Patrizia AG

XETRA:PAT

Earnings Call Transcript 2018-Q1

[Karim Bohn, CFO & Member of the Managing Board]

Thank you, Mia, and good afternoon, everyone, to our earnings call on the Q1 2018 financials.After the closing of Rockspring, end of March this year, I'd like to recap a little bit on our journey over the last 6 months and also how our industry has developed over the past 5 years. And also, I'd like to talk about what's in the center of what we do and what drives us every day, our clients. With SPI, TRIUVA and Rockspring, we now are a top European real estate investment manager with close to EUR 40 billion of assets under management. We are a true pan-European player, and what is even more important, we have a very clear vision going forward. We want to become the leading global partner for pan-European real estate investments.So how is this vision linked to our business and our strategy? And what does becoming the leading global partner for pan-European real estate actually means for us? Our industry is rapidly consolidating with fewer and bigger players in the game. And this consolidation will continue to accelerate. The average AUM of the top 10 European investment managers was little less than EUR 24 billion in 2012. And today, it's roughly EUR 40 billion, which is an increase of over 70% in the last 5 years. And as the market has grown, we, at PATRIZIA, have grown as well. With the acquisition of SPI, TRIUVA and Rockspring, we belong to the top 10 European players today, which has put us on the radar screen of many large global institutional clients.If you look at the market today, you'll also see that some of the well-known asset managers either disappeared or were eaten by the competition, such as CORPUS SIREO in Germany, Henderson, Aberdeen or SEB Asset Management. And you see how important size is to be relevant in our market and, more importantly, to our clients. And this development is to a large extent triggered by the changing requirements of our clients. Institutional clients, who are also getting larger, want to diversify their investments on a global scale. And these global clients want to work only with a selected number of large European investment managers that offer diversification across all asset classes, risk profiles and across all key European markets. These larger clients want to rely on strong and stable partners that deliver the best performance and client services across the European countries. And PATRIZIA has become a major and well-trusted investment hub in this category.Will PATRIZIA be able to adjust -- to digest the recent and the future growth initiatives? Yes, because change has always been a constant in the development of PATRIZIA. PATRIZIA was founded as a German resi specialist in 1984. We went public in 2006 and became a public company, meeting all obligations concerning transparency and compliance. In 2010, we took over the German investment platform, LB Immo Invest, and so become a full commercial service provider. In 2013, we acquired U.K.-based investment manager, Tamar Capital, and became a pan-European asset manager. In 2015, we expanded our fund business with the launch of PATRIZIA GrundInvest, addressing all private client needs. And in 2017, we acquired the fund-of-funds business, SPI; we acquired TRIUVA; and we acquired Rockspring.And let me underline again. Now with SPI, TRIUVA and Rockspring, we have a really exciting opportunity ahead of us to become the leading global partner for pan-European real estate investments. And our recent history shows our ability to constantly transform and adapt is key for our future success. But we have already said this several times. We do not grow for the sake of growth. We grow to meet the needs of our clients and to enhance the stability of our company. And again, financial and real estate markets are changing rapidly and so are our client needs and expectations.So what are we seeing with our clients? We're seeing that clients are more and more sophisticated in their demands and expectations of performance from their chosen investment managers. Clients increasingly expect larger and more diverse pan-European products. Our German clients are considering more pan-European products, and our global clients expect pan-European product as well. And we need to keep a sound balance to serve all our clients across Europe.Global clients are looking for strong and trustful European partners, with an outstanding and long-dated track record who can fulfill all their investment and service needs. They look for a one-stop shop. At the same time, clients also expect a strong level of expertise. Clients want high-quality ideas backed by thoughtful in-house research, and they expect the highest quality of execution.And finally, clients seek transparent, comprehensive and accessible performance reporting. And our position is very, very strong when it comes to local expertise and presence. Having competent teams on the ground and of relevant real estate investment markets sets us apart from our competitors. This is a key competitive advantage that we will maintain and that we will strengthen.With the acquisition of TRIUVA and Rockspring, we have doubled our asset management to almost EUR 40 billion, and we are integrating 4 organizations at once. As a consequence, it has become clear that we will have duplications, which we are addressing with high priority. And we have selected a new senior leadership team out of the 4 companies that is empowered to review their organizations and teams, who will then structure and look for all efficiency gains possible in their respective areas. And this is one of our highest priorities this year.The changes to some key leadership positions you might have noticed in the press recently, and that actually reflects our integration approach. We choose the best of all worlds, given we not only acquire companies, we much more acquire excellent and well-connected investment professionals that will drive our organization forward. What is important to all of us is that we build a highly effective organization that supports us in fulfilling our full potential as a company.With that, let me now move to our Q1 2018 results. And I'm pleased to say that we had a very strong start into 2018, building the bases for another successful business year for PATRIZIA.Moving to Page 2 of the presentation. The Q1 2018 results reflect the new level of business activity and profitability across the board for PATRIZIA. We have increased our AUM by 78% to EUR 39.1 billion, of which TRIUVA contributed EUR 10 billion and Rockspring contributed EUR 7.2 billion.With regards to the geographic breakdown, EUR 24.7 billion or 64% of our AUM is related to Germany, and EUR 14.4 billion or 36% is related to assets outside of Germany. With that, our operating income increased significantly to EUR 42.7 million in the first quarter of 2018 from EUR 9.3 million in the first quarter of 2017. And both management fees, performance fees as well as sales proceeds from the further reduction of the group's principal financial investments were a major driver to achieve that operating income.Moving to Page 3. We do confirm our operating income guidance for 2018 of between EUR 85 million to EUR 100 million. In a very transparent way, I'd like to walk you through the components of our first quarter results. Management fees of EUR 37.4 million are up 63% from EUR 22.9 million in the first quarter of 2017, and that is due to the full quarter inclusion of TRIUVA and with that the growing AUM base that led to the strong growth. The EUR 37.4 million represents 22.5% of our midpoint of the full year guidance for 2018.Transaction fees of EUR 5.1 million are somewhat down compared to the EUR 8.1 million in the first quarter of '17 due to the softer transaction markets or activity overall in the first quarter of '18 compared to the first quarter of 2017. The transaction fees of EUR 5.1 million represent roughly 10% of the midpoint of our guidance.Performance fees increased significantly from 0 in the first quarter of 2017 to EUR 22.7 million in the first quarter of '18 due to strong performance fees in core investment products, both in revenues with EUR 10.3 million and in income from participation with EUR 12.4 million. The total of performance fees represents 37.8% of the mid-term of the full year guidance.Net sales and co-investment income of EUR 24.6 million is up from EUR 7.4 million in the first quarter of 2017 due to the higher net sales in rental revenues of EUR 14.1 million compared to EUR 3.8 million in the first quarter of '17 and co-investment income of EUR 10.5 million compared to EUR 3.6 million in the previous year's period. The EUR 24.6 million there represent 63% to more than half of the midpoint of the full year guidance.And ultimately, net operating expenses increased to 43.7% (sic) [ EUR 43.7 million ] by 57% compared to EUR 27.8 million in the first quarter of 2017, mainly due to the acquisition of TRIUVA and SPI. So the cost growth is well below revenue growth. On a gross basis rather than a net basis, costs increased by 33% compared to 63% increase in management fees. The EUR 43.7 million of net operating expenses represents just below 20% of the mid-term of the full year guidance.Moving to Page 4 of the presentation. Let's talk about the overall income streams. Our acquisitions, in particular, contributed to the increase of our base management fees. Total service fee income is up 36% to EUR 65.2 million, driven by outstanding investment performance and the first time consolidation of TRIUVA. Management fees are up 63%. Transaction fees, as discussed, are down from EUR 8.1 million to EUR 5.1 million. And the strong investment performance, especially of co-investments, yield substantial performance fees of EUR 22.7 million. The inclusion of Rockspring will further contribute to the total service fee income from the second quarter of 2018 onwards.Let's talk a little bit about the transaction activities in the markets on Page 5. In the first quarter, we closed EUR 700 million of transactions, compared to EUR 900 million of transactions in the first quarter of 2017, which is roughly in line with the reduced transaction activity in the first quarter. In the first quarter of '17, the European market volume was roughly EUR 64.4 billion compared to EUR 48.4 billion in the first quarter of 2018. And with that also transaction fees have come in lower in the first quarter with EUR 5.1 million compared to the EUR 8.2 million in the previous years. However, we cannot see indicators for the change in the overall market. And in general, we expect the market to be up again during the remainder of this year and already see signs in April and May that the market is actually picking up.In 2017, the total market volume in Europe amounted to roughly EUR 260 billion. And we, again, expect a radically high transaction volume in 2018 with anything between EUR 200 billion and EUR 250 billion. So it's actually the first quarter will be too early to make a judgment or talk about indicators for the overall market environment.Coming to performance fees on Page 6. The performance fees of EUR 22.7 million in the first quarter emphasize again our very strong investment and asset management capabilities and investment track record. And a weighted average IRR of 18.6% directly translates into our strong performance fees. And for the entire year of 2018, we again expect total performance fees to come in between EUR 50 million and EUR 70 million, and we believe we are well on track to achieve that number. PATRIZIA continues to be well positioned for further growth and for the further strategic developments.Coming to Page 7 of the presentations -- of the presentation regarding balance sheet and our liquidity. Our balance sheet ratios have improved since the end of 2017. Total equity ratio went up from 60.3% to 62.1%, and the net equity ratio amounted to 77.1%. And with that comes a total availability liquidity of just above EUR 500 million at end of the first quarter of 2018.I'd like to conclude the presentation on Page 8 with an outlook for the remainder of 2018. As I said at the beginning of the presentation, we stick to our full year guidance of EUR 85 million to EUR 100 million operating income. And the strong performance in the first quarter was more or less in line with our expectations for the full year and for the first quarter.The integration of all the corporate acquisitions is well on track. The consolidation of the -- the consolidation -- financial consolidation of SPI and TRIUVA has been successfully completed, and Rockspring will be included in the P&L from Q2 2018 onwards. We do confirm again that we expect organic growth in AUM to reach roughly EUR 2 billion to EUR 3 billion, and the transaction market is expected to pick up, resulting in an annual transaction volume of between EUR 4.5 billion and EUR 6.5 billion, which will translate into a total service fee income of EUR 267 million to EUR 302.5 million, and with that an operating income of EUR 85 million to EUR 100 million.Thank you for your patience. I will now give back to Mia for the Q&A. Thank you.

[Operator]

[Operator Instructions] And the first question is from the line of Thomas Neuhold with Kepler Cheuvreux.

[Thomas Neuhold, Head of Research of Austria]

Actually I have a couple of questions today, and I think the best is just to tackle them one by one. Firstly, you mentioned that you have seen a strong decline in transaction activity in Q1 and you expect a pick up during the year. Can you give us some reasons why you think that the transaction activity declined so strongly in Q1 '18? And then also why you think that we should see a pickup in the remaining 3 quarters of the year? That's the first question, and then I have a couple of follow-ups...

[Karim Bohn, CFO & Member of the Managing Board]

Thomas, let's take them one by one as you said. Now it's actually not unusual. The first quarter comes in usually weaker than the average of the entire year. And that's, in particular, the case when we had a very strong fourth quarter where everyone try to get deals over line before year-end. That was the same case with 2017. 2017 had a very strong fourth quarter. And therefore -- and that was followed by a somewhat weaker first quarter. We do see already a pickup in the market activity in the deals we see, the deals we negotiate and we have in the division's pipeline. In Galileo, a deal we announced, I think today, it was total of EUR 350 million building in Frankfurt shows that the market is quite active also when it comes to larger tickets.

[Thomas Neuhold, Head of Research of Austria]

Okay. And then the next question is actually a follow-up on this one. You mentioned that you target EUR 2 billion to EUR 3 billion organic growth. I was wondering if you can provide us some details on your deal pipeline in terms of size, sectors and countries, if you can.

[Karim Bohn, CFO & Member of the Managing Board]

Well, we've never been, on these calls, specific about the deal pipeline. But with a -- I think, if you look at the past, we do see on a [ pan-European ] basis across all product. I think the vast majority of the deal pipeline and our confirmation of the confidence of our organic growth and the transaction volume expected for this year, I think, shows you that our deal pipeline is sufficiently filled to get to these targets at the moment.

[Thomas Neuhold, Head of Research of Austria]

Okay. And the next question is on the unchanged guidance. I understand that there are many moving parts, especially transaction and then performance fees. But if I look on Page 4, management fees, you had in Q1 already EUR 37.4 million. If I multiply that by 4, I have already EUR 150 million, and that's basically with our [ AUM ] of EUR 31 billion because Rockspring did not contribute to the management fees, if I'm correct. So basically, if I do the math, you will add the Rockspring for 3 quarters and also plan to increase AUMs internally by EUR 2 billion to EUR 3 billion. I would rather assume that the management fees should be closer to EUR 190 million to EUR 200 million and not to EUR 160 million to EUR 170 million. Is there a mistake in my calculation? Or is the management fee of Rockspring very low? Or is it just a conservative guidance from your side?

[Karim Bohn, CFO & Member of the Managing Board]

Well, first of all, after the first quarter, we feel it's too early to change the guidance. And as I said, we are -- we feel very confident with the guidance. The first quarter wasn't a surprise. And one thing you have to remember in your calculation, which was right, but also costs came in at just 20% with some timing delays. And also when you do add the revenue items, you also have to include an uptick or a catch up on the cost guidance. And that's why all in all, we feel comfortable. And when we -- and I think we always used to be rather cautious in the first quarter and gave more guidance -- or more specific guidance on the outlook throughout the year, and we will again.

[Thomas Neuhold, Head of Research of Austria]

Okay. And the next question is related to the consolidation of the recent acquisition. I was wondering if you want to -- if you can give us an indication how the organic revenue and operating income growth would look like if one exclude the recent acquisitions in Q1.

[Karim Bohn, CFO & Member of the Managing Board]

You mean excluding the recent acquisitions?

[Thomas Neuhold, Head of Research of Austria]

Yes, yes.

[Karim Bohn, CFO & Member of the Managing Board]

Well, you know what, this is actually -- this is kind of a tough question. I'll tell you why. We are -- we started to integrate TRIUVA and reorganized teams literally in the second week of January. So as of today, it is almost impossible to tell which part of the transaction team came from TRIUVA and by now which part of the transaction team came from Rockspring. And we changed our operating model under the new -- in the new world under the new regime where we merged 4 companies to a pan-European functional model across all 4 companies. So as of -- and that makes it very difficult for us to really differentiate whether a professional from Rockspring, TRIUVA or PATRIZIA or SPI has contributed to a new deal or a new fund. What I can tell you though is performance fees, for example, they -- in the first quarter, they all came out of PATRIZIA vehicles.

[Thomas Neuhold, Head of Research of Austria]

Okay. Maybe a follow-up here. I mean, if you look at the combined cost base of all the companies, PATRIZIA and the acquisitions you made, what do you think at the end of the day how much cost savings will you be able to realize once the integration is done?

[Karim Bohn, CFO & Member of the Managing Board]

Well, I mean, we've been -- as you know, we've been shy of communicating a number. Because we are -- as I said, in the very beginning of this presentation, we are in the process with our leader -- senior leadership teams going through their new organizations. What we -- I think what we can say though is that we do expect efficiencies in the lower double-digits million area to come in -- to be fully realized, obviously, in 2019.

[Operator]

Next question is from the line of Andre Remke with Baader Bank.

[Andre Remke, Co]

Starting with the first question on the operating expenses, this was EUR 44 million in the first quarter. So again, as it relates to the guidance, you have guidance of EUR 210 million, I think -- EUR 210 million to EUR 230 million for the year-end total. So to do the math here, we need an increase for the last 3 quarters to roughly EUR 60 million. What could be the reason for that? So -- it wasn't fantastic first quarter, but what would be the reason to really -- on the operating cost side to have higher levels over the next couple of quarters? Are there special line items here to -- worth a mention?

[Karim Bohn, CFO & Member of the Managing Board]

Well, first of all, yes, as I said, the cost in the first quarter represent, compared to the midpoint of the guidance, roughly 20%. One part, which is obviously missing in the first quarter is the contribution of the costs coming from Rockspring. That's one part. And then there is a part that is always there. Just to give you a few examples, the AGM for example, happens -- is in June. So AGM costs coming in June. There are always delays. I think what we saw historically is that the first quarter in terms of total expenses was always below the annual quarterly average. And having said that though is we -- I mean, we do want to stay disciplined. And I think last year, on a cost basis, we also came out below the guidance because we've been very disciplined with new hirings, and we've been very disciplined with G&A expense. But at this stage, we do stick to our guidance, in particular, because of Rockspring will be included and because of some expense delays, which we -- with some expense, which will come throughout the year, such as the AGM.

[Andre Remke, Co]

Yes. Well, I would not expect that the AGM costs some millions, but -- well, it's okay here. Another question is today EUR 350 million deal I saw this came from TRIUVA fund. How can we read this? In which line we would see a potential earning contribution here? Is it included or would it be included in the transaction fee or in the performance fee? So as TRIUVA is a new business for you, probably you can describe the way how it works into your P&L?

[Karim Bohn, CFO & Member of the Managing Board]

Well, the disposal of Galileo is just like any other disposal out of a larger PATRIZIA group. And you will see the disposal in 2 line items: one, you will see an entry in the transaction fee; and you will see performance fees in the second quarter coming out of the disposal of Galileo.

[Andre Remke, Co]

And the second line was transaction fee and? Sorry.

[Karim Bohn, CFO & Member of the Managing Board]

Performance fee.

[Andre Remke, Co]

Performance fee. Okay, okay. Yes, okay, okay. And the last question then after the inclusion of the acquisition, well, you mentioned you are working on efficiency programs, et cetera, et cetera. You already gave an indication of a lower double-digit amount effective from 2019. Will we hear something from you later in the year? Or will you say, "Well, it's all integrated, and we cannot split up the efficiency gains or synergies?"

[Karim Bohn, CFO & Member of the Managing Board]

Well, we -- once we went through the exercise in the summer, we will share the guidance with you, the same number which will be shared with entire PATRIZIA, but we will be open about it, what we expect to see on an annualized basis in 2019.

[Andre Remke, Co]

Okay. Then we will see a clear indication what is the annual run rate.

[Karim Bohn, CFO & Member of the Managing Board]

Yes.

[Operator]

And the next question is from the line of Georg Kanders with Bankhaus Lampe.

[Georg Kanders, Investment Analyst]

Could you please provide us with a split of the result from participation? Hello?

[Karim Bohn, CFO & Member of the Managing Board]

Yes, yes, I can. Let me just find it in my P&L. The total income was EUR 15.7 million, of which roughly -- or of which the majority came out of GBW.

[Georg Kanders, Investment Analyst]

So the performance fee contribution from -- in this line is also due to GBW, so this EUR 12.4 million, I think?

[Karim Bohn, CFO & Member of the Managing Board]

The EUR 12.4 million comes from GBW. And what we account for under income participation is all our core investments. So it includes GBW performance fee -- it includes GBW shareholder contributions, which basically is the management fee. It includes, for example, the RETT blocker we still hold for the Harald portfolio, which was acquired by Deutsche Wohnen. So it's a mix of items but the majority in the first quarter came out of the -- of GBW performance fee.

[Georg Kanders, Investment Analyst]

Yes, so -- and also the -- I think you have also annualized this dividend from GBW in this.

[Karim Bohn, CFO & Member of the Managing Board]

Yes, exactly. The shareholder contribution, which is basically the management fee, which comes in at just below EUR 2.5 million per quarter.

[Georg Kanders, Investment Analyst]

Yes, okay.

[Karim Bohn, CFO & Member of the Managing Board]

And we -- exactly. And that's basically -- we did not...

[Georg Kanders, Investment Analyst]

But usually this performance fee from GBW is booked in the fourth quarter?

[Karim Bohn, CFO & Member of the Managing Board]

Oh, we also had a performance fee coming out of GBW in the fourth quarter, if you remember. And we were now able to also collect the performance fee actually in the first quarter and there might be even a smallish part coming in the second quarter.

[Georg Kanders, Investment Analyst]

Okay. So -- in the second -- and then you also expect the normal one for the last quarter?

[Karim Bohn, CFO & Member of the Managing Board]

Yes.

[Georg Kanders, Investment Analyst]

Then I have another question regarding your -- you mentioned that you sold off your principal investment. But if I add it up in the balance sheet, it still amounts more or less to the same amount. So is this amount now...

[Karim Bohn, CFO & Member of the Managing Board]

Yes because what you -- that's right. The face of it looks like it hasn't changed. But what is also included in the balance sheet is the warehousing for the private clients business. I'm sure we talked about this. When we -- the BaFin regulation requires that you're only able to place assets in a closed funds with prior clients if you bought the asset beforehand. And that's what we do. We buy the asset. We basically warehouse it, and the BaFin approves the close-ended fund. And then we go into distribution. And with the distribution, it's -- it is deconsolidated again from the balance sheet. And there's also -- and you will see that even a line in the P&L, which is called income from the deconsolidation of subsidiaries, and this is the line where you notice when a -- an asset from private retail fund is deconsolidated. And that's basically neutralized from the P&L through the line I just mentioned.

[Georg Kanders, Investment Analyst]

And so could you probably mention the split more or less? Is this is now everything or is this 50-50?

[Karim Bohn, CFO & Member of the Managing Board]

No, it's not 50-50. Let me look it up quickly.

[Operator]

Mr. Kanders, is that answer to your question?

[Karim Bohn, CFO & Member of the Managing Board]

What? No, it didn't. But now I have. It's EUR 21 million coming out of PGK.

[Georg Kanders, Investment Analyst]

So EUR 20 million from warehousing assets?

[Karim Bohn, CFO & Member of the Managing Board]

EUR 21 million, yes.

[Operator]

And the next question is from the line of Kai Klose with Berenberg.

[Kai Malte Klose, Analyst]

I had a question regarding -- on Page 10 of the interim report where we had minus EUR 15.4 million in changes of inventories -- changes in inventories. Could you indicate what was the split between the -- reflecting the book value of principal investments sold and the cost of materials allocated to inventories? And then the next question would be on Page 9, maybe a follow-up to the previous question. So EUR 121.8 million of principal investments, maybe you could split that up a bit more in detail and what is this behind? And the third question would also be on Page 9 regarding the EUR 216.5 million GBW performance fee claims which you have shown here. Maybe you could elaborate a bit more on the underlying calculation of asset?

[Karim Bohn, CFO & Member of the Managing Board]

Kai, there was a lot of questions very quickly asked. I'll start with the last one because that's the one I can surely remember, Kai, which is on GBW on Page 9. We are now with -- under IFRS 9, we're now required to account for all co-investments at fair value, and that also includes the present value of performance fees, in particular -- in this case, in particular for GBW. And the split you see on Page 9, the EUR 127.6 million is the fair value of our co-investment of EUR 52.2 million and the EUR 216.5 million is the fair value of the performance fee or basically the present value of the performance fee discounted back from 2023.

[Kai Malte Klose, Analyst]

Yes, I understood that. But how was it calculated? Could you give some details on the calculation method of the performance fees, just to be clear?

[Karim Bohn, CFO & Member of the Managing Board]

Remember, we get -- the required IRR hurdle is 20% -- is 11%, and then we get 20% between -- of the profit basically between the acquisition and the disposal value. This is how it's calculated.Kai, can you ask -- we had 3 questions. What was your second question?

[Kai Malte Klose, Analyst]

The second question was maybe it was a follow-up on the previous question regarding the EUR 121.8 million as principal investments shown on Page 9 the -- in the interim report. Does this include the -- so the temporary holding of properties for the closed-end funds? Or is there anything -- does it belong to anything different?

[Karim Bohn, CFO & Member of the Managing Board]

It's the same number I just mentioned to Georg. That's why it looks odd, that the investments -- the capital at fair value is higher than the asset under management, but this is because it does include, again, the part of the assets we hold for PGK.

[Kai Malte Klose, Analyst]

And may I ask -- I think you also won a development in London in Barking. Would that still appear on that table?

[Karim Bohn, CFO & Member of the Managing Board]

Barking is a principal investment. So it would be under principal investments.

[Kai Malte Klose, Analyst]

So the EUR 121.8 million includes Barking as well as properties hedged temporarily for the closed-end funds?

[Karim Bohn, CFO & Member of the Managing Board]

Yes.

[Kai Malte Klose, Analyst]

Okay. And then the second question was regarding -- was on -- regarding 10, Page 10, the split of the changes in inventories between the book value of principal investments sold as a minus and the cost of material allocated to inventories as a plus, as you saw in the footnote on the right-hand side.

[Karim Bohn, CFO & Member of the Managing Board]

The change in inventories, the EUR 15.4 million, that basically decreases in inventories by EUR 15.3 million, but the increase of 9 -- of EUR 0.9 million [indiscernible]. And usually, the increase comes from CapEx measures, which are capitalized.

[Kai Malte Klose, Analyst]

Okay.

[Karim Bohn, CFO & Member of the Managing Board]

And the decrease to inventories mainly comes from the disposals -- from disposals, we did at [ business ] sites, more specifically at Plot 9 and 10 at Manchester First Street. That was the majority of it.

[Kai Malte Klose, Analyst]

Okay. And may I ask a last question regarding Page 3 of your presentation where we have the EUR 24.6 million net sales coming -- EUR 24.6 million coming from net sales and co-investment income. Could you indicate what was the transaction volume of the co-investment income shown in that number?

[Karim Bohn, CFO & Member of the Managing Board]

Well, the co-investment income in total was EUR 10.5 million, and that -- and the majority of that came out of WohnModul based on the -- and that relates more or less to the disposal of, I think, it was again half in Düsseldorf, which we sold this year.

[Kai Malte Klose, Analyst]

So it was more of kind of one project or several for -- the EUR 10.4 million co-investment income was coming from mainly one larger project? Or was it a couple of sales other than WohnModul?

[Karim Bohn, CFO & Member of the Managing Board]

Well, it was -- there are always a couple of sales, because they are privatization projects in WohnModul. But the EUR 10.5 million mainly relates again to [indiscernible] which was -- where the disposal we signed last year and closed this year.

[Kai Malte Klose, Analyst]

Okay. And the very last question. There was a press article that there will be a fourth -- no, fifth board member of PATRIZIA to be appointed soon. Given the context of the education of TRIUVA and Rockspring, could you comment on that as well? Also what kind of, let's say, restructuring expenses for redundancies costs, et cetera, you -- which may accrue for the remainder of the year?

[Karim Bohn, CFO & Member of the Managing Board]

Well, it's okay. I mean, the -- it's Robert Gilchrist, who was the CEO of Rockspring and a Senior Partner of Rockspring, will become a member of the what we call the extended board. Now he's not -- technically speaking, he's not a board member of the AG board, but he is -- and he doesn't have the same, I'd say, legal right and responsibilities as a AG Vorstand, but he is part of, we now call, extended board. He will be the Chief Strategic Officer. And that actually reflects that we actually mean what we said that we want to partner up with [ box firms ] ideally with companies which are run by a partnership. And Robert, who was -- who has been in the business, I think, for 30 years, a very senior member, very experienced, and we are very happy that he has actually -- has become part of the larger board. Because strategically, it will be important to also have the partnership represented in the senior leadership of PATRIZIA.

[Operator]

[Operator Instructions] And the next question is from the line of Manuel Martin with ODDO.

[Manuel Martin, Analyst]

Yes, 2 questions, if I may. Question one is also again regarding to a press article where it talks about kind of reshuffling in the personnel of PATRIZIA. For example, TRIUVA CEO Wenzel Hoberg leaving the company at 30 April and some other persons. Could you elaborate a bit on that? Is that part of the restructuring process or something else?

[Karim Bohn, CFO & Member of the Managing Board]

Well, Manuel, it's a little bit of both. Well, first of all, as I said initially, the entire integration process had one aim, and that is combine the best of our worlds. That means that we pick the leadership out of all 4 companies and took what we thought -- the best senior leaders for their respective business areas. And with that, we obviously had to replace former senior members of PATRIZIA, former senior members of TRIUVA and also senior members of various groups of Rockspring. But this is potentially very much in line with our integration synergy. Wenzel Hoberg I say was a little special. Wenzel was hired at TRIUVA to prepare the company for disposal and to lead the company into a successful disposal. And that was his project. This is what he wanted to do. And now he decided himself to go back to Canada, what he wanted to do all along.

[Manuel Martin, Analyst]

Okay, I see. Okay. My second and last question is regarding acquisitions. I know that you're very, very busy with integrating the acquisitions of the fourth quarter. But is there any room for potential other acquisition if something -- if an occasion appears on the radar screen of PATRIZIA? I mean, at least the war chest is fully filled.

[Karim Bohn, CFO & Member of the Managing Board]

Yes, talking about the -- what you said room financially, we certainly have the room with EUR 500 million of cash. And yes, we have our hands full with the integration and with business continuity. But as you've seen in the last quarter in 2017, when -- you usually have the luxury to determine the time when you to do acquisitions. And we always said, and that goes both ways, what is important to us is to buy and integrate the right target rather than looking at the timing. I think as of now, talking about large target, it's more likely than not that we aren't just going to buy any other large target this year, but what we've always done is pick up smaller targets along the way. So this might happen, but it won't have a significant impact on the balance sheet or the operating income this year, if this would happen.

[Operator]

[Operator Instructions] So we have no further questions. I hand it back to Karim Bohn for closing comments.

[Karim Bohn, CFO & Member of the Managing Board]

Thank you, Mia. Thanks, everyone, for participating on the call. I look forward to the second quarter, well, to talk to you in the next quarter. If you have any questions in the meantime, I'd see some -- I'm sure some of you I will see on various roadshow occasions throughout the summer. But if you have any questions, please reach out to us. Thank you. Enjoy the rest of the week.