Earnings Call: H1 2020

Aug 18, 2020

Ladies and gentlemen, welcome to the PSP Swiss Property Half Year Results 2020 Conference Call. I am Eugenia, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Giacomo Balsarini, CEO of PSP Swiss Property. Please go ahead, sir. Thank you, and good morning to everybody. I hope you and your families are all well. I think before I start with going through the half year results, I want to say that we are very glad on how we went through this COVID crisis and I want to address a big thank you 1st and foremost to our employees, which really did an extraordinary job over the last quarter together with our partners and with our tenants. So I think we went very well at this point through this crisis. And at the outside, I'm very confident that at PSP, we are very well positioned to attack and handle the next challenges. As always, I will do a quick rundown to a few slides in order that we have more time for the Q and As. I think this should not take more than roughly 10 minutes. I think it's best use of time if we go then directly into your questions. Let me start on Page 4 of the presentation with the current market environment. I think I can confirm that we see a quite resilient office market in the Swiss main cities, especially in the CBD areas. We see a recovering business sentiment in all our markets after the shock of the COVID crisis. That means that we start seeing tenants being interested in the surfaces, it's clear that many companies are currently reviewing their expansion plans that they might reconsider headcounts and surfaces. But generally, we observe a quite healthy environment despite this shock phase. Especially and even more so on the transactional markets, in the prime area, we are back at pre COVID levels or even in certain segments at even lower yields, which has also been materialized in the valuations we have seen. If you go on the Slide 5 as a rundown, as mentioned, Euronet portfolio now of €8,100,000,000 dollars We did an acquisition in the Q1 we reported that. Today, we report a vacancy rate of 3 point 4% and a renewal rate of 92% for the expires of the year. And we improved our guidance to around 3% vacancy year end from below 3.5%. On the financing costs, we're able to reduce the passing average cost of debt further from 50 8 percent to 52% for the mid year by a stable loan to value. Clearly, we paid out a dividend in the 2nd quarter, so that increased a little bit the loan to value. But we run at the healthy €900,000,000 credit lines where of €730,000,000 committed and the confirmation of the rating from both rating agencies. With regard to the COVID implications and in the Q and A, we'll clearly talk about it more, We took a hit on the rent release of EUR 2,300,000 on the top line in the Q2. We have rent collection of 94% and as per mid year, we have outstanding lockdown related rent receivables of €5,200,000 All these numbers are part of our confirmed EBITDA guidance for the full year. On Slide 7, I think here just one number, it's the EPRA EPS, which is for the half year 2.12 percent, it's an increase of 7.2%. As you know, the EPRA EPS excludes all the tax rate effects that we had last year, excludes also the condominium sales, so it's a pure operating number. And I think with CHF 2.12 for the half year, we are very well positioned to continue on our dividend policy and on the projections, therefore. If you go on Slide 8, on the consolidated income to highlight is the increase of the rental income of 1.2%. This stems on the one hand from a continued vacancy reduction and from rental income from the development projects. It includes the mentioned EUR 2,300,000 hit from the COVID on the second quarter. It includes also a reduced turnover rent, which you have not calculated and factored in for the Q2. And it includes, obviously, also the lost rental income due to the sales of 2 properties last year. Nevertheless, an increase of 1.2% of the top line On a like for like basis, if we include the COVID effect, this €2,300,000 rent losses, it's a negative 0.9%. If we exclude that effect and we look at the pure like for like, it's a positive 0.7%. On the property sales revenues on the condominiums is €1,300,000 are purely the accounted percentage of completion returns from Parcolago. You will here see in Q3 the revenues we generated through the sales of the Tour Lindenstraas reported on the subsequent events. I will quickly mention that later, but that's where this gain of more than €7,000,000 will come in, in the Q3. If you go on the cost side, you see a general reduction of operating expenses of 6.2%. We mentioned during our Q1 releases that we wanted to take some extra cost measures to just soften a bit the impact of the COVID crisis. Clearly, the operating expenses came down also due to the fact that we were able to further reduce the vacancy rate. So the ancillary expenses on the vacant space are not paid anymore by the landlord. Secondly, the maintenance and renovation expense, the reduction of CHF800000 are also due to the fact that we postponed selectively renovations just also to reduce traffic on the buildings and just really to soft a little bit the impact on the P and L. However, this will be this is a minor element, but released a little bit the expense line. The improvements on the general administrative expense lines of roughly CHF 500,000 is related to the legal compensation we received to the fact that we won the Steiner case. There we reimbursed by CHF 500,000. So the operating expense in general came down by 6.2%, and we should see that pattern for the full year. So we'll have probably for the full year a lower cost line than last year. Final number on the P and L on Page 10. The net financial expenses, which have been reduced by a third of €3,000,000 now at 7,000,000 dollars It's clearly a sign of our ability to fund at very interesting conditions. We had some expiring swaps, but also we did some very interesting new bond issues. So also for the year, you will see this continuous pattern with perhaps a cost line around plusminus €14,000,000 for the year compared to the €19,000,000 we have seen last year. If you move to Slide 14, you see the development of the vacancy rate with a vacancy rate of 3.4% at midyear. Based on what we see on Slide 15 and our discussions with other tenants, we are confident that we can further reduce this vacancy rate from 3.4 by a few percentage points in order to have a clear new guidance of around 3% for the full year. Slide 16, on the expiry profile. We are quite ahead with the discussions for 2021. What I can say from the top 10 expiries, 9 have been renewed and 1 renew that they will relocate the building and this means roughly 1 third value wise of the 2021 expires we have already solved. So also here, our efforts and focus is really on advanced renewals and discussions on those expiries. Let me give you a brief heads up on the valuations, Page 17. You saw the revaluation gains of €31,400,000 for the first half of the year, which are split between investment portfolio, dollars 26,400,000 development portfolio, dollars 4,900,000 Drivers are a 4 basis points yield compression on the portfolio. We have seen a slight increase of the structural vacancy from 5.2% to 5.3%, contrarian to our vacancy rate development, but I think this is a bit of a precautionary measure also, but the value and also some market rent adjustments by the value. Generally, we see this positive development, especially on the prime assets, where we have seen this further when also small yield compression. That's what we also observe in the transaction market. It's not a very liquid market, but on the transactions we have seen, as I mentioned at the beginning, we see still quite aggressive bids. Let me now go quickly to Slide 20 21 on the debt side. I think generally, we are very much focused on keeping a very diversified lender portfolio. We increased our lines by 2 uncommitted credit lines. We should bond the notes by amount of €370,000,000 in the first half of the year, and we still have a lot of unused credit lines and no refinancing needs by the year end. So I think from a pure debt point of view, we are well positioned. And if we look at the ratios on Slide 21, clearly, in our view, a strong loan to value figure. The cost of debt, the passing cost of debt, which I wouldn't say reached lows, but it's starting to bottom and clearly ICR figures, which position us very well in our rating rate. If we spill forward to Slide 32, we'll give you an overview on development projects. I think here, if you go through the table on Slide 32, Rue du Marche has seen a delay, but will open September 1. We will clearly forego 3 months of rental income, but the product is basically finished and we look very much forward of this opening term. Parcolago Paradiso has also seen a delay of 3 months. But compared to May, we are today more comfortable and more positive that we are able to hand over a significant amount of the more than 40 apartments we have sold in Q3 and Q4 and have this as a quite strong contributor to our EBITDA guidance. The project Banoffplatz Zurich and Banoff K, which is almost fully let, is developing according to plan for the lead space. And also, Atmos, we plan to hand over the surface January 1 to the tenants in order that they can start and their fit out. So on the major projects, everything goes according to plan. And as you see on the bottom line, clearly, we have an additional EUR 270,000,000 dollars of expected CapEx. If we take out the proceeds from Parcolago, we'll have a net CapEx of roughly $170,000,000 $180,000,000 which I would say is moderate in the overall portfolio complex, but generates an additional roughly EUR 30,000,000 of rental income over the next few years. To close Slide 38, what I mentioned as the subsequent event, we closed as per August 1, the disposal of an asset in Zurich, Thorlindenstrasse, which was originally an office property. We developed a concept to develop a residential property, and then we decided not to develop it and sell the apartment ourselves, but sell the project. And we tried to find a partner whereby we can adequately swap that asset with an asset which is of interest of us. And we were able to swap it with an asset which is adjacent together. So pre IPO of Zurich Financial Services, our asset and the ones we swapped were 1 property. They were then split and we are able now to buy it back through this asset swap and we are very glad on how this went through. And as mentioned, you will see then the gain going through the P and L in the Q3. With this, I would like to end on Slide 40, the confirmation of our EBITDA guidance of around CHF 260,000,000 for the years and the new vacancy rate guidance of around 3% for the year end. With that, I would like to start the Q and A and leave the floor up for questions. We will now begin the question and answer session. The first question is from Andres Thum with Green Street Advisors. Please go ahead. Hi, good morning. I was just wondering what measures are you taking to protect occupancy in current environment. Is this coming at the expense of rent discounts or rent free periods? Well, thank you, Andres, for the question. I think there are 2 elements. The first of all is what we do in our buildings with our employees. I think here, we are benefiting from a setup that we have offices which are post COVID compatible. So clearly, the people are safe in our environment. With regard to tenants, I have to honestly say that we have not yet had requests of giving back space. We had 2 tenants, which gave signs that they want to give back space that this was pre COVID and they're already factored in. So for the surfaces, we see we have in our portfolio, we don't see yet those elements you mentioned. And my second question is regarding the 94% collection rate. I was just wondering, does that exclude deferred rents and rent relief in the denominator? It is in the denominator, it's the full amount of rent plus ancillary expenses that we are asked for. I have to say the rent relief we gave is rather low. So we have settled with the majority. We have a little bit of postponement of rents, but this is rather moderate. So the rent relief as a pure hit is $2,300,000 then the rent postponements to be able to pay the staggered period is a very small amount. Right. But these are these included in the denominator or are taken out? It's all included. It's all included. Okay. Thank you. And my last question regarding the $5,000,000 outstanding receivables. What are the odds that these are collected? I think the odds are, I would say, quite well and also have been already collected. There are a few discussions with a couple of larger tenants. However, we have embedded in our EBITDA guidance of around $260,000,000 a large part of it. So we are comfortable with our guidance. Fair enough. Thank you very much. Thank you. The next question comes from the line of Andreas Brun with Credit Suisse. Please go ahead. Hello. Thanks for taking my question. I have a couple of general ones. First, could you elaborate on the assessment of your city hotel sites? Then could you maybe give like a general outlook in terms of how you see revaluations going forward? Thirdly, you mentioned that office demand picked up in Q2. Is it an ongoing trend that you expect also to continue in the second half of the year? Thanks. Thank you, Andreas. With regard to the city hotel sites, I think generally, clearly, the city hotels are facing a very challenging environment. If we take, for instance, Geneva, we hear and read that especially the 5 star hotels are currently suffering. We are positioned in Geneva with a citizenM concept in the very center. And I think there we are, 1st of all, well positioned with the product, with the location, but also with a partner which thinks long term. And we have a fixed base rent. So we are quite confident with the launch of this hotel, although clearly that the operator would have loved to start in another environment. But there is not much of such a product in the Geneva City Center. So here, we are I would say, we are moderate positive. On the second one, in Zurich, Weisenhausplatz, which will open end of next year, it's the same concept. It's a very central location with a very competitive quality price setup. So here, I think the ones which we suffer are rather the larger or the older setups. So from that end, I'm not so worried about these city hotels. Also, and that's the link clearly then to the revaluation that if you look at values, they are perhaps a bit more cautious if they look at operating or operated assets. So to your second question, long term, it's very difficult to say. But what we observe is that the historical active players in the Swiss market, and it's always been a Swiss dominated market, are still very active on the investment side. Mainly for prime assets, clearly then for the residential part, but also for prime office with a good visibility of the earnings. And if we continue with that interest environment, I would say that this will prevail. With regard to the pickup in demand in Q2, we had a show stopper, obviously, March, April, May. So it's also not so difficult to see a bit of a pickup in demand. We had a quite good year end 2019, a good start into 2020 with interest and this has completely came to a stop at the beginning of Q2. But we saw in the discussions with tenants that the demand is coming back. And I really believe that many tenants will have to rethink on how they structure their office, but I believe also that they will keep going to the office. They need offices, but probably with a slightly adjusted concept. And there, we truly believe that being in point of interest, being in central locations, having modern, sustainable products is a medium long term advantage. Okay. Thank you. Like a small add on. So with regard to the whole home office trend, do you expect actually not that much pressure on your existing contracts, also medium to long term? Or what would be your best guess in the Swiss market for prime office? Do you expect actually a decreasing additional demand due to the home office trend? Or is it more the pressure on like the general market condition? I think if I may start with a caveat, I think we have to because this is an international call, I think we have to distinguish between the Swiss cities and the big international cities, where we have on top of it a big commuting problem. And here in Switzerland, luckily due to the small size of the cities, the commuting is less of an issue. So people are able to get in a healthy way to the offices. Having said that, I think COVID showed that home office is technologically feasible, but it was a forced home office. It was not a voluntary home office. It was not that the company sent the employees at home because they are more efficient and more innovative at home. They sent them out because in the office, it was not safe enough. So I think at the end, the office, the people which are working really on a variety of tasks need to be brought together. The home office phase of COVID showed that there is a need for flexibility timing wise, location wise, but I truly believe that companies will come back to having people in their offices, perhaps in different setups, Perhaps they need, in certain cases, even more space. It's just not feasible anymore to have a space of 8 to 10 square meter per employees. And so I think this will have an impact on the type of asset, on the quality of assets. And as I mentioned at the beginning, having assets also on a relative small size in the city centers, I think, in our view, is an advantage because companies need to bring their people and their employees together because at the end, the employees want to work together and to be more efficient. So I think this is a trend which started. Technology accelerated it, but it will have even perhaps a positive impact on how we work together. And we see it in our side. We had a home office for about 4 weeks during May. Since beginning of June, we are all in the office. But we can, at the outset, through our collaborative spaces, through our space we give to employees, ensure and have a good confidence that we can work in that manner together. And I think this will have also a trend for other tenants. Thanks a lot. Very helpful. The next question is from Pascal Bolle with MainFirst. Please go ahead. Yes. Good morning, everyone. I have my first question targets your guidance. You improved or you increased your guidance on vacancy rate. You lowered that by 50 basis points, but you kept your 58 target. So my question is what did change in your in the composition of your EBITDA guidance? When I also and this is a related question, when I remember correctly with the Q1 numbers, you said that this disposal of the Zohr Limstrasse should also contribute to your EBITDA target. Now you decided to make an asset swap, which obviously changed the matter. Can you elaborate on that a little? Of course. Thank you. Clearly, the vacancy reduction will have an impact on EBITDA and the top line, of course, but this has always a delayed factor. So whatever you knew now or you have close of rents and agreements in October, November, you see then the effect on a later stage. It's not and it's even not 50 basis points. We were at below 3.5 to around 3. So is it perhaps a 20, 30 basis point improvement? It's a sign of confidence that we are able to keep that low vacancy rate. On the second point, on the EBITDA guidance, in our EBITDA guidance, there is there are forecasts for the proceeds of Parco Lago, which in May with the stop of the development, we were not sure if we are able to reach those handovers of the apartments. So there was other question about the project, but just on the handover of the size of the apartments. I think here, we are positive now that we get close to those numbers we had. And clearly, the around 260,000,000 is perhaps a bit of a stronger around 260,000,000 than it may, but not sufficiently strong with the visibility that we increased our EBITDA guidance. Okay. I have another question. It seems that your anchor shareholder, Aloni Heads, is currently leaving or exiting the company. Do you, 1st of all, expect to reduce him to reduce his stake completely? And secondly, what will be the impact on your board at the moment? I think he has 2 seats. I think on the first question, he's a shareholder and he will decide on what to do with the shares. I cannot foresee if it's further reducing or not, but I think with a 3.5 percentage point stake for the liquidity of the stock and for the market, it's not really relevant. With regard to the Board seat, I think this is up to the Chairman, to the Board to reflect towards the end of the year. What I always said and confirmed is that they are both very valuable Board members and represent typical shareholders and not really represented the stake they had. So they were from that end always very strong and valuable contributors to our Board. So what the decision will be there towards the end of the year for the next AGM on their side or on the Chairman's side. That will have to be seen, but I'm not worried about these elements. Thank you. Thank you. The next question is from Ken Cagera with ZKB. Please go ahead. Yes, hello. I have a question regarding the expiry profile of leases on Page 16. Could you just tell us where you stand in 2021 2022 with these relatively high numbers of expiries? It's the first one. Yes. Thank you, Ken. As I mentioned on the 2021, we have quite a large, how should I say, discussion rate and resolution rate for the largest tenants. From that end, we are very, I would say, quite positive on this renewal of the expires of 2021. On the top 10, majority have been already closed. And also 22, if I go through the largest ones, there's not a very peak one where today I'm worried. Clearly, the discussions for 2022 in that sense have not yet fully started. But if I look at the expiry profile and the single tenants and assets, I don't have indications now that the vacancy rate is extremely shooting up. So I think here, especially for next year, the visibility is quite good on a reasonable vacancy rate for a portfolio like we have. Thank you. The second question would be on co working. What is the current demand your clients are seeing? And where do you see the outlook for that type of tenant base going forward? What we have seen through the COVID crisis from our COVID tenants, as you know, our contribution to rental income is between 1% 2%. It's quite moderate. But they kept the majority of them kept it open. We had no rent relief discussions or only limited one if there was more to postpone a rent. And thirdly, they did quite well, and they restarted also. So I think there is a demand for flex space. Clearly, also there, perhaps to adjust a bit to COVID friendly flex space, but I was just recently in 2 of our tenant spaces, and I truly believe that there is a demand for this space. However, seeing it and how they opened also now, Lawson, it's something we shouldn't and don't operate because these are really small microcosmoses and networks. You need really to have a dedicated operation running it. So for us, it's a tenant, which adds value to the building or like in Zurich West, really adds value to the whole area. Thank you. And a very short and simple one to the end. The deferred tax is related to the revaluations. Could you just give us the number? Thank you. Deferred tax related to the valuation, one second, was I have to check on this deferred tax to devaluation was EUR 7,600,000. Thank you very much. Thank you. The next question is from Kai Klose with Berenberg. Please go ahead. Yes. Good morning. I've got 2 quick questions. The first one is on Page 51 of the first half report, where you show the split of the like for like by areas. Could you maybe elaborate a bit about the relatively strong result for sorry, for the negative result here for Bernd and a slight negative one for Zurich and Geneva and what's the split was coming from the COVID impact? And the second question is on the Page 36 of the presentation. Just to check, you plan to spend CapEx for development projects for about €90,000,000 for the remainder of the year, which was as of March, I think it was about €129,000,000 percent. The delta is just what you've spent in Q2? Or has there been any other changes? Thank you, Kai. With regard to the CapEx I mentioned, it was not really the postponed we have postponed some of the projects slightly also due to the fact that either in certain areas, the sites were a bit closed or we had reduced work. On the other hand, we also wanted to reduce a bit the traffic in those buildings. So from that end, we have to say, it's now not an extraordinary reduction. But clearly, we had the lockdown also of 2.5, 3 months. Once you start off some smaller works to run down until you ramp it up, this takes a bit of time. So these were not one specific action we have taken because we are not confident on the projects. On all the projects we are running, on all the CapEx plans, we still think that we have not changed anything to it. With regard to the like for like you mentioned on Page 51 on the slides. And if you go on the major changes now on, for instance, burn, we have had a on the one hand and these are always small numbers because we talk about CHF 80,000, CHF 70,000 or CHF 50,000. And it's not it's perhaps percentage wise a bigger number, but Swiss franc wise, it's quite a small number. It's on the one hand, a renewal on the Weizenhaus plots and soy sauce costs where we renewed at a little bit lower rates, but this is really on range instead of $650,000,000 to $580,000 The larger one in Lawson, if I remember correctly, is on Sevella, where we had and it's not a lot, I'm sorry, on the Geneva one. On the Geneva one is Rue de la Fontaine, where we have vacated the building. We are repositioning it, and we have clearly an increase of the vacancy. But the Hydra Fountain is really behind Plasti Molar, and we are currently in the process of building really a very, very nice office setup there. And the second element is from the Boursnoir, the spa in Geneva, where we have not figured in and factored in the turnover rents. That is also true for the Zurich drop of 0.8%. That's the missing turnover rent, which is linked to the Bath and the Hotel. Great. Many thanks, Ines. Thank you. The next question is from Alvaro Soriano de Miguel with Bank of America. Please go ahead. Yes. Thank you for the presentation. Three quick questions. The first one, what is the current utilization rate of your offices, of your buildings? I didn't understand the question. The yield? The utilization rate, how what is the occupancy utilization rate of those assets? Yes. I think if I the portfolio is so big, and I think we have a range of if you think about our tenants, which can go from 20% to 100%, but we don't measure utilization rates of our tenants. We have a utilization rate in our building of 100%. Okay. Thank you. The second question is on your renewals in 2020 and 2021, those who are already closed. What sort of pricing and also what sort of length of those new contracts or new renewals are you closing by now? Yes. On the renewals, we are, I would say, renewing flat. As you know, we have a CPaa indexation in the contract, but this is not captured because we have basically no inflation. And also on the rents, the ones we are closing now is closed at flat rent in average. The other one or the other where we are able especially for next year, we have a larger one. We are able to increase the rents on this specific asset by roughly 10%. But then this is folded into a flat, I would say, development on the overall portfolio. Okay. Thank you. And the third question is on your CapEx plan. Do you have any sort of NAV gains to be expected over the €180,000,000 net CapEx you expect over the next 2, 3 years? Well, theoretically, all these transactional projects beside Parcolago, which will fully be NAV accretive, are mark to market. The ones perhaps at the earlier stage will benefit from letting success. The ones now already are lighter stage, I think there, if the mark transaction market continues to be strong, they might benefit from a light yield compression when they are finished. But typically, those projects are all mark to market. Okay. Thank you very much. Thank you. The next question is from Andreas von Arcs with Baader Helvea. Please go ahead. Yes. Good morning. Also 3 €5,200,000 additional receivables. So do I understand it correctly that EUR 0.7 1,000,000 are related to that new upcoming law that's coming in Switzerland. So that gives you another EUR 4,500,000 that are not related to, let's say, a legal solution. Could you elaborate which sectors are mainly included in that EUR 4,500,000? Are these all lockdown related segments? Or is this also office related segment? And then I would like to understand a bit better what are the conditions that would force you to basically make a rental holiday in the 3rd or 4th quarter? Is that after a specific time period or after unsuccessful negotiation or when you when the dispute would go to court? That will be first question. 2nd one, just quickly on your hotel exposure, just as a reminder, I mean, I get it right that you have 0 operational with the hotels. So these are all contracts where you only get rents from your hotels. And then the last question is on the revaluations. And here on the gap between your reported €30,000,000 revaluations and €100,000,000 effect of a 4 basis point discount rate reduction mathematically. So I assume that you have here also negative revaluations. Could you elaborate a bit what type these are? Are these all lockdown related segments like hotel and retail? Or is there also office related segments? And if you especially could comment on the situation in Zurich North in your revaluations? And just maybe as a try, I mean, if you would have to guess for the full year, would you expect overall positive or negative revaluations for PSP? Thank you very much. Thank you very much. On the first one, it's clear it's correct, the EUR 0.7 billion are part of the EUR 5.2 billion. Percent. Overall, this 5.2 percent are exclusively linked to lockdown related tenants. I will not specify which sectors are part, but what I can say is that we have solved basically all the retailers and the retailers all paid the rents. And we have already factored in basically the thermal bath exposure. So the rest is, I would say, pretty obvious in which segment it is. But it's only related to the lockdown. To your hotel question, I can confirm that we have no operational activities within the hotels. It's all contracts with very well established operators. And beside one case, which has also fixed rent, they are all fixed rent based on the long with long contracts. And on your evaluation question, it's correct. These 4 basis points would have had a stronger uplift. As I mentioned, there were 2 factors, which were considered in. 1, a slight increase by the value of the structural vacancy, which clearly has an impact and also some market rent adjustments on selective properties done by the valuer. So I think this is in a portfolio of 170 assets, you have always ups and downs. But I can clearly say that whatever was central had uplifts, whatever was a bit of the outskirts, and you can take the Zurich Nord example, there you had a little bit of adjustment of market rents, not even because there was an evidence. We think it's also in some cases a cautionary measure. And of course, there were also office properties in because we don't have pure retail restaurants or hotel properties. These are all mixed use properties. But generally, I think this was quite a good balance to the portfolio. If I would have to guess for the full year, excluding a second lockdown or COVID crisis and foreseeing a stable interest rate environment, I would judge I would guess an overall positive number. But that's really from today's view on these two premises. Thank you very much. Thank you. The next question is from Raven Vee with Martin Currie Australia. Please go ahead. Hi, good morning. Thank you for the presentation. Just some quick questions for me. So the 6 percent rent that was not collected, so if I missed it before, was it mostly retail portion? And with regards to your bigger retail portion in the portfolio, is that mostly discretionary or leisure related? And my next question is on distributions. So what is your target or outlook for, say, the next 3 to 5 years on distributions? Thank you. Thank you very much. Perhaps if I can specify on this retail. On this the retail we have is almost exclusively high street retail, and we have basically collected all the rents from the retailer. So this €5,200,000 is not linked to retail exposure. I would say it's predominantly linked to the turboblast we had and to some restaurants where we have discussions. So the retail here is not part of it. On the distribution, if you look on our dividend distribution history, I think we are known for quite a high stability of the payout. And if we paid out 360 dollars this year for last business year, it was because we are confident that we can continue to pay this dividend amount. And based on my statement that in the first half of the year, the EPRA EPS was, which is the base, already 2.12 dollars As per today, we have no signs that we cannot continue on that path for 2020. If you look at our top line growth to development pipeline, we also have a good visibility that we can continue on that path of a flat or slightly $0.05 increase dividend policy over the next 3 to 5 years. That's the visibility we have as per today. Thank you. Thank you. The next question is from Daniel Feldman with Timber Creek AM. Please go ahead. Good morning to Zurich and congratulations to a great set of results. Two questions from my end. The first one would be in regard of Project Rubenstrasse 6, which seems to be from speculative nature. In general, in which cities, what kind of use and what kind of sizes of developments are you currently comfortable to conduct in speculative nature? Thank you very much. I think the Grubendstraß is a €30,000,000 investment, right on the back of the hoeleman site attached to a train station, which is only a few stops from the main station. It's a speculative development, but it's a very well controlled development project. So I would say, whatever is in that range, dollars 30,000,000 $50,000,000 in the city centers, almost city centers, if we can get it at in today's world reasonable yields is something we feel very comfortable because it allows us also to develop a kind of a modern product, which has then a competitive advantage for the neighboring spaces in that area. But I can assure you that you will not see us doing large scale development projects. Well received. And my second and last question would be in regard Berenplatz Beren as a perfect showcase for a good pre leasing rate to 30% as reported. I am curious, given the kind of post COVID or in the middle of COVID situation as well in Switzerland, how is the leasing environment to get here for full 100% leasing? And how should we think about retail versus office, given office seems to be still in a good run? What do we need to adjust in terms of returns or return expectations? On Verint Plus, you have not to adjust. We are finalizing now an agreement for the top floors with related hotel. We manage these residential parts. We are in discussions with the offices. This is reasonable sizes. It's very central. I think here on this project also considering the size and the timing we still have until the completion, I think this is this will be a very good product in a very central location. I'm really also here not worried in front of the parliament next to the National Bank to have this roughly 1,000 square meter of office. Excellent. Thank you very much. Thank you. Thank you. Mr. Bolzarini, there are no more questions registered at this time. Thank you. I would like to thank everybody for we'll have in the next couple of days. Thanks to everybody and take care. Bye bye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.