Hello, ladies and gentlemen. Welcome to the TAG Immobilien AG Publication of Interim Report Q1 2023. [Operator Instructions] Let me now turn to the floor over to your host, Martin Thiel.

Yes. Many thanks, and good morning, everyone. This is Martin from TAG. Many thanks for joining our call for the Q1 2023 results. Before we go bit more details into the results that we have published this morning, please allow me to make some comments on the Ad-hoc announcement that we have released yesterday evening. I'm sure you have seen this. Within the Ad-hoc announcements, it was stated that Rolf Elgeti will leave the Supervisory Board after our AGM on May, the 16, so effectively next Tuesday. This is, of course, something we regret very much as he's been working for us for a long time and as Rolf did a really incredibly good job during his time as a CEO and later as a Chairman of the Supervisory Board. But we also have to respect his decision to withdraw from the Supervisory Board and please be sure this is purely for personal reasons. So, this has nothing to do with us, with TAG. So that's for us sad news. The good news is that Olaf Borkers is planned to become successor, so to become the new Chairman of the Supervisory Board. Of course, Olaf stands as a candidate in the next AGM. So that means he needs to be elected in a first step. But from our point of view, from the Management Board, this would be a very good candidate and a very good solution to replace Rolf. So Supervisory Board will, of course, begin the search for a new Supervisory Board Member because now someone is missing within our 6 people Supervisory Board immediately, and we will keep you, of course, updated in this regard. But then let's go into the Q1 results for 2023. And I will start with Page 4, which is the highlights slide. FFO I in the first quarter 2023 came up at EUR 42.6 million. That's a reduction in comparison to the previous quarter, and also a reduction by 11% in comparison to the previous year 2022. Main reason for that are higher financing costs. I will come back to this a little bit later. On the other side, FFO 2 saw a strong increase compared year-over-year by 12%. It is a reduction in comparison to the fourth quarter, but please be aware that the fourth quarter is always a very strong one in terms of FFO II growth because within FFO II, we also have the sales results from our business in Poland. And typically, the fourth quarter here is the quarter with the highest results. So therefore, not unusual that quarter-on-quarter, it is a quite strong reduction. No representative is the comparison year-on-year, where we had a 12% increase. Not really any major changes in EPRA NTA and LTVs, more or less stable quarter-on-quarter. Good result in the operational performance in the German portfolio from our point of view. So the like-for-like rental growth without vacancy reduction effects was at 1.6%, including vacant reduction, 2.8%. Not unusual for the first quarter of the year, vacant rates saw a slight uptick by 20 basis points. So it's now 4.7%. We know from the past year that's always in the first quarter, people are moving. So then replacing them with new tenants takes some time. So therefore, traditionally, the first quarter is always a little bit weaker, but we are very confident, and we see this already after the balance sheet date that a further reduction in vacancy rates will be very safe for the remaining part of the year. Coming to disposals. And I think this is an important part for today's announcement. We can report further progress on our disposal program in Germany. So, we have disposed and signed in the first quarter of 2023, 1,638 units at a total selling price of EUR 163 million. There was a slight book loss of around EUR 4 million for these disposals, and we sold on average at a gross yield of 4.7%. From the sales after repayment of related bank debt, we expect net cash proceeds of EUR 129 million. And we expect the closing of this transaction towards the end of the second quarter and in the course of the third quarter. Included in this sale is a sale of 1,350 apartments, with net cash proceeds for EUR 90 million, for which the buyer's financing has not yet been secured. That means the closing is outstanding. So as long as the financing is not secured, there's, of course, a certain risk that this sale will not happen. Part of this transaction is a purchase of 650 apartments from the same buyer. And of course, this purchase for effectively kind of asset swap that we're doing here with the buyer will only take place if the sale of these 1,350 apartments is completed. So let's look at these transactions on a netted basis. So total net cash proceeds from the signed disposals and from the acquisition on a net basis are around EUR 84 million, and that leads to a net acquisition volume of around 1,000 units. Also after the balance sheet date, we've been quite active. So, we sold one commercial building and also 200 residential units. In this case, above book value regarding the commercial building because part of this commercial building was valued at cost. For the 200 residential units, purchase price was around book value. And we expect here net cash proceeds -- for additional net cash proceeds of around EUR 46 million and the closing of these transactions in the third quarter of 2023. Coming to the next slide. We touched a little bit the highlights for our first quarter from our business in Poland. We're disclosing with these financial results for the first time also an FFO I for the Polish business. FFO 1 came out slightly negative at EUR 300,000 as a loss. But please be aware -- we come back to this a little bit later, that a lot of the apartments that we brought to the markets in Poland were rented out within the fourth quarter. So, we expect for the full year as planned, an FFO 1 from Poland for EUR 4 million. And as of today, so meaning in the first quarter, rental income was still very low as we're still renting out these apartments. And on the other side, we clearly have already financed costs on this portfolio, but nothing unusual. So, that's a development that we already expected. The net income from sales in Poland was already quite strong, EUR 8.8 million, and especially positive was the number of sold units. So, we achieved nearly 1,000 units sold in the first quarter. We'll come back to this a little bit later, which was a very strong result compared to previous quarters. Coming to Page 7, where we show the details regarding EBITDA, FFO and AFFO. As said, here you already find a split between the FFO 1 coming from Germany and the FFO I coming from Polish business. We see also the breakdown for the adjusted net income from sales in Poland. So how we get to this figure? And just as a comment, in the appendix, you also find further details from the income statement, not only a split between Germany and Poland, but also split within the Polish business when it comes to sales and when it comes to the rental business. So therefore, now beginning from 2023, as indicated, we've given also more details on our Polish business when it comes to the split with rental business and sales business. Just commenting on the EBITDA for the rental business. The EBITDA improved quarter-on-quarter. So, we had EUR 59 million in EBITDA from the rental business in the first quarter compared to EUR 55.7 million in the fourth quarter. If we compare that with the first quarter 2022, that was an almost stable EBITDA. So, that means when it comes to the FFO I reduction, it's really more or less purely an impact from higher financing costs. So quarter-on-quarter, the financing costs increased by roughly EUR 3 million. This is nothing unusual. Remember, our guidance where we already indicated a stronger increase in financing costs for roughly EUR 10 million for the full year. Clearly, what is weighing on the financing cost is also the interest rate for the bridge loan, which is on a floating rate basis. And as the EUR ibor has increased quite significantly in the next month -- in the last month, therefore, we are also paying higher interest cost than that. So therefore, it's also an economic target for us to repay the bridge loan as soon as possible. Page 8 shows the EPRA NTA calculation. As said, basically unchanged or slight increase in EPRA NTA due to our ongoing results. And we did no portfolio valuation as always at the end of the first quarter. So the next full valuation will be carried out at the end of June 2023, again, as in the past years by CBRE. It's really difficult to give a guidance what we expect for this valuation. I can give you perhaps a rather broad range. So operation loss between 5% and 10% is something that we would expect. If you take the middle of this range or something between 7% and 8%, this is really already reliable official guidance. No, this is not the case. But as we see in the market, as we sell apartments currently with a certain discount between 5% to 10% and generate some liquidity on this level. We assume that also the valuation will follow such discounts in the course of the year. Is there already a possibility to give an outlook for the second half? That's perhaps even more difficult. What is quite sure is that in the second half, the increase in rents for us and also other market participants will clearly support valuations. So therefore, we are quite confident that perhaps this valuation decline is something that perhaps is softening already in the second half of 2023. But again, let's wait for the final valuations. And we will, of course, update you with our half year numbers. Page 9 shows the financing structure. Let me comment, first of all, on the maturities in financial year 2023. So, we see EUR 243 million in total, but effectively, we are talking here when we look at upcoming maturities, about EUR 125 million corporate bond that is maturing in the middle of June. We will repay this corporate bond from existing cash. So there's no other additional refinancing needed. Other maturities are rather small, like the EUR 25 million commercial paper that we extent on an ongoing basis, small promissory notes of EUR 15 million in Germany, a small corporate bond in Poland of EUR 13 million, so that will be repaid simply from existing cash and credit lines. And the EUR 65 million, that's the dark blue color that you see, these are RCFs, so revolving credit facilities. We're using in Poland to finance the ongoing construction business. So effectively, this is nothing that will be repaid. So, we're always using that if we need to finance construction a little bit more. And then after that, in the course of the project received customer prepayments. So, this is for us, economically, not really a maturity. So in essence, 2023, all the maturities are already covered. There's no refinancing needed for that. Looking into 2024, clear, the main maturity is the bridge loan, which is due at the latest in January 2024. As indicated in the press release, it is our target to repay the bridge loan in the course of the third quarter. How is this -- or will this be done? And we discussed the net cash proceeds that we will achieve from disposals. So if you add this up, what we have sold in the first quarter, what we have sold after the balance sheet date, we're already at around roughly EUR 130 million. We can also tell you that as a second component to repay the bridge loan, we are already working and quite intensively working on further mortgage secured bank loans in Germany. So, we have signed already term sheets that would enable us to repay this second half of the bridge loan. So term sheets in the amount of around EUR 130 million, EUR 140 million already signed. So taking cash from the disposals, taking then this new cash from mortgage secured bank loans would enable us to repay the bridge loan in the third quarter, and that's something that we expect. Does this then mean that we stop our disposal program after that immediately? No, this is not the case. But, of course, then we've got a lot more freedom to look at the market, to be more opportunistic to continue perhaps in smaller sizes, but it's definitely been a good achievement once we have repaid the bridge loan. There's no pressure on us to do larger disposals. And that is more pure something to really look mid-term about deleveraging and also to perhaps continue to increase the liquidity position. Commenting shortly on slide 11. That's the slide that shows like-for-like rental growth and the investments. Again, a good development regarding total like-for-like rental growth with 2.8%. Commenting on the total investments that you see on the top right of this page, that stands at EUR 23.4 per square meter on an annualized basis and this is as in the prior years, really everything. So that's maintenance and CapEx. This is basically on the same basis like in the previous year. The increase in comparison to the years before is due to more modernization CapEx for energetic modernizations. So, we are clearly already on the way to decarbonize our portfolio, and we will continue to do so also in the next quarters and years. Page 12 shows the vacancy reduction in the German portfolio. Again, nothing unusual that we see a slight increase in the first quarter. So, this 20 basis points increase is very much comparable to the increase that you've seen in the years before. And we will clearly be able to reduce vacancy in the coming months. Coming to Poland. And I'm now on Page 15, which is a slide that we're presenting here again. We have already discussed this outlook during our Capital Markets Day in Warsaw also. What we wanted to do here on this slide is to give you an idea how the Polish build-to-hold portfolio can develop in the next years. So where are we now? We have completed as of today, 2,100 units. Further 1,236 units are under construction. So it means once the constructions are finished, we will have roughly 3,350 units on the market in the course of 2024. It is very clear for us, we will only start new construction activities for build-to-hold portfolios or build-to-hold units in Poland once, first of all, the refinancing on TAG level is done. As discussed, this is now very close to happen. And of course, only if the financing for such further build-to-hold portfolio is secured. But let us give you 2 scenarios how we can do this and what is possible. The first scenario is a scenario where we simply only take the cash that we produce from our build-to-sell business, which we expect is between EUR 50 million and EUR 60 million surplus annually. So from the results from selling apartments, also taking into account that at some point in time, we additionally need to buy further land banks to keep the build-to-sell operation going. So if we take this EUR 50 million to EUR 60 million for annual surplus and take this cash to reinvest this into new build-to-hold project, we would increase the portfolio in the next 5 years by roughly 3,250 units that it means we would end up with a portfolio in 5 years of 6,600 units. So that's the first scenario. The second scenario, which is our clear target is that we have additional growth by an external financing, whether this is coming locally in Poland, whether this is coming from TAG side of roughly EUR 100 million per annum. So from our point of view, really, a realistic amount over the next 5 years. So EUR 100 million debt financing on top of the surplus from the disposals between EUR 50 million and EUR 60 million. And that would bring us within the next 5 years to a portfolio with a size of more than 10,000 units. And just to compare that with the German business, as you know, the per square meter rent in Poland is more than double the rent in Germany. So 10,000 units in Poland, the rental cash flow equivalent of more than 20,000 apartments in Germany. So that means that would already bring us to a really meaningful portfolio. We've given you other indications how net actual rent would look like in this case. So in both scenarios, you see that the second scenario, as I mentioned, we expect net actual rent in 2029 of around EUR 85 million. That's basically a rent that is based on today's rent levels in the different locations, plus a very moderate rent increase between 1% and 4% per annum. So, we can also pencil in more rental growth as you see today's strong rental growth in Poland. But to be more on the conservative side, we decided to go for this lower growth rate. So EUR 85 million net actual rent. And we expect in this case that the EBITDA margin is around 80%. In case of the scenario 1, the smaller portfolio, that it will be, as already indicated in the past at around 75%. Effectively, we are able to grow the rental portfolio step-by-step once financing is secured, with a large part supported from the ongoing cash flow from the build-to-sell portfolio and also important to point out, without any external equity. And that's our clear target. Once the refinancings on TAG level are complete and again, we are very close to that now to continue starting investments in Poland, but it's up to us when we do the next residential rent projects, but it's now very visible that this is not far away. Page 16 shows you more details on the rental portfolio. So, we have now, as said, 2,100 apartments in the market. We divide this here in 2 sections. One actually is the rental units that we have in operations for more than 1 year. Here the like-for-like rental growth was at 16% for the last 12 months and rental units in operation for less than 1 year amount to 1,500 units. We'd still be afraid of a still high vacancy rate of around 42%, because most of these apartments have really been finished at the end of the last year or within the first weeks of 2023. So, you will clearly see strongly dropping vacancy rates from our re-letting processes in the next month. And some of you have been attending our Capital Markets Day, it was in Warsaw, have seen the project. We are really, really convinced that we are offering here a very, very strong product to the markets. If you want further information, you will find also a lot of material videos, some more data in our Capital Markets Day section in the IR section on our home page. Page 17. I'll make it short. Shows you that in general, in Poland, rents are growing quite strongly. So, we see here really good developments in the locations that we are investing in currently. Page 18 shows the development of sales numbers in 2022 -- in the first quarter of 2023. We are very happy that the first quarter of 2023 was now the strongest quarter since basically 5 quarters. So, we sold nearly 1,000 units in the first quarter. And let me also say that this is before the new program for subsidized loans for first-time buyers of apartments is starting in July 2023. Clearly, already the announcement of this program, which is now in place, already led to higher sales numbers and as a lot of people are expecting increasing sales prices in Poland. So people that, for example, already had their financing in place or buy with equity that decided to buy it right now before prices increase. But clearly, this is a program that will be very supportive for the whole market and also for us. So 1,000 units in 2023, a very good result. So yes, how should I say, worst times are clearly behind us. You see the reduced numbers in 2022. As of now, the business develops really strong. On Page 19, we give some details on a new joint venture that we have signed with an international institutional investor. Signing of the joint venture contract was right after our Capital Markets Day on the 28th of April. And the joint venture target investment for land acquisitions of USD100 million, we have initial contribution of projects from our side in Warsaw and in Tri-City. The co-investor, the joint venture partner will contribute cash in the joint venture. And that means that we also have the possibility to acquire further land banks from third parties for the joint venture. And this will, of course, accelerate our pace of the growth of our business in Poland in the first step in the build-to-sell business. And as we generate cash from the build-to-sell business, this is, again, cash that we, for example, can use not only for further land bank acquisitions for the build-to-sell business, but also for the build-to-hold business as defined. The stake of TAG and of the international investor is 50% each. So it's a very simple real joint venture. So, there is no structured financing or whatever behind it. It's really a 50-50 joint venture. And the rationale for us is that this joint venture as we transfer land bank into the joint venture and then the cash releases equity for us. And we get additional fees for services that we do for the joint venture like the construction business and the sales activities that we do for the joint venture. So, that's definitely a good step for us to grow the business in Poland. Then final comment. Page 21 shows the FFO I and FFO II guidance for financial year 2023. This is unchanged in comparison to what we have published last time. So therefore, I think it's not necessary to comment on that in more detail. That's it from my side. Many thanks for listening, but I'm, of course, now very happy to take your questions.

[Operator Instructions] The first question is from Societe Generale, Marios Pastou.

Great. Thank you very much. Just checking, you can hear me, okay?

Yes. Good morning, Marios. We can understand you very well.

Fantastic. Just a few questions from my side. Maybe we go one by one. First of all, just on the portfolio valuation guidance. I understand this is fairly high level and broadly in line with the messaging, I think, you gave at the full year. It looks like the disposals you're doing are tighter than this. If I'm looking at this, especially the second quarter, the lower volume, 200 units broadly in line with book value. So, I just wanted to check what I'm missing here because I believe you were also mentioning you were offering units at the 5% to 10% discounts. So, I'm just trying to square off where the gap is.

Yes. Very good and a valid question. Let me carefully comment like this. This disposal, especially after the balance sheet date was for us an extremely positive one. Is this very representative? Perhaps not. So we see -- and that's more what I wanted to indicate or we wanted to indicate with our last announcement if we are in discussions with potential buyers. To sell a book value is extremely difficult. Yes, from time to time that happens. But the usual discount is perhaps something between 5% and 10%.

Okay. Just as a follow-up. The disposals agreed over the first quarter, what was the range of discounts offered on the various different deals or broadly on average as well?

And this was really a broad range, I would say, between selling at book value and selling to a 10% at very slightly above discount. So I would say, on average, the guidance that we gave that we're selling at a discount of 5% to 10% still makes sense.

Very useful. And I suppose just as a secondary follow-up to that and then referencing the high-level guidance again. Is this purely based on these disposals? Is it the discussions you've had with your external valuers? And how do you consider the timing of that? Is it something which is more over the year? Or is that something which you're expecting really to come through in the first half?

Well, this is basically the outcome of both. So what we see in the market, how we can dispose assets as of -- really, they are very preliminary discussions with CBRE. Also for them, it's, of course, incredibly difficult to find a precise figure. So therefore, this range that we give an indication for a valuation reduction of 5% to 10% is quite, quite broad. Why are we a little bit confident that this -- if not more and also that in the second half of the year, we will perhaps not see another 10%. So, we don't expect 10% in the first half, 10% in the second half. We clearly own higher-yielding assets. And we see this also when we sell our assets. We feel, and perhaps you can argue that's not really representative, as you said, just smaller portfolios, but we see there is demand. If you sell assets at a 5% or 6% gross yield and the buyer needs to finance that with a 4% bank loan, but still makes sense for him. So, I'm not worried about really material valuation losses. Again, this range is very broad. It's an outcome of our observation of our first discussion with CBRE, but we have not really, let's say, a final data point yet.

Very clear. And just finally from my side. I'm just keen to understand, these assets what you've mentioned in more detail, can you maybe give a bit of rationale here behind it, the kind of pricing that you've sold out versus what you've agreed to buy would be very useful?

Yes. But first of all, it would be for us a good pricing. So when I was commenting about disposals that we're more at a 10% discount or more close to book value, this is clearly a disposal that is more to book value. And would we normally buy in transactions assets? No, this is not the case. So, we have effectively stopped our acquisitions in Germany, but this is really a combination. So, we agreed on an asset swap. We are selling apartments to the buyer, and get one portfolio in East Germany from him that fits very well into our structure. So operationally, it makes sense. So, this was more or less the rationale behind it.

So broadly, what you're selling in line with this transaction buying broadly in line with book, is that the way to think?

Yes.

The next question is from Thomas Rothaeusler, Deutsche Bank.

Hi, good morning, everybody. Actually, a question on the bridge loan and the repayment. What you plan on this? I mean, if I listen to it, it seems like more or less done. Do you expect this to have a positive impact on your rating maybe? And also, what are the terms for the secured loans to replace the bridge loan? And on the disposal, which is part of the bridge loan payment, it seems it's conditional on the final financing from the buyer side. So do you see any risk this not to happen?

Yes. Good morning, Thomas. First of all, I wouldn't say that the repayment of the bridge loan is already done. But we're very confident that we will do this in the third quarter by a debt. I mean, we have signed the disposals. And again, you have to wait for the closing, commenting on this disposal that we are specifically mentioning. Yes, if the financing is not yet in place, then clearly, there's a certain risk that this disposal could not happen. What would be the consequence of this? We get a certain contractual penalty, of course. Then we would simply put this portfolio or portfolio again in the market where we are convinced that we would find also another buyer for debt at a reasonable price. And therefore, there is -- then once the closing has not occurred over a certain risk. Regarding the bank loans, we have signed term sheets. Normally, this is something, I would say, technical that we also signed a contract. So, we are very confident that this happens. But we don't want to comment in the sense of that it's done unless the disposals have really closed and really all bank contracts are signed. But perhaps further commenting on the bank loans, I mean, we had the last larger financing round last year in November. It was the same process. So term sheets were signed, contracts were signed some weeks or months later on the same basis. So, we should not expect this year anything different. Terms for the bank loans, so for 10 years, we expect margins, let's say, between 120 basis points, 130 basis points. And the swap rate for 10 years is currently around -- or slightly below 300 basis points. So still the indication that roughly a little bit about 4% for 10-year bank loan is valid. And this is not that much different to the financing conditions we achieved last year in November. So that's also good news that not only the willingness of banks is still there to finance residential portfolio and also perhaps from our banking partners to finance our portfolios. Also the conditions have not really moved very much.

Okay. Maybe a second question actually on Poland. I mean, you basically rely on this EUR 50 million, EUR 60 million free cash produced from the build-to-sell product in order to build up the build-to-hold product. I mean, how would you assess the risks to not to materialize? And also, what would be the financing terms for -- actually for the business? So in order to get you to the second scenario, including some elements of financing on top?

I mean, we have in Poland and perhaps also got a certain impression from the Capital Markets Day a really good platform. And this team that we have in place in Poland has been successfully working on the markets now for many, many years. What's the state of the market at the moment? It's clearly on a positive way. So this year, 2022 was not easy for everyone. And still we achieved with our team a very good result in the last year. Now, sales numbers are increasing. And we expect as -- or we have the assumption to produce this EUR 50 million to EUR 60 million cash surplus that we need to sell between 3,500 units and 4,000 units in a year. This is basically the run rate that we already have today. So we sold, as said, roughly 1,000 units in the first quarter. So it's not an assumption necessary to get to this cash surplus that we sell even more than today. So even today's sales number would be enough to produce this EUR 50 million to EUR 60 million cash flow. So therefore, I'm very confident that we get this cash. And coming to the financing part, EUR 100 million a year, that could be also achieved by mortgage secured financing on the assets that we have in Poland. So already in the portfolio, even though it's under construction as a GAV to rental portfolio of more than EUR 200 million and this will grow further as we finish more apartments, as we will clearly see also some positive valuation impact on that. So, for example, if we just financed the portfolio as it is today on a 50% LTV, we would already get this EUR 100 million. And what are the terms for that? I mean, if we do this on a zloty basis, it's still quite high. So, that's something at around 8%, 8.5%. If we do this on a EUR o basis, our discussions show there is perhaps more. It's still more than German financing, where we are currently at around 4%. It's more 5.5% to 6% to give an indication. And yes, clearly, this is a higher financing rate, but don't forget that we have in Poland also high gross yields of 7% where we started, that we have a quite strong rental growth, last year 16% year-on-year. So even on these terms, we could produce significant cash inflows. And clearly, who knows perhaps in 1 or 2 years, we have even more interest cost reduction than the cash flow surplus would look even stronger.

Okay. Just a quick follow-up actually on my first question and the potential rating impact if you would manage to pay back the bridge loan in Q3?

This is definitely a rating positive. And if you ask us if they may trigger for an upgrade, I would assume that this is from Moody's. I would assume that this is still too early as they look, but they are not so much specifically at TAG, but clearly, they are more careful with the German residential market. I would assume that they want also more clarity where values go. But also -- therefore, both ratings, this would be clearly something positive.

The next question is from Thomas Neuhold, Kepler Cheuvreux.

Good morning, everybody. Thanks for the presentation. I have three questions. Firstly, I was wondering on the JV in Poland, can you provide more details who the partner is and what exactly the JV conditions are in terms of how much new capital each partner needs to inject in the JV? And if there are also any cash requirements for the JV concerns for the deal, you're just injecting land plots in the JV? Or do you also need to build cash in there? Maybe you can also talk a little bit about annual sales target in the JV and how it's going to be consolidated in the future.

Yes. Good morning, Thomas. We will be able to disclose the JV partner quite, quite soon. I think the JV partner himself will do a press release, perhaps not in the next days, but you should expect this in the course of May. So then we can also disclose the name, which is a very, I would say, good international investor. It's a typical JV. So it's really 50-50. So, there are not any call put options in between. Nothing is structured. The purpose of this JV is, if I try to describe it quite simply that we put land banks into the JV, the co-investor gets -- put cash into the JV. So, there are not any additional cash requirements from our side. Then we develop the projects together, which are ready-for-sale projects. It takes them perhaps 3 years to 4 years. So, these projects are right now about to start with the sales activities and with the construction and at the end of the project. So after 3 years or 4 years for each project, we share the profits. And additionally, we get then, of course, as we do the whole construction work, as we do all the sales process, as we do orders, administrative work, certain fees for this work. So therefore, our total share in the profit is higher than the joint venture partner, but also for the joint venture partner, I assume that this is a good deal. As we have discussed, the market in Poland is now clearly getting stronger. So also this trend will be very, very attractive.

The next question comes from Rob Jones, BNP Paribas.

Yes. Great. Thanks so much. Couple of my questions have already been answered. But I just wanted to follow-up on the point you were making around, you made a commentary around H2 valuation. And I read into your comments, maybe rightly or wrongly that perhaps H2 value decline from your expectation might be less than H1. Now, I appreciate you're seeing a bit of an acceleration in rental growth. But I wonder from an asset acquirer perspective, to what extent, that actually makes a difference and kind of what gives you the confidence to say that potentially the H2 value decline could be less than H1. That was my first question.

Yes. Good morning, Rob. And again, please understand that I'm very careful with giving you a concrete guidance. But what we clearly see is increasing rents in Germany. So if you look at the rents that you can observe, if apartments on the market are rented out, I also show that we see higher rent increases from the units bigger. And then the valuers will also take this into account and also potential buyers of apartments will take this into account. So once perhaps this is more and more visible -- and I mean, at the moment, everyone is a little bit looking into the crystal ball, thinking about exact outcome of rent increases in [inaudible] this year. So once this is more clear, this will have a value increasing impact. And on the other side, it's very clear. I mean the higher interest rates have a value reduction impact, but I assume that perhaps a little bit more this value reduction impact is already there, whereas there's more positive impact from the rental increase has a certain time lag. But again, that's an alimentation that we think is reasonable. Do we have really specific evidence for that? No, that's not the case.

Okay. I understood. And then slightly linked to that, again, around asset values. You were talking about the fact that your higher yielding portfolio, certainly relative to some of the other companies that I cover, you believe to be more resilient. But when I think about last reported value declines and indeed, looking forward over to say, H1, it looks to me like you could potentially end up delivering the weakest H1 like-for-like moving in asset values despite the fact that your portfolio is high yielding. And I guess, am I wrong in those thoughts? Or why should I kind of have more confidence in the resiliency of our asset values, I guess, relative to maybe other listed real estate companies in the German sector?

Yes. Sorry, that was a bit difficult to understand. Can you once repeat why do you think that we have perhaps the weakest valuation result?

Well, because you're implicitly guiding to values down maybe 7% to 8% in H1 and the rest of the sector is probably going to be down 4% to 5% decline in that [inaudible] portfolios.

Yes. Okay. Now, I understand the question. And there could be also, how should I say, other types of guiding showing more optimistic, more conservative. And it's, of course, not possible for me to comment on other companies. But we feel more comfortable to have this valuation outlook guidance, if you want to call it. So a little bit more on the conservative side.

And then the final one is on a different topic, which is with Rolf Elgeti leaving, which I saw yesterday. Any changes to the Management Board? Or you don't have a view at this stage?

No, this is not planned. So -- and definitely, status for me or for my colleague. But clearly, this is then something -- or this is always a decision of the Supervisory Board. So do we expect anything in this regard? That's not the case. But please understand that now this is really then a process where we have after the AGM, then not completely new Supervisory Board, but new Supervisory Board Members. And clearly, they will also discuss mid- to long term, how will the Management Board look like. But this is nothing that was discussed in the last days that I can tell you.

So the next question comes from Paul May, Barclays.

A few questions from me. On the disposals that you've done and then the acquisitions, I appreciate there was a question earlier, but I don't think it was fully answered. Can you give any guide to the yield or the multiples on those disposals and the acquisition or the asset swap? And then secondly on that, I appreciate disposals in line with book values. But as we know, your book values can change over time and they can change differing degrees. What would be the sales prices relative to peak values of those assets, if you are able to give that? That would be great. And I've got a few other questions as well after this.

When we comment on selling at discount or at book value, we always refer to the book value at the last book value, which is December. So that means if you compare it with the peak of -- at the beginning of 2022, this is 5% to 10% lower already. So, there has been already in our books a certain valuation declines, valuation result. So, I would say that we -- if I -- let's put it this way, if we talk about selling at a discount to 5% to 10% to current book value, there's perhaps already a discount of 10% to 15%, perhaps in some cases already slightly more to the all-time high, which was perhaps at the beginning of 2022 or perhaps more at the end of 2021. So just to give you an indication where we are staying right now. And we disclosed that the average gross yield for the portfolios that we have sold in the first quarter was 4.7%. We have not yet disclosed the gross yield for the 650 apartments that we potentially buy, but you should expect here nothing, which is very different to our portfolio yield, which stands at a little bit above 5% currently.

Great stuff. Just on the valuation changes and just following slightly on from Rob's question. You mentioned different approaches to guiding, I think, was the response. The sense we've had is you've always been a little bit more on the realistic or conservative side, should we say with regard to valuations, I think wanting to get the transaction market open and working again. Is there a risk that you could be potentially too cautious? Or do you think that maybe the 15% to 20% from peak declines feels about the right sort of level to get transactions moving again in a sort of sustainable way?

Yes. Again, just to be clear, I'm not commenting on how -- if the guidance from other companies is correct or not. I just would like to express that our guidance between 5% and 10% for valuation loss in the first half is something where we feel quite safe. So that's the way we like to guide the market. I can also argue that this is a little bit more conservative. And yes, I mean, we see in the market, once we give these discounts as discussed and the discounts are already more compared to the old-time high in 2021, we create at least some liquidity. So therefore, we feel comfortable with this guidance. Again, the range is broad. So 5% and 10%, that's clearly a difference. But difficult to be more specific. If the market clears up more early, if we've been too cautious -- I don't see this yet, but if we are too cautious, clearly, we will be happy about this.

Sorry. Just one follow-up on the asset swap. It's down to financing being secured. Do you have any, should we say, guarantees or are there any penalties paid by the opposing party if they aren't able to secure financing? Or is it just that the transaction gets canceled?

No, there is a penalty. I cannot disclose the amount, but there is a penalty agreed.

And then, sorry, very last one. I notice there's small increase in vacancy, and I appreciate it's small quarter-on-quarter and I see it's going to be around. But it seems slightly counter to what we've seen over the last 12 months in terms of vacancy reduction across the board and the operating environment where we understand there is far more demand than there is supply of housing. Just wondering, is that anything to read into? Or is it just simply a rounding error and a small change in the first quarter?

Yes. But I would clearly say, Paul, there's nothing to read into. And also, we are not, I should say, doing this very granularly that we sold out, for example, one or the other modernization projects where we have done for a certain time, naturally, more vacancy because we are modernizing the full apartment block. So also this has some impact. So, we're not reading something into that. So, you should not see here a change in any fundamental trends. As discussed, this is something that we observed always in the first quarter in the last years. So, we will be on track in the second quarter and as in the past years, even more under third and the fourth quarter.

So that's very much coming from a client. Appreciate the JV on the build-to-sell in Poland. Hopefully, it should start to accelerate that part of the market. The build-to-hold or the build-to-rent, how do you plan on investing there? Because I think from the Capital Markets Day, the returns on that seemed very, very attractive as well, but capital is a constrain. I just wondered what your thoughts are around where you get that capital from?

Yes. I mean, we've given today with the presentation these 2 scenarios. One scenario is really, as I said, a scenario without any external financing. So, this is really a bear case. So nothing is available. We only have the cash flow from our build-to-sell business, which is quite strong. So then we would end up at the 6,600 units that we have mentioned in 5 years. We think a realistic amount for taking on additional debt is at least EUR 100 million that can then be also debt that we raise on our projects in Poland. So, we're not talking here about a situation where we need to issue bonds or any larger unsecured instruments, which is effectively not possible today. And that's also not possible in the next quarters. So more the idea behind is to finance already finished projects, mortgage secured and give also an indication whether interest rates may be -- and this seems for us a realistic target. So therefore, these 10,000 units in the next five years is nothing, I should say, it unrealistic, but something that we can really achieve and that we want to achieve.

Mr. Thiel, there are no further questions in the queue.

Good. Then many thanks from our side for dialing in and listening to the call. As always, if there are further questions, please feel free to contact our IR team or myself. Many thanks for listening and looking forward to seeing and speaking to you soon again.