CA Immobilien Anlagen AG

VSE:CAI

Earnings Call Transcript 2018-Q1

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the conference call of CA Immo regarding the interim report for first quarter of 2018. [Operator Instructions] Let me now turn the floor over to the company.

[Christoph Thurnberger, executive]

Hi, good afternoon, everybody. It's Christoph Thurnberger speaking. Welcome to our 1Q '18 call. Let me start with an excuse with regards to Hans Volckens, the CFO, who cannot join me here today. The reason is a car accident he had last Friday on the way home from Munich airport to his home. Someone ran over a red light and badly crashed into his car. He broke an arm and some other injuries, he's still suffering from a major concussion. So he's on a good recovery path now, but he sends his regards, and again, apologies. At the same time, our CEO is stuck in meetings today, so I have the honor to run you through our Q1 results, and I will jump straight into it.

Starting on Page 2, the highlight slide, which you are all well familiar with, as with every quarter, summarizing the major key events in the first 3 months of the year. Number one, certainly -- and this is something we've seen throughout '17 as well -- a pretty robust operating business. We were able to sustain the trends, kept up a high operating margin above 90%. Occupancy still high at more than 94%. Strong like-for-like, that's something we've seen in the second half last year across our portfolio, and that's a sustained trend in 1Q. We'll get to that a little bit later.

Second part is certainly the Tower, which is a 4Q 2017 event. But I think what's most important, closing went through beginning of January. And we received the cash inflow of EUR 150 million in the first days of this year.

From our development pipeline, good news as well. KPMG is 1 out of 3 buildings we are going to put on our balance sheet, and this one was completed according to plan and handed over to the tenant in March this year. We achieved the planned pretty decent yield on cost of 6.1%, roughly EUR 57 million volume, and this is going to contribute to earnings starting in 2Q.

At the same time, we could manage to achieve a goal pretty all in the year regarding the continuation of our CEE expansion strategy. After the Budapest acquisition in 2016 and Warsaw in '17, we could now manage to add a property to our Bucharest portfolio in 1Q. Also details in a few minutes.

On the next Page 3, highlights from an American point of view. I said before, pretty strong top line development. Net rental income up EUR 0.46 per share, 12% plus compared to the reference quarter. Major driver, the Warsaw Spire B acquisition which we conducted in 3Q last year, so that came now fully through in the first quarter of '18 and helped us to offset losses which were linked to the properties we sold, for instance in Infopark in Hungary. And most importantly, as we sold the Tower 185 last year, which was our biggest property, generating more than EUR 1 million FFO per quarter, 1Q nicely shows that we fully digested that. FFO I is up as well, again driven by the top line. In addition, still some tailwind from -- for the reduction of financing costs or the optimization measures we took last year, also come fully through now. FFO II per share is up as well, a bit unusual. We had some decent trading profit in 1Q related to a sale of a plot that is nonstrategic in Munich. Nonstrategic because it's an industrial use, and not interesting for us to develop. So that contributed around EUR 6.5 million to the trading profit and boost the FFO II.

NAV slightly up, in line with the profit of the first quarter, stands at EUR 26.25, and the EPRA NAV for the first time exceeded the mark of EUR 30. Still all translated in the top line -- in the bottom line of EUR 0.31 per share. Strong recurring business plus trading profit boosted the EBITDA by more than 40%, and as a consequence, nice net profit in the first quarter.

Page 4, profit and loss in detail. Maybe a technical remark at the beginning. We had to restate the 2017 numbers due to IFRS changes, IFRS #15, for technical reasons. Not a big impact. It actually only influences or mainly influences the trading and had some impact on FFO II as well but no impact on the recurring business of the group.

As said before, the strong operations rental business plus a trading profit led to a boost in EBITDA. No revaluations in 1Q, which doesn't come as a big surprise given we have all the external appraisers working on our properties for the full year results. And the joint venture line stands out here with EUR 17 million. As we sold the Tower, actually our joint ventures are pretty much gone, so this line is subject to, say, minimal contributions in the future. However, the Tower 185 closing in 1Q still had an impact on that line as we were able to release deferred taxes, trade taxes, which didn't materialize in 1Q. And that's roughly EUR 8.5 million in that line. In addition, we sold a remaining property in Sofia, Bulgaria, which is nonstrategic. And it's not closed yet, but we signed it in 1Q. And we also booked a positive revaluation gain in the first quarter and achieved the result.

Financing costs, slightly down. So there's still some room to improve our run rate here. And the other financial result is also worth to mention. There was a second one-off related to the convertible bond, which was a noncash valuation effect. The reason for that is that we have in our bond documentation a settlement flexibility, meaning that upon conversion, we can settle in shares or in cash or also a mix of both. And if you contain such a cash settlement option, you have to mark-to-market the embedded option through the P&L. And this is what happened here. It's driven by the share price and also driven by the bond spread. Over the lifetime of the instruments, this is going to get to 0 again, end of maturity. But for the time being, we had a negative impact here -- again noncash, but had an impact on the P&L. Income tax, we booked a pretty high current income tax, and at the same time, made a high release of deferred taxes that also relates to the Tower 185 sale.

FFO on the next Page 5. We talked about the major trends here, driven by top line, but financing costs also contributed. And it's worth to mention that the EUR 9.6 million financing costs contain around EUR 2 million which we have stripped off given its interest expense is linked to fiscal authorities that relate to previous periods. So it had nothing to do with 1Q '18. That means the actual financing cost run rate is even below the EUR 9.6 million we should see in the coming quarters.

FFO II is free of Tower 185, as we have included that in 4Q '17 already. So we just adjust the trade, and this you see in the adjustment line. The EUR 19.8 million, which is outlined on Page 5, is just the neutralization of that effect in 1Q '18.

Page 6 summarizes the same thing. Overview of the FFO numbers per share. Pretty good start into the year. FFO guidance confirmed, plus EUR 115 million in '18 and plus EUR 125 million in '19. We keep the guidance, of course, for the dividend, 70% payout going forward.

Balance sheet, no major changes. But what's certainly eye-catching here is the pile of cash we have at the reporting date, EUR 570 million. That's really a snapshot end of March. It has changed already. The reason is simply we got in the cash from the Tower transaction, EUR 150 million. We moved quickly and spent around EUR 90 million to repay the remaining, say, most expensive -- or actually only expensive from today's point of view, secured debt financing CEE, and paid back the loan on our Millennium properties, EUR 90 million. That was an interest rate of around [ 2.17% ] including the swaps, so that made perfect sense in light of our current average cost of debt, which stands at around 1.8%, so substantially above that. At the same time, of course, we paid the dividend in May, EUR 70 million. So EUR 150 million came already down from that pile. Simultaneously, we signed the Skanska deal, the Bucharest office, which we'll talk about in a few minutes. This will close later, and so there is no cash outflow for the time being, but this can be deducted as well. And otherwise, the balance sheet metrics are pretty stable: equity ratio, around 50%; the LTV, down to 31% because of the cash pile, but certainly way below our strategic range. But as you all know, and we've guided this for quite some time, with every new property we put on our balance sheet, this is subject to an upward trend, given we refinance our new properties at a high LTV, of course.

NAV statement, Page 8. Nothing special to report: EUR 26.25 NAV per share, EUR 30 EPRA NAV. So slight improvement in the first 3 months.

In terms of financing, also no big news. We were able to slightly reduce the average cost of debt from 1.87% to 1.81%, so not really a meaningful improvement any more possible. If you were to strip out all the swaps, we stand at around 1.7%. But again, we could lower the financing cost run rate again as all the optimization measures, which you're all aware of in the last year, are now paid off nicely. So there are still some positive impacts in '18 from the convertible bonds transaction, plus the repayments that followed it. But from this level, certainly very limited room for further improvement.

Next, Page 10 gives an overview of the structure. Debt maturity averages at 6.1. If you would include all the financings for our development projects, which have not been closed, but LOIs signed, and this number would be at around 7 years. Debt maturity, pretty comfortable situation for the next 3 years. If you look at 2018, it's actually all done. The yellow block, EUR 34 million, refers to the property in Sofia I mentioned, which we just sold, so that loan is gone. The other 2 loans technically due in '18 is the KPMG loan in Berlin, which we now transfer into a long-term financing as we have put the property in our balance sheet; and EUR 22 million related to the Intercity Frankfurt, which is under construction as well, and will also be transformed into a long-term loan.

Jumping to Page 12 and the portfolio overview. Structurally, I think from our point and many analysts' point of view, an improvement given we sold the Tower, which means that the property value held in joint ventures is now diminished. EUR 3.8 billion is the total property size, and thereof around EUR 130 million of property value relates to joint ventures. As we now sold also the property in Sofia, that's even further reduced. EUR 3.2 billion income producing, and around 85% of our land bank value, which is in total, around EUR 300 million is located in Germany, as most of you are aware of.

Page 13, overview of the most important portfolio metrics. Pretty stable picture here. Occupancy maintained and it's 94.4%. Gross initial yield is pretty stable, so no yield compression or any market trends visible in the first quarter of this year. Like-for-like is positive. We'll get to that in detail in a few minutes. In total, across the portfolio, we could report a 5.5% plus, which is a very promising trend. Average lease term, 4.2, no big change there.

14, more of the same. You see the individual yields, occupancy rates. Maybe worth to mention, Hungary, we -- this was the only market where we were below 90% with our 4Q numbers as we had a larger property under refurbishment, which is now coming out of it. So this is a positive impact and should be subject to further improvements throughout the year.

So like-for-like in more detail on Page 15. Austria is the only market that is down due to a major change in the portfolio, as one of the key tenants, Österreichische Post, Austrian postal office, left the portfolio. We were able to relet the space quickly, but not 100% of it, which is the reason for the like-for-like minus. Otherwise, Germany stands out, but this is, again, driven like in 4Q '17, by the Königliche Direktion relapsing, where we were lucky and could actually sign a large lease for the doubled rent last year. That will be visible throughout this year. And also very encouraging is the CEE trend. So across the board, we see a positive like-for-like improvement. Serbia is just a single-building case but otherwise, Poland for instance, which was certainly very challenging from an asset management point of view over the last 2 to 3 years. It's nicely recovering, and the same goes for Hungary now. So all in all, a pretty positive trend visible across our markets.

Top tenants properties, Page 16. It's just worth to mention the Tower 185 sale impact, which has actually improved the balance of the whole portfolio, PricewaterhouseCoopers, our largest tenant, was halved, so it went from 6% to 3%. Frontex, the European Border and Coast Guard Agency, made it to #2 now given we fully incorporated the Spire B building we purchased in Warsaw last year. In terms of biggest assets, no real changes compared to last quarter.

The Bucharest transaction, on Page 17, was a major target for '18. At the same time, we worked on a second transaction as well, which might come into effect later this year. The ratio here was clearly after adding to our portfolio in Warsaw and in Budapest. Now it's about Prague and Bucharest. I mean, Bucharest is twofold as we have Orhideea under construction. But this was an opportunity to snap up a property at around 7.5% yield, which is newly built. It's still under construction, around EUR 50 million ticket, well located in the western part of the city and is, in our view, a perfect addition to our existing standing investments. The occupancy, which is stated here, is expected to be 100% end of this year. We already exceeded here more than 90%, which is also a closing condition, by the way. So we expect this house to -- at around EUR 4 million rental income in 2019. Nice tenants. It's -- there's a cool working space, otherwise IT tenants, the usual you see in Bucharest today [ world ] is longer than 5 years. So pretty good quality and quality addition for our portfolio in Bucharest.

Page 18, you see the map, just where it's located in the west area. Metro station is just across the street. It's close to the Polytechnic University. So very good location as well.

Jumping to 20, and an overview of our portfolio of developments and portfolio growth that comes with it. Roughly EUR 1.1 billion under construction. We aim to keep around EUR 800 million thereof for our own balance sheet with an average yield on cost of around 5.8%. So it's -- we're happy to outline that after '16 and '17, where we had no completion out of our pipeline, in '18, we're able to add 3 buildings with a value of around EUR 170 million; and so in '19, with even more, at EUR 250 million. So we finally have this organic momentum coming again from our own development pipeline.

21 and 22 is details you are all aware in terms of projects for our own balance sheet, plus the ones we sell. And on 23 you see the KPMG building, which we just handed over to our tenant, achieved a yield of 5.7%. And this will be -- start to be income producing in -- or started to be income producing in April, and should around EUR 2.5 million rental income in 2018.

Orhideea is -- next slide, is under construction. We expect completion in 3Q this year. Occupancy reporting at around 60%. In the meantime, even higher if you factor in the LOIs. So very decent yield on cost. Should help our top line in '19. And the same goes for the ViE in Vienna, Page 25, which is also coming to an end in terms of construction.

A new project is shown on Page 26, which is in Prague. So apart from the Budapest plot we monetized with Orhideea, we have 1 plot adjacent to 3 prime properties we own in so-called River City in Prague. And we're about to start construction second half of this year. Will be actually 2 buildings. Investment volume also around EUR 50 million, including the plot which we own. And that will be a quality addition as well for our Prague portfolio.

Development map on the next page. Adjacent to Danube House, Nile House and Amazon Court which are 3 outstanding properties in the Prague market.

With this one, I'm about to close, and thank you very much for the attention. Very happy to take questions, if you have any.

[Operator]

[Operator Instructions] The first question comes from Stefan Scharff by SRC Research.

[Stefan Scharff, analyst]

My first question's about Slide 12 of your presentation. Slide 12, the joint venture property values are mentioned, EUR 130 million. Can you give us your split of what is now the remaining joint venture property values, as it's not the flavor of the day for you or your company, and you don't prefer joint ventures in your books. What's left, and what can you do with them?

[Christoph Thurnberger, executive]

Stefan, certainly. In terms of investment, as you know, the strategy has been for a while to get rid of joint ventures when it comes to standing investments, income-reducing properties. And this will be achieved pretty soon with the sale of the Sofia asset. As been disclosed, this number drops below EUR 100 million. And the remaining part is more or less joint ventures. We have, for instance, the PATRIZIA joint venture in Munich. We still have a resi joint venture in Vienna with a local developer. So that's really reduced to joint venture structures in our development business, which we, as you know, also will try to avoid in the future unless we have a partner that really brings something to the table. But this cannot be ruled out to have that in the future as well. But in terms of income-reducing portfolio, that's about it.

[Stefan Scharff, analyst]

Okay. And you mentioned the acquisition of Campus or Millennium Towers in Budapest, where also good deal to bring some rental income to the top line quickly. What can we expect for the remaining quarters of the year and also these cities like, say, Bucharest or Budapest, to find 1 or 2 more acquisitions?

[Christoph Thurnberger, executive]

Yes. As I said, we're looking at one more acquisition. That's -- targets 1 of our 4 core markets. I mean, we -- our idea is to scale the existing 4 core markets. We're exposed to Belgrade as well, as you know, but that's a rather small markets with limited expansion potential. But in Budapest, it's pretty sizable now after the Millennium deal, which also gave us room to dispose of an asset, which we did in 4Q. It rejuvenates the same strategy. It might hold true for Warsaw, where we bought a prime property that has improved the average quality of our Polish portfolio. Might be also room to use the very healthy liquid investment market to dispose of an old asset. So we're looking at the 4 markets and screen the markets continuously, and it will happen in one of those markets, if it happens.

[Stefan Scharff, analyst]

Okay. One additional question about the financial results. You have the noncash item here of the convertible bond, which brings some volatility to your P&L. And this effect will also continue in the next quarters until the settlement of this bond.

[Christoph Thurnberger, executive]

Possibly. I mean, this depends on the major input factors, which would be the share price. We had a pretty decent share price movement in the last weeks, months, that had an impact. It depends on the credit spread developments, which are rather stable for the time being with our rating. But if the share price goes further up, then there is some more volatility to be expected. But as mentioned before, this is something which will flatten out until the bond is due.

[Stefan Scharff, analyst]

My best wishes for Hans Volckens, of course.

[Operator]

The next question is by Thomas Neuhold from Kepler Cheuvreux.

[Thomas Neuhold, analyst]

I basically have only a twofold one. The first is on the land disposal of Immofinanz stake in CA Immo. Are you already involved in the disposal process? And if yes, can you comment on how many parties? And what kind of parties are interested in Immofinanz's stake with you guys? And then the second question is just a quick bookkeeping question. I was wondering if you can comment why indirect expenses went up 16% in the first quarter. Have there been any special items here?

[Christoph Thurnberger, executive]

Thomas, fully understand the first question. That's something everybody is very interested, including us. Not much color I can give, as we don't know anything. This process is running. And I guess the most important notice I can give is what I heard at the AGM of Immofinanz 10 days ago, a week ago, that this process should be -- meaning the sale process should be completed in summer. I mean, summer was not defined. But there was a confirmation that the company will sell the stake. And we will be ready in case we're asked to hold management presentations with interested bidders, as we did when Bank Austria sold their stake a couple of years ago. But so far, Immofinanz has not reached out to us. And yes, we're in a wait and see mode, as all of you are. The second question, not sure if I got it right. Did refer to the admin expenses?

[Thomas Neuhold, analyst]

Indirect expense.

[Christoph Thurnberger, executive]

Expenses. Yes. Well, higher. So you can see that our company is growing now in terms of rising personnel expenses. At the same time, you have the, more technically, the income from services line in the P&L, and the cost line that goes with it is also booked into indirect expenses. So you have sometimes fluctuating cost in terms of services. That goes, for instance, for omniCon, our construction management subsidiary, which also does third-party business, who works for other clients, not just for CA Immo. And they were a little higher as well, but it's also slightly higher personnel expense.

[Operator]

The next question is by Christian Bader from RCB.

[Christian Bader, analyst]

I've got 2 questions for you. First of all, referring to Europe like-for-like performance of the rental income that is shown on Page 15. So for all the individual markets and also for the total group, these changes of like-for-like rental income, I assume, is a combination of higher rent per square meter and improved occupancy?

[Christoph Thurnberger, executive]

Christian, yes, it's -- I mean, the occupancy table. So you can see actually that apart from Austria, occupancy has improved in every single market. So there was apparently a major driver. Germany, as mentioned, Königliche Direktion, which is a property where the major tenant moved after a long time. And we signed a new one for double the rent. It was simply a market catch up when a long lease expired that drove Germany. So there was the higher rent impact you had there. So it's a bit of a mix, but it's had a lot to do with occupancy in Hungary for instance, which is maybe the most promising recovery market at the moment, coming from pretty low level in terms of occupancy and average rental price. We clearly see that this is driven by City Gate, which is one of our largest houses there in Budapest, which was under refurbishment. And for instance, we could drive the City Gate vacancy down from 65% a year ago to now 30%. So that's the development which really drives this.

[Christian Bader, analyst]

Okay. Is it also fair to say if we basically slip out the vacancy effect, we can work at basically the like-for-like vectors for the rent per square meter?

[Christoph Thurnberger, executive]

Yes. You could, more or less.

[Christian Bader, analyst]

Okay. Yes. And then a second question, maybe a little bit different one, has to do with you development activity with your, let's say, big pipeline. Can you please remind us how do we actually ensure that there are no cost overruns for all the developments, both for your own balance sheet and for the ones that you're going to sell?

[Christoph Thurnberger, executive]

Yes. I mean, construction cost is a major topic. There's a reason for it, because it's simply a fact that construction costs are rising across the board. Well, first of all, all our development projects contain a reserve. So we always calculate a certain amount or we always put in a cushion for potential cost overruns -- which, in some cases in Germany, start to be consumed to a certain degree. For the time being, it is under control. What certainly is helpful for the moment, especially in markets like Munich and Berlin, where major activity happens, is rising rental prices, which also exceeds the budget. So the question will be, midterm, was the ratio of rental price increases versus cost increases. Obviously, we have omniCon, which runs all our projects, so we can avoid to have a generic constructor. And also the margin, which is helpful. But in terms of monitoring the noise, it's a very experienced team that closely monitors this. And I think the fact that we are one of the biggest developers in Germany helps as well. So we have a continuous flow of projects and have had such a flow for many years now, 10 years. That's all the ingredients which help, but still, we watch this very carefully. And end of the day, it's a fully occupied industry. And that doesn't go only for Germany, but the way, it goes for Austria as well, where we are not too active with just one project. But it goes for CEE as well. So for instance, Budapest construction prices are rising tremendously as well, the labor costs are rising across CEE, especially in Poland. So this is a general trend the construction industry sees and -- to develop this year. So that's something we think we'll discuss over the next quarters as well.

[Christian Bader, analyst]

All right. Interesting. And maybe to follow up on this question. So but the numbers that you're providing for the individual projects for these, let's say, outstanding construction expenses. Those might -- may potentially go up?

[Christoph Thurnberger, executive]

May potentially go up, yes, exactly. At the same time, the fair value, we can -- or the value of the property, once it's completed and revalued on a market level, might go up as well. Because, as I said, we have significant rental price increases. Just to give you one example, which is certainly a hedge effect, our John F. Kennedy property in Berlin, completed in 2011, rental level at that time, EUR 18, EUR 19. Today, we rent this out for EUR 25. And we have the Cube next door, which is certainly a more prominent prime property, but this isn't an asset which will exceed EUR 30. Within 3, 4 years, you have substantial rental price increases. So this is something which certainly helps, and that's also not fully reflected in the budget. So yes, but certainly the costs might go up.

[Operator]

So for -- our last question comes by Andre Remke from Baader.

[Andre Remke, analyst]

So first question on your remark on positive trends in CEE. I think you mentioned it around the rent like-for-like increases. Do you see this as a general market trend for most of the CEE countries? Or is it really specific to your portfolio? And a related question to that, do you also see a positive -- a more positive trend in terms of the transaction market, i.e. what could this be -- mean for your portfolio valuation?

[Christoph Thurnberger, executive]

In terms of fundamental situation in letting environment, it's not a CA Immo specific situation. It's a broad recovery for the whole region, which you see really across the board. I mean, every market is different. Warsaw has had a fantastic run. And as well-known, it's the only market that never slipped into recession in the EU and all that. So Warsaw hasn't been really affected. You could say that that's become sort of a victim of its own success given the very speculative pipeline that emerged in the office segment in Warsaw, which has caused its own challenges. But that's a very healthy market that is super liquid, institutionalized, attracts global capital. Poland is a domestic -- is a big domestic market. So looking at our tenant structure, you have not really a back-office structure, but more Polish banks and joint companies, industrial companies, international companies as well, but it's a broad mix, and with prominent share of Polish corporations as well. Budapest is coming from a very low and depressed state back in 2011, '12. I think the office vacancy was 15% to 20% in inner-city quality office. So we've come a long way now to a single-digit vacancy rate, which is the reason that you now see like-for-like improvements. This is something people have waited for a long time. And it simply didn't happen because there was so much space that had to be filled up, and this has now happened, which translates positively into rising rental prices. Prague is very healthy, too, very stable, which is, of course, a quality by itself. It's a small market. We have a 98% occupancy, which we've never had before in any market. And we still have a lot of demand, which the reason we kicked off the Prague development. It's also liquid. It's a market that attracts capital. And you see -- both in Warsaw and both in Prague, you see yield compression. We could see -- it's always a question what rents are discounted. But it's -- we've seen yields below 5% in Prague now and 5% yields in Warsaw as well. So Budapest is certainly a different market in terms of transactions. But today, you have German banks that finance properties, which was not the case 3 years ago. So that was clearly a big stimulator. And Budapest is relatively liquid today as well, I mean, relative terms, of course, compared to the bigger Western European markets. But you have banks that finance, and you have a healthy fundamental situation, and nobody's afraid anymore, it seems, of any government issues whatsoever. So that's pretty healthy. And Bucharest is an interesting market, which now stands out in terms of GDP -- I think it was 7% growth rate last year -- and healthy demand. We see a lot of young companies, fast-growing companies in our portfolio -- a lot of IT, for instance. So it's not only back office, which is a major tenant group in Budapest. I mean, our biggest tenant is Morgan Stanley. And CEE was expanding. We saw JPMorgan in Warsaw expanding big time. So you have a lot of back office, some U.K. Brexit effects as well. Bucharest has got the difference, a lot of IT industry. You have very modern offices that's driven by really mainly IT. And yes, and transaction activities is liquid, is higher as well compared to, say, 2, 3 years ago. So it's really a broader trend that has to do with GDP growth and very low unemployment rates you see in the CEE markets. They're all way above -- way below the EU average, which now apparently translates into more office demand and higher rental prices.

[Andre Remke, analyst]

Okay. Very helpful. Probably also a follow-up questions on that. Regarding your strategy to expand in CEE markets, do you have any midterm target in your mind? Or will this only depend on opportunities in the 3 different markets?

[Christoph Thurnberger, executive]

Yes. It depends on opportunities. It's not easy to acquire, to be honest, because it's tight markets. In contrast to Austria and Germany, where we would not buy given the market situation and the competitiveness and the pricings, we feel that our market position in CEE is different. So we think that we are a legitimate buyer, with lower cost of capital compared to many other players in CEE. We have the local platforms. That's key, because our people on the ground screen the markets and work with a transaction team that is based in Vienna. But it's actually the people on the ground who will drive the process and have a good understanding of the houses and tenant movements and all that. That's certainly a key advantage many other buyers don't have. And we are big and have strong financing links and have cash, so we can act quickly, and so we feel we are pretty well positioned in CEE to acquire. But at the same time, there's not that much products. We are not looking to acquire assets that have a, say, a redevelopment potential. So we want to buy quality. It's also a strategy to -- every acquisition should improve the average quality, which gives us then room to dispose of, say, an old asset. So it's a rejuvenating strategy in CEE, and we want to own the best, the best houses in the best locations in the CEE capitals. Which means it's challenging to acquire. We're not the only ones as the markets have become more liquid. And at the same, the time price is up, which makes it more challenging to find value-accretive transactions. But, I mean, the goal was to buy at least one property in '16, which we managed; in '17, the same. And now in '18, we haven't defined a specific volume, but it should be a meaningful transaction, which has an impact on the portfolio, which would be, in most cases, more than EUR 100 million. But it's something we might set as a target for '19 as well, but we haven't done for the time being.

[Operator]

At the moment, there seem to be no further questions. [Operator Instructions] There are no further questions.

[Christoph Thurnberger, executive]

Okay. Thank you very much, everybody, for dialing in. And if further questions arise, you all know my telephone number. Very happy to talk to you, and see you soon. Bye-bye.