Earnings Call: Q1 2021

May 10, 2021

Dear ladies and gentlemen, welcome to the conference call of Takmobilian AG regarding the publication of the interim statement of the first quarter twenty twenty one. 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. 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 q one figures. Many thanks for dialing in. Yeah. Today, as you've seen already in the presentation, we wanted to structure the call a little bit differently. So quite brief and comprehensive overview about the q one results and perhaps afterwards a little bit more time to, talk about ESG topics. As you know, that we have published our last, sustainability report two weeks ago. So perhaps a good time to talk a little bit more about our ESG strategy. But let's start on page number four of the presentation and look at the financial highlights for the first quarter two thousand and twenty one. The result development was definitely very positive. Looking at the FFO one development in the first quarter, FFO one increased by nearly 9% year on year. So if you compare it with the February and by 10% quarter on quarter if you compare it with the February. Also on a per share basis, we saw a increase or similar increases like in absolute terms. Just 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 the February 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 February. I will come back to that in a second. Like for like rental growth without vacancy, a reduction was unchanged at 1.4% compared to the same number in the last twelve months in 02/2020, 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 APRA NTA and the LTV, perhaps not any spectacular developments. We saw a steady increase in the APRA NTA. 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 February, 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, but this will now change, over the course of 02/2021. You 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 the first quarter. Perhaps you remember that we had some delayed handovers in the fourth quarter. Now they have been taking place in the February that led to revenues from set of properties to more than 19,000,000 compared to 11,000,000 in the same period of the previous year. Also, results of operations in Poland, the VOFO impact, was stronger than the previous year, came out at 1,900,000.0. 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. So that means in Poland, we are well on track on track. The construction sites are all running, So that's, of course, good to see for us. Yeah. Maybe just to complete this, on bottom of page number five, COVID nineteen business update. I mean, rent deferrals are still of minor impact, so 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 in the last year, so there should be nothing structural. But, what we clearly observe is that, renting processes in terms of the lockdown in our regions are more difficult than times where we have no lockdown. Also good to see in this difficult time of the COVID nineteen pandemic is that the rating agency Moody's increased its outlook or changed its outlook from b a three stable to b a three positive, and this was this action was taken in April 2021, and that should be a very good sign of our 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. So still the monetization surcharge, has a very small contribution to like for like growth because we're investing most of our CapEx in reduction. And the rate increase from tenant turnover and from existing tenants was quite on a same level at 0.6% or 0.7%, respectively. In the February, saw also a little bit lower CapEx. On the top right of page number seven, you see that we invested 11,200,000 after 14,600,000.0 in in sorry. €11.2 per square meter after €14.6 per square meter in 02/2020. Please be aware that this is not a change in our CapEx strategy, and this is more or less something seasonal. And so you should expect for the full year of 2021 a similar number like we have seen in 02/2020. Page eight shows the development of the vacancy rates. As I already mentioned, we saw an increase by 60 basis points. How should we think about this increase? Well, we have no concerns that this is something fundamental, something structural. Firstly, if you look at the last years, we really always saw in the first quarter of the year an increase by 30 basis points. And especially after larger acquisitions, with high ratings rates, which was the case in 02/2020. Most of these acquisitions closed towards the end of two thousand twenty, and these acquisitions in the financial year 2020 had a ratings rate of more than 20%, so there's nothing unusual. And the second, thing to have in mind, I mean, what we clearly see is that real estate processes in times of the lockdown are a little bit more difficult. It's not the case that we cannot rent it out, but, clearly, tenants in markets where we have vacancy rates, think twice whether to move or not in such times. So what we expect for the remaining part of the year is to see a similar development like in 02/2020, So perhaps more or less stable vacancy rate in the second quarter and then a clear reduction in the February. Looking at page number 10, we're showing you the FFO and dividend guidance for financial year 02/2021, which is unchanged. I mean, looking at the run rate for 2021 based on the first quarter results where we achieved more than €45,000,000 FFO. If you multiply that with four, you're already at the upper end of the guidance, which stands between 178 and 182,000,000. So you see that we have here a very good momentum at the moment. We're paying out 88¢ per share after our AGM, which will take place tomorrow, and also dividend guidance for 2021 at 92¢ per share is unchanged. Yeah. 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, but 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. And 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 c o two emissions is extremely important. But we think that really needs to be seen as a as a topic where all three components are important. And especially in the German residential sector, the social component should be extremely important, as this clearly also relates to tenant relationships. And you know all the discussions about the relationship between, especially, listed landlords and tenants in 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 an excellent board expertise, which we should clearly have, and a transparent compensation scheme for management are some of the key areas to to to cover here. Moving on to page number 13, and talking a little 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. And especially when it comes to c o two emission reduction, this is perhaps not that easy to to achieve. So, therefore, that care 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 and portfolios where we still have high vacancy rates, where tenants pay affordable rents. So therefore, we as a company are achieving high yields. And on the other side, we're clearly supporting society. We're supporting cities. We're 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, but please, take your time and have a look into our sustainability report, which is also available on the website, and as I said, which was published just two weeks ago. Page number 14 puts a little bit more spotlight on the f. As I mentioned, we are clearly in a sector and we're clearly focusing where we're looking at affordable rents. Our average net accurate per square meter is currently around €5.50. And we know that our average apartment size is around 60 square meter, so that brings us to a typical average net trend per month in absolute terms of around €330. And 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. And this is clearly an advantage that we have in these times around discussions of rent regulations, around discussions about this this social topic in ESG that we offer, hopefully, the right product for the market. So affordable rents in high yielding portfolios, that's clearly our our business strategy, and that helps to bring in line the different targets that I mentioned on one side, the economic targets, and on the other side, the social targets. Patient 114 also shows on the bottom right, the results that we achieved from our energy company. Energy bonus service came behind at the 100% on subsidiary. Why are we showing that here? Because we think that's also a good example for bringing in line different areas of ESG. So we're clearly here improving energy efficiency by by modernizing heating system. And on the other side, this also contributes to the f because after such modernizations, the rent increases that tenants receive are very, very moderate. So that's for them definitely manageable. It's definitely stay at affordable rent. But on the other side, we're improving your energy efficiency. So that packs 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 with my colleague, Claudia Hoyer, our COO. And we think it's important to include also employees in these discussions. And we show you here on page number 15 that in the sustainability committee, there are also THED employees, and that's clearly the majority of the members of the sustainability committee who are sitting on on this on this on this committee. And we think it's simply important to to in include them into these discussions and also 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 supervisor board. Looking at corporate governance on this bottom right of this page, you see that ESG codes 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 nonfinancial targets in the short term incentive plan. And there's also an option for the supervisory board to put nonfinancial target, 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 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. Note that we are investing in Poland now quite materially in next years. That's more than €1,000,000,000. And as we are only investing in Poland in new constructed apartments, it's clear that they that they are highly energy efficient. So that brings us with additional investments, which are a clear focus in the next next years into also an energy standard, which is clearly above average. Looking at our German portfolio, it's 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 in 2019 stood at 31.9 kilogram c o two emissions per square meter, which is definitely a good value. And, also, if you look at the energy efficiency certificates, which you show which you see at the bottom left of page 16, you will realize that more than 60% of our residential units have already energy certificates, which is c or even better, and that less than 5% of our buildings are in the energy efficiency classes, g or h, which is also, of course, good to see. And what does this, will try? 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. So we have a portfolio which is clearly more above average regarding energy efficiency. And therefore, for whatever is coming in the next ten to twenty 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 fundamental future investments. We're taking that clearly with care because we're talking here about investments for the next ten, fifteen, twenty years. And therefore, we think it's perhaps good to have here a little bit more time to 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. So, we still have a vacancy. So, therefore, that's absolutely crucial for us, tenant certification, and also new offers that we create for tenants like to see some examples, the b home platform or, like, 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, are an important part of TG. And that's important to point out and good to see is that diversity at TG is already more or less achieved as the share of men and women working our company is nearly equal. So 50% women, 50% men, and also in the management board. So that means 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. So finally, page number 19 shows you an overview about our rating. We are quite proud that we have significantly improved our ESG ratings in the last one to two years, especially the analytics and MSCI. We have improved that strongly, so 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. So therefore, we're very optimistic that now for next years, we will also keep very good and clearly above ESG ratings. Yeah. That's from my side. A quick overview regarding the q one 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. But, of course, now we have also enough time to discuss g one results and ESG strategies. And therefore, I'm happy to take your questions. Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial 01 on your telephone keypad. Now you should enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial 02 to cancel your question. If you're using speaker equipment today, please lift your handset before making your selection. One moment, please, for the first question. Our first question comes from Sanderbank, 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. And just first of all, one clarification, please. So if I read on the front page of Page four then the difference between the like 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? Yeah. Good morning, Sandra. It's it's not unusual that there is a difference perhaps in this quarter. It's a little bit more wise that the like for like rental growth is a very pure exact like for like number over the last twelve 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. So that means, between January and March 2021, that's a like for like number, also includes acquisitions that we had in the, for example, February. So these acquisitions are included in this vacancy development and perhaps contribute a little bit more to the increase increase in vacancy, whereas in the like for like rental growth number, as they have not been in the group for a whole twelve month period, they are not included. So over a full year, this is exactly the same number, but with this vacancy view, we always start new at the January 1. So that means in the at the end of our first quarter, it's just a three month like for like view if you want. So Okay. But just to just to confirm, the the vacancy rate increased by circa 60 basis points in the first quarter? Yeah. That's the case. Okay. And and just a bit elaborating further a bit on that because that that is post pandemic, and I think it's basically the strongest increase, albeit still very modest. Don't get me wrong, but the largest increase we've seen over the last five years. What what is the exact reason for that, and how do you expect it to develop, into the remainder of this year? First of all, very clear that we expect a vacancy reduction in the course of the year, And we don't see here anything fundamental that changes anything structural. And by the way, just to mention that and to show you the underlying fundamentals, I mean, we are not guiding today for a specific evaluation results for the half year evaluation, but everything that we see in the market and that we hear is some preliminary thoughts, numbers from our value points towards evaluation results, which should be clearly more than in the February. So that should confirm what I said that we're not talking here about, a weaker market or whatever. I mean, what we have really always is a kind of seasonality in the first quarter. Looking also in a year like 02/2019, we had a 20 basis point increase. Looking into a year like 02/2018, we had a 30 basis points increase, so this is nothing unusual. And then what we have is is an effect from the pandemic is that we are simply missing, for example, in some locations, students. That's that's something that that's really incredible, hard to rent out. We're not offering, 100% student homes, but in some locations, also apartments that are really, let's say, fit to the needs for students. And secondly, we see that real estate processes in times of a lockdown are simply more more difficult. I mean, people in a location like Sattita or Gera, who you think twice, well, do we really have to move into a new apartment in terms of the lockdown, or if this is also something that I can do in in some weeks when we are in a in a different time of the pandemic. So, therefore, we are not worried that we now see increasing vacancy rates, and we are convinced that in the course of 02/2021, you will see a a positive development again. Okay. So and and and kind of pulling that altogether, I think you briefly mentioned something here, but just to make just to make sure, what what will be at this point in time your kind of sense of, like, like, rental growth in f y twenty one including vacancy reduction? Well, the the guidance stands between 1.52%, and this is clearly something that is unchanged from today's point of view. And you know that we are in Germany, hopefully, now in a good way regarding the the pandemic. So lockdown is now ending, and, therefore, we are very optimistic that we achieve this guidance, and this would include back end reduction. So this 1.5 to 2% is really the total like for like rental growth. Okay. Great. Thank you very much. The second question I had was on the, on on Poland and on the development there. And I was just kind of trying to understand a bit more in terms of what you're expecting from that, particularly with regards to potential revaluations. I mean, the the yield on cost remains quite high relative to to Germany, obviously, around seven to eight percent. When do you, what do you expect kind of that to do with or how do you expect stabilized yields in that country to be? I are they closer to 6%? And as a result, would you expect some revaluations to come through? And and kind of when do when do you expect that impact to start coming through if there is any impact on on the revaluation from from Poland? Well, first of all, you're you're right that the the final valuation is should be definitely or if this was a question, should be definitely lower than seven to 8%. That's our yield on cost. Whether this is more 6% or this is more 5% that needs to be seen. And I think this is nothing for 02/2021, and perhaps nothing for 02/2022. Perhaps looking in in a year like 02/2023, so two years from now, then we have really a larger size or a larger number of apartment blocks rented out. In 02/2023, We have can hopefully close to 3,000, 4,000 residential units in Poland. They are already rented out. So also for the, it's been quite clear, hopefully, that the business model is is working. So I think that needs a little bit more patience. I mean, today, the portfolio is still small, and, clearly, we need also to to deliver, and we are very optimistic on that. And in two years from now, think we we will know more, and and that it's going more towards the five or 6% than staying on the seven to 8% growth sheet. That should be quite clear from from our point of view. Okay. Great. That's very useful. Thanks very much for that. Our next question comes from Thomas Bauthusse, Jefferies. Please go ahead. Your line is now open. Good morning. One question on ESG and the potential change of your CapEx and investment program on that. I mean, should we expect that currently, do a lot of focus on vacancy reduction? I think that's your main CapEx approach. And with ESG, can we expect this to change to more larger programs similar to your peers? And what kind of return do you expect on that? Well, thank you for the question, Thomas. And we are not talking about really the mid to long term investment strategy. It's 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. So, therefore, it's very likely that we need to invest also more in programs that they which have not only rate reduction as a as a main target. The returns would be quite similar like you know them from the p group. We have been quite careful with these monetization programs in the past as the returns in the back into reduction projects were simply even more attractive. But I think what is in good on a good way in Germany is the question around subsidies for such programs. And you know the laws that are now getting effective or perhaps potentially nowhere knows it exactly will get into force after elections. And so I'm not worried that we are now getting into a situation where we're forced to invest a lot. And for what reason ever in our regions, the returns are are lower than in in in other regions. And, actually, you have shown the presentation, first, 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 lot of portfolio, especially in Eastern Germany, with very well maintained, modernized, prefabricated buildings that TG has acquired some years back. And that gives us today an an advantage when it can steps to forced monetization programs to improve energy efficiencies. But it sounds like you you, to a certain extent, you rely on subsidies in order to to keep the CapEx returns for these larger programs as attractive as as as your CapEx returns on on vacancy reduction? I mean, it's clear that subsidies would would help, and that's that's should be should be obvious. But even in the current regime, if we need to do more, I mean, we still create absolutely good returns. But, yeah, to be honest, looking mid to long term, I think we we need to change, and that's for true for everyone, our our CapEx plan. I mean, there's simply more investments needed to to achieve the c o two emission goals. That's 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 of Berenberg. Please go ahead. Your line is now open. Yes. Hello. Good morning. Have question on Page 28 of the presentation, where you show the German portfolio details by region. Could you comment a little bit more on the quite significant change in vacancy across the whole region? Mean you mentioned that, but particularly also in cabinets where you have spent a lot of CapEx in the last year, we saw an increase quite a strong voice also in Leipzig. Maybe some more color on a regional basis. That would be helpful. Yeah. Good good good morning, Kai. I think perhaps in Leptik, we had here a larger contribution to or to make or important reason for an increase in vacancy rate was the closing of acquisitions in 02/2020. I mean, this is clearly then not in in full the reason for that because we look at that, as I said, on a like for like basis. But 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 need to take as as we are taking over property management, as we actually need to terminate also some some contracts from tenants that are not paying as we start, perhaps, with the first monetization programs. A region like Rostock that also includes not only Rostock but also Thrive's side is suffering from students or from less demand for apartments or students as I explained. Cabinet and Selskitter, that's something that I've 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. And in these markets, we try clearly try to get tenants into our portfolio by offering them above average apartments. And, I mean, that's for what going tell you, perhaps that's not really a a pressure to do this extremely quickly. So perhaps they wait until the lockdown is over. That's something that we have seen in the February then, and then start moving again. That clearly clearly helps us. Thank you. And then a second question on page five on the Polish portfolio of course in Poland. Could indicate how much of the units hand over handed over and so it's a little bit of a spillover or delayed, so to say, action from last year? And Yeah. What would you think is or has there been any change regarding volumes and prices when it comes to the developed sale activities? Mhmm. Well, the the share that was delayed from the fourth quarter now into the '1 first quarter was quite high. That was around 140,000,000. And if you look at the units sold for us, that was surprisingly high that we sold 160 units already in the February. And it's a little bit misleading if you compare that number to the previous year where we sold 205. So 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 of Vantage development, our subsidiary in Poland, where now the largest share of apartments that are constructed are for the ready for rent business, and 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. So that means that this 163 in the first quarter during the pandemic was definitely a a good result. What we have observed on the on the market in Poland, looking at sales prices is that they have been extremely stable or even increased. Also, volumes have been absolutely in line in 02/2020, perhaps a little bit weaker than the previous years if we look at other developers. And that gives us, of course, a lot of confidence that also the Polish residential market is is very stable and very attractive even in in such a time. Thank you very much. Our next question comes from Manuel Martin, Orogo, PHS. 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 has been quite favorable in q one as as we can see. Maybe you can give us some 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, and that will lead to to quite tax, low tax rate in 2021 and also also in 2022 where we have benefited also a little bit, but this was not a material impact, approximately €300,000 in the first quarter that we got some tax payments from prior years. But, you could expect for the full year 2021 and also for 02/2022, tax or income taxes perhaps in ranges between $35,000,000, which is clearly a low number. Looking into the mid to longer term, this number should increase, but I see I think also said in the past, mid to long term tax rates based on a pre FFO number of around 9% should be something realistic if you do really a long term model. Okay. Okay. That's useful. Thank you. Second question on your construction activities in Poland. So picture seems quite good. Volumes remain stable. Prices are going up. Have you observed any development on the on the construction material prices? Are you feeling there a bit of pressure coming from rising prices? Just to be honest, that's the case. And this is something that you observe in Germany as well. This is 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 in the past month. But still the projects are are running in in Poland, are running as planned. The impact that we expect on our the final growth here should be not that material, but this is clearly something that you can can observe. But, I mean, we're here very confident. We know that we have a very experienced subsidiary working in Poland with really long term relationships with their suppliers. So this is not an extremely big concern, but if you ask me, yes. That's really something that we observe. Okay. Thank you. Our next question comes from Thomas Neuhold, Kepler Cheuvreux. Please go ahead. Your line is now open. Good morning. Thank you very much for the presentation. Thanks for my questions. I have a couple of questions regarding the energy efficiency and organization topic. I was wondering, firstly, if it is technologically possible to upgrade the building with an energy efficiency class of E or F to to a or b. And I'm I'm wondering what kind of CapEx are required to make such a big improvement. And secondly, was wondering in terms of monetization strategy, what do you think is is the sweet spot in terms of what buildings in terms of energy efficiency class you should upgrade to to which efficiency class? Yeah. Good morning, Thomas. I mean, clearly, the the energy efficiency class c is for us a kind of, like, a minimum level that we perhaps want to to to not to achieve the pool, but to improve over the over the next next years. It's clear that already with our investments in in Poland, if you incorporate that into the total number, we will see a strong increase. But also for the German portfolio, that should be something where we could continuously be working on. I mean, the the investments 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. But, clearly, these are then the more material investments. I think what we were taking care of are the low energy efficiency classes. I mean, apartments in the classes, g, h, f. If you ask me for a personal opinion opinion, we we're talking a lot around regulation risk, regarding rent decreases, tax regulation risks, regarding energy efficiency classes that are required to rent out apartments in the future is as we've seen in some other European countries is something that could come in the next next years, and therefore, minimizing these energy classes. So getting the whole portfolio out of these classes, g, h, or even f, that should be clearly more the focus of the mid and and long term strategy. K. Thank you. Our next question comes from Simon Stipic, Warburg Research. Please go ahead. Your line is now open. Yes. 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 Sorry, Simon. The the the question was hard to understand. Can you can you repeat it, please? Sure. So just in to the growth expectations latency reduction, do you expect a similar level for year twenty one as you did 1.4% in last year 2020? Well, I mean, the guidance is unchanged between one point five percent and two percent for the total like for like rental growth. And if you ask us for a split that could be realistic, that like for like rental growth without making changes and vacancy is stays at the current level, that should be a realistic assumption that would be then 1.5 1.4%. And then a reduction vacancy that we expect now to take place over next quarters should bring them the like for like range growth in total within the within the guidance. Great. And just in regard to your twenty twenty one guidance. As a total number, you expected the gap or the data of full year 2020 in regard to net rental income increase to be €14,500,000 And going back to the full year 2020 acquisitions, M and A activity, what do you think is your your net your net impact coming from m and a? Well, this I can't give you the exact numbers. This 14 or 14.5 increase in net rent that we've been guiding, it was based on a total like for like rental growth of 1.8%. And then we already penciled in that we are have already sold in 2020 some units where the closing would take place in '2 in the February. I think this was a portfolio of three or 400 units. And then the remaining part part was coming from the acquisition that to a certain part were already part of the 2020 results, but to the largest part was are then, of course, effective in 02/2021. Okay. Just to cross check, on the net on the net rental income basis, m and a activity, roughly 8,000,000. Would that be very much off? Yeah. I don't have it in my head exactly, but it Okay. It sounds reasonable. Okay. And then just on again, sorry, one more question to you in towards the m and a side. I think, otherwise, all the questions were asked. Do you do you see anything in the pipeline, not in Poland, but actually in Germany? And then are do you intend tell do you intend to sell any noncore assets during this year? Mhmm. Well, selling noncore assets will not be really a big part in or a big big thing in 02/2021, and we will continuously doing that. But we should not expect a huge number there, so some something definitely below 1,000 units. And and 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 designed. You know that we're very disciplined in that regard, but it's not the case that we are now looking at a market which is completely dry. Clearly, it's extremely competitive. I mean, what I said about increasing prices is in more competition, good investment markets in very helpful for relation purposes. It's not that easy for, like, the acquisition market, but, it's not the case that there's nothing anymore on the market, especially in our regions. And you know that we also buy portfolios in smaller sizes, and we buy more frequently. So that should us 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 01 on your telephone keypad. Are currently no further questions. I will hand back to the speakers. Yeah. I mean, 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. 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