Earnings Call: Q4 2019

Feb 27, 2020

Good morning, ladies and gentlemen, and welcome to the Tac Immobilian AG Conference Call on the Annual Report twenty nineteen. At this time, all participants have been placed on a listen only mode and the floor will be open for questions following the presentation. Let me now turn the floor over to your host, Martin Thiel. Many thanks, and good morning, all. Welcome to our full year twenty nineteen conference call. Thanks for dialing in. As always, we will start with a presentation, which is available on our website and as some of you already see via the webcast that we present to you. And of course, afterwards, as always, we have enough time and questions. So looking at the highlight slides for the financial year 2019. First of all, I think it's fair to say that we had a really good and strong fourth quarter on the operational side. This is shown by the vacancy development, which was definitely positive, but a reduction in the vacancy of the residential units of 40 basis points in the fourth quarter, so from 4.9% to 4.5%. And looking at the total portfolio, the overall vacancy that means including the commercial units that we have and including all the acquisitions that we made during the financial year 2019, vacancy was for the first time also below the 5% mark at 4.9%. Like for like rental growth with 1.9%, I would say, more or less in line with the previous quarter. The total like for like rental growth, including the effects of vacancy reduction was stronger than was 2.4%. Good development in the full year for the FFO on an absolute amount and on a per share basis, a 10% increase year on year. Finally, ended up at €160,600,000 which was also above our guidance. Also good developments regarding the EPRA NAV and the LCV, both numbers strongly driven to the positive way caused by the full year valuation by CBRE we had in the fourth quarter. EPRA NAV now stands at 20 point euros 4 and the LCV is down to below 45%. Looking a quick overview of acquisitions and disposals. On the acquisition side, we stated the thirteen thirty one units that we I think already reported for the Q3, but after balance sheet that we already signed in January in Germany and other portfolio of four thirty one units. I will come back to the acquisitions later as well as to the disposals. Basically two kind of disposals this year. First of all, that you know also from the last year, 68 non core units were disposed. The closing of these non core units will be or was already in 2019, some of them in 2020. Basically if, let's say, task of noncore units is already done. So we will also in the future have some noncore units disposed, but that's more an ongoing process. So what we reported, I think, one point five or even two years back, a larger amount of noncore units of around 2,000 units, that's now basically done. Then secondly, and this is something special for this financial year, we were very happy that we signed in December 2019 a contract for disposal of one of two joint ventures we have in a commercial project in Munich. And perhaps some of you remember this, a project that basically started in 2013 where we have done with the help of a joint venture partner development project, something that is quite unusual for KED, but has historical background. And we were very happy that we signed now the first stage, the first two joint ventures in December 2019. We cannot disclose the purchase price, so hopefully, you understand that it's confidential. But just looking at the net cash proceeds expect from this commercial project, This will amount between to numbers between EUR 55,000,000 and EUR 60,000,000. That includes our THG shareholder loans. But just to give you an indication, the amount of THG shareholder loans are definitely the lower part of this total net cash proceeds. Closing will be expected at the end of financial year 2020. And the second stage for the second joint venture, which is basically the building right next to the first building. We expect here that the disposal will take place perhaps end of next year or beginning of twenty twenty two. So also for the second stage, that should be a very positive OpEx. And I'm on the next page, quick look at the portfolio relation that was done by CBRE again. I would say similar positive results like we had in the first year or the first half of twenty nineteen. So all in all, we ended up at an 8.6% annual uplift and the relation levels are now at €1,000 per square meter or to be more precisely, euros $10.30 per square meter and a 6.1 gross yield. On the financing structure at this time, just a quick comment or something to point out, which is I think important, that's the new LTV target. We have reduced the LTV now with high population gains to 44.8% and we think that definitely makes sense to adjust the LTV target accordingly. So the new LTV target stands now at 45%. This is down from 50% as we stood before. I already mentioned, FFO was very positive in 2019, so EUR 5,600,000.0 above our guidance, 10% increase year on year. And very consequently, we also are adjusting that means increasing the dividend for the financial year 2019 as we have over fulfilled our guidance. So the new dividend proposal to the AGM in May will be €0.82 after the original €0.80 for the financial year 2019. On Poland, you know that we have acquired all shares in Vantage development already at the end of last year, the signing took place in November. On the January 13, also the closing took place. So now we are a full owner of Vantage Development. The company has at the moment a pure pipeline of 5,400 residential units. When you remember the call that we had in November, at that time we said, this is mainly concentrated or solely concentrated on Wartsilaaf. Now our second location as planned is already in the pipeline and that's Poznan where we have in the meanwhile approximately 1,000 units secured in transactions in the fourth quarter of twenty nineteen or in the first weeks of twenty twenty. Then looking at the P and L income statement and some comments on the main developments. The increase in net rent year on year was up by four or the rents were up 4.2%. That translates into an increase of €12,800,000 Out of this 4.2%, 2.4% was due to our like for like rental growth. The rest is coming from portfolio acquisition. Not all of the acquisitions in 2019 have already closed in 2019, so we expect something to come in 2020 as well. The increase in net rental income is even stronger than the increase in net rent. We consider it to be this a very good sign. Especially, it's remarkable that we had a little bit lower maintenance costs in 2019 compared to 2018. So that's nearly €1,000,000 lower maintenance costs that we have. So therefore, the improved net rental income should be definitely a positive outcome. Also, increase in net income from services was very positive, euros 3,300,000.0 up. That shows that our service business, which mainly refers to Caretaker Services, Multimedia and Energy Services is in a very good way. I think as to explain the development in other operating income, here we have a reduction of EUR 4,000,000, but other operating income is to a very large effect driven by one off effects. And perhaps remember that we had last year a larger reversal of a provision for real estate transfer tax risk. We made this provision originally in 2017. And now this whole risk is time bad, so we could reverse the provision in full, but the remaining amount in 2019 was lower than in 2018. So this is the main difference. So if you adjust this for one off items, I think the other operating income level is on a stable level. Looking at the net financial results. The net financial growth was reduced by more than €20,000,000 quarter on quarter, but this is definitely also the very largest part of noncash effect. At the end of the fourth quarter, we had again the fair value relation of the equity option of our convertible bond and that cost a noncash expense of €29,000,000 Looking at the net financial results, which is relevant for the FFO. So we see the cash results. It was stable quarter on quarter. And if you compare the years 2019 with 2018, we had an improvement in this net financial result by €9,000,000 The income tax in financial year 2019 was higher than in the previous year, but this increase mainly refers to deferred taxes. Looking at perhaps more interesting cash taxes, yes, also we had an increase by EUR 3,000,000, but looking at the income tax rate, so based on the pretax FFO, it is still at a very moderate level at 4% after 3% in 2018. Now I'm on the next slide, a quick look on the developments in EBITDA, FFO and AFFO in detail. So the EBITDA margin states basically on the same level. I already mentioned that the FFO development was very positive with a 10% increase year on year, driven by the €8,300,000 higher EBITDA and improved net financial results by €9,000,000 and this had an opposing effect or we had an opposing effect with €3,200,000 cash taxes. But not only the FFO increased, also the AFFO improved by 6%, so an AFFO improvement year on year by €5,500,000 And yes, we had higher CapEx in 2019 compared to 2018. But I think looking at the split of the CapEx, it's remarkable and positive that this higher CapEx is not driven by capitalized maintenance, it's really driven by modernization CapEx. I will come back to this a little bit later when looking at the different regions. So summarizing investments at Borelin at this stage, the maintenance was even a little bit lower than the prior year. Capitalized maintenance also a little bit lower than in the prior year. And what has driven the increased investments, not massively, but higher than the year before, is really the modernization CapEx. Then on the next slide, the balance sheet, I think there's nothing really special to mention here except perhaps one position I want to explain shortly. You see in a separate line item in the current assets, the prepayment on business combination EUR 131,000,000. That's the total transaction price that we paid for Vantage Development. And splitting this total transaction price into components, the picture that is as follows. We paid €131,000,000 to the sellers and €46,000,000 were directly repaid to us for the disposal of the commercial segment of Vendix Development. So the net price for the acquisition was €85,000,000 That's the number that you remember from the call in November. Then on the next slide, the development of per NAV is shown a strong increase year on year by 18%. If you exclude the dividend payment of $0.07 5 that we made during the year, the NAV growth was even 22%. And of course, this was mainly driven by the portfolio valuation. So the effect on a per share basis by the very positive valuation result was already €3 per share. Then on the next slide, a quick look on the financing structure. I think it's still important to point out that we have ongoing refinancing potential. So we have already reduced our average cost of debt, which stands now at 1.7%. But there are still more than EUR 300,000,000 of bank loans maturing in the next three years, so this year in the middle years 2021 and 2022. And talking about the average coupons of this bank loan, there's still also 3%. So every bank loan we are today refinancing brings us further interest cost savings. On the next page, you'll see more details the development of cost of debt and LTV. That's just something important to add to the development of cost of debt. This 1.7% cost of debt is based on a maturity of still more than seven years, so seven point four years exactly and is based on nearly 99% fixed rates. Actually, we already commented that now for the first time below 45% and we said always in the past, well, delivering on that with the help of relation teams is for us economically something different compared, for example, to really retain debt. And you know that we look on the financial side much more from a cash flow perspective, from a perspective of maturities and of fixed rates. So therefore, for us, it was very natural to reduce the LTV target now to 45%, and that should ensure everyone that we will continue the financial policy, which was from our point of view very reliable, very conservative as well also in the future. On the next slide, see the development in the first very important very important financial metrics like the ITR, like the net financial debt to EBITDA. And I think not so many companies are reporting this figure, but we think it makes sense to show it the net financial debt in euro per square meter, which still stands at a very moderate €460 per square meter. Then let's move on to the slide that shows rental growth and CapEx allocation. I already said 1.9% was the like for rental growth without vacancy reduction, including vacancy reduction 2.4%. The split of this like for like rental growth was also very comparable to the developments we showed in the previous quarter. So still the largest part is coming from rent increases for existing tenants and from tenant turnover and only a very small part, 10 basis points, and that's, I think, unchanged during the last quarters for modernization programs for existing tenants. Looking at the total investment behind, you see an increase year on year from formerly EUR 19.2 per square meter now to EUR 20.4. So that's not a massive increase. And it really includes, I mean, actually everything. So total maintenance, total CapEx is included in that number. And perhaps to explain this 20.4 the euros per square meter number a little bit more, if you look at the maintenance and CapEx split by region, you see the 20% of the total maintenance and CapEx went to the cabinets region. And you have in the appendix a table with your details, breakdown, maintenance and CapEx per region. So if you add up the number for Chemedits, this was EUR 45 per square meter. So really for our normal numbers, exceptional high investment, but which paid off. In the Chemedits region, we had a reduction in vacancy rates of nearly 200 basis points, where 3% like for like rental growth in Chemedits. So therefore, this monetization programs that we started also to a larger extent already in the first half of twenty nineteen really showed their success. And therefore, this high investment were from our clients more than justified. But still to summarize that, we think that with a total investment of around €20 per square meter, achieving 2.4% like for like growth, this is still a very good number. On the next slide, you see an overview of vacancy reduction for the financial year 2019 and the year before, ending up with 4.5% vacancy rate in the residential units. So that means on a like for like basis is something that, of course, was very positive for us. So therefore, you can see that, of course, let's say reduction in basis points is not anymore the 100, 150 basis points in years before. That's clear because the vacancy rates are now on a low level, but still there's potential to improve that. Then looking at the portfolio relation, we think that the numbers are definitely positive. They are absolutely in line with the first half of twenty nineteen with the financial year 2018. So percentage wise, it's very clear. Now the annual uplift was 8.6%. It's a little bit lower than last year with 10.1%. But if you look at the absolute numbers comparing the different years, $430,000,000 to €414,000,000 so it's basically in line and it shows that the trend is still there, the positive trend of valuation that we see in the market. Looking at the overall levels, and we are now at 6.1% gross yield, so that's the in place yield based on the current rent that includes also the nearly 5% vacancy rate that we have on the portfolio that translates into $10.30 euros per square meter. So that should be definitely also a level of further weatherization gains are something that one should expect. Of course, for us at that stage, it's not really possible to estimate annual valuation gains for the financial year 2020. That's percentage wise, as in 2019, you should expect a reduced number. But the general trend in our portfolio is still very positive that should be out of doubt. Then coming to the acquisitions of financial year 2019. I already mentioned that we acquired after the balance sheet date another four thirty units in Dexen Bienhardt. And for the full financial year 2019, we acquired 1,300 units. We're very pleased with the multiples of the gross yields that were the basis for these acquisitions. So for the 2019 acquisitions, all in all, the average gross yield was 8.3% based on the current vacancy rate of an average 11%. So that was definitely positive outcome of our acquisitions in 2019 that we were still able to acquire at attractive yields. We cannot disclose exact purchase price, the exact yield for a new acquisition in 2020, but I think at common, it's fair that you should assume that it's similar to what we have acquired in 2019. But looking into acquisitions for 2020, so that means looking to our pipeline, I think this 8.3% growth rate is something that you should note for the full year. So that should move more towards, let's say, 7% or 7.5%. And just to make this clear, in line basically with the positive trend that we have on the valuation side, of course, another effect is that we see a slightly increase in prices or increasing prices also in our markets, which is a good news for the portfolio. But acquisitions then are a little bit more pricey, but still the 7% gross sheet, if this would be the case for the full year financial full year 2020 would be definitely something which is very, very positive. On the next slide, you see the disposals, five sixty eight non core units that we disposed. And it's important to mention that these are really non core units. So that means non core in the sense of construction quality that is a little bit poorer or especially locations where we think perhaps today it's okay to operate there. But in the future, that means in the next five to ten years, we have to have our doubts whether this is really something very successful. So therefore, this explains the 8.3% gross yield, which was the basis for the selling price and the 19% vacancy rate. And in this case, from our point of view, this 19% is something which is not contrary to the acquisitions that we made last year and that's the potential. And then coming towards the end of the presentation, some words on Poland. Just summarizing again the key transaction terms, we acquired all shares, so 100% in Vintage Development is our Vintage Development very successful developer based in Wartslav. That's also the city where the main pipeline of the company currently is. I already mentioned that our net consideration amounts to €85,000,000 So this was effectively, economically the purchase price that we paid. And I can tell you that we also acquired the cash which is in the balance sheet. If you deduct the cash position from the year end balance sheet, which was around €36,000,000 leaving out any cash from the commercial property segment. So that's a kind of really paid purchase price in an economic sense was more around 50,000,000 So therefore, we consider this price as definitely very attractive. The transaction closed at the January, so on the January 13 that was very much planned. We're very happy and very proud that the team is absolutely full in place and highly motivated. So Vantage has currently a platform of approximately 100 employees. All of them are still on board. All of them are very much looking forward from our point of view to work with us on a basically new business model because we wanted to change at least the largest part of the business model of Vantage from a residential sales model to a residential for instance. On the next slide, you see a quick overview over the regarding the pipeline of Vantage development. So for now, it's exactly 4,400 units based in Nord Slough. If you compare that with the 5,300 units that we communicated at the sign in date, the difference of approximately 900 apartments is simply the number of apartments that Vantage now handed over in the fourth quarter to customers. So therefore, it's now 4,400 units in Wartsilaft and new an additional 1,000 units in Poznan secured for our Renting business in the fourth quarter of twenty nineteen or in the first quarter of twenty twenty. And we already told in our conference call in November that Poland is really a midterm project. So therefore, 2020 will be a year where we see earnings from disposals of Vantage and the first rents will be collected towards the end of twenty twenty one. And our midterm target is still unchanged and we are very optimistic and very positive that this can be fulfilled to have in next three to five years between 18,000 units in Poland, as you see the numbers, what we think are quite attractive gross yields and quite attractive margins. We will provide you with more details on our plans in Poland with Q1 figures. So now after the closing, we are really working with the management team of Vantage on a more detailed plan, on a split between residential for sale and residential for rent apartments upon the timing of rents. So therefore, our plan is when we publish the Q1 figures on the May 14 to provide you with a guidance for the year 2020 for Vantage, which is then basically disposal results and perhaps that's even more relevant for years 2021 onwards with a guidance, what kind of rent levels one could expect from the current pipeline and perhaps from projects under negotiations, so that it's perhaps easier for you also to put it in the model. And finally, we have already announced that we are doing our Capital Markets Day in Wartslav on the May 26, so that then nearly two weeks of those two weeks after the publishment of the Q1 figures. So perhaps it's interesting for you to go there to have a better understanding of the business that we're doing there and to get more insights from the what we think very promising residential foreign market in Poland. Finally, some concluding remarks on our guidance for the financial year 2020, which for now stands or is unchanged. So the FFO guidance is still at 168,000,000 to €117,000,000 and the dividend guidance still stands at €0.87 per share. But it's now I think it's clear after we had really a good fourth quarter as well, The guidance for 2020 should look very much doable. So therefore, we are very optimistic regarding our numbers for 2020. That's it from my side. Thank you so far for listening. And of course, now we're very much open to take your questions. And it looks like we have the first question here from Kai Klauser, who's calling from Berenberg. Over to you. Yes. Good morning. I've got two questions on the annual report. First of all, on Page 128, regarding the earnings contribution from services. We had a margin expansion of around 150 bps. Is this still bit of a kind of because I was affected in a bit of a bit up phase? Or is this further efficiency gains to be expected from this segment also here in 2020? Second question would be on the personnel expenses displayed here on Page 129. Of course, we had higher costs for Caretakers and Craftsmen, but also the employees in operations went up as well as admin by 16%. Also here the question, is this now a level which you expect to sustain? Or are there any or were there any one offs special items in the last year, which were the reasons for the participant in costs? And the last question would be on the portfolio split. In the presentation on Page 29, we have the regional splits of maintenance and CapEx. Could you indicate that after the high amount or the higher amount of CapEx spent in ten minutes, say, in a new region in Germany where you intend to ramp up the full investments to a similar level as it was in cabinets last year? Thank you, Pat, for the questions. Perhaps I'll start with the last one. What's perhaps the main focus for 2020 regarding CapEx? Still cabinets, of course, will be a region where we invest more. That's not that massively as we've done that last year. That was clear. And another region where we will definitely invest more is the Berlin region. You know that this region is at the moment very promising. If you look in our presentation, the appendix, we show the like for like rental growth numbers of the Berlin region. And for example, in 2019, we achieved a total like for like rental growth of more than 4.1%, out of which 3.2 were also the like for like rental growth without vacancy reduction. So therefore, we are investing here more. But the idea of this more CapEx in the Berlin region is definitely also to reduce vacancy. And if you remember our Brandenburg and half a portfolio, there we still have high vacancy rates, and this is especially a place or a vacation where we will invest more. So you should, perhaps for 2020, expect lower CapEx in the Cambridge region, but more CapEx in the Berlin region, I would say, overall, perhaps a similar level across the regions than we had in 2019. Looking at the development of personnel expenses, there are there's nothing that you should have in mind for 2020 regarding a strong increase. The increase in personnel expenses is then, as you said, on the one side, driven by the extended service business because we showed the personnel costs for the service business not in the line item for the service expenses, but in the personnel expenses as long as it refers to salaries. You should also not expect a stronger increase in administrative costs. So what we expect, for example, for increase in salaries in total is perhaps something at around 3%, just to give you an indication. What we have planned for the financial year 2019 is perhaps some more bonus payments for some of our employees. So therefore, it's a little bit increased towards the year end. But I think there's nothing really trend wise looking at it that should be taken into account when looking at future results. And then regarding the margins of the Service business, yes, improvement is definitely there. But looking into the future, I think the next steps are here a little bit smaller. And the big jump in income from services, the results from services was between 2017 and 2018. Now we are really continuously doing this, but you should assume perhaps a similar margin for 2020 like in 2019. You. The next question comes from Sander Bunk, who's calling from Barclays. Over to you. Hi, good morning everyone. Two questions from my side. The first one is on your values and how currently the discussion with the values are going. And appreciate you don't want to necessarily comment on what you expect for potentially 2020, but more to get a bit of a flavor of how when you discussions how our value is currently looking at the German residential climate in the sense of potential regulation? Do you think they're getting more cautious and as a result are potentially more reluctant to push through yield compression? Or are they saying, in particular, your case, like, given that your portfolio is still relatively conservatively valued and there has been less probably less regulation impact in your regions, it is not really an issue? So that's the first one. And the second one is on potential further acquisitions. Now obviously, you've shifted slightly your investment profile probably going forward into Poland. But is there opportunity to be a bit more aggressive in your acquisitions in Germany, especially where your LTV currently sits, which share price rating? Are there potentially any opportunities there, particularly with units with higher vacancy, where you can basically increase vacancy through CapEx? Thank you, Sander, for the questions. Starting with the valuation question. So the question was more or less what is the impact of potential regulations also in our region in relation. My impression is that this whole topic is completely left out in the current valuation. So for example, I mean, for us, this was nothing really material. The real burden portfolio that we have, which is a little bit more than 300 units, there was not write down on this portfolio. This was simply valued I don't know the exact increase, but I would say more or less like in the previous quarters, simply the argument from our values was here that what they observed on the market are still stable or even slightly growing transaction prices, of course, coming from smaller disposals they observe on the market. But let's say, as long as we not really have evidence that, for example, any regulation with Sweden reduces prices, we continue like in the past. So therefore, especially in our regions, there was not any influence on regulation risks regarding valuation. And also not to the contrary because you can, of course, argue why should not our regions, especially, for example, the Berlin commutables benefit from any increased risk in the city of Berlin, also this was not the case. So I know there's a big discussion around that and for good reason, a big discussion about regulation risk. But looking at results from valuers, our impression was that this had no impact on the valuation in 2019. If we want some more or less really a formal relation, what is observable really in concrete prices on the market. And so far, we have seen no reaction. Whether these changes in 2020, that's difficult to predict. But I think for our reasons, you can be sure that these would be, from our point of view, best least affected one if regulation really would spread out out of Berlin. Regarding your question to acquisitions, yes, if I want to, we are a little bit more aggressive. I tried to point it to that direction a little bit when I commented on the pipeline for 2020 that also gross yields of 7%, perhaps even a little bit lower, of course, depending on the individual acquisitions offer us something that could make sense with our lower cost of capital. That means lower cost of equity and lower cost of debt. So yes, that's clear, something that we have to accept that we need to go in price levels that are a little bit higher than what we paid in the past. But one thing should be made here at this stage very clear, we will not pay any price we see just to grow externally. So we will be disciplined, but disciplined today means that perhaps even a gross sheet of 7% or lower is something that we would accept. Great. Thanks very much. Thank you. The next question we have comes from Georg Candace calling from Bankhaus Lambert. Over to you. Good morning. This fits perfectly because I just want to is there anything more concrete you have seen in the pipeline that you are talking about these yields? And when you are suggesting that it's a little bit lower than the 8% last year. So I think you're thinking about further additions in the quarter of the year. I will comment as I've done in the previous quarter, but it's really hard to say, but now we have very concrete pipeline where we are close to signing because this is simply not the reality today. I And would suggest there is a clearer pipeline and we are optimistic on that. But it's, I think, very natural for us that we frequently have processes that we frequently are bidding for portfolios And looking at our offers, they are more in the direction that I pointed out that that's an 8% gross yield for the acquisitions in 2019 is, of course, something that we would like to see, but more realistic is a number towards the 7%. But again, it's hard for us to predict an exact number, for example, when we talk next time in May, what we can communicate on new acquisitions. Thank you. Thank you. And the next question comes from Thomas Neuhards, who's calling from Kepler Cheuvreux. Over to you. Good morning. I have a couple of questions. Firstly, on the strategy, especially in Poland, I understand that you want to provide more details of the Q1 results. But I'm just wondering if you can elaborate a little bit what could happen in Poland after you have reached this targeted 8,000 to 10,000 units. Could you add more units to Poland? And what do you think is the maximum exposure in terms of total portfolio exposure you want to have in Poland in the long run? And then also in terms of strategy, if the Polish business works out well and you gain development experience, do you think it's possible that you might consider adding development activities also in your German activities? Or do you think that the yields are not attractive enough in Germany to take the risk to go into development in Germany? And then I have two more accounting related questions. Thank you, Thomas, for the question. Looking at our plans in Poland, I would say it's definitely a lot of work to build up now the residential for rent pipeline of 8,000 to 10,000 units. As I said, this looks all very promising and very positive on this market. Why is that? We think that Poland definitely has a housing shortage in the sense of growing cities and on the other side, a lot of older apartments, a lot of older housing blocks that simply need to be replaced. So therefore, this product that we will, together with our colleagues from Vantage, offer to the market, newly constructed apartments in large cities, we're convinced that this will have a definitely growing market. But it needs to be done, needs to be constructed. And therefore, we say this is a midterm target the next three to five years. And that would translate into 10% of our total units, assuming just simplifying that a little bit, we keep the German portfolio as it is. But in terms of rents, in terms of cash flows, it would be even more as the per square meter rent in our portfolio in Poland as we're talking about newly constructed apartments will be higher. So you should expect more rent leverage in euro of EUR 10 to EUR 11 per square meter. So that would mean we have perhaps 15% to 20% already of our total rent in Poland when we achieve this, let's say, 10,000 units. And then we will simply decide based on what we see in Poland, how well developed the business. One thing is clear, we will definitely be a company with a main focus on Germany. So you should not expect that TAG now shifts into a company who is heavily investing across Europe or is changing its, let's say, main focus from Germany to Poland because we simply believe in the German market, and we see this from our numbers that, that works very well. And then, of course, very good question is, as we have bought, acquired and developed in Poland, is this a business model that we think is effective in Germany as well? And clearly, the answer is clear, no. And why is that if we compare the gross years that we are expecting from our business in Poland with gross years in Germany, we see a material difference. I mean we talked here of gross yields of 7% or even more large cities important for newly constructed apartments. So that's definitely a huge difference compared to Germany. And it's not only, let's say, the final gross yield difference, it's also the whole way how projects are handled, the duration of project cycles that's in Poland as far as we have seen now. Definitely, that's half the time than in Germany. So therefore, we consider that definitely higher development risk is also clear in Poland. It's very much justified by a foreseeable project cycle and attractive returns, but both of them we not really see in Germany. Understood. And the two minor questions I have is on cash taxes. You mentioned that they went up from 3% to 4%. Can you give us an outlook how cash taxes could develop in the next years? Maybe you can also give an indication what kind of spot financing costs you would or could currently face for reasonable maturities? For 2020, you should expect cash taxes on a similar level like we had this year. Looking into the midterm, it's always difficult to predict, but the tax rate in relation to the pretax FFO should definitely stay in that single digit number. So currently, are around 4%. And if we look into our assumptions, but again, for taxes, it's always not that easy. We end up in the next three to five years more towards 8%, 9% as a tax rate in relation to pretax FFO just a typical indication. And the second question that you have was on Sorry? Financing costs. Financing costs, sorry. Currently, when we discussed with our banks, margins for ten year bank loans were at around 100 to 110 basis points. At the ten year, mix swap rate is currently negative by ten, fifteen basis points. So financing of around 1% for a ten year bank loan is perhaps a good estimate. Okay. Thank you very much. There are no further questions at this time. Mr. Thiel, there are no further questions at this time. Okay then. Thank you very much to all of you for listening to our call and for your questions. As always, if there's anything left, please feel free to ask the IR team or myself personally. Looking very much forward to meeting you next roadshow and then perhaps on our Capital Markets Day in Wartsila or with the Q1 conference call. Thank you very much, and have a good day.