alstria office REIT AG

XETRA:AOX

Earnings Call Transcript 2021-Q1

[Operator]

Dear ladies and gentlemen, welcome to the conference call of alstria office REIT-AG regarding the 3 months results 2021. At our customers request, this conference will be recorded. [Operator Instructions] May I now hand you over to Olivier Elamine, who will start today's conference. Please go ahead.

[Olivier Elamine, Chairman of the Management Board & CEO]

Thank you very much, and welcome, everybody, to Q1 results presentation from alstria. Welcome from cloudy Hamburg this morning. I'm here in the room with Alexander Dexne, which is alstria's CFO; and Ralf Dibbern, which you all know well.Before we move in, just a short reminder of the disclaimer and notes regarding forward-looking statement and the duty to update. And with undue delay, we have a relatively short presentation for you today considering the activity of the company. I mean, in short, the first quarter of 2021 have developed pretty much in line with our expectations. With our revenue FFO in line with our full year guidance, which we are happy to confirm today. The balance sheet solidity, I think is not to be demonstrated anymore. EPRA NTA at around [ EUR 18.50 ] EUR 18.49 per share. And our net LTV still at a relatively low level of net LTV prior to the payment of the dividend. I guess most of the focus of the conversation we're going to have today is going to be about the underlying market as we have expected and we have, I think, communicated earlier. We don't expect the letting market in Germany to resume to a normality before we have more clarity on the health front, which currently we don't. And as such, the leasing results of alstria, again, does not come at least for us as a shock as they are pretty much where we would expect them to be. With 4,300 square meters of new leases and 12,600 square meters of extension, a slight increase in the EPRA. A vacancy rate, which is essentially linked to the acquisition that we've made in Frankfurt.If we move a bit to the portfolio. View as the portfolio value is at EUR 4.6 billion, which gives us an average size of the portfolio of 13,000 square meter. The valuation yield is still around 4.3% and a value per square meter at EUR 3,200. There was no revaluation of the portfolio in the first quarter of 2021. The next revaluation date is going to be at the end of this year. We have been collecting 99% of the rent, which is in the kind of normal scope of collection for alstria. With a total contractual rent currently at around slightly short of EUR 200 million. So rental collection is really -- there is nothing fundamental to report here. It's pretty much in line with a normalized year, which evolved between 99% and 101%. The letting volume, as I said, is subdue, which again doesn't come as a shock, considering the overall circumstances. The good news is the new leases that we signed have a relatively long maturity of around about 12 years. And we have extended some leases for maturity of 4 years on average, which in total, secure income of EUR 15.8 million. For the company going forward, we have an average rent per square meter, which is slightly up at EUR 13.09. And before you have the question in the appendix, there is a like-for-like rental growth for the company compared to Q1 last year, which is at plus 1.3%, which, all in all, I think, demonstrates the strength of the portfolio itself which is operating in the market, which is relatively weak as we speak for obvious reasons. We did execute one acquisition during the quarter, as you remember, we have raised EUR 350 million in May last year. With the view of trying to find a good opportunity in the market. It has proven a difficult exercise, but we are finding some of those opportunities right now. One of them is the one we've closed in Hanauer Landstrae in Frankfurt. We are looking at other opportunities in the key markets that we are investing in as we speak, and so we expect to deploy a bit more capital here. The acquisition price, all-in cost was EUR 32 million, which reflects a capital value of EUR 3,100 per square meter. With a relatively high vacancy, it's an asset that will require a substantial amount of CapEx of around EUR 10 million, and we hope to bring the market trend up to EUR 2.1 million. And underwrote this asset in line with our usual underwriting, so an unlevered IRR somewhere between around 7% is what the company is targeting on those acquisitions. So we are finding here and there are still assets where we are in position to deploy capital in line with our return criteria, but it's proven higher than what we thought last year. And the investment market is still very much resilient, and I'm sure we will have the opportunity to discuss that in the Q&A session.We will have tomorrow, our general meeting, which would be hold virtually. If you are a shareholder and you are registered, you will be able to access it from our website, we are proposing a dividend of EUR 0.53 per share. And post dividends, we will be paying, hopefully, the dividend, which will be approved tomorrow. Our net LTV would grow to 29%, and our cash at hand would reduce to EUR 359 million while the EPRA NTA will adjust from the dividend payment and still be slightly shy of EUR 18 per share.Briefly to conclude our presentation today. I think we have been pretty outspoken about the fact that we do not expect that the leasing markets are going to recover before we have some kind of visibility on the pandemic front. The feedback we're getting from the market, which is understandable from our perspective is most of the time are postponing that decision to lease-up new space. So we have a pretty full pipeline internal season, but no decision been made on the other side. So we do expect that by the time there is more visibility on the pandemic front, there is going to be a kind of strong recovery of the letting market itself. But until then, I think we need to expect that the leasing market is going to remain relatively weak. What's interesting is the investment market itself, albeit on lower volume is still relatively strong, and we're still seeing price increases across the board into the German real estate, which again, we don't believe is directly related to what's happening in the letting market is more related at the imbalance between offer and demand and the keep on inflow of capital into a German real estate, which is driven by the ECB monetary policy. And as long as that -- the ECB monetary policy remain as good as it is today, we don't expect any material change in the investment market, and we don't expect property value to kind of move materially away from where they are today, at least not on the way down, but more probably on the way up. So we have this kind of disconnect between what is happening on the letting market right now and what's happening on the investment market, but I think that's not something, which is new. It has been there. It has been with us for quite a while, and we expect it to stay with us for the foreseeable future.So that's it on our side, we really wanted to keep the presentation relatively short this morning to allow potentially more time for questions. And I'm happy to open the floor to the Q&A.

[Operator]

[Operator Instructions] And the first question is from Joe Bosch, BBS.

[Unknown Analyst]

I have 2 questions. The first one is, how do you think of this acquisition at EUR 3,100 per square meter versus buying your portfolio through share buyback at EUR 2,700, I think? Just in terms of compare and contrast between those 2 options of capital allocations? And related to that, as you also mentioned, I think you used the words, we plan to deploy a bit more capital here. Just wondering if that means you made the decision of acquisitions over share buyback over the rest of the year? And then my second question is, I think a few quarters ago, you mentioned that weak leasing will have -- was a bit of a leading indicator and would have some impact on vacancy down the line. And just noting the vacancy being up a little bit, 60 basis points. Maybe there are some specific reason, but I just was wondering, now the weak leasing of minus 85% for this quarter, should we expect that over the next few quarters, we will see this impact on vacancy? So even as leasing recover potentially towards the year-end, vacancy to continue on your rationale will potentially rise a little bit more from here. So any guidance on vacancy would be very useful.

[Olivier Elamine, Chairman of the Management Board & CEO]

Yes. I mean, let me start maybe with the last question about the vacancy. So the increase in vacancies this quarter is literally the impact of the acquisition in Frankfurt. So if you were to strike that out, our vacancy rate would be relatively unchanged to what it was before. Alstria vacancy rates usually grow between 8% and 11%, 12%. And that vacancy rate is basically reflecting also the kind of where we stand into the refurbishment cycle of the portfolio. We are now at the end of a refurbishment cycle, which explain why our vacancy rate was closer to 8% than to 11%, 12%. But so irrespective of how we are -- how the markets are performing, I would expect that -- actually, I don't expect, I will act in a way that the company increase its vacancy, so we can actually start launching the next refurbishment pipeline because we will need the asset to be vacant to be able to reposition them. So I think the first one. So I mean, again, irrespective of how the market are doing, we do expect that the vacancy of the company should go up, again, reflecting on the need to prepare the assets for the next refurbishment cycle. The letting market themselves, the fact that there are being weak does have also an impact on the vacancy, actually, not only at the company level, but across the market itself, vacancy rate and most of the German cities are up right now, albeit, they stay at historical low, but they're still up from where they were a year ago, somewhere around 100 basis points. And so what is happening, we believe, is that a lot of the decisions have been postponed. And therefore, you're seeing here kind of a delay into potential take up, which will take place. So the way we're looking at it from a business plan perspective on our portfolio, we have not assumed a lot of lease-up this year. But -- and we have kind of extended the vacancy period of the space that we currently have on the market just to reflect the fact that it's unlikely that tenants are going to commit massively right now, and they're going to wait to have more visibility on the -- on their business in essence. And on the pandemic front before they move back into leasing space. So we do expect that this also is going to kind of reduce the take-up within the portfolio this year and also across the market next year. And as such, I think it's fair to assume that our projection of the vacancy in the portfolio just take us more time to lease-up the space, which is vacant, which doesn't mean that we don't expect to lease it up. We just expect to lease it up a bit later. On the first one, with respect to capital allocation, I think it's an interesting question, which we have been discussing on those calls for quite a while. The conversation between share buyback and an acquisition in the market. I think the main difference between the 2 from our perspective is, I mean, in one case, you're returning capital back to shareholders. In the other case, you're basically reinvesting within the company's own business. And the way we're looking at it is you return -- so we're not necessarily looking at an arbitrage. We're not pretending that the share price is low or high, which you seems to say your -- the market is pricing your portfolio cheaper than it need to be because like if I look back 5 months before, the market was pricing my portfolio, like substantially higher than where the value of what were buying in Frankfurt today is. But we're more looking at it in terms of do we believe we can generate the returns that we expect on that kind of assets and yes, it probably makes sense then to deploy capital into that assets because we think it's going to be accretive for the company over the long run versus returning capital to shareholders. And this is really the way we're looking at it. The second thing I just wanted to highlight is and I think you can run the number quite easily. I mean, those acquisitions are being banked and funded essentially through that because this is a bond we've been raising. If you were to deploy the same amount of capital to buy back shares, then the impact on the LTV would be much more radical than buying back the asset themselves.As we mentioned before, I mean, share buyback is -- first of all, I don't believe they are necessarily antinomic once with the other. And for me, the share buyback is more a question of if you sell assets at a premium to NAV or close to NAV and then you can buy back your share and do the same transaction, so you're doing this kind of arbitrage. But we don't feel we are, at this stage, still lacking investment opportunities that we actually need to revert, I mean, send back capital to shareholder. And I know this is -- I mean, you can argue -- I could also argue the other way around. But this is clearly the view we've been taking so far.

[Unknown Analyst]

Okay. Just final follow-up. It might be a bit early, but just to build on what you said about preparing this next refurbishment cycle. So going back to your first answer. How do you think about the retail on CapEx currently. Obviously, the need for more clean air breakout options, et cetera, but also on the other hand, do you benefit from the government subsidies for modernization? How do you think about those different potentially offsetting factor as you look about the return on CapEx on your next cycle of other refurbishment?

[Olivier Elamine, Chairman of the Management Board & CEO]

I mean our return expectation on capping have not fundamentally changed from where they were before. We're still trying to underwrite assets and generate the kind of IRR, I was mentioning earlier. I think when it comes to the increased demand from flexibility from tenants, as -- I mean, I know it's just 4,200 square meters, but we just signed like an average lease length of 12 years on the new lease we've signed. So I mean we are also not seeing that kind of massive requirement for break option, et cetera, which is happening right now. Subsidies are increasing quite dramatically. I mean the way we're looking at subsidies as more as a way to improve the overall quality of the asset, which -- but not necessarily to enhance the returns. So we're not kind of counting on subsidies to deliver returns. We we're just counting on our own ability to reposition the assets. So I mean, you look at the asset that we acquired in Frankfurt, and I think if you run the number, the return that we try to generate by refurbishing that specific asset is coming both from the ability to lease-up the space and achieve higher rents, which is going to give you a cash of cash return somewhere around 5.5%. And then looking at where property value are today, so we have some kind of risk attached here to the valuation and the real estate market, you would be able to sell a building like this at somewhere around 4%, 4.5%, maybe 3.75% if it's depending on how it plays. And that's going to crystalize some kind of capital value gain, which going to get you to the 7.5%, 8% IRR return we're looking for. And so basically, I think as a management, you should be focusing on delivering the return, I mean, with yourself, as soon as you start counting on subsidies to get returns, then you enter into a very sloppy and dangerous territory.

[Operator]

The next question is from Thomas Rothaeusler, Jefferies.

[Thomas Rothaeusler, Equity Analyst]

A couple of questions on office market actually. I mean let's start with letting markets. You remain cautious for this year, as I understand. And there seem -- so there seems no sign of recovery yet. And when do you expect some kind of inflection point for letting markets, maybe also with some pent-up demand benefits. Is that something for next year, you expect?

[Olivier Elamine, Chairman of the Management Board & CEO]

So I mean, we really expect the inflection point to be when you have visibility on people going back to the office, in essence. I mean, as of today, most of the corporate, we're speaking to, they are into no rush whatsoever to make a decision. So they're extending eventually the lease in which they are. But nobody wants to commit on a long-term basis to a new letting, which again is very much understandable in the current situation. So as long as you have like potential lockdown and you don't have clear visibility on the fact that the economy is going to reopen, people are going to go back to the office. And that's going to be on a permanent basis, not on something which is just going to be for 2 months and then you go back into lockdown again. It's unlikely that you're going to see the rental market and the letting market redevelop -- I mean, differently from what it is today. I think this is something I hope we've been very, very clear, relatively early on, if I remember the presentation we've made in September last year. I think that was the first point we've made is as long as you have uncertainty on the health part, you're going to be trading in a very volatile environment with little visibility on the letting market. And our position on that has really not changed. We still believe that you need visibility from an office occupation perspective and the lockdown situations before you're going to be able to return back to a more normalized office market.

[Thomas Rothaeusler, Equity Analyst]

Maybe on the structural COVID impact on office demand. I mean, what's your take specifically on acceptance among employees for flexible desks? Which I believe is a key presentation to reduce space actually. Any experience you can share with us here?

[Olivier Elamine, Chairman of the Management Board & CEO]

I think this is also a point we've touched base on, I think, in our year-end presentation. I mean, first of all, you're absolutely right. In order to reduce space in the office because you're like having home office structure. And we do expect, by the way, that home office is going to become the norm in Germany for somewhere around 1 or 2 days a week in the future. But in order for that to have a material impact on the office demand, you need to introduce desk sharing policies. And I guess, when it comes to desk sharing, you're going to have as many answer as you're going to ask the question. Some people like it, some people hate it. The reality at the end of the day is, I mean, there is no easy way today to organize their sharing policies, and that's the debate about desk sharing is clearly not started with COVID, it's predated COVID. And so our view, but it's just worth what -- what we think and what we are. It's really not an academic or scientific base view is, desk sharing today, always end up being -- creating more problems than it's providing solutions. And then people usually tend to revert back to avoiding the concept. So what I'm trying to say is it's likely that you're going to have a lot of trial and error in the future. And when people are going to implement the home office policy, you're going to see people trying different number of things. And the net impact of all of that is probably going to be negative for the demand on the office space in the market. But it's going to be trial and error. So I would expect that over time, people are going to just go back and return to -- I mean, to less desk sharing and more fixed desk policy. But again, I mean, that's just my view, it doesn't mean much.

[Thomas Rothaeusler, Equity Analyst]

I mean, coming back on your point, what do you expect that people work 2 days from home, 3 days from office, maybe it seems like that's common base for an employee-based surveys. Any signal that also from employers that's their target? Or is there a big difference?

[Olivier Elamine, Chairman of the Management Board & CEO]

You mean our employer also looking at those 2 days a week?

[Thomas Rothaeusler, Equity Analyst]

Yes.

[Olivier Elamine, Chairman of the Management Board & CEO]

I mean I would think so. I think the -- if anything -- I mean, if we learned anything positive from the pandemic is that there are benefits from working from home. And there are kind of -- it can have a positive impact. But as always, you should not take an extreme or the other. So I think it will be wrong to be an extremist and think working from home is absolutely disaster, never work ever. And the same way it would be extremist to look at the office and say, not working in the office completely useless. So there are a certain number of moment in time where, where people benefit from working from home. And I do believe that employers are also looking into that. I think there are going to be discussion and debate about how does it work. I mean the difference between employers and employees, as far as I can see today in Germany is employee wants to have the option to work from home, and employers would like as much as possible to know when they're working from home and know that in advance. And this is basically where you're going to have the conversation. Because if employees have only the option of working from home that your desk sharing policy is already in limbo, if you can actually tell them you're going to be working from home on Monday, Tuesday, and then the rest of the day, you're going to come to the office, then you're more likely to be able to implement the desk sharing policy. But that's really the conversation, which is taking place right now, at least the feedback that we are getting is you have those 2 kind of -- it needs to be an option. It should not be an obligation. And as soon as it is an option, it's kind of increase the complexity of organizing it from an office capacity perspective. If it's an obligation, then it's much easier to organize. And that's, I think, from an office perspective and an office demand perspective, where we should probably monitor then the company who are going to be able to make it an obligation, are probably going to have more flexibility into the way they implement it.

[Thomas Rothaeusler, Equity Analyst]

Okay. Last one, maybe any chance we can get guidance for first half year property valuation?

[Olivier Elamine, Chairman of the Management Board & CEO]

Well, it's pretty easy because we're not going to do a half year valuation. So the value is going to stay where it is today.

[Operator]

The next question is from Sander Bunck, Barclays.

[Sander Bunck, Vice President of Real Estate Equity Research]

Two ones for me, please. First one is on your FFO guidance and kind of looking at your Q1 FFO as well. Q1 FFO looked pretty strong, basically due to some lower operational costs, I think you mentioned. Can you just highlight what those lower operation costs were and how would you think about the other 3 quarters in terms of FFO contribution, i.e., are there some one-offs in the first quarter that we should not bring over to the next quarters?

[Alexander Dexne, CFO & Member of Management Board]

I mean the way we're looking at Q1 results is where we're bang online, in line with our guidance. So the -- where you tend to see some -- as you put it, strong performance, this is, in our view, basically shifts from one quarter to another. I mean we were kind of planning measures on the properties to happen more in Q1, now with the overall lockdown situation, I think some of these measures and initiatives could not be implemented, but we still need to do those on the buildings. And I think we're just shifting from one quarter to another. So this slide, if you like, over performance against a fourth quarter average is something that is just a shift between quarters. And this is also the reason why we are confirming overall FFO guidance at this stage.

[Sander Bunck, Vice President of Real Estate Equity Research]

Right. Okay. So -- but you mentioned some operational cost savings, I think, that sounds quite different than what you're saying now. So was that not necessarily the case then? Or should -- how should I look at that?

[Alexander Dexne, CFO & Member of Management Board]

What we're seeing in real estate operating expenses, clearly, no cost savings. This is just postponements that we're moving from one period to another. Where we're seeing more like structural savings is in the G&A area, where I mean it's simply less travel, less costs that are related to external training. I mean these are savings related to the overall COVID situation.

[Sander Bunck, Vice President of Real Estate Equity Research]

So it's too optimistic to multiply the first quarter by 4...

[Alexander Dexne, CFO & Member of Management Board]

But this is what I'm trying to guide you to. I would not do that. I would rather stick to the overall FFO guidance we've given.

[Sander Bunck, Vice President of Real Estate Equity Research]

Okay. Understood. And the second question I had is slightly follow on from Thomas. I mean, obviously, no revaluation with the first half, but just more generally, I mean, if you are speaking to your valuers, I think I heard during the presentation that you mentioned that property values were broadly flat. Is that indeed correct? Or did I mishear that?

[Alexander Dexne, CFO & Member of Management Board]

Look, I mean, obviously, we are consistently in the investment market. I mean, we're speaking to brokers. We are evaluating investment opportunities as they occur, as they are presented by potential sellers and our view from the visibility of real estate transactions, we have seen on the proposals, on the assets, on the market that have been offered to us. We feel that the investment market is relatively strong, as Olivier also discussed. And this trend seems to be unchanged as to what we have seen as of year-end. And therefore, we said, look, there is not a great additional value, we're adding to have the value to do a desktop valuation midyear because from all the indications in the market we have, there is no volatility. The market seems to be rock-solid and stable. And therefore, I think we're just going to be very, very comfortable in holding and confirming the values and we rather feel that in a market of high volatility, it probably makes more sense to have like additional data points to give the market, to give our investors additional data points where we felt the investment market in 2021 as it presents itself to us today looks very, very strong and steady. And the steadiness is probably the most important judgment call we had to make here.

[Operator]

The next question is from Kai Klose, Berenberg.

[Kai Malte Klose, Analyst]

Just one question on the new acquisition in Frankfurt. Could you indicate a bit on the timetable about the targeted CapEx spending of EUR 10 million to intend to vacate the property in full? And meaning then to start on in 2.5 years? Or will it start sooner?

[Olivier Elamine, Chairman of the Management Board & CEO]

So Kai, thank you very much for the question. I mean the beauty of this property is actually it's not one single building, but it's a number of smaller buildings, which are linked one with the other. So we do intend to start with the -- I mean we just like closed the deal. So we have the keys of the property for maybe like 1.5 month now. So we are really looking at starting this, the refurbishment of the property as soon as we can. Obviously, we're going to have some times to prepare like looking for building permits and planning, et cetera. So I would expect that to be within the next kind of -- in our next refurbishment pipeline, in essence, this property is going to be in, which probably going to start at the end of this year.

[Operator]

And the next question is from Manuel Martin, ODDO BHF.

[Manuel Martin, Analyst]

Two questions from my side. How do you see in the office market, the demand and supply situation? Is there too much office space coming from construction during next time? Might that be a threat to the investment market or to the letting market? Or is it so far so fine? Do you have an opinion on that, please?

[Olivier Elamine, Chairman of the Management Board & CEO]

So over construction is, I think as long as I can remember, has always been a threat to letting market. And whenever you have a real estate match that start, it usually starts with over construction. There are a certain number of markets. I think there is an interesting chart that you could point to, which is the amount of space that is going to be delivered versus the -- and the amount of vacancy. So -- and just compare the 2, I think when you look at the German market today, there is a lot of space coming into the market, but vacancy rates are still relatively low. So I don't believe we're yet into a situation where you might end up into an overbuild situation. But it's clearly something that needed to be monitored. A market where you have the most completion going forward are obviously the market, which I believe are the most at risk. We usually tend to argue that all those leases or all those new buildings are pre-let. But the pre-let tenant is coming from somewhere. So the fact that the building is pre-let doesn't mean anything in terms of further vacancy coming down your way. And so it is something we are monitoring quite closely, but we don't think we get at a point where it's something, which is incredibly worrisome.

[Manuel Martin, Analyst]

Okay, I see. Second question on the office space during pandemic. There might be a trend that more space per employee might be needed. Could this be a countereffect of to -- versus home office and these kind of things and shared desk or whatever?

[Olivier Elamine, Chairman of the Management Board & CEO]

Yes, I think you could clearly make the case that if I just look into our office today, we're using more space. But that's just to make sure we are meeting the social distancing rule and regulation. But the likelihood is that this is just kind of a temporary effect. So I don't -- again, I don't believe that social distancing is going to be with us forever. Human nature is what it is. After a couple of years, we will probably revert back to what we were before. So you are going to have some kind of short-term effect, this is what I tried to mention before was the trial and error things. You're going to have different company taking different views, and all of that is going to have like a different impact on the market. So I assume some companies are going to continue to apply social distancing, other are not. There are all the discussion about the fact that you need more meeting room, less meeting rooms, you need more shared area, more common area, et cetera. So there is going to be a shift into the way office occupation is done. From our perspective, and I think this is something we also tried to highlight in the past. The mistake would be to believe that there is a before pandemic and after pandemic and that the world after pandemic is going to stay the same. Again, if we learned something about the last not 2 years, but 15 years is the office is not the office. I mean it changed all the time. And the difficulty that we have as an office property company is to make sure we follow those changes, and we're able to propose a product that is going to evolve all the time. So today, we're having the conversation about social distancing. Tomorrow, we're going to have it about whether we need more or less meeting rooms. But because the work environment is changing so fast and all the time, the office needs to change with it. So it's not a one-off process. It's not about how the office is going to look next year. It's an internal question. We're becoming like any other industry where we need to rethink the product we're offering to our clients all the time. And so I think what we need to do and what we're trying to do here at alstria is to get organized to make sure we have the means to listen to what's happening, and then we can implement that. But it need to be like a continuous process. It's not like a one-off. You're not going to have the office prior to the pandemic and the office post pandemic, and that office is going to be good for the next 20 years. That's not going to happen. It is -- we are into an ever-changing product line.

[Alexander Dexne, CFO & Member of Management Board]

And if I may chip in here because that's really on my mind listening to the discussion. I think we, as an industry, are currently really overvaluing and over discussing, overly discussing the COVID impact. I think what's going to have an impact on office demand is going to be the performance of the German economy. It's going to be the move and the transition from secondary to tertiary sector. It's going to be agglomeration of greater, greater cities or urbanization, the growth of the big city centers, it's not going to be COVID. And I remember a discussion, which was more back after 9/11 when people said, there's going to be a complete like shift of how people work, people are not going to go back in a Manhattan Skyscraper again. I mean this discussion lasted probably less than a year. So yes. I think we're also shaken and to a certain degree, our thinking at alstria is influenced by the pandemic and by COVID. But I think we all need to make sure that we're not like missing the forest for the trees. And I think what Olivier said before that we're more looking at the long-term trends like trying to look through the pandemic like pre-pandemic, what were the key trends in office. And actually, when I -- what I was discussing before, I mentioning before, I think what I missed is really the fight for talent, the war for talent. I mean, people, companies, corporates, have spent so much money in getting attractive offices in positioning themselves on the labor market. This is just a trend that is going to continue, but the quality of office is going to remain a key focal point for companies and corporates to position themselves. So I think we need to, at some stage, at least go back and look at those trends, that were there before, and they're going to be driving our industry way through the pandemic and thereafter. And I think as business people, as managers, it's -- it is our job and was our job actually in pre-COVID to be able -- I mean, to have the systems, to have the processes, the structures in place to deal with these changing requirements and then be able to come up with products that find its market, and we feel we're pretty well equipped and positioned to do so.

[Operator]

We have a follow-up question from Thomas Rothaeusler of Jefferies.

[Thomas Rothaeusler, Equity Analyst]

Just one quick follow-up on ESG and the relevance for property value. So our view, there's a kind of shortage of green buildings that could drive pricing. I mean, how do you look at this?

[Olivier Elamine, Chairman of the Management Board & CEO]

So we think that I'm just trying to phrase it appropriately. But in essence, we think that the kind of awakening of ESG, which has been triggered by the EU taxonomy and the fact that all the funds out there are just crumbling to see whether the fund can be still called ESG funds yes or no. It's probably going to trigger an interesting opportunity for a company like alstria because you're going to have tons of people who do not want to buy what we're buying because the building are not going to tick the boxes. And they're going to be willing to buy what we're selling because what we do is we buy the old dirty stuff, and we turn them into the nice ESG stuff. And so I think a lot of -- and it's not going to be an opportunity only for us. I think a lot of people are going to position themselves on that. But in essence, I do believe that for quite a while, while the industry is trying to figure out what exactly is a sustainable building because there's still -- I mean, no concrete definition of that. People are going to be focusing on like certificates, they're going to be focusing on ratings. They're going to be focusing on a number of things that can allow them to tick the box. And I do believe there going to be an opportunity because a number of real estate investors are just going to go into a tick the box exercise. And therefore, are not going to be buying what we actually want to buy, which is going to help us in acquisitions, but are going to be buying what we want to sell, which is going to help us in this pool. So we look at that, and we see that as a relatively interesting development, which should, in principle, be beneficial for the way we're looking at our business.

[Operator]

We have another question from Thomas Neuhold, Kepler Cheuvreux.

[Thomas Neuhold, Head of Research of Austria]

I have only one question also related to the -- with taxonomy. We have now since mid-April, the final rules of the Taxonomy Climate Delegated Act out, and I was wondering what do you think are these sufficient to trigger sufficient CapEx and the right CapEx in the property industry that it can contribute its required share for the CO2 reduction targets in EU and Germany?

[Olivier Elamine, Chairman of the Management Board & CEO]

No. I think that would be the short answer. And the reason why no, is first of all because refurbishment is barely a part of the taxonomy. I mean the taxonomy is only focusing on new buildings, is not focusing on refurbishments, which is one of the kind of shortfall of the taxonomy, which I think EPRA has been highlighting to the EU for quite a while, and us as a company, has been highlighting also quite a while. And so in essence, and I think this is a -- has been also very clear on that, the likelihood that taxonomy is going to change flow of capital is fairly limited. Apart from a number of people who wants to tag themselves as green, and that is going to be essentially fund, which are investing or like marketing themselves to retail, which in real estate, is a lot of open-ended funds. And therefore, they would need to apply the taxonomy, which, hence, my previous comments. But the fact that the fund sell a building to buy a green building doesn't help the Germany to achieve anything because you just -- I mean, you have not changed anything. You just move capital from something, which is assumed not to be green to something, which is assumed green. But your impact on real-life is 0. And this is really what's going to happen now. So you start to see fund running to the portfolio. And trying to sell the thing, which do not fit the taxonomy and buy the things that fit the taxonomy. So yes, they're going to be green from a taxonomy perspective, but the real-life impact is going to be 0.

[Operator]

So far, we have no further questions. I would like to hand back to the speakers.

[Olivier Elamine, Chairman of the Management Board & CEO]

Well, thank you very much for you joining us today. We're going to be on the road. We have a number of roadshows and conference, which we're planning to assist in the coming weeks. So I'm sure we'll have the opportunity to speak again. If you need any additional information, please don't hesitate to revert back to us. We're, obviously, available. We look forward to speaking to you on Thursday at our AGM if you would be available and you will join us. Otherwise, I will see you at the half year result presentation for the company. Thank you very much for your interest in alstria, and have a very nice day. Cheers.

[Operator]

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.