at the run rate for 2021, based on the first quarter results, where we achieved more than EUR 45 million FFO. If you multiply that with four, you're already at the upper end of the guidance, which stands between EUR 178 million and EUR 182 million. You see that we have here a very good momentum at the moment. We're paying out EUR 0.88 per share after our AGM, which will take place tomorrow, and also dividend guidance for 2021 at EUR 0.92 per share is unchanged. As I said, from page number 12 onwards, we have some more slides on ESG because we know that this is, of course, a very important and big topic for everyone, and I mean, very naturally, this should have been always a topic. What clearly has changed in the last quarters, perhaps the last one or two years, is that companies, and as also ourselves, need to talk more about that. Page 12 shows you a condensed overview about our ESG strategy. For us, it's very clear that all three areas of ESG are important. The focus is, of course, in our sector, very often on environment, and it's clear that energy efficiency and reducing CO2 emissions is extremely important. We think that really needs to be seen as a topic where all three components are important. Especially in the German residential sector, the social component should be extremely important, as this clearly also relates to tenant relationships. You know all the discussions about the relationship between especially listed landlords and tenants in Germany, and therefore this social element, especially in our business model, is extremely important. Governance is an underlying fundament from our point of view, especially in excellent board expertise, which we should clearly have, and a transparent compensation scheme for management are some of the key areas to cover here. Moving on to page number 13, and talking a little bit more specifically about sustainability goals. What's the difficult thing about these goals? I mean, the difficult thing is perhaps to bring in line economic goals on the one side with social and ecological goals on the other side. Especially when it comes to CO2 emission reduction, this is perhaps not that easy to achieve. Therefore, that clearly needs to be handled with care. What is good in our business model is that we clearly can bring in line social goals with economic goals because you know that we are investing in areas in portfolios where we still have high vacancy rates, where tenants pay affordable rents. Therefore, we as a company are achieving high yields, and on the other side, we are clearly supporting society, we are supporting cities, we are offering a good product for tenants to rent apartments at affordable rents. I don't want to comment on every sustainability goal that we have. Please take your time and have a look into our sustainability report, which is also available on the website. As I said, which was published just two weeks ago. Page number 14 puts a little bit more spotlight on the S. As I mentioned, we are clearly in a sector and we are clearly focusing where we are looking at affordable rents. Our average net cold rent per square meter is currently around EUR 5.50. You know that our average apartment size is around 60 square meter. That brings us to a typical average net rent per month in absolute terms of around EUR 330. That should be also in a time of economic difficulty, like the pandemic, something that a lot of people are searching and that really everyone can pay. This is clearly an advantage that we have in these times around discussions of rent regulations, around discussions about this social topic in the ESG, that we offer, hopefully, the right product for the market. Affordable rents in high-yielding portfolios, that's clearly our business strategy, and that helps to bring in line the different targets that I mentioned. On the one side, the economic targets, and on the other side, the social targets. Page number 14 also shows on the bottom right the results that we achieved from our energy company. Energie Wohnen Service GmbH, that's a 100% owned subsidiary. Why are we showing that here? We think that it's also a good example for bringing in line different areas of ESG. We're clearly here improving energy efficiency by modernizing heating system. On the other side, this also contributes to the S, because after such modernization, the rent increases that tenants receive are very moderate. That's for them definitely manageable, definitely stay at affordable rent. On the other side, we're improving here energy efficiency. That perhaps is also an example how we see these different components, and how we want to bring them in line. Page number 15 gives you a lot of details about our ESG corporate structure. ESG is clearly an area that the whole management board is focusing on. The responsibility within our management board is with my colleague, Claudia Hoyer, our COO. We think it's important to include also employees in these discussions. We show you here on page number 15 that in the sustainability committee, there are also TAG employees, and that clearly the majority of the members of the sustainability committee who are sitting on this committee. We think it's simply important to include them into these discussions and also a sign where you see how important the opinion and thoughts from employees are for us, is that we still have two employees as members of the supervisory board. Looking at corporate governance on the bottom right of this page, you see that ESG goals are also introduced now, and that's new in the management board compensation. We have the AGM tomorrow, and we propose to our shareholders to change the remuneration system of the management and also to implement non-financial targets in the short-term incentive plan. There's also an option for the supervisory board to put non-financial targets, ESG targets in the long-term incentive plan, and that could contribute to up to 20% of the total long-term incentive plan remuneration. On page 16, we look at our portfolio from an energy efficiency view. Perhaps it's worth here thinking about, I would not say two different portfolios, but clearly two different kind of investments that we have. We know that we are investing in Poland now quite maturely in the next years. That's more than 1 billion EUR. As we are only investing in Poland in new constructed apartments, it's clear that they are highly energy efficient. That brings us with additional investments, which are the clear focus in the next years into also an energy standard, which is clearly above average. Looking at our German portfolio, it is good to see that we already are, at least comparing that within the sector, comparing that within the peers, also above average regarding energy efficiency. The emission intensity in the total portfolio 2019 stood at 31.9 kilogram CO2 emissions per sq m, which is definitely a good value. Also, if you look at the energy efficiency certificate, which you see at the bottom left of page number 16, you realize that more than 60% of our residential units have already an energy certificate, which is C or even better, and that less than 5% of buildings are in the energy efficiency classes G or H, which is also, of course, good to see. What does this bring to us? It's not the case that we can say, well, we don't need any investments in the future, but this is definitely a good starting point. We have a portfolio which is clearly more above average regarding energy efficiency, and therefore, for whatever's coming in the next 10 to 20 years, the investments that we need to do will start on a very good basis. We are right now working on a decarbonization strategy, and we will finish that by the end of the year, which will then clearly set the fundament for future investments. We're taking that clearly with care because we're talking here about investments for the next 10, 15, 20 years, and therefore we think it's perhaps good to have clearly a little bit more time to have really the chance to develop that very carefully. Page 17 gives you some more insights about tenant services. I mean, for us, it's very clear to be an attractive landlord as we're investing in regions where we still have a vacancy. Therefore, that's absolutely crucial for us, tenant certification, and also new offers that we create for tenants. Like you see some examples, the BeHome platform or electric mobility, and community initiatives. That's something we've been working on now for years. Looking at page number 18, as a final aspect of our ESG discussions today, clearly employees are an important part of TAG. What's important to point out and good to see is that diversity at TAG is already more or less achieved, as the share of men and women working in our company is nearly equal. 50% women, 50% men, and also in the management board. Sorry, in the management level, in the management board, and in the first management level, the relationship between men and women is nearly split, as you can see on page number 18. Finally, page number 19 shows you an overview about our ESG rating. We are quite proud that we have significantly improved our ESG ratings in the last one to two years, especially the Sustainalytics and MSCI. We have improved that strongly. That means that also rating agencies have seen what we're doing here basically for years. We will continue to work on other ratings that you see also on page number 19. Therefore, we're very optimistic that now for next year, we will also keep very good and clearly above ESG ratings. Yeah, that's from my side. A quick overview regarding the Q1 results, also a short summary of our ESG strategies. Again, for further details regarding ESG, please have a look at the sustainability report, which we have published on our website. Of course, now we have also enough time to discuss Q1 results and ESG strategies, and therefore I'm happy to take your questions. Thank you. We will now begin our question and answer session. One moment please for the first question. Our first question comes from Sander Bunck, Barclays. Please go ahead. Your line is now open. Hi. Good morning, everyone. Two questions from my side. The first one is on the increase in vacancy. Just, first of all, one clarification, please. If I read on the front page of page four, the difference between the like-for-like rental growth with and without vacancy reduction is around 20 basis points. If I go to slide eight of your presentation, that increase appears to be close to 60 basis points. Can you just explain that difference, please? Good morning, Sander. It's not unusual that there is a difference. Perhaps in this quarter it's a little bit more. Why is that? The like-for-like rental growth is a very pure exact like-for-like number over the last 12 months. On page number eight, where we show the vacancy development, basically the like-for-like view starts always at the beginning of the year. That means between January and March 2021, that's a like-for-like number. Also includes acquisitions that we had in the, for example, second half of 2020. These acquisitions are included in this vacancy development and perhaps contribute a little bit more to the increase in vacancy. Whereas in the like-for-like rental growth number, as they have not been in the group for a whole 12-month period, they're not included. Over a full year, this is exactly the same number. With this vacancy view, we always start new at the 1st of January. That means at the end of our first quarter, it is just a three-month like-for-like view, if you want so. Okay. Just to confirm, the vacancy rate increased by circa 60 basis points in the first quarter? Yeah, that's the case. Okay. Just elaborating a bit on that, because that is post-pandemic, and I think it's basically the strongest increase, although it's still very modest, don't get me wrong. The largest increase we've seen over the last five years. What is the exact reason for that, and how do you expect it to develop into the remainder of this year? We're clear that we expect a vacancy reduction in the course of the year. We don't see here anything fundamental that changes anything structural. By the way, just to mention that and to show you the underlying fundamentals, we are not guiding today for a specific valuation result for the half year valuation. Everything that we see in the market and that we hear as some preliminary thoughts, numbers from our valuer points towards a valuation result, which would be clearly more than in the second half of 2020. That should confirm what I said, that we're not talking here about a weaker market or whatever. What we have nearly always is a kind of seasonality in the first quarter. Looking also in a year like 2019, we had a 20 basis point increase. Looking into a year like 2018, we had a 30 basis points increase. This is nothing unusual. What we have as an impact from the pandemic is that we are simply missing, for example, in some locations, students. That's something that's really incredible hard to rent out. We're not offering 100% student homes, but in some locations also apartments that are really a fit to the needs for students. Secondly, we see that releting processes in times of a lockdown are simply more difficult. People in a location like Salzgitter or Gera really think twice, whether we really have to move into a new apartment in times of the lockdown, or is this also something that I can do in some weeks when we are in a different time of the pandemic. Therefore, we are not worried that we now see increasing vacancy rates, and we are convinced that in the course of 2021, you will see a positive development again. Okay. Kind of pulling that all together, I think you briefly mentioned something, but just to make sure. What will be, at this point in time, your sense of rental growth in FY 2021, including vacancy reduction? Well, the guidance stands between 1.5% and 2%, and this is clearly something that is unchanged from today's point of view. You know that we are in Germany, hopefully now in a good way regarding the pandemic. The lockdown is now ending, and therefore we are very optimistic that we achieve this guidance, and this would include vacancy reduction. This 1.5%-2% is really the total like-for-like rental growth. Okay, great. Thank you very much. The second question I had was on Poland and on the development there. I was just trying to understand a bit more in terms of what you're expecting from that, particularly with regards to potential revaluations. The yield on cost remains quite high relative to Germany, obviously, around 7%-8%. What do you expect that to do with, or how do you expect stabilized yields in that country to be, i.e., are they closer to 5%, 6%? As a result, would you expect some revaluations to come through? When do you expect that impact to start coming through, if there is any impact on the revaluation from Poland? Well, first of all, you're right that the final valuation should be definitely, or if this was your question, should be definitely lower than 7%-8%. That's our yield on cost. Whether this is more 6% or whether this is more 5%, that needs to be seen. I think this is nothing for 2021, and perhaps nothing for 2022. Perhaps looking in a year like 2023, so two years from now, then we have really a larger size or a larger number of apartment blocks rented out. In 2023, we have then hopefully close to 3,000, 4,000 residential units in Poland that are already rented out. Also for the valuers, it's then quite clear, hopefully, that the business model is working. I think that needs a little bit more patience. Today the portfolio is still small, and clearly we need also to deliver, and we are very optimistic on that. In two years from now, I think we will know more, and that it's going more towards the 5% or 6% than staying on the 7% to 8% growth yield. That should be quite clear from our point of view. Okay, great. That's very useful. Thank you very much for that. Our next question comes from Thomas Rothäusler. Jefferies, please go ahead. Your line is now open. Morning. One question on ESG and the potential change of your CapEx and investment program on that. Should we expect that, currently you do a lot of focus on vacancy reduction. I think that's your main CapEx approach. With ESG, can we expect this to change to more larger programs similar to your peers? What kind of return do you expect on that? Well, thank you for the question, Thomas. We are now talking about really the mid to long-term investment strategy. It's clear everyone in the sector needs to do more, and perhaps after the German elections in September, everyone's forced to do more. Therefore it's very likely that we need to invest also more in programs that have not only vacancy reduction as a main target. The returns would be quite similar, like you know them from the peer groups. We have been quite careful with this modernization programs in the past as the returns in the vacancy reduction projects were simply even more attractive. I think what is in a good way in Germany is the question around subsidies for such programs, and you know the laws that are now getting effective or that perhaps potentially, and no one knows it exactly, will get into force after the elections. I'm not worried that we are now getting into a situation where we're forced to invest a lot. For what reason ever in our regions, the returns are lower than in other regions. As we have shown in the presentation, for us, it's good to see that the starting point, so the energy efficiency level that we have in the portfolio today is definitely a good one. We definitely own a portfolio, especially in Eastern Germany, with very well-maintained, modernized, prefabricated buildings that TAG has acquired some years back. That gives us today an advantage when it comes perhaps to forced modernization programs to improve energy efficiencies. Mm-hmm. It sounds like to a certain extent, you rely on subsidies in order to keep the CapEx returns for these larger programs as attractive as your CapEx returns on vacancy reduction. It's clear that subsidies would help. That should be obvious. Even in the current regime, if we need to do more, we still create absolutely good returns. Yeah, to be honest, looking the mid to long term, I think we need to change, and that is true for everyone. Our CapEx plan, there's simply more investments needed to achieve the CO2 emission goals. That's true for the whole sector. I don't think that this is specific for one or the other company. Okay. Thank you. Our next question comes from Kai Klose, Berenberg. Please go ahead. Your line is now open. Yes, hello. Good morning. I have a question on page 28 of the presentation, where you show the general portfolio details per region. Could you comment a little bit more on the quite significant change in vacancy across the whole region? You mentioned that, particularly also in Chemnitz, where you have spent a lot of CapEx in the last year, and we saw an increase quite a strong rise also in Leipzig. Maybe some more color on a regional basis, that would be helpful. Yeah. Good morning, Kai. I think perhaps in Leipzig, we had here a larger contribution to, or the important reason for the increase in vacancy rate was the closing of acquisitions in 2020. This is clearly then not in full the reason for that, because we look at that, as I said, on a like-for-like basis. It's very typical that after we integrate some new acquisition into our portfolio in the first perhaps even quarters, vacancy rate increase as we are taking over property management, as we perhaps need to terminate also some contracts from tenants that are not paying as we start perhaps with the first modernization programs. A region like Rostock, that also includes not only Rostock, but also Greifswald, is suffering from students or from less demand for apartments for students, as I explained. Chemnitz and Salzgitter, that's something that I tried to give you a sense when I was talking about regions, where in times of the lockdown, perhaps vacancy reduction programs are not that easy, as people are not really forced to move to the next apartment. In these markets, we clearly try to get tenants into our portfolio by offering them above average apartments. That's for context, perhaps that's not really a pressure to do this extremely quickly. Perhaps they wait until the lockdown is over. That's something that we have seen in the second half of 2020 then, and then start moving again. That clearly helps us. Thank you. A second question on page five on the Polish Western Poland, could you indicate how much of the units handed over and sold was little bit of a spillover or delayed action from last year? What would you think, has there been any change regarding volumes and prices when it comes to the develop-to-sale activities? Well, the share that was delayed from the fourth quarter now into the first quarter was quite high. That was around EUR 140 million. If you look at the units sold, for us that was actually surprisingly high, that we sold 160 units already in the first quarter of 2021. It's a little bit misleading if you compare that number to the previous year, where we sold 205. This is not an outcome of less demand, but we're simply offering less apartments on the market today as we now are right in the middle of the change of the strategy of Vantage Development, our subsidiary in Poland, where now the largest share of apartments that are constructed are for the ready for rent business. The smaller part is for the ready for sale business. We expect that from 2021 onwards, we're selling perhaps 400, 500 units a year. That's the plan. That means that this 163 in the first quarter during the pandemic was definitely a good result. What we have observed on the market in Poland, looking at sales prices, is that they have been extremely stable or even increased. Volumes have been absolutely in line in 2020, perhaps a little bit weaker than the previous years if you look at other developers. That gives us, of course, a lot of confidence that also the Polish residential market is very stable and very attractive even in such a time. Thank you very much. Our next question comes from Manuel Martin, Oddo BHF. Please go ahead. Your line is now open. Good morning. Thank you. Two questions from my side, please. First question, maybe you take them one by one. Tax situation as being quite favorable in Q1 as we can see. Maybe you can give us some words on that, please. Well, we're benefiting clearly today regarding income taxes from the repurchase of an outstanding convertible bond in 2020 in August last year. That will lead to quite low tax rate in 2021 and also in 2022, where we have benefited also a little bit, but this was not a material impact, approximately EUR 300,000 in the first quarter that we got some tax payments from prior years. You could expect for the full year 2021 and also for 2022, tax or income taxes perhaps in the ranges between EUR 3 million-5 million, which is clearly a low number. Looking into the mid or longer term, this number should increase. As I think also said in the past, mid to long term tax rates based on a pre-FFO number of around 8%-9% should be something realistic if you do really a long-term model. Okay. That's useful. Thank you. Second question on your construction activities in Poland. The picture seems quite good. Volumes remain stable, prices are going up. Have you observed any development on the construction material prices? Are you feeling there a bit of pressure coming from rising prices? To be honest, that's the case. This is something that you observe in Germany as well, that you observe in other countries in Europe, perhaps in the whole world, and also in Poland. Prices for materials like wood, steel, have increased quite strongly in the past month. Still the projects are running in Poland, are running as planned. The impact that we expect on the final gross yields should be not that material. This is clearly something that you can observe. We're here very confident. We know that we have a well experienced subsidiary working in Poland with really long-term relationships with their suppliers. This is not an extremely big concern. If you ask me, it's clearly something that we observe. Okay. Thank you. Our next question comes from Thomas Neuhold, Credit Suisse. Good morning. Thank you very much for the presentation. These are my questions. I have a couple of questions regarding the energy efficiency modernization topic. I was wondering, firstly, if it is technologically possible to upgrade a building with an energy efficiency class of E or F to A or B, and I'm wondering what kind of CapEx are required to make such a big improvement. Secondly, I was wondering in terms of modernization strategy, what do you think is the sweet spot in terms of what buildings in terms of energy efficiency class you should upgrade to which efficiency class? Yeah. Good morning, Thomas. Clearly, the energy efficiency class C is, for us, a kind of minimum level that we perhaps want to, not to achieve it full, but to improve over the next years. It's clear that already with our investment in Poland, if you incorporate that into the total number, we will see here some increase. Also for the German portfolio, that should be something where we continuously working on. The investment to improve them from C to B or even A, that really depends on the building, and I think it's not possible to give you an average number. Clearly these are then the more material investments. I think what we are taking care of are the low energy efficiency classes, apartments in the classes D, H, F. If you ask me for a personal opinion, we're talking a lot around renovation risks, regarding rent increases, perhaps regulation risks regarding energy efficiency classes that are required to rent out apartments in the future, as we've seen in some other European countries, is something that could come in the next years, and therefore minimizing these energy classes. Getting the whole portfolio out of these classes, G, H, or even F, that should be clearly more the focus of the mid and long-term strategy. Okay. Thank you. As a reminder, if you would like to ask a question, please press 01 on your telephone keypad. Our next question comes from Simon Stippig, Warburg Research. Please go ahead. Your line is now open. Good morning. Simon speaking here. Thank you for taking my question. My first question would be in regard to rental growth. For the year 2021, on rental growth, including the modernization, do you have the number this year? Sorry, Simon. The question was hard to understand. Can you repeat it, please? Just to the rental growth expectations vacancy reduction, do you expect a similar level for year 2021 as you did 1.4% in last year, 2020? Well, the guidance is unchanged between 1.5% and 2% for the total like-for-like rental growth. If you ask us for a split that could be realistic, that like-for-like rental growth without changes in vacancy stays perhaps at the current level, that should be a realistic assumption. That would be then 1.4%. A reduction in vacancy that we expect now to take place over the next quarters should bring then the like-for-like rental growth in total within the guidance. Great. Just in regard to your 2021 guidance, as a total number, you expected the gap, or the delta of four year 2020 in regard to net rental income increase to be EUR 14.5 million. going back to the four year 2020 acquisitions, M&A activity, what do you think is your net impact coming from M&A? Well, I can give you the exact numbers. This 14.0% or 14.5% increase in net rent that we've been guiding, that was based on a total like-for-like rental growth of 1.8%. We already penciled in that we have already sold in 2020 some units where the closing will take place in the mid of 2021. I think it was a portfolio of three or 400 units. The remaining part was coming from the acquisitions, that a certain part were already part of the 2020 results, but to the largest part were then, of course, effective in 2021. Okay. Just to cross-check, on the net rental income basis M&A activity, roughly EUR 8 million? Would I be very much off? Yeah. I don't have it in my head exactly. Okay sounds reasonable. Okay. Again, sorry, one more question to you towards the M&A side. I think otherwise all the questions were asked. Do you see anything in the pipeline, not in Poland, but actually in Germany? Do you intend to sell any non-core assets during this year? Selling non-core assets will not be really a big thing in 2021. We'll be continuously doing that, you should not expect a huge number there. Something definitely below 1,000 units. If you ask us for the acquisition pipeline, yes, there are portfolios in the pipeline. As always, it's extremely difficult to predict which acquisitions in the end will really be signed. You know that we're very disciplined in that regard. It's not the case that we are now looking at a market which is completely dry. Clearly, it's extremely competitive. What I said about increasing prices and more competition, good investment markets, still very helpful for valuation purposes. It's not that easy for the acquisition market. It's not the case that there's nothing anymore on the market, especially in our regions. You know that we also buy portfolios in smaller sizes, and we buy more frequently. That should enable us also to find new opportunities in the future. Okay, great. All clear. Thank you very much. We haven't received further questions at this point. Another reminder, if you would like to ask a question, please press zero one on your telephone keypad. There are currently no further questions. I will hand back to the speakers. Gentlemen, thanks all for joining this call. As always, please feel free to contact us directly for further questions. Thanks again for joining this call. Have a good start into the week, and talk soon. Bye-bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.