TAG Immobilien AG

XETRA:TEG

Earnings Call Transcript 2021-Q3

[Operator]

Dear ladies and gentlemen, welcome to the conference call of TAG Immobilien AG regarding the publication of the interim statement Q3 2021. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Martin Thiel, CFO, who will lead you through this conference. Please go ahead, sir.

[Martin Thiel, CFO & Member of Management Board]

Yes. Many thanks, and good morning, everyone. This is Martin from TEG. Many thanks for dialing in, in today's conference call for the third quarter results. And we will go through the results quite briefly of the first 9 months in the third quarter, and then, of course, discuss our guidance for the financial year 2022 that we have issued today. Let's start on Page #4 of the presentation, which is also available in our website if you want to download it.Page 4 shows the highlights for the third quarter and the first 9 months of 2021. Looking at the operational performance of the German portfolio, vacancy was slightly reduced from 5.8% in the previous quarter to 5.7%. Today, vacancy at the end of October was around 5.6%. So we are at least on a positive track again. In the total portfolio, vacancy was around 6% nearly unchanged to the previous quarter. Like-for-like rental growth, including vacancy reduction at 1.7%. That compares to 1.6% in the previous quarter and a slight increase in FFO or a more stable FFO, EUR 46 million in the third quarter compared to EUR 45.9 million in the second quarter of 2021. In the EPRA NTA and in the LTV, no big changes. The next major changes and should be the next positive changes will happen at the end of financial year 2021. So in the fourth quarter when we will carry out our second valuation for 2021.Looking at acquisitions and disposals in Germany. So far, we have acquired no new units in 2021. Markets, as discussed in previous call, are simply highly competitive. I mean, what is the good news on the valuation side. That means increasing prices is then, of course, for the acquisition side not the best news. But I mean, we stay optimistic that we will be able to source new acquisitions also in the future, but it's clear the market is extremely competitive. Location disposals, we continued our disposal program for non-core assets of 343 units disposed, slight book profit of EUR 400,000, 7 months above 20x. So this is more an ongoing disposal program that we carry out here in Germany now for 4 years.Turning to Page #5, looking at the operational performance in Poland. Again, we have definitely good news. Increased revenues from sales in the first 9 months of 2021 in comparison to 2020 and also our strongly increased results operations Poland, and that's going directly to the FFO II. So this result is today really completely a sales result, and it ended up at EUR 6.1 million compared to EUR 2.5 million in the previous year. Looking at the total pipeline that we have contractually secured. Also this numbers increased, not only in comparison to the previous year, also in comparison to the previous quarter. We are now in the build-to-hold units at a contractually secured pipeline of 8,500 units and the build-to-sell units pipeline comprises 3,600 units.Today, we're publishing our new guidance for 2022, but I'll first mentioned that the guidance for 2021 is unchanged. So we keep the FFO guidance at the midpoint at EUR 180 million. This should be definitely good achievable, when you look at the results that translates into an FFO per share of EUR 1.23, and the dividend guidance for the financial year 2021 paid in 2022 of EUR 0.92. The new guidance for 2022 shows an increase of 6% in all metrics. So in the FFO in absolute terms, the FFO per share and the dividend per share. And in the midpoint for the new guidance regarding the FFO 2022 stands at EUR 190 million. We will come back to that a little bit later.Page 7 shows the details regarding the income statement. Looking at the total rental growth and comparing the first 9 months of 2021 with the first 9 months of 2020, we saw an increase of 4%, out of which 1.7% is from total like-for-like rental growth, with the remaining 2.3% is coming then from acquisitions that closed in this quarter of 2020 that are now in full in our P&L in 2021. Slightly reduced net rental income quarter-on-quarter, but this is only caused by higher maintenance costs by EUR 400,000 in the third quarter. So much not really a trend. This is always the kind of swing that we have.Looking at the net income from sales, this positive development is mainly coming from the business in Poland. So in the first 9 months 2021, the net income from sales in Poland was at EUR 10.5 million, even after the effects from the purchase price allocation, which reduced this result by EUR 3.1 million. So eliminating this noncash effect from the purchase price allocation, the net income from sales in Poland would be close to EUR 14 million. So beside the fact that we have today, just very small income from net actual rent, which they already have as last year with quite attractive cash flow from disposals in Poland.Yes. I already mentioned that the next valuation will be done, as always, at year-end 2021. We saw a quite strong valuation uplift of 5.2% in the first half. Looking in first indications that we have from our value and that we also have internally, I think you should expect also a quite positive valuation result for the second half. Whether this is exactly then in line with the first half or even though perhaps a little bit lower, that needs to be seen. But for us, it's clear that the positive valuation trend continues also in the second half of 2021.Coming to Page #8. We show you the calculation of EBITDA FFO and AFFO. In all metrics, we've seen an increase. EBITDA increased by 3% in comparison from the first 9 months 2021 -- the first 9 months of 2020. FFO I increased even a little bit higher by 5%, also coming from higher -- or not only coming from the higher EBITDA, but also supported by lower net financial results and slightly lower cash taxes. And also, the AFFO improved quite strongly by EUR 13 million. Clearly, it's a higher FFO. And we also used a little bit less CapEx than in the previous year. So therefore, we saw the strong increase in the AFFO. Please be aware that the AFFO and the FFO and also the EBITDA shown in the page is purely coming still from the German business. Page #8 also shows on the bottom right, a detailed calculation of the result that is coming from Poland, which is today still for the largest part results from disposals.Page #9 shows the balance sheet. [ That's just ] book mentioning that the cash position is still very strong at EUR [ 280 ] million, even after payment of the dividend in May 2021. Page #10 shows the EPRA NTA calculation. The EPRA NTA per share stands now at EUR 23.88 compared to EUR 21.95 at the beginning of the year. So that's a 9% increase. If you include the dividend payment in this increase that we have done made in May, then the increased percent in total 13%. This year, we [ are that ], as in the past, the EPRA NTA does not add back transaction costs. The footnote will gave you a picture or a calculation how EPRA NTA would develop, if we would add back this transaction costs, so mainly real estate transfer tax. In this case, the EPRA NTA just for illustration purposes would stand at EUR 27.13.Just as an information, in September 2021, we exercised a clean-up call for our convertible bonds 2017, 2022. So as of today, this convertible bond has converted or to be more precise, we have paid back that in cash. So we issued no new shares. Therefore, there's just one convertible bond as of today outstanding. The convertible bond that we issued last year, which is not in the money, the strike price is here close to EUR 35. So therefore, in the EPRA NTA calculation as well as in the FFO calculation, you will not find in the future any diluted numbers as long as the convertible bond from last year is not in the money.Page 11 shows the financing structure. LTV stands at 44%. So that's nearly exactly in line with our LTV target of 45%. Flipping to Page #13 gives the overview about our portfolio. The total GAV stands at EUR 6.4 billion, out of which EUR 282 million is coming from the Polish portfolio. On the map on Page #13, ended correct for the third quarter, you see 4 locations after the balance sheet date that we have seen that in the press release, we have entered a fifth location in Poland, which is Krakow in the south of Poland with a first small acquisition of 230 units, but other acquisitions in Krakow will follow. So we have mean -- in the meanwhile, represented in Poland in 5 locations.Page #14 shows like-for-like rental growth. As I said, we came out at 1.7% total like-for-like rental growth. Excluding the effects from vacancy reduction, the like-for-like rental growth was even a little bit higher at 1.8% as we have had on a net number, negative basis point -- negative effect just by 10 basis points from changes in vacancy. The total investments annualized, you see this on the top right of Page #14 and it stays at EUR 20 per square meter. So that's really everything. That's maintenance, that's capitalized maintenance and debt modernization CapEx, which is very much in line with the 2 previous years.Page #15 shows the development in the vacancy rates. You know that we have saw an increase in the first quarter of the year from 5.3% to 5.9%. We have managed to reduce this slightly to in June to 5.8%, in September to 5.7%. Let's say, if in October, we are down to 5.6%, our target for the full year still stands at 4.8% to 5.0%. So let's see how the fourth quarter develops or how November and December develop. In the past years, we have managed to reduce vacancy rates by approximately 50 basis points. So it's clear our target, let's say, to come as close to this 5% as possible.On Pages #17 and following, we show you the development in Poland, just to point out that we have -- that we had further acquisitions so that the total build-to-hold pipeline increased from 8,200 units in the last quarter, and also 8,500. And I already mentioned the new location in Krakow, which is not included in this number as the acquisition was done after the balance sheet date.Yes, then we should turn to the guidance, which is on Page 21. That's the guidance for the financial year 2021, which is unchanged. So the midpoint of the guidance stands at EUR 180 million. That's a 4% increase. Looking at the results so far this year, I would say this guidance is quite comfortable. So that should be very well achievable. And as always, the payout ratio stands at 75%. So also because the FFO per share guidance is unchanged. The dividend guidance is unchanged at EUR 0.92.Page 22 shows the new guidance for financial year 2022. We expect an increase in FFO, FFO per share and dividend per share of 6%. This guidance is, as in the past without any new acquisitions and without any disposals, and it is -- it purely refers to the German rental business. For the Polish rental business, which has basically now started in June, we expect result, which is yes, slightly positive, but not really material. So therefore, we decided that to make it more comparable with previous years for 2022. This is again included for the German business for 2023. You should then expect a first -- for the first time, a combined FFO guidance for the German and the Polish business. This EUR 190 million FFO in absolute terms translate to an FFO per share of EUR 1.30, 75% payout ratio leads to a dividend per share guidance for the financial year 2022 paid out in 2023 of EUR 0.98.And finally, on Page #23, you see the FFO bridge. So the most important differences between the FFO 2021 that we expect to come out at EUR 180 million and the expected FFO for the next financial year. I mean, if you keep that really short, you can say, well, we expect high rent by approximately EUR 6 million. That's a like-for-like rental growth, if we do the exact calculation of 1.8%, 1.9%. And we expect a reduction of financing costs for our German portfolio of around EUR 4 million. There are also some smaller effects, for example, higher net income from services by EUR 2.5 million, personnel expenses as we have, yes, let's say, the regular salary increases and other effects, which are also separately looked at [ not that ] material that lead them to the new guidance.That's it from my side, a short overview about the third quarter results, which are from our point of view, perhaps in line, which was expected. And the new guidance for 2022 that shows even without new acquisitions and based on the German portfolio, an increase of 6%. From 2023 onwards, we will expect more contribution from our Polish portfolio. You are very well aware, I think, of how we expect that this pipeline in Poland translates into results. You know that we also have in the guidance -- in the presentation here, an outlook for the development of the number of units. So this will be something definitely attractive and meaningful for FFO contribution from 2023, 2024 onwards.Many thanks for listening so far. And of course, now we're happy to take your questions.

[Operator]

[Operator Instructions] The first question is from Kai Klose of Berenberg.

[Kai Malte Klose, Analyst]

I've got a couple of question, if I may. The first one is on Page 25 of this presentation. Could you indicate why for some part of the portfolio, like Leipzig or Hamburg, we have seen 370 bps increase in vacancy rates as well as in other cities like Salzgitter 100 bps or Chemnitz 170 bps increase in vacancy rates. Secondly, on Page 26, what was the reason for negative rent reversion or negative like-for-like rental growth in Salzgitter? And then the third question is on Page 14. Obviously, the -- I think it's the first time for a long time that we saw a negative impact from vacancy changes on the total like-for-like. When and how do you expect this to reverse -- this trend to reverse?

[Martin Thiel, CFO & Member of Management Board]

Yes. Kai, many thanks for the questions. Starting with Page #25. If you compare the vacancy rates shown in column September 2021 and the vacancy rate shown in column 2020, and you should be aware that the 2020 numbers exclude the acquisitions in 2020. So therefore, we have presented on Page 26, a kind of like-for-like comparison with vacancy rates, and we already mentioned in the slide. So perhaps it's a better view to look at Page 26 to see really the developments in the regions. And yes, we had an increase in vacancy rate in Rostock and in Salzgitter.Looking also in the previous quarters, this was a quite similar picture. So this increase was mainly coming from, yes, I would say, the first half of the year. Yes, especially in Rostock where also [ that's what is ] included. We had -- yes, we had an effect from students who are not really renting apartments during the pandemic. We saw in Salzgitter, also reduced turnover that led them to the fact. And in Salzgitter where we, of course, are trying to attract also tenants from other landlords. Yes, [ we're letting ] results in our portfolio were not as expected. Chemnitz is mainly modernization and CapEx-driven as we are investing quite a lot.In general, I mean, it's very clear and we're very open that we expected more in vacancy reduction at the beginning of the year or, let's say, at the end of last year when we published the guidance, we are standing now at 5.6% in October. Our original target was to reduce debt for 5.0%. So that's not extremely far away and we are optimistic for the remaining 2 months. Yes, but also the fact, as I said, that we had, although it is very slight negative effect from vacancy changes on our total rental growth as 10 basis points is, of course, nothing that we planned at the beginning of the year. But for us, it's clear, this is not really something that now changes our business.So we're very confident that we hopefully can already show at the end of the year, not only further success in vacancy reduction, but also clearly a positive effect from vacancy changes on our like-for-like rental growth. So perhaps for us, and compared to, yes, to some other companies, a little bit more difficulties coming from the first half of the year as in 2020 from the pandemic regarding [ rerenting ] processes. But if you ask as well, is this something that is really structural in the market, we think the answer is actually no.

[Kai Malte Klose, Analyst]

And maybe the last question regarding the investment markets and tax acquisition activities. You mentioned that the competition is quite tight. If you consider maybe to sell a larger part or some parts of the existing letting portfolio in order to recycle capital and to invest that in Poland, for example?

[Martin Thiel, CFO & Member of Management Board]

Yes. Think about more disposals, but you should not expect really large block sales. So we're not talking about, I don't know, 10,000 units. But to bring the portfolios to the markets of, let's say, 1,000 units or 2,000 units, simply use this momentum, this high demand that we see in the market, it's large competition. We think that's something that, that makes sense. So therefore, it's not the case that we now change into a net seller. But I would say, selling a little bit more than in the past in this environment makes sense. And we have the chance to recycle this capital into really attractive and high-yielding properties in Poland. And that's, of course, for us a good situation.

[Operator]

The next question is from Sander Bunck of Barclays.

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

Couple quick ones, please. First 2, actually, on Poland. Just if you could give a bit further color on rising construction cost inflation, if your thoughts have evolved since the last quarter, if it's impacting any of your margins, et cetera, would be helpful. And the second question related to Poland is on, you mentioned that in 2022, there is a contribution from Poland, but you're not including it in the FFO. Can you just give us a rough feeling of how much the contribution would be, if you were to include it? And why it was decided not to include it at this time?

[Martin Thiel, CFO & Member of Management Board]

Yes. Sander, I'm starting with your last question. I mean, I can also give you the numbers. So we expect in Poland rents between EUR 2.5 million and EUR 3 million. And the FFO impact, if it really the exact calculation is something between EUR 500,000 and EUR 1 million positive. So -- I mean, we can stretch this back and forth. It's perhaps better to concentrate the guidance on the German portfolio, also to make it more comparable. And of course, what we will do in 2022 onwards that we will also report on the FFO impact on Poland in our quarterly results.So one. So we have got 2 guidances. The first guidance is for a German portfolio, less than EUR 190 million. And the second guidance for the Polish portfolio sales, the result is slightly positive or around 0, but we decided not to put that into a precise number. For 2023 and 2024, of course, the FFO from Poland is much more meaningful and then you will also see order figures integrated, but perhaps good to have this in '22 more separated. Hopefully, this is then more clear where -- which contribution is coming from.And you asked about rising construction costs. I would say, compared to the last quarter, this is unchanged. So yes, it's clear, we are also seeing Poland rising construction costs, mainly coming from material. If we sign contracts today with general contractors for a project, the price increases are at 5% or even a little bit higher. This is still manageable, especially sales prices have also increased quite strongly in Poland. If you see now towards, hopefully, the end of the pandemic, also quite strongly increasing rent. So therefore, there's not any pressure on our margins or not really a material pressure on our margins.What's the good thing is that we have still construction companies available and craftsman available in Poland to do the construction work. You know that in Germany, this is perhaps an additional problem besides the fact that prices have increased simply to get, yes, construction companies to work. And this seems to be important, much more manageable. Let's see how this develops, but we are not so much concerned about that at the moment, although clearly, it's a topic.

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

Okay. Great. And just quickly coming back on the first one, in the kind of the helpful range of EUR 2.5 million to EUR 3 million rental income versus the contribution of EUR 500,000 to EUR 1 million on the bottom line. That delta, can you just give a bit color on that, given that I would have expected that given your very low financing costs on tag as a whole? It basically means that, yes, the delta should have been smaller, i.e., there should be a larger drop through? Are there any other costs that are currently capitalized that flow into the P&L next year?

[Martin Thiel, CFO & Member of Management Board]

No. It's mainly the fact that, of course, the platform is already there. So the personnel cost, the SG&A are there, and the rents are relatively small in 2022. So therefore, the EBITDA margin is quite low. And this will, of course, change over time. So we are predicting in the presentation, and that's still absolutely valid in EBITDA margin north of 75%. Yes, and as rent increase, especially this platform creates costs when they were not increased in the same pace. So therefore, we simply have the picture in Poland today that the platform is already there. I mean, people are building their partners and so on and the rents they will now pick up from year-to-year.

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

Okay. And currently, the platform costs of Vantage, are they fully included in the FFO I calculation or not yet?

[Martin Thiel, CFO & Member of Management Board]

We are dividing the platform into a platform which is designated for the sales business, which is a smaller one and a platform which is then designated for the renting business, which is the larger one.

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

Okay. And what is the -- and how much of the platform costs are currently included into the FFO I number?

[Martin Thiel, CFO & Member of Management Board]

That's the majority. So if you ask me percentage wise, I mean, that's then perhaps around 60% to 70%. And just to make the picture complete, Sander, perhaps that we have had for the sales results in Poland, we expect next year also a slightly positive result. So in total, the result from Poland coming from FFO contribution from the sales result should be slightly above EUR 1 million. It's not the case that we hear, yes, a shift platform costs from FFO I, for FFO II, just to make our FFO I number a little bit nicer. So that's all included.

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

Okay. And just to wrap up on that, basically means that currently the platform costs from the development to hold business included in the FFO I number is roughly around EUR 2 million. Does that make sense?

[Martin Thiel, CFO & Member of Management Board]

Yes, that makes sense. But perhaps that's -- it's a bit more complicated. I mean, we are also capitalizing the platform costs to really directly related to the construction work. So people that are working in construction department that is capitalized. So the platform costs are a little bit high.

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

Yes, for the stuff that's currently under construction, obviously.

[Martin Thiel, CFO & Member of Management Board]

Yes. And just a final comment. And 2022 is quite a transitional year in Poland. I mean, when we acquired Vantage, there were ongoing disposal projects, and we received or are receiving attractive cash flows from disposals. We changed the business model of the company at the beginning of 2020. We started with the ready-for-rent project that leads now to the fact that the first ready-for-rent projects are finished. And on the other side, the ready-for-sale projects have now been reduced as their apartments have been sold and have been handed over. So therefore, 2022 is a year with lower handovers and starting renting business. So that explains perhaps why the result from Poland 2022, if you want, so it's only at EUR 1 million or EUR 2 million net positive.

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

Okay. That's very helpful. And one final one on a separate topic. I mean, some of your peers have been acquiring large portfolios recently from potentially somewhat a motivated seller. Have you looked at any parts of the portfolio? Or is there anything interesting within that, that you would be looking to acquire? Or are you happy to stay on the sidelines for now?

[Martin Thiel, CFO & Member of Management Board]

Well, to be quite clear, we're definitely active. And we look at opportunities in Germany as intensive as in the past. And it's clearly the portfolio, especially in East Germany is on the market that fits into our structure. And I mean, you mentioned perhaps one transaction that was published. It should be clear that we are also very much interested. So that's one of the fact. Yes, we'll work on that, and we do this really intensively. And the second aspect is pricing. And here, we simply have to accept that the prices that perhaps we find reasonable do not seem to be the market prices that are paid today.So that's not really something extremely negative for us. But we think it's really good to be disciplined, to be careful with our capital in Germany. As a set, we're optimistic that we will find acquisitions in the future as well. As in the past, as with small acquisitions, buying more frequently. Yes. And then we have the external growth prospects in Poland. So therefore, we are not really under pressure to overpay for acquisitions.

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

Yes. I understand. Just on that point because I think part of the portfolio in Eastern Germany, that transacted was, I think, broadly in line with book values. You're basically saying that given your underwriting, you believe that's -- is still pretty expensive for your liking?

[Martin Thiel, CFO & Member of Management Board]

Well, as far as I know, also -- and I think also this was stated in the press releases that this was above book value. So therefore, we have a huge…

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

Do you have a number? Yes, a huge amount, right, not by 20%, 30% or so?

[Martin Thiel, CFO & Member of Management Board]

Yes. It depends on which book values you are looking at. Yes. I mean, we are now here in a dimension also for portfolios in East Germany where that the cash flow yield is not that spectacular if you paid at this full purchase price for that. So therefore, it's -- we are not under pressure to buy another 10,000, 20,000, 30,000 units to get into a next efficiency level. We think being a little bit more patience buying that, as I said, perhaps more frequently or some smaller sizes building up the German portfolio this way really offers better cash returns.And then, of course, you can argue, yes, but there should be clearly more yield compression. Yes, that's a fair point. But we feel more comfortable when we still buy with good cash yields and I'm not buying with a low cash yield, and say, okay, the additional return needs to come from yield compression. Otherwise, that's not really a positive or a spectacular acquisition. So we'll continue to act as we have done in the past.

[Operator]

The next question is from Thomas Neuhold of Kepler Cheuvreux.

[Thomas Neuhold, Head of Research of Austria]

There are only 2 left from my side. Firstly, I was wondering if you can give us an update from your point of view on the coalition talks. Is there anything worth mentioning regarding the residential market, which could have a positive or negative impact going forward?

[Martin Thiel, CFO & Member of Management Board]

Yes, Thomas. I think as most people, I don't know really what is going on -- in the negotiations in detail. I mean you know that they have published this preliminary paper. Generally speaking, we thought that was in a first step, a good result that here, the tax order statement on rent regulation was very short and was not already pointing in a direction of tightening regulation. And I think also partitions have realized that especially for energetic modernizations, you need certain returns, you need certain rent increases. I mean, there are a lot of investments coming in the future to the sector. So that should be hopefully -- well, that should hopefully go into a direction where we perhaps continue with the current regulation with, yes, slight changes that are manageable. But it's -- I think for most people, this is only something that is, yes, no person that's been in -- have not really any detailed insight here.

[Thomas Neuhold, Head of Research of Austria]

Okay. Understood. And my last question is just out of curiosity. You have the same auditor as for Nobia KPMG. Well, Nobia had their revaluation results in Q3, and they said that basically, the auditor asked them to do that. I was wondering, did you have similar discussions with KPMG? Or was it another topic in Q3 with you?

[Martin Thiel, CFO & Member of Management Board]

Yes. And right, it's correct also KPMGs auditor. We had not such discussions. But perhaps the simple reason is that in the third quarter, KPMG did not carry out a review of the financial statements. So we have semiannual review and now the full year audit. So therefore, perhaps, in our case, there was not a need to discuss this intensively with KPMG as the Q3 results at in the past have not been reviewed.

[Operator]

The next question is from Marios Pastou of Societe Generale.

[Marios Antonios Pastou, Equity Analyst]

Just 2 left from my side. Just firstly, on your valuation commentary from the presentation. If I heard correctly, your preliminary estimates are showing something along the lines of the first half and maybe slightly below. Is that correct? And did I hear that correctly? And then secondly, on your like-for-like rental growth expectations for next year, looking at around the 1.5% to 2% mark, again, similar to your guidance for this year. This still feels fairly low considering what was achieved prior to the pandemic. I just wanted to check what your assumptions were here and what is being factored into regarding potential rent controls as we move in for next year?

[Martin Thiel, CFO & Member of Management Board]

Yes, firstly, you heard that correctly regarding my comments about potential valuation uplift. And so there should be, let's say, not too far away from the first half, but that's slightly lower. But hopefully, everyone understands that we can't publish an exact figure today, and that's also don't want to publish that exactly. So that should be a good valuation result. And perhaps the first half of 2021 was something which was, yes, it's extraordinary instances becomes clear when we compare this with the past.Looking at the like-for-like rental growth guidance for 2022. It's correct that the guidance stands in a range between 1.5% and 2%. That includes an effect from roughly 30 -- to up to 50 basis points from vacancy reduction. And if you consider this as conservative, Marios, perhaps you're right. But we have seen simply with the development in 2021 that especially vacancy reduction in these times was a little bit more difficult. As in the past, we are still in the pandemic. I mean infection numbers are rising in Germany and in Europe. So therefore, we thought well to basically to give a guidance, which is very much in line with the rental growth that we saw in 2021 in this unchanged environment seems something that should make sense.

[Marios Antonios Pastou, Equity Analyst]

Okay. Makes sense. So I suppose the question being as well as if we don't see any significant changes in an underlying rent regulation beyond 2022, should we then start to expect that growth to maybe normalize as it was back in the past, let's say, like a mid-2%? Or is the 1.5% to 2% probably more in line with the future now?

[Martin Thiel, CFO & Member of Management Board]

No. I mean it's -- looking really in mid to long-term in our portfolio that we have a like-for-like rental growth without vacancy reduction effects of around 2%, that should be a reasonable number. Yes. And then on top of that would come that effects from vacancy reduction that clearly then depends on acquisitions that we have recently done or certain levels where we are in the respective regions. So in a broader picture, it should be more towards 2% and 2.5%.

[Operator]

The next question is from Manuel Martin of ODDO BHF.

[Manuel Martin, Analyst]

Just one question, that's regarding Poland. About the political situation in Poland, we see that there are ongoing tensions between the European Union and Poland. Are you a bit worried about political stability? Or do you see some headwinds coming up from that situation and also from perhaps rising COVID-19 figures?

[Martin Thiel, CFO & Member of Management Board]

Well, on the politic situation in Poland, you could have perhaps 2 views. The more general views looking at, as you mentioned, the discussions or the tensions between the Polish government and the European Union, that's definitely not a positive. But for us, it would be -- it's -- yes, more as excluded that this tension end up in the fact that Poland leaves the European Union or things like that. So that should be very clear. How many advantages Poland has from European Union, and that's clear for everyone in Poland? So let's see how this develops.But then looking, that's the second thing really detailed in the business that we do in Poland. Do we see here any difficulties? Do we have problems with authorities regarding building permits? Are they open to also foreign investors, yes or not? That's all positive. And we don't really see here anything that limits our business anything where we said, well, if we would have known that 2 years before, we would have looked differently at the Polish market. So the day-to-day business is growing, I would say, very smoothly. And then there's more general topics. Yes, that's something, of course, that we closely follow, but so far have not really an impact on our business.

[Operator]

The next question is from [ Michael Kuhn ] of Deutsche Bank.

[Unknown Analyst]

Just coming back on [Technical Difficulty] especially in East Germany. I mean you mentioned [Technical Difficulty] a high pricing level that will be from the cash flow yield. Is there any pricing point example from EBITDA maybe from recent -- most recent transactions due to multiple [Technical Difficulty] yields?

[Martin Thiel, CFO & Member of Management Board]

Thomas, this was -- sorry, it was hard to understand because the line was not really good. Did you ask for a kind of transaction multiples from recent transaction compared with our book values? Or…

[Unknown Analyst]

Yes. I mean, you mentioned higher price [Technical Difficulty]. With regards to cash flow yields, maybe you can provide some examples.

[Martin Thiel, CFO & Member of Management Board]

I'm not sure whether I understood the question correctly, sorry for that. So that where our cash flow yield going in transactions that we see in East Germany at the moment. I mean, talking about the multiples, you know that we have acquired at 16x, 17x rent in last year. If you look at current transactions, you'll find in such portfolios in the meanwhile of multiples north of 20x rents. And then the argument from [indiscernible] portfolios is, of course, yes, you should explore [ preferential ] growth in the future. Yes, okay, that's valid.And secondly, and if you, let's say, expect further yield compression, yes, that's also valid. But we think of such transactions like, yes, I would say, we invest this -- same investors or private people would do the same. But what we need in such locations, we're talking here about secondary locations about locations where it's really intensive asset management work necessarily. We need from the first day on a good cash flow. And that's what's drives us, and that's how we still look at that. And of course, we have also increased our pricings over the last years. And with the times where we have bought it at 10 or 12x a month multiple, they are far away that it's clear. We have, but still we feel comfortable with the strategy of being here really. We are careful and perhaps not following any price developments that we see today in the market.

[Unknown Analyst]

Maybe one more question on the high [Technical Difficulty]. I mean, what has been the most recent momentum there? Maybe I've missed it in the presentation. But for example, most recent momentum with regards to your sales prices there?

[Martin Thiel, CFO & Member of Management Board]

Yes. I mean, you've seen 2 transactions in the market, although the prices were not specifically disclosed coming from the [ other ] portfolio to large transactions, where we know that the prices are -- yes, definitely about book values that we also would have in our company. So therefore, that this trend of increasing prices is there that the fair values of the investment properties will increase over the next quarters or the foreseeable future. That seems to be clear. We are always little bit careful to pick transactions and say, well, that's an exact comparable to our portfolio. So therefore, we are careful with giving detailed guidance like prices are 10%, 15%, 20% above book values, but that they are above current book values and that this trend of increasing values is continuing. That seems to be clear from our side.

[Unknown Analyst]

Did you refer to Poland? Is it right?

[Martin Thiel, CFO & Member of Management Board]

No, this was for the German portfolio. And then for the Polish portfolio, if this was the question, sales prices have increased throughout the country. So we're talking here about the big 6 or 7 cities in Poland. And that's Warsaw -- Krakow and Warsaw and so on, which was good for us to see. I mean, the Polish economy and the Polish residential market managed the pandemic quite well. So this is clearly a very positive trend that shows basically that the positive trend from the past continues. And the thing is true for rents. I mean, we've saw in some cities rents dropping during the pandemic. I mean it's clear that's an unregulated market.And in a situation where, for example, students are not coming to their apartments, they normally rent, and rents have been reduced, although not to [indiscernible]. Now this trend has clearly reverted. Rents are already back on the pre pandemic level and continue to rise. So therefore, in Poland, also prices are increasing. But looking at the, for example, acquisition gross yields or project gross yields, we are still at gross yields of around 7%. And for new constructed apartments in big cities in Poland in really good central locations, and that's still attractive.

[Operator]

[Operator Instructions] The next question is from Simon Stippig of Warburg Research.

[Simon Stippig, Analyst]

And to you, all of the questions were asked already, and I have just 2 smaller questions. One is the clean-up call of the convertible. What exact cash payment did you have for that in December?

[Martin Thiel, CFO & Member of Management Board]

Yes, Simon. This was after balance sheet date. I think the total amount net, it comes as around EUR 25 million.

[Simon Stippig, Analyst]

Okay, great. And then you mentioned -- okay. Great. Yes, cash yield EUR 25 million all in?

[Martin Thiel, CFO & Member of Management Board]

Yes.

[Simon Stippig, Analyst]

Great. And then another question in regard to what you -- you answered the question of Sander before in regard to investments, and you mentioned that -- yes, [ assured ] as the [ awards ] surrounding this one motivated salary, et cetera, and that there was a larger portfolio in the market. And then you said there are -- if you would add '20, if I got that right, 20 to 30k units, it wouldn't get you to the next efficiency level. Could you explain that a little bit?

[Martin Thiel, CFO & Member of Management Board]

Yes, our thinking is, I mean, there could be a need to grow in size. And this is, for example, the case for us in Poland. And we discussed during the call, the platform costs being still quite small in comparison to the rents. I mean, we have clearly laid the fundamental for our growth in Poland. We need to get to a certain size. You know that 8,000 to 10,000 units, which is a clear midterm target. So therefore, it's mix -- from a strategic point of view, also sense to buy, to get to a certain efficiency level that really allows you to operate the residential business in a way that makes sense. That's a difference in our -- in Poland than in Germany where we own close to 90,000 units and comparing margin improvements between a portfolio of 90,000 units to 110,000, 120,000 units.Yes, it's clear. I mean we have still room for improvement if you have more units. But then the question is, is it really worth to increase the margin slightly or just a very small extent and therefore, pay a price, which is then materially above what you see from real estate perspective makes sense. So is it worth paying a kind of strategic premium for that? And here, for us, the answer regarding the German portfolio is clearly no. So we are on a level where we think we can do everything that we want. We have an efficient platform. And yes, of course, a larger portfolio helps. But the mix margin improvements coming from portfolio size are then really small as we have seen in the past when our portfolio was growing.

[Simon Stippig, Analyst]

So what you're saying is if you turn around that argument and say, okay, your additional increased gain of one unit because you have lower costs in your portfolio -- in the German portfolio. And you say that this gain is actually smaller than and -- or it's smaller than compared to the higher price you paid for the portfolios in this competitive market here in Germany?

[Martin Thiel, CFO & Member of Management Board]

Yes. That's…

[Simon Stippig, Analyst]

Just totally here that you're setting 3 and more scale effect in regard to the platform in Poland, but just turning around, I mean, it can still make sense to act, especially because you have a presence in Eastern Germany that is non-comparable to a lot of peers, especially this appears that you have a competitive advantage there to just buy additional portfolios. So that's what I wondered about. But thanks, I mean, I think you answered the question in my understanding.

[Operator]

As there are no further questions, I hand back to the speaker.

[Martin Thiel, CFO & Member of Management Board]

Yes, many thanks all for dialing in and for the discussion. As always, if there are any question left, please do not hesitate to contact our department or myself. Thanks again for listening to the call. Have a good day and talk soon.

[Operator]

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