Thank you, good morning, and welcome everyone to Catella's 2023 second quarter report, apologies for the slight delay of this webcast. In addition to myself, with me today is Michel Fischier, our Chief Financial Officer and Head of Investor Relations. As per our usual, we will go through our main events in the quarter and the financial performance. After that initial presentation, we'll take questions on the phone and online, if you so prefer. Of course, our financial reporting and presentation materials are always available on the web. Let's start, as we normally do, the presentation on page three, with a brief overview of Catella. I'm sure most of you, but we hope there are some new people online, but most are likely familiar with our strategy and our operations by now.
Catella operates in three property-focused business areas: investment management, principal investments, and corporate finance. We now manage nearly SEK 150 billion in our Pan-European investment management platform. Just over 75% of the assets under management are managed in property funds, and the remaining part in a significant number of asset management mandates across Europe. Principal investments is where we invest our own equity into a broad and diversified portfolio of European investment projects together with partners. Corporate finance is our real estate advisory and brokerage arm, with leading positions in five large European markets. Corporate finance is also an important internal advisor to our other business areas, investment management and principal investments. With that brief introduction, I'd like to start this quarter's presentation slightly differently with a market summary on page four.
The European real estate transaction volumes are at historically low levels, levels not seen since the global financial crisis in 2008 and 2009. Furthermore, the drop in transaction volumes is even higher than what we experienced during the GFC. Clearly, this affects all of our three business areas. The transaction-driven income in corporate finance is directly and mostly, you know, most affected by our errors in a very slow transaction market. In principal investments, the main impact is obviously that the uncertainties in the market delays divestments of completed and, and fully let investment projects. For investment management, it reduces the variable income that stems from acquisitions and disposals of our fund assets and also performance-related fees.
However, as we've grown over the last large number of years, and continue to grow our asset base, the underlying fixed fees continue to grow and partially cover the lower variable fee income. Of course, this is not an easy environment at the moment, and put the numbers in a little bit of context. With that market backdrop, let's move to page five for a summary of our key operational highlights of the quarter. Despite a slow market throughout Europe, it has been an eventful quarter for Catella. We signed an agreement to acquire a French company, Aquila, which we're very excited about. Besides adding roughly SEK 16 billion to assets under management , it also adds significant synergies to Catella.
We now have the opportunity to internally manage our French fund assets, which are about SEK 6 billion, we are present in the French market now with an attractive asset management proposal in the current volatile market. Additionally, we have a partner for principal investments in France. Finally, crucially, it adds a new source of investment capital through the retail platform, Axipit. Retail investments, so from, from individuals, is a source of capital that we see continue to grow or at least stay strong, even in current market conditions, and which is a great diversification and source of capital for us. Our focus is always on long-term value creation for our shareholders. Those of you who you normally listen in know that we, we never really focus too much about the quarter. It's about long-term, steady growth.
We have made progress this quarter, despite a very, very calm market. It allows us to focus on these long-term initiatives. With a very strong 2022 behind us and a continued strong liquidity and financial position, we are in a good position to grow the company through investments in digitalization, capital raising, by evaluating M&A opportunities, obviously, Aquila being a good example, and by making opportunistic investments with partners, and also by launching new products tailored to the new market environment with a clear sustainability profile and ideally with a pan-European reach.
If we focus on investment management, even though the transaction market is currently very quiet, we can show an increase in AUM of nearly SEK 9 billion in the quarter, supported by finalized development projects entering our assets in funds, but also some exchange rate positive effects as the Swedish krona continues to depreciate. Looking ahead, we have capital commitments of approximately SEK 10 billion in our funds and several development projects coming to completion, both of which will support AUM growth going forward. After quarter end, Catella APAM in the U.K., won a 12-month significant advisory mandate for Transport for London. This represents yet another prestigious assignment for our U.K. platform.
Initially, the contract will involve assisting TfL in understanding and realizing the potential of its primarily retail assets around subway platforms and stops. Although in the longer term, it may also open up opportunities for growth in assets under management for Catella APAM. Turning to principal investments, relatively quiet. However, we sold a logistics property in Sweden, generating a profit of SEK 5 million. Furthermore, at the end of July, so after the quarter, we divested our 50% holding in Infrahubs and associated project companies, bringing an end to that partnership. The value of the transaction corresponds to the return of the total invested capital, SEK +12 million for the value of the platform and assets. Our partnerships with Infrahubs successfully contributed to the Swedish market needs for sustainable logistics solutions.
The rationale behind the transaction was really to reduce our exposure to these particular development projects and to free up capital for other growth investments across Europe. For our remaining investment projects in principal investments, we expect divestments to be limited during 2023. However, as we've discussed in the past, we are in a good position, where we can be patient with divestments of completed and cash flow-positive properties, while we're flexible and ready to utilize liquidity for other investment opportunities that we're actively working on. For corporate finance, obviously the most challenging business area in this market environment. The transaction market remains hesitant, and thus revenues are limited. The pipeline ahead is centered around large and more complex transactions.
There's, there's, there is potential, but the timing continues to be very uncertain, and, and success stories are, are somewhat binary. However, one landmark transaction during the second quarter was advising a Finnish government-owned residential company in the sale of a major residential portfolio to, to KKR. This was KKR's first acquisition in Finland and the biggest real estate transaction so far this year in the Finnish market. It's a, it's a good sign that, that, for whatever transactions are occurring at the moment, we have the, the teams and the expertise to, to work with the biggest players in the most complex transactions. On page six, we have a summary of the group's consolidated results in the second quarter. Year-over-year revenues decreased by SEK 75 million. The main driver behind lower revenue were simply significant transactions.
Last year, we had a record-breaking 2022. We divested two logistic properties in Sweden with significant profit margins and received quite material performance fees in investment management. In the current market environment, it's also inevitable that it was hard to match the transaction revenues in corporate finance from last year. You know, as an effect of the lower revenue, EBIT ended at SEK 84 million contributive both to Catella shareholders, compared to SEK 328 last year. I think it's important to put this in context, and I would like to point out that SEK 84 million in a quarter historically is a very solid result for Catella. With around SEK 100 million from last year's divestments and a similar drop in variable fund income, the year-over-year comparison is tough.
Just as a side note, the underlying income in Investment management keeps growing, and this was in fact, Investment management's second-best second quarter in history. It's just a very tough comparison to 2022, but we still deliver SEK 84 million of EBIT, which on a long-term trend is not a bad result. Investment management continues to grow with substantial AUM increase of SEK 14 billion over the last 12 months. Quarter-over-quarter, AUM increased by SEK 9 billion, mainly driven, as I talked about, inflows into residential funds, completed development projects, but also we have some currency tailwind, of course. The operating profit here is important to put into context. Our fixed fees continues to show the resilience of the underlying business model.
Even though there were very, very few transactions and, and virtually no variable fees, we have a solid profitability in the segment. Fixed fees are up 14% year-over-year, and this will continue to increase our long-term earnings baseline and reduces volatility. I think in, in the current market environment, where we see, you know, limited change in the short term, this is a, a real strength for us, and, and shows the, the long-term focus of our business model. In principal investments, a bit more choppy and short term sometimes. One divestment, as I said, was realized, generating a profit of SEK 5 million.
As mentioned, we exited the Infrahubs partnership in July, looking forward and ahead, we will continue to focus on developing our current pipeline of projects, in, in the pace that we find appropriate. I think more importantly, pursuing co-investments aimed at generating new mandates and revenue streams for our various companies, and mandates across Europe. Long term, we're working on some exciting new opportunistic investment strategies to meet the changing market dynamics and investor demands, and of course, more of that when those are launched. The historically slow transaction market that we started the call with, naturally affected revenue and corporate finance as well, which led to a negative SEK 22 million EBIT compared to a positive SEK 26 million last year.
While looking out ahead, we have a strong pipeline, we're working on, just like our competitors, with big complex transactions, helping players across Europe. But the market, as I said, is somewhat binary, driven by these large transactions, and it is difficult to predict precisely how and when yields will be realized. I think there's, in several countries, still, a hesitancy and a slight discrepancy in price expectations, but we have seen in several markets, buyers and sellers starting to come together. We, we, a slight, slight optimism going into the second half of this year. Let's move to page seven, where we discuss a little bit about investment management in more detail. And one of our favorite charts, since the inception of investment management, we have delivered a strong average annual growth rate of 24% in AUM.
As I said, over the last 12 months, SEK 14 billion and even SEK 9 billion in the last quarter. Majority of that over the last year has been inflows to our residential fund offerings, but also with some FX. We view 2023 cautiously positive as we continue to have a pipeline of transactions to complete, development projects to finish, and capital commitments of SEK 10 billion to be invested now in a changing market with, with prices, having moved down. You know, we, we still remain prudent and, and, and have continued dialogue with our investors on, on how to best utilize the capital that we have available. We also, have some positive trends and, and remain very positive our outlook in growing asset management.
The pipeline for new mandates is strong, with opportunistic investors being more active, and existing property owners are really in need of our expertise at the moment, as some of them have, you know, workout needs, sustainability improvement, requirements. Some of this is really playing into our strength. One example is evidenced by our new mandate with TfL in the U.K., for example. As I started with a little bit, and we are taking the time now in, in a slower environment to develop the next strategies and the next funds and products and mandates to meet the investor demands in, in a somewhat more volatile and sustainability-focused market. On page eight, the continued underlying AUM growth drives increased fixed fee income.
I can't stress this enough, and it is our key underlying investment management metric, and a main long-term profit driver in Catella. As you can see, our fixed fees have increased by 50% since 2020. I think this is something that we take great comfort in, and I, I think from a, from an investor perspective, it's really important to look at this long-term trend and, and take the good quarters when they come, but look at the long-term trend on the underlying fixed income. You know, right now, over the last couple of years, we've, we've passed this hurdle where our fixed fee income materially exceeds our non-variable operating expenses.
I'm not saying this is unique among our peers, but we're in a, in a solid and strong position with very little goodwill and other depreciation on our balance sheet impacting us. This is gonna, this is gonna go well even in a slow transaction market without significant variable fees. In Q2, variable fees such as acquisition, disposal, and performance fees were substantially lower than a year ago, again, as an effect of lower transaction volumes and underlying valuations. Again, we had a, an amazing first half of 2022, but we had a strong second quarter in 2023. Besides capital commitments to funds, our broad offer in asset management provides critical competencies in a turbulent markets to, to primarily reposition and, and redevelop assets.
This is an offering which balances core AUM growth in economic downturns and slower transaction markets, and really should provide significant variable fees in the coming years. We are now turning to page 11, talk about principal investments. Our diversified portfolio consists now of 10 active projects in different asset classes, as well as some projects in pre-development phases spread across six European countries. In addition, we also have a portfolio of smaller co-investments, and, and, and we hope to be able to grow this in the coming years, that both meet our return targets and more importantly, create new partnerships with investors and generate new revenue streams through asset management and development mandates.
Operating profits during the quarter was mainly driven by rental income from our Kaktus development project in Denmark and the sale of the logistics property in Sweden. Besides the sale in Sweden, no substantial transactions were made. In the current market environment, we expect divestments of completed projects to be limited, frankly, in 2023. We have made some steps forward in utilizing liquidity and started a couple of new projects during the quarter, and we'll talk more about those when we get further ahead. But look, our strong financial position here is key, that gives us the flexibility to be patient with cash flow positive properties. And we are ready to utilize our liquidity in pursuing new investment opportunities as they emerge.
At the moment, we're, we're maybe more a bit more prudent than we have been in the past, and waiting patiently like, like most others. We have made steps even in the second and third quarter to, to move our positions ahead a little bit. Corporate Finance, which is on page 13. You know, it's, it's a slow transaction market. There's no way to, to get around that fact. All our competitors, our peers, our friends in the market are, are facing the same issues. The pipeline, it confirms that Catella Corporate Finance maintains a strong position in our five markets. But, you know, the, the uncertainty in the market is pushing transactions forward. It takes longer to close, it's renegotiated several times, and, and all buyers can't get their can't, can't get their deal together.
It's not nothing new. It happens a lot in, in this type of environment. You know, a slow, hesitant market affects all our business areas and especially corporate finance. Until this bid-ask gap between sellers and buyers close, we expect relatively low transaction volumes and revenues to continue. At the same time, demand for valuation services continues to be strong, as well as demand for more complex capital markets and restructuring services. These are, as mentioned, you know, pretty lumpy and unpredictable, but if we close a few of these in the pipeline, you know, it'll turn out to be an okay year despite this, this, rather, challenging, to be kind, environment. With that, I'll hand over to Michel, who will share a brief financial summary beginning on page 15.
Thank you, Christoffer, and once again, welcome to our call. I hope you have all enjoyed your holidays. For me, I'm happy to present my second quarter as CFO of Catella. Not to repeat what has already been said a little too much, the year-over-year comparables were challenging due to a lower variable revenue in investment management, limited profit from sales and principal investments, and of course, fewer transactions in corporate finance. In essence, these were the drivers behind an EBIT SEK 244 million lower than last year. Although SEK 84 million is still something, in EBIT, is still something that we view as a solid quarterly income. If we take a look below the EBIT line, both currency effects and an improved structured and structured intercompany lending has supported an improved financial net compared to last year.
Also, a more transparent and straightforward group structure has taken us closer to a point where we meet local and group tax obligations. Thus, financial nets and taxes led us to a net profit at the same level as EBIT. As seen, the lower earnings resulted in an operating margin of 11% and an EPS of SEK 0.95. Both positive, still substantially lower than last year, the reasons behind this have already been explained. If we continue to page 16, to have a look at our financial and liquidity position, our balance sheets and equity ratio remain strong and provide, you know, the necessary dry powder to support our growth plans.
The cash position is broadly unchanged year-over-year, but lower than last quarter, and this follows our decision to replace expensive mezzanine financing with internal shareholder loan in the development project in Kaktus in Denmark. This shows our ability to be flexible and have the opportunity to invest capital where necessary. In this instance, we have the liquidity to replace expensive financing, and we did so. To conclude and reiterate what we've said previously, we're comfortable with our liquidity position and the outstanding market debt, which matures in early 2025. Our position, of course, provides us the headroom necessary to continue to invest in long-term value creation, creating opportunities, and also the firepower to harvest opportunistic ideas going forward. With that said, I'll hand back over to you, Christoffer.
Thank you, Michel. Before we conclude and open up for Q&A, I'd like to briefly summarize the quarter from our perspective, on the final slide or slide 18. Look, for everyone in this market, the first half of 2023 has been slow. Slow is a generous word. It's down dramatically, but we're still pleased. We have been active. We're building the future of Catella. We have invested in long-term value creation, within the organization and through M&A. The current market does affect all of our business areas, but at the same time, it creates opportunities, for companies which can lean on a flexible product offering, a sound financial position, and balanced leverage, such as Catella. And we are in a favorable position to act in this market.
The agreement to acquire Aquila adds one piece to our strategy of profitable growth. Combination will add synergies, increase diversification, both of assets and of capital inflows, and provide new revenue streams going forward. Looking ahead, our sound financial position and capital commitments and funds puts us in a good position to capture growth opportunities and invest for profitable growth in the coming years. We'll do everything to work on long-term shareholder growth and value regardless of the market sentiment. With that, I'd like to thank you all for listening and open up for questions.
Thank you. We'll now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Your first question comes from Patrik Brattelius with ABG. Please go ahead.
Thank you. Can you guys hear me?
We can hear you okay. Morning, Patrik.
Good morning. Good morning. Thank you. A couple of questions from me. firstly, you, I wanna go to the acquisition that was highlighted in the quarter. This strengthened your footprint in France. How do you view further M&A from here? Are there any geographies or, or segments in the market where you want to strengthen further, or any black spots that you want to to enter?
Yeah, it's an important and a delicate question. We can't obviously talk specifics. First I wanna highlight, you know, Aquila, SEK 16 billion of assets to add to our AUM is a significant transaction. It's profitable, quite profitable from day one. It gives us the ability to, over time, at least, hopefully pretty, pretty soon, manage our own French fund assets. That's SEK 6 billion that we could move internally. You know, France is a huge market. It gives us the opportunity to work with corporate finance. It gives us an opportunity to access new capital base. It gives us a partner for principal investments. Most importantly, the company that we are going into business with is just like us.
They are-- they work across the value chain. They work across the risk curve. They are flexible and entrepreneurial and have a strong name and footprint across France, so we're super excited about it. Going forward, I think we've talked about it, we are continuously looking at opportunities to pursue interesting M&A activities across Europe. Right now, you know, we have been focusing a little bit on debt, which is a segment where Catella doesn't have much presence as far as... We do not, do not have debt funds, for example. The challenge in that market today is existing investments on most of these fund platforms.
You know, it's a great forward-looking investment, but we, you know, you have to be very precise in when you enter and what they have in the existing portfolios. That's one segment that we're looking at. Geographically, you know, we think, you know, that's, that's, we've probably filled a big hole now with France, and then we'll see what we, what we look at going forward.
Thank you. Your next question comes from Emil Jonsson with DNB. Please go ahead.
Good morning, thank you for the presentation.
Morning.
I just want to begin by asking if, if you compare now to.
You know, again, I'd like to point out we have significant capital commitments available already in our funds. We have development projects that are ongoing that will add assets to our funds. The capital that we're really focused on short term is more in separate mandates and club deals with specific strategies, rather than expecting a huge inflow into funds in the coming, let's say, couple of quarters.
All right. I understand. If we compare with last quarter, what, what changes have you seen in the amount of capital getting flagged for withdrawals in investment management?
Yeah, that's a, it's a very important question. You know, look, when, when the, the funds flow, inflows are, are somewhat limited in funds, you, you kind of play defense. We have a strong investor base with great relationships, and right now, I'd say you're in daily dialogue with your investor base to make sure that they understand that you work on their assets, that you reposition, and trade as needed. We have seen a, I would call it a very modest call for capital across our funds. Again, most funds have a 12-month notice period minimum, which provides a lot of ability to act where you can offer those redemption requests to other investors.
You can, you can obviously renegotiate with the investors and as, as, as a last resort, work on liquidity by, by trading, some assets. You know, there's no significant increase or change. We're, we're continuously tracking at a, at a modest level, but it's something that we monitor and work with on a daily basis.
All right. Speaking of capital commitments, they were at SEK 10 billion this quarter, just like they were in Q1 and just like they were in Q4. Does that mean that this SEK 10 billion has not yet been utilized, or does it mean that some of it has been utilized and that more capital has been committed to sort of compensate for that?
It's a combination. I mean, frankly, the capital that has been utilized over these last couple of quarters has been to continue or finalize development projects. Some new capital has come in to replace that, which means we're largely in the same position. You know, acquisitions have been very modest, so that a lot of that capital is. You know, investors just like us are, are being patient, and they're okay to be patient with their capital at the moment.
All right, that makes sense. Just a question on principal investments, speaking of Kaktus in particular.
When Kaktus gets, eventually divested, let's say maybe H1 of next year, how much do you think the IRR on that property will have been affected by the sort of drawn-out divestment process? Are we talking, like, 1 or 2 percentage points, or are we talking 10 percentage points?
I would simply say it's going to be negatively impacted. you know, look, as most of us are, are acutely aware of, it's, it's hard to speculate exactly on timing and price levels at the moment. Of course, there's no. We've been transparent that, you know, it's not our business generally to have large balance sheet positions and finished cash flow positive assets on our balance sheets. We can, and, you know, the current income on that property makes it cash flow property positive, and that's okay. Now, if it drags out, yes, the IRR will go down, but the IRR in this instance, I think is a lot less important than the actual total return.
You know, the Copenhagen market is still strong, with yields, at least with a few comparables they are, they are, are, are trading well. You know, we expect still, you know, a profit on this project, and, and I think the absolute number of that is more important than the IRR on this particular project.
All right, that makes sense. just 1 final question. In corporate finance, 53% of the revenues in Q2 were made up by something called residential. Could you just explain what that is?
Yeah. Two things really in that. One, we have a specific residential advisory team in France, that is, is a very prominent market position. Also specifically in this quarter, the large specific residential transaction in Finland, accounts for quite a lot of those revenues in the second quarter.
All right. That makes sense. Well, that's it for my questions. Thank you for taking the questions.
Great. Thank you, and, and, welcome to the Catella coverage family.
Thank you. Your next question comes from Jesper, Jesper von Koch with Redeye. Please go ahead.
Hi, guys, and good job on the quarter.
Morning.
Morning. Let me start with the profits for letting the commercial spaces of Kaktus. Could you just give us an update there?
Cautiously positive and very drawn-out process. We have been, you know, in and out with one big tenant for a long time. Nothing is fast at the moment in the market, I'll, I'll say that. We have a good, a good prospect for a very significant letting. We have also discussions with other potential tenants should that deal fall through on similar terms. We have actually, I think, very close to completing all the other smaller commercial areas. Look, it's, it's, it's, it's not as fast as we would have liked it to have been, but the more important thing is to get the right tenant in on the right terms. That's ongoing. Again, obviously, as you understand, I can't comment in much more detail than that.
No, of course. I mean, regarding finding a buyer also, do you have, like, a prospect buyer, that is kind of like waiting for you to close the last, like, tenant deals? Yeah, what's the status?
The short answer to that is yes. The more complex answer is that is no guarantee for, for a, a short-term close. Yes, we, we have had long conversations with, you know, I mean, we're, we've been in exclusivity. You know, that's, that's where we are.
Okay, good. I'm sorry. Just around capital allocation and the bond loan of SEK 1.2 billion, which is currently taking half, I guess, at almost 9% interest rate, so which means quite high interest cost annually, which obviously demands really good returns on your investment. In, I think it's in mid-September now, that you have the first opportunity to buy back the bond with a penalty fee of, I think, 1.4%. How do you think about this, given your financial situation, combined with perhaps completing Kaktus and selling it? I think it would have felt reasonable. Could you just elaborate on your thoughts?
Sure. First of all, you know, we feel, Michel and I and the rest of the team, that having, you know, available, financing at a, at a 4.75 spread in today's market is good. You know, we, we're very happy with our outstanding bond. There's a lot of time left and, you know, with the market where it is and, and how it continues to, to move, you know, we are very happy with liquidity. Now, the capital obviously is a big chunk of, of, liquidity being freed if, if, if we do get a sale through. That just gives us more power and more flexibility.
I mean, there's both on the opportunistic co-investment side, I think that's where we would like to reinvest a lot of that money, to create big new mandates across Europe. Frankly, with, you know, with the investments that we have, you know, those, those, that money gets allocated pretty quickly if we have the right opportunity. You know, the M&A market today is, is. There are more and more people looking for growth capital. There are more and more people with, with a bit more sensible valuation expectations. So we're happy to, to have the capital, and we're happy with the terms of our bond. That we have, you know, in at least in the short term, no, no need to, to change that position.
All right. Good. And then, talking about deploying some of the capital, what are the plans regarding the purchase option on the remaining 25% of APAM that falls during the fall?
Well, we have recently extended our partnership agreement, for another five years, and today we own 87.5% of APAM.
Good. Also, I mean, because it seems like, the asset management part of your AUM is the one that is, I mean, highly interesting in this market. Could you just talk about the general development of APAM? As it appears to have hired quite a lot of new staff this year around, I think so. Yeah, turning it.
Yeah. No, I mean, I, I think Catella APAM is doing extremely well. We've, you know, the TfL, Transport for London, advisory mandate, you know, had we chosen to record that as AUM, which, you know, you know, you have the flexibility, we chose not to because we don't like volatility. That's a big number. It's a big advisory mandate, and it shows the type of client that Catella APAM can now attract. Do you know we have an ongoing significant mandate with Greater Manchester Pension Fund? That is one of the largest institutional investors in the world in real estate. So from our perspective, that shows that we've moved up in the league. We can attract that type of capital.
We can attract those types of clients because we have an excellent track record in this type of environment, repositioning and solving complex problems on a detailed level. That, I think, is a competitive advantage that we may not highlight enough. Across Europe, having local operating partners that are vertically integrated is relatively unique, and it gives us a strength where, sure, we have hired people in APAM because we do a detailed job on site, on location, with in-house people. We don't outsource it. We don't have a franchise. We have a partnership directly with our clients that delivers superior returns and a lot more service, we would think, than, than some of our competitors. And that is starting to really, really impact the type of clients and capital that we attract.
Clear. Good answer. Regarding the product in Jönköping, which I guess, I mean, you have the tenant and most of the product is in place. Do you have any kind of, like, expected timing of selling that project?
Sure. I mean, it's, it's, it's on the market. I mean, it's, it's, it's another one that has a, you know, it has a decent yield on it. We'll look to transact when the right buyer comes along. I mean, it's no problem for us keeping it on the balance sheet for a little bit. You know, the opportunity cost there is pretty good. It, it yields a solid return. There's no rush. You know, that's a great asset. It, it's a fantastic first-rate location. It's a really, really good tenant on a long-term lease with good terms. I've no, no doubt that that will be sold. You know, but we're not gonna sell it just because we need, need to free up capital.
We, we have the liquidity to be patient, and, you know, this is yielding a decent return, so.
All right, good. Then, I was also wondering about your plans with the holdings of Pamica and Pamica II. It's, it's rumored that it will go public this, this fall, at least what I've heard. Yeah, I also saw that you, you, you did a, a write of the, of the, of the value of it, now. How much do you own, and, and, what is your plan with the holdings?
Well, I know Pamica has an important history with Catella. It's, it goes back a number of years, you know, with investors and entrepreneurs working together. This is an entrepreneurial, you know, entrepreneurs for entrepreneurs, basically. We like this team. We have investments in now three funds and a small ownership stake in the investment management company of one. It's, you know, it's not a massive amount on our balance sheets, but it's an interesting connection. It provides good discussions, good entrepreneurial connections, and we like the team. What their future plans are, I have no idea, and I can't comment on that. We're not obviously owners or partners in Pamica specifically, so.
All right. All right. Good. That's, that's all for me. Thanks so much for all the good answers, good luck going forward.
Thank you so much. Appreciate it.
Thank you. Your next question comes from Patrik Brattelius with ABG. Please go ahead.
Hi again. I had some troubles with my headset. Sorry for, for that, but now I'm back.
Okay. A question then from my side is that if you look at some of your larger property funds, they've started to trend down since the start of the year, basically, and the current performance level is at the levels we haven't seen in a couple of years, for example, in Catella European Residential Fund. Can you talk a little bit how dependent you are on that transaction market recovers in order for these funds to recover to the performance levels that we have seen for the last couple of years?
Patrik, I. You know, look, a short-term return to the performance fees over the last two years, it's not gonna happen for, for us or any competitor. That's, that's a simple fact. Well, you know, you have High watermark, you have a very slow market. Like I stressed in the beginning, this is a period where we live off of our really, really strong fixed fee growth, our fixed, fixed, as we call it, margin, that's positive, meaning that fixed fees are, are substantially higher than fixed costs. And that's gonna be the story in, in investment management, in funds in, in the near term, for sure. It's gonna take some dramatic turns to, to create big performance fees in the short term.
On the other hand, you know, anything that's being launched now, anything, any new mandate, any new fund, any new investment, we think is going to be a really good vintage.
Now, that takes a little bit of time to turn around into performance fees in the future, but that's the nature of the cyclicality of fund management. You know, fixed fees, fixed revenues, stably stable and growing AUM. That's a boring and very healthy situation to be in.
I see. Given that, if we talk in Catella European Residential, which is, which is a big fund for you guys and has generated significant performance fees for the last couple of years, are you, are you saying that, given the, the current environment, it could be hard for it to come back to the high watermark, in April, next year, already?
I think that would be a challenge. I mean, we don't, we don't give forecasts, but since a lot of this is public, you know, it's gonna be hard, sure. If you look, and, you know, we've obviously looked at it, all our peers, there are not a lot of performance fees in our industry at the moment.
That's a cyclicality that's completely normal. We have a great underlying business model, and we do have a lot of capital available in these funds, so investments going in at a completely different level will create future performance fees, and that's, that's, that's, that's not a bad place to be.
I see. I agree. Apart from that, I didn't have any more questions from my side. Thank you.
Great. Thank you.
Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Mr. Abramson for closing remarks.
Thank you. Thank you. I thought it was, you know, a great call. Fantastic questions today. We're, we're happy to have, actually, increased our analyst coverage from DNB, which we're very excited about, and, and, that challenges us to, to, to think even more detail about our, our business and our strategy. We appreciate everyone's time and, and for listening in, and, please reach out to myself or Michel if you have further questions. Otherwise, we wish you a great rest of the day and a wonderful weekend. Thank you.