Dear ladies and gentlemen, welcome to the conference call of alstria office REIT-AG regarding the nine months results 2021. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Olivier Elamine, who will start today's conference. Please go ahead. Thank you very much. Welcome everybody to cloudy and rainy Hamburg this morning for our third quarter result. We're also very excited to publish our Sustainability Report this morning. I'm here today with Alexander Dexne, alstria's CFO, and Julius and Ralf, which you know very well from the IR team. Without any delay, briefly over the disclaimer and Q3 update and forward-looking statements. Of course, I guess the news this morning of the investment agreement that we have signed with Brookfield is clearly something that is gonna be discussed more in the Q&A. Just wanted to briefly give you an overview about what we have agreed and discussed with Brookfield. Brookfield is preparing a voluntary tender offer for all the share capital of the company at a price of EUR 19.50 per share. That represents a premium of 6.8% on the last reported, which we're reporting today, EPRA NTA and a you know of 17.3% compared to the closing price yesterday. We have been in contact with Brookfield for a number of years, and we've been knowing them relatively well, and we share a certain number of views on how the office market is developing, and in which direction it's developing. We intend, subject to the review of the final document, to be supportive of the offer, which is aiming at gathering 50% plus one shares of the company. We do expect the offer to close in the first quarter 2022. I think, you know, from our perspective, I think it's fair to say that the office market is going through a major transformation as we speak. This is both driven and actually accelerated by what happened with COVID and the new work from home policies that companies are adopting here and there. This has started probably before COVID and you know our view that you know the market in Germany and the office sector need to upgrade and we need to move the buildings from where they are today into the 21st century. This is something we've been doing as a company for quite a while. You also have everything which is related to ESG and decarbonization. We're gonna speak about that in more detail in a minute. This increase into the transformation need of the market we believe is gonna provide a substantial volatility in the market. We see as a company a lot of value in being able to anchor ourselves to a large shareholder like Brookfield who will be able, wi th whom we basically share the similar view about the challenges and opportunity that are taking place in the market right now. I think the result of that is we will need to do more, and we are actually doing a lot, but we'll need to do more on the asset, accelerate a bit capital rotation. We will be looking at keeping more cash at the company level, and then therefore reducing the dividend going forward, if the offer succeeds. Those are, I think, elements which I think we have taken into consideration into looking into all of that. The attractiveness, I think, from Brookfield to the company is essentially also linked to the quality of the platform, and I really would like here to insist on that. I mean, the only reason why we're able to go through that transformation is because we have been building over the years a functioning platform, which is able to take those old assets, work them out through the new work concept, through the ESG requirement. That's really something which I feel is one of the valuable assets that we have and which has attracted Brookfield. In that respect, they have agreed to basically help us to keep and improve and attract more talent to the company. From a governance perspective, the plan so far is that there's gonna be no change at our levels, so Alex and myself, and then there will be a proportional implementation of Brookfield supervisory board, depending on the final outcome of the offer. I'm sure there is a lot of question about that, and I'm sure I have not addressed them all in that two-minute introduction. But I'm just gonna use the fact that you all wanna wait to the end to ask those question to walk you through our ESG report, because I still believe it's an important topic that we should be addressing. Then we can go through the Q&A. We have been, like every year in November, we publish our Sustainability Report. This year is a bit particular because we happen to be during the week of the COP26. We are kind of in tune with the overall global news. We have been reducing our ESG emission. As you can see from the slide, our kind of carbon footprint and energy footprint on the building is substantially lower than what we have when you compare it to German or European offices. Our current portfolio, if you look at the CRREM tool, which is basically seeing where we stand today compared to the target in 2030 and in 2050, is already for all practical purposes very much compatible with the 2030. The way we achieve that is not necessarily by being hyper energy efficient on the assets themselves, but it's mainly because our building are kind of low tech buildings, and therefore they tend to use less energy. Obviously once we refurbish them, we improve dramatically the performance that you have on that screen, which help us to become kind of very rapidly compatible with the 2050 and 2040 targets. The thing which I think is important to highlight here, not only from an ESG perspective, but there is currently a discussion about how much CapEx you need to do to meet your ESG targets. I mean, from our perspective, you know, the CapEx that you need to put in, you need to put in anyway. The sense of direction is clear. We know where the market needs to go, and we knew that for the last 10-15 years. It's not like we've discovered yesterday that we need to invest in the building in order to meet those targets. This really has been our bread and butter for the last 10 years or so. There is no fundamental change in the amount we need to invest in the building compared to what we were planning before. We did know what was necessary and what was required, and now we're just going on with those plans, which basically allow us to improve the overall performance of the assets. We really see ourself and the purpose of the company as helping into that transition, and doing that in a way that is both sustainable financially and sustainable economically. One of the point I think in our narrative, which is very strong and thankfully is being very much picked up more and more in the market, is the importance of retrofitting existing building versus building new assets. This is really, I think, one of our main contribution, if I may, to the real estate sector in the sense that we believe that the efforts need to be focusing on retrofitting existing buildings, which is both financially viable and ESG compatible. What you see on the slide, if you happen to just be coming into your new office building, on the left side of the slide, is basically showing how many years you would need to use green energy or how many years you need to recycle to basically compensate for the amount of carbon that you have been emitted just to allow you to get into that building in the first day, because that's the amount that has been emitted to build the building itself. If you look at that slide, it should be self-evident that, you know, getting a new building is not as efficient as you might think, and actually probably one of the worst thing you can do, if you're looking at it from an ESG perspective. You should be focusing your attention on if you're a tenant renting into a renovated building and avoiding new building as much as you can. That's something which as a company, we strongly believe in. The stranded assets are not the old buildings, they are the buildings that need to be built in the future. We have been also, and this is really one of the new topic and focus, I think from an ESG perspective, which is biodiversity. I mean, I've been quoted in the press saying that alstria has been doing a bit of greenwashing here and there, recently, and this is probably one of the place where you could argue that we are one of the largest manager in Europe of green roof. We have the equivalent of 12 football fields of green roofs that we are managing, and a couple of pictures to illustrate that on the slide. I think we also need to be clear that the reason why we have those green roofs is because they are mandatory in most of the cities in which we operate at the time of the construction. Also they don't necessarily increase biodiversity, but they mitigate the negative impact that the buildings have. We have also been investing into timber and forest. We've done our first acquisition. Here again, although we are highlighting that in the ESG report, the view that we're taking is that timber, looking at the decarbonization path that the real estate industry is gonna take, is gonna become a critical element of our business going forward. This is by definition a resource which is limited in terms of supply, where the demand is gonna grow exponentially, as we move into a decarbonized economy, and the intention here is to secure our supply, secure the supply of the company going forward. We've made that first acquisition to better understand how that market functions, better understand how you underwrite a forest. It's not driven by offsetting our carbon emission. I mean, we're not looking here at offsetting our carbon emission. We're really looking at securing the future needs of the company. The forests we acquire right now basically represent around 2% of our annual needs in terms of timber. If we want to secure that further, we would need to continue investing in that field. That's it for the Sustainability Report. I would clearly encourage you to take a look at it. I'd like to thank all the people at alstria who have been putting the information together. There's a lot more in the report that we just discussed today, and I always hope you will find it as entertaining to read as we found it interesting to put together. I'm looking forward to your feedback on that, although I assume it's not gonna be on that call. Moving to the quarterly results presentation per se. The revenue of the company has been going up 3.4%. Our FFO is up around 4.8%, and the FFO per share is also up approximately the same amount. We are reviewing the guidance, and I'll come back to that at the end of the presentation to basically give you a bit more overview about the nature of the guidance review and where it's coming from. The leasing market itself has been improving gradually over the last few months, which is reflected a bit in our guidance increase. We still expected them to recover at a more global scale assuming nothing bad happened from the health situation in early 2022. There is still a lot of backlog of leases that have not been signed over the last 18 months that need to go through the market. There is clearly a positive dynamic around the letting market right now. Our EPRA NTA is at EUR 18.26, which is up 2% year-on-year, and our Net LTV is up as well, which is basically reflecting the acquisition that we have been doing over the quarter at around 30%. If we have a brief look at the portfolio, I think here again the main thing I would like to highlight, which is similar to what we have highlighted in the second quarter, is the fact that you don't have any more a placeholder called others. So we have kind of finalized the cleaning up of the portfolio when it comes to the acquisition of Deutsche Office that we done in 2015. And now we would be moving into a higher kind of asset rotation in order to fund for our development pipeline that we have. The portfolio from a geographical perspective is very much focused on the five regions where we want to be. Munich is still not on that map, and it's still a market that we are considering, but so far we have not found the right and appropriate entry point into that market. Looking very briefly at the letting results, we signed 26,800 sq m of new leases. A number of extensions. As you know, tenants have a tendency when they have the choice today to extend and stay where they are rather than move out. It's an easier choice given the COVID and the question mark around how much space people need. That represents around EUR 24 million of future income for the new leases and EUR 21 million for the lease extension. Our average rent per sq m is up to EUR 13.24. Looking now, again, briefly at the balance sheet. I'm not gonna expand too much on that, but investment property is up 3.2%, essentially reflecting the acquisition that we have made as well as the CapEx investment. In the portfolio, the change in equity is essentially related to the dividend payment, and there is a net impact between the dividend payment and the retained earnings that happened since the beginning of the year. The net financial debt is up here again reflecting essentially the acquisition that we have been making, converting cash into assets, increasing the Net LTV at the company level. Looking at the profit and loss, I'm also not gonna spend too much time on this because we have been looking into that and discussing it briefly on the introduction slide. Our revenue and funds from operations is up, which is triggering the increase into guidance, which on which I want to spend a bit more time to give you a bit more granularity about where this is coming from and what implication it have for future years, FFO, although I'm not intending to provide a guidance for next year. The revenue guidance is basically driven by the transaction that we have been doing, but also by lease up. We were anticipating even a lower turnover in leases than what we have finally achieved. On the FFO guidance, one of the main adjustment points relate to the fact that a number of the measures that we're expecting to do in terms of maintenance in the asset were not done in 2021, either because of COVID or because of the supply chain constraints. Our intention is not to build up a maintenance backlog, so what we have not done this year, we will be doing next year. Therefore, we should have kind of a higher real estate operating expense next year compared to the running average. Whereby this year we're having lower real estate operating expense compared to the running average. That's basically an effect which just gonna kind of correct itself year-over-year. Clear intention is not to let a maintenance backlog building up within the portfolio. In summary, when we look at the market on the leasing side, we do see that the letting market is improving, the momentum is improving. Our leasing pipeline is getting stronger as we go through the year. We still believe there is a substantial backlog that has been built over Corona that we need to go through, and we expect increasing letting demand starting over 2022 that would help us solve the backlog. One of the reasons why we believe that's gonna be the case is we're currently in a phase where a lot of corporations are having discussions between management, unions, and labor to basically agree on the setup for the future offices, and that's a bit all over the place as we speak. We think that the last few years of 2021 are gonna be used to go through that dialogue, which is an important one before companies are in position to actually make an informed decision about their office location. The investor market remains supportive essentially for the same reason that they were supportive over the last six years, which is the low interest rate environment. There's clearly an increasing ESG relevance. You would notice that I said here for the investment market, which is looking much more into that following the taxonomy being put out there. The letting market itself, you know, there is some kind of relevance but clearly to a much lesser extent than it is for the investment market at least in the market in which we operate. That's it on my side. I'm sure there are a lot of questions about our ESG report, so I would like to open the floor to the Q&A. Thank you. We will now begin our question and answer session. If you have a question for our speaker, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask the question. If you find your questions answered before it is your turn to speak, you can dial zero and two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. The first question is from Ben Richford of Bernstein. Your line is now open. Good morning, gentlemen. Just to, you know, clarify what you can give us on the Brookfield offer, how do you assess the value of that? Clearly some premium to NTA? Do you in your own estimation see that NTA growing, and therefore are you sort of selling the company at a forward NTA of a year or two? A little bit more about how you think about value. Secondly, what did Brookfield bring to you? Obviously they're a global leader in the office business. What will you do differently with them on board? Maybe just start with those two questions, and give a chance for others to ask around the Brookfield transaction. On your first question, we are in the process of running the valuation process for your end, which is not something we have done yet, so we don't know where the NTA is gonna land at your end. There is from our perspective some revaluation gain to be expected between now and then. We still believe that the Brookfield offer is gonna be at a premium compared to where this is gonna land. Again, this is a process which is ongoing, and we're not gonna have the end result of that before basically the end of January, beginning of January basically where the valuer is gonna sign off on the values. First of all, if you look at the Brookfield offer, it represents a substantial premium to where the share price is trading, and even more substantial premium to where your target price is at auction. I think that's clearly reflecting that there's a gap today between the private market and the public market, and the offer of Brookfield is clearly valuing the company at the private market level rather than at the public market level, which we think is interesting for the shareholder to look at. This is something clearly we've took into consideration when we decided to recommend the offer. From a company perspective, what I've mentioned before is, We are, t he market is gonna go into a place where there are gonna be much more earnings volatility than you would expect and probably where the public market is comfortable with. That's linked to the transformation we've been discussing here. Having a shareholder like Brookfield within the company, which basically has a deep understanding of those dynamics and with which we can have a deep dialogue. Brookfield has been a shareholder of the company basically forever. I think we have the time over our years of interaction to basically check and confirm that we share views. They do provide this kind of stability that we think is gonna be extremely helpful going forward. Typically, Brookfield is not mostly interested in receiving like high dividend every year, and therefore the company is gonna be able to retain more of its earnings to reinvest into if we have opportunities, obviously, to do that, to invest into the portfolio and then accelerate the pace at which we are investing. We do see a lot of value. On top of that, as you rightly said, you know, when you're in the office world, being able to rely on a partner like Brookfield sounds like an attractive value proposition. Because they have within their network. I mean, we are all looking at different kind of technology. We're all looking at different elements. Being able to access Brookfield network both from real estate perspective and from a financial perspective is something that we feel could be valuable to the company. Okay. Thanks. Do you think if you sold the properties today, you'd get a similar outcome? Or do you sort of believe the NTA is a fair reflection of what you would achieve for a piecemeal disposal? Well, I mean, first of all, I think that's a major difference between what I'm suggesting here and what Brookfield is suggesting. I think Brookfield is not suggesting to liquidate the company. You're suggesting here is to liquidate the company, and that's a completely different value proposition, right? Brookfield is not doing that. There are people working for the company and I would not support anything which get anywhere close to liquidating the company at this stage. You know, we do sign off on accounts, which basically reflect the NTA of the company. Yes, we do believe that, you know, the underlying value of the properties is what is reflected in our books. Okay. Look, I'll leave it for others to ask questions. I don't want to go over more. Thank you. The next question is from Sander Bunck of Barclays. Your line is now open. Hi. Good morning, team. Thanks very much for all of that. A couple of questions as well related to the Brookfield side. Just a couple of technical ones really. Obviously, I presume that Brookfield will look to reduce the real estate transfer taxes that potentially could be required. Does it mean that they expect to remain under the 90% and that alstria will remain a listed entity, or will alstria be taken private as a whole? The second one would be on the REIT status. Do they expect that they can retain the REIT status, or will the REIT status be lost as a result of that? And just the third one, which is just more a bit of a curiosity question, like when did the conversation start? Because I believe when the initial kind of press release came out, I think you mentioned that the conversations hadn't started yet. They basically started conversations right at the time, or was it after, shares kind of had a very strong run up. They started today, somewhat underperformed after that, and basically then the dialogue was initiated then, just out of curiosity. I think your first two questions are closely related, right? You know, whether or not you remain listed or and whether or not you remain a REIT, and the transfer tax are to a certain extent related because, I mean, because they're all related to the free float and the conditions become a REIT. I mean, Brookfield is making an offer of 100% of the shares of the company. I'm assuming they would be comfortable in owning 100% of the shares of the company. As you know, they have already disclosed that they own a certain percentage of the company and they do expect to have non-tendering agreement with a number of shareholders to limit the transfer tax. That's clearly the case. I don't believe that the Brookfield. I mean, the conversation we have is not depending on whether or not we could delist or we should delist the company. It is one option, but it's not necessarily the option. So that's something which will obviously depend on how much you know what the overall result is at the end of the day. The strategy I think that we have discussed with them would work either way, and there's no lack of need to do that. On the REIT, I mean, from our perspective, the REIT is essentially a tax status, which is currently relatively helpful to the company. But there's also different ways where you can structure around that. And, I mean, the REIT is the exception rather than the norm in Germany, so there are hundreds of companies who operate outside of the status and are operating pretty efficiently from that perspective. Here again, I think whether or not you are a REIT in three years from now or four years from now is really gonna be a question of what's the best things to and the best structure at that moment in time. I mean, Brookfield has been a shareholder of alstria basically almost since the IPO, so we've been having conversation with them all the time. The same way, we've been having conversation with other shareholders. Obviously, during those conversation, we not only speak about what alstria is all about, but also about our view of the market, how we think things developing. Over time, we have kind of the view that we tend to share the perception of a certain number of elements. The actual conversation about the offer itself, I mean, we haven't slept much over the last two weeks or so, and this is really where the things have accelerated. You know, I mean, since I'm running this company, like every year I had conversation with somebody who was discussing with us whether or not they would consider making an offer on the company, and that's Brookfield and others. The real conversation that really started relatively recently. After what you mentioned before, so after they disclose, like way after they disclose their position in the company back in August. Okay. Where we had conversations which were like more informal rather than as in really concrete. Yeah. Understood. Okay. Just very quickly kind of related to the first one. It was mentioned that they're not looking to implement a domination agreement. Has the regulator been consulted on that? Do they believe it's not required? Or, is there a chance that the regulators will basically say, "Look, you have to implement a domination agreement as part of this deal? I look, there is no synergies here to be realized through a domination agreement. I think the business plan is really the business plan of alstria. And so unless you wanna realize synergies, there is really no need for domination agreement. So the chances that the regulator and I mean, there is really no reason for the regulator to interfere. We're not into a merger, which have happened into other situation, where you would argue you can't put the synergies in place if you don't have the domination agreement. So I think from that perspective, it's pretty transparent. There is literally no need for domination agreement here. Okay. Super helpful. Thanks very much, guys. The next question is from Thomas Rothaeusler of Deutsche Bank. Your line is now open. Yeah. Morning, everybody. Maybe some questions beyond the offer. First, on leasing markets and the outlook. I mean, you expect the backlog could start to be released at the beginning of next year. Maybe you can elaborate a bit on your assumption. What does he make so confident on this? Well, for once we're confident and aggressive on our assumption on leasing, I will have hope a bit more support on this one. But in essence, look, you can delay a decision when you're a company for a couple of months, a couple of years, but at one stage, not making a decision is making a decision. Company need to decide what they need to do, what they wanna do with their real estate. And what is holding back, at least in our conversation with the tenant, what is holding back today is really the uncertainty and the fact that this dialogue between the labor force and the management have not completely take place, and it's not completely clear, you know, what does it mean to work from home? Is it an obligation? Is it not an obligation? Is this gonna be two days or three days a week? Are we gonna do desk sharing or aren't we gonna do desk sharing? How we wanna organize the office, do we wanna fundamentally change it or we wanna change it briefly? This conversation, which is a fundamental conversation, which is company by company, because every company is gonna have a different answer to the same question, is taking place as we speak. What we see in the leasing conversation that we have is that, you know, those conversation are getting to an end, right now. We expect that this is really the case across the board, and most of the German corporation are as people go back to the office. What has been holding back those conversations is the fact that companies were not back into the office. Because it's very hard to discuss how your office is gonna look like in the future if you're not in the office yet, and you're doing that from home. As companies go back, those conversations start, and as those conversations start, people are gonna be more comfortable about what they need and how much they need and for when they need it. We believe that all the decisions that were not made over the last 18 months are gonna be made in early 2022, which is gonna come as an increase amount of demand. I mean, early, like in the course of 2022, but starting early 2022, which is gonna be an increase in demand, compared to what you would usually have in a normal year. I think where we should not be overly excited is just a backlog you need to run through. Once you run through that backlog, you're gonna go back to normal. There'll still need to be a backlog we will need to run through here as a market as a whole. Our intention as a company is to try to take advantage of that as much as we can. Okay. Thank you. Maybe another question on your CapEx program. What would you say is the consequence of increasing construction costs? I mean, do you adjust your CapEx program on this, and what's the impact on returns? Maybe does this change your allocation between, you know, acquisitions and renovations? I mean, construction cost is increasing. Inflation is pretty high right now in Germany, like not only construction cost but everywhere. I mean obviously at the end of the day, if you can't compensate an increasing construction cost with an increase in rent, then it does hurt your return. Having said that, if you look at the impact of an overall construction cost increase on the overall performance of a transaction, you're talking about kind of you know, 10-15 basis points up or down on an IRR perspective compared to what we usually underwrite. Because obviously our underwriting assume that there is gonna be some kind of construction cost increase between the moment where we acquire the property and the moment where we will do the construction itself. But then you know if inflation is stronger than what we have expected and construction costs are substantially higher than what we have expected you know there is no black magic here. Either you can adjust that through higher rent and if there is inflation usually rent tend to go up in line with construction costs. If you cannot this was the case over the last few months where construction cost was substantially higher than inflation then your return are downgrading a bit. What has helped obviously over the last decades, since the increase in construction costs is not a new phenomenon. What has helped obviously is the compression of exit yields or the increase of exit multipliers, which has in the past at least outweighed any construction cost increases that we had to experience. Even if you look at this year because the product we're producing is usually brand new, fully let, and this is realizing and basically translating into like top exit yields in the market. Therefore, I mean, with the additional yield compression we've seen in even 2021, I think, yeah, basically inflation has been of a lesser concern to us because the markets have been so strong and so supportive. This has really also, I mean, not led us to focus too much on the threat of inflation. To that, Thomas, to your last question, is that changing our allocation between acquisition and CapEx? The answer is clearly not, because we still believe that, you know, the opportunity is really to upgrade buildings and as Alex says, turn them from where they are today into brand new building, which will support, you know, higher valuation multiple. This is where the scarcity of product is. I mean, this is really where if you look at the investment market, this is really where the scarcity of product is to have like a quasi brand new building which fulfills all the sustainability ESG requirements, which offers like, high quality office space. This is why, I mean, in the context of the M&A rationale we're discussing. I mean, it's probably rather the idea to accelerate that than to think about capital allocation otherwise. Okay. Thanks, Olivier, Alex, and all the best for your new journey. Thanks. Same for you actually. Thanks. The next question is from Véronique Meertens of Kempen. Your line is now open. Good morning, gentlemen. Thank you for the presentation. A few more questions from my side on the offer. First, going back to the REIT status. Could you give an indication or an estimate on the retroactive tax impact if you would lose the status? Secondly, maybe the tax impact for shareholders that would tender. Am I correct to say that they should face around 30% capital gains tax on the delta between their acquisition price and exit price? Maybe lastly, are you aware of any irrevocable undertakings that Brookfield received from other major shareholders? On the last question, I think you should address the question to Brookfield. I'm personally not aware of, I mean, I don't know in essence. Yeah, it's more addressed to Brookfield. On the first question, I'm not sure I understand the question, but I'm still gonna try to answer. In essence, if you lose the REIT status, there is no tax to be paid. I mean, because you just go back to the normal tax world. You know, if we sell a building, we would need to pay capital gain tax, assuming there is capital gain to be paid. But the fact that you exit the regime per se doesn't trigger necessarily any payment at the company level. At the shareholder level, I mean, this is the first time I hear about it, so I'm not sure why this would impact the shareholders. I don't know where this information comes from. Maybe it's something I'm not aware of, but I've never heard that before. No, but the last one isn't exactly concerning the losing of the REIT status. Currently, if a shareholder would tender because of the REIT status, they are facing capital gains tax if they tender, right? Well, I don't know. I have no idea where does that information come from. I mean, basically every shareholder face taxes depending on, like his entry price and his exit price, depending on his tax position. I don't see why being a REIT would have any influence on that. I'm pretty. I mean, I don't know the answer to that question, Véronique. As far as I know, I mean, if I speak about my position, I mean, I wouldn't see any of this, what you're mentioning, the 30% coming out more than the. I mean, I wouldn't need to pay any taxes beyond what I need to pay as income tax in a sense. Maybe you know. Okay. Maybe you know better. Yeah. I will go ahead take a look on it. Thank you for your answers. The next question is from Thomas Neuhold of Kepler Cheuvreux. Your line is now open. Good morning, gentlemen. Thanks a lot for taking my questions. I have two follow-up questions on the REIT status and the tax implications. If you read the REIT law, it says in accordance with paragraph 11 of the German REIT law that no investor must own more than 10% directly or indirectly to have a REIT status. Is it fair to assume that most likely the REIT status will be lost if the offer is successful? It also says that if the REIT status is lost, the company must compensate all investors owning less than 3%. I was wondering how this potential compensation is calculated and what the value of this compensation could be? On your first question, we had in the past multiple times shareholder with more than 10%. That's not a real problem. It's very easy to structure around that because what you need to have is, you know, multiple vehicle owning less than 10%. When the company IPO'd, it had a private equity fund which has a 50%—more than 50% stake in the company. Later on when we merged with Deutsche Office, we had Oaktree Fund, which has more than 30% in the company itself. Then at a later stage, we have GIC, which has a 20% stake in the company. That was never a problem under the REIT law. I think, you know, the, I mean, so the idea that nobody can own more than 10% of a REIT, and kind of challenge the REIT status, I don't think is rooted in fact. The second point is the paragraph that you're mentioning. I think we need to be very specific about that. It is only triggered in the case where the loss of the REIT regime comes out of a shareholder breaching those 10% rules. It's actually here in the law as a deterrent to basically prevent anybody from doing that because you would be hurting your own stake in the company if you were to do that. I think to, l ike, going through this calculation of the damages that would be due to the minority shareholder is to a certain extent, I mean, superfluous because nobody intend to breach that rule in the first place. Okay. Understood. Thank you. What I'm trying to say, it's a very theoretical compensation, which is very unlikely to happen in real life. The next question is from Monika Leykam of Immobilien Zeitung. Your line is now open. Hi. I got one specific question and one more general. The specific one concerns the new risk return profile that you intend to achieve together with Brookfield. How will that affect your cost of capital and your leverage? Your leverage now is very conservative. How much will it grow? And what will be the advantages of a higher leverage? That's the specific one. And then you mentioned that there will be a high return volatility in commercial real estate in the next years due to the ESG transformation. And this doesn't match very well with an income producing a dividend company, dividend paying company. If that is true, wouldn't that affect the whole of real estate as an income producing asset class? Because real estate is very much appreciated because of its stable cash flow returns. The whole institutional market, fund market is going that direction. If this was true with the income volatility, this would also concern other parts of the real estate industry. Or did I get that wrong? These are the two questions. To your first question, I think, you know, you're right. alstria's leverage today, we believe, is completely appropriate for a company which has 100% free float. Because we're trying really here to provide low income volatility in a sense and shield the volatility. The more you increase leverage, the higher the volatility is on the equity. If you go now, you look at how other company operates in a more private setting, they tend to have a higher leverage. That's what you would find in the public market. Clearly one of the benefits of having a shareholder, like an anchor shareholder like Brookfield, would allow to move away from where we're comfortable as a company with 100% free float and get closer to where you would be if you were 100% kind of private. There will be an increase in leverage. I'm pretty certain about that would take place after the offer. Which will again would be then we would look at. I think that's clearly the case, and that's going to increase the risk-return profile you were speaking about. On your point about the market as a whole, I would not necessarily disagree with you. I think this is not an alstria specific conversation. This is a broader conversation. You can actually see that if you read most of the analyst report or the question they ask, it's all about how much CapEx you need to spend in the building. Are those CapEx going to be yielding, yes or no? Obviously in order to do CapEx, you need to get the building empty, which is basically tend to reduce your revenues while you're doing the work. If you assume that you have a portfolio where 100% of the assets need to be retrofitted over time, then y ou want to do more of that, it means that you need to have more assets vacant, more assets which are not income producing. Until the market has gone through that transformation, you are going to see volatility in return, on the market as a whole, much more than we had in the past. I would agree with your statement. I don't think this is very much specific to us. What we're saying is we are aiming to adapt and adjust to that reality. Could you give me an idea about the leverage you are intending to achieve? Will that be about around 60% or will it get up to 80%? Well, I think this is something we would need to go into more detail at this stage. We don't have real clarity. You know, we're an investment-grade company where we are. But you know, we would probably look at something more closer to the 50% level. But then it, we also would need to look at, you know, what impact would that have on the overall rating, et cetera. It's a conversation we need to have with the number of stakeholders before we make that call, but it's clearly gonna be higher than where we are today. Well, it's not gonna be 80% so. Okay. Yeah. Thank you. That was it. The next question is from Jonathan Kownator of Goldman Sachs. Your line is now open. Good morning. Thank you for taking my question. At the risk of repeating perhaps some of the questions, but just to go back to the tax status. Just could you confirm? So I think I heard you said that there would probably be some agreement of non-tendering so that there wouldn't be a threshold of 90% breached. Are you expecting that there would be some real estate transfer tax payable in relation to the offer and under which condition? So that's the first question. Then to skip to the next topic of sustainability, because there hasn't been any questions on that. Just on your assessment for forest, you said it's 2% of your requirement going forward, but how do you calculate your requirements? I.e., how much do you expect wood to become effectively key material in your requirements going forward? Thank you. Your first question is, I mean, I don't expect that they're gonna be with the transfer tax triggered by the transaction. I'm clearly not gonna like give you a reps and warranty on that. At least my expectation that they wouldn't, and that's not something I would be so concerned about. Even in the case of a delisting, if there was ever a delisting? Yeah, look, there are other precedents in Germany where, you know, companies are taking older companies over without triggering transfer tax and even in case of delisting, yes. That is- Okay. The new law introduced in July has no change to that? Well, the new law introduced in July, as we all know, have introduced also ways to kind of limit the or annihilate the transfer tax, depending on whether or not you have an existing shareholder, which was there before the first of July, who basically holds the shares, and plays the role of the kind of blocker in the structure. That can be several shareholders. It doesn't have to be one. It could be- Because no one has 10%, right? It could be any. I mean, yeah, it could be several. If you wanna make sure that it doesn't happen, which I think it's in everybody's best interest, then you better know who they are. Yeah, that's really where. So I would not expect that you're gonna have transfer tax. Okay. Triggered by the offer of Brookfield. On your second point, we do expect that wood are gonna be a substantial part of construction going forward. I mean, it's clearly not the only solution, because if this is the only thing we rely on, we're in deep trouble. But in our specific business, where, you know, we barely do new construction, what we do from time to time is we add a floor on top of a building, et cetera. Those construction we tend to do in wood. It's basically more economic because it's lighter in terms of weight, so it requires less structural implication on the building itself, which is underneath. The technology has evolved dramatically over the last years, which basically allow that to be an extremely viable path to the structure. That's also true for inner fit-out. It's also true, for instance, for all the windows. You don't wanna know, but we have tons of windows in our buildings, which we're replacing all the plastics with wood. As part of the decarbonization process, wood is one of the key resources. The way we estimate our needs is basically looking at the pace at which we are using wood today in our refurbishment, assuming that's gonna go on increasing, and then make an estimate of how much timber that represents, which leads us to the estimate that we have provided earlier. Then if you talk about rooftop extensions and things like that, a subject dear to my heart, but those are usually done in, not in hardwood necessarily, but in CLT or similar material. Is that something that you're taking into consideration? I mean, I assume, are you gonna become a CLT producer or transform that? How do you expect to play? We don't necessarily. That's exactly what we're using. It's CLT and/or equivalent material. But we don't expect to necessarily become a producer. The view here is, I mean, the amount of wood that is produced every year is limited by supply constraint, right? This, I hope, is pretty straightforward. Especially in Germany, where the overall forest management and how much timber you could harvest is basically fixed, because Germany intend to use forest as a carbon sink as a whole, and therefore, the amount you can take out is fixed. You are gonna have more and more people looking at decarbonizing their portfolio. The demand of wood is gonna go up. The price of wood on the market, and as such, CLT, et cetera, is gonna go up. We're not necessarily saying that, you know, we're gonna be chopping the trees in the forest that we own and then using them to put in our buildings and therefore have the full value chain incorporated within the company. But you know, basically the value, you're basically hedging your exposure to a certain extent. Right? Yes. The value of your wood and the timber in the forest increase, and then whatever you sell in the market increase as well. You're basically locking on one material, which we believe is gonna be a fundamental competitive advantage going forward. If our construction costs can be lower than average because we are able to hedge that specific cost, naturally, then we will have a competitive advantage in the market. This is exactly what we're trying to assess here and potentially get into. How big are you planning to become in this market? Sorry? How big are you planning to become if you're only right now covering 2% of your needs? It's not much. The reason why we provide those two number, it gives you an idea about how much we would need to become 100% of our needs. All right, thanks. The next question is from Kai Klose of Berenberg. Your line is now open. Yes, good morning. I've got three questions, if I may. The first one is regarding the future dividends or the potential future dividend. I think it was mentioned in the press release that the dividend could be lowered, the payout ratio could be lowered. Are there any numbers already in mind which you could share? Second question is on page four of the presentation regarding the GHG emissions in 2020 compared to 2019. Would you have an idea of what could be the reduction or which you are targeting for 2021? Then the last question is on the lettings on page 10 of the presentation, where we had a lease extensions of just 3.7 years. Kai? Operator, are we still on the line? Yes. Yeah. Yes, you are. I think it's the line of Kai. He hung up now. I think he will come later. We can take the next one is from Manuel Martin of ODDO BHF. Your line is now open. Yes, hello. Thank you, gentlemen. I have two questions. One is on the REIT status. Would it be a scenario which makes sense to give up the REIT status of alstria, in view of being able to reduce the dividend, maybe notably to finance CapEx plans? That would be the first question of two questions. I think, Manuel, the REIT status have never been a driver in our dividend policy. The obligation that we have under the REIT is to pay out 90% of the German GAAP net income. To calculate the German GAAP net income, you need to account for the depreciation of the assets. It's the German GAAP net income is somewhere around EUR 10 million-EUR 20 million every year. We pay substantially more than what is required by the REIT status. It has never been really a driver for the dividend policy of the company. As such, if we were to consider reducing that to basically reinvest more or keep more cash to invest in the accretive investment in the company, I mean, the REIT status is almost irrelevant in that conversation to assessing that. Does that make sense what I'm saying? Well, I will go through that. Yeah. Thanks. If you look at the obligation under the REIT law, it is to distribute 90% of your German GAAP profit. The German GAAP is not IFRS. It has depreciation of the assets on top of your cost. Also looking at it only at the AG level, it's not consolidated. Basically, if you look at how we were paying dividend every year, we're basically recreating profit out of reserves to be able to pay substantially more than what is required by the REIT law. Okay. You don't have to give up the REIT status to No. Okay, fine. The second question would be on your CapEx plans. I mean, if I understand correctly, the FFO guidance was also raised because you couldn't spend all the CapEx you wanted to spend this year. Is there a number you could share with us, how much CapEx have you to postpone to next year, which will influence the FFO, of course, next year? Yeah. I think it's in the presentation. I'm looking at Julius. The amount of CapEx we have, which is impacting our raised operating expense. It's not really CapEx, right? It's maintenance expense. We have the number in the presentation on the slide. Sorry. The order of magnitude is around EUR 3.5 million. That's what I would expect would increase the raised operating spend next year. Yeah. That's the right number. Yeah, yeah. Sorry. No, I was just on another topic. Yeah. Look, basically, I don't have the presentation in front of me right now, but basically we're increasing the guidance to EUR 115 million, and we're saying this EUR 115 million is overstating the going rate and the recurring income potential of the company by EUR 3 million. Your basically all equal going rate would be more under 12-ish. This EUR 3 million that we're in quotes, in brackets, saving this year is gonna be an excess and extraordinary burden on next year. Without guiding to next year, if you take the going rate of EUR 112 million and put them into next year, next year is probably all others equal than more EUR 109 million. This is what we're saying. Our going rate is EUR 112 million. This year we're EUR 3 million higher because of projects we didn't realize, i.e., EUR 115 million. Next year, we're gonna be EUR 3 million lower, all others equal again, because these EUR 3 million from this year gonna happen next year. I hope that is- That's clear. Great. Thanks. Yeah. Okay. Kai Klose is back in the line. Your line is open again. Yes. Good morning. I had two questions. The first one was on page 10 of the presentation, on the lease extensions of 3.7 years. Could you indicate what was the award of the expiring leases, to get a feeling how tenants currently look in the terms of lease lengths? The second question would be on page four of the presentation regarding the reduction in emissions. Could you indicate what kind of emission reductions we can broadly expect for 2021? Thank you. On your first question on the why is the WAULT of the extension lower than it used to be, I think that's really a reflection of what we've discussed in the past, which is a tenant which is currently in a building and have, like, the option to terminate. Because they don't really know what to do next, their best option is to stay where they are, and then they're gonna extend with a shorter term than they would initially. You had a couple of tenants with whom we agreed an extension for 12 or 18 months just to give them more time to figure out exactly what they wanna do. And that basically is reflected into the lower WAULT extension you're referring to. With respect to, I hope that answers the question, Kai. Yes. Thank you. With respect to the ESG, I think this is something where I'd like to be a bit transparent about. The vast majority of the ESG reduction that takes place on portfolio is not necessarily driven by things we do, but it's driven by the decarbonization of the economy as a whole. In essence, there is no way we're gonna reach any of the 2050 targets if the grid does not decarbonize and if the district heating system is not decarbonizing. I can't really give you a target of where we're gonna be next year because I don't really know. That's the reason. The biggest proportion of decarbonization is coming from district heating and grid, electric grid decarbonization. What we do is we basically electrify more and more of our buildings, and we connect them more and more to the district heating. If they don't decarbonize, we're just doing that in vain. It's very important for us that those things happen. You can't really look at one company in isolation of what's happening around it. We can't get there on our own. We need the whole economy to get there. Mm-hmm. That's really the question mark. If you look at the pace at which things have been decarbonizing, the grid is not decarbonizing that fast. The district heating we're hoping is gonna be doing better going forward. Understood. Very clear. Thanks so much. If there are no further questions, I hand back to the speakers. Okay. Well, thank you very much for being here today. We appreciate your time. I'm sure we will have a number of follow-up questions. We are obviously available to answer them, either Alf, Julius or Alex and me. Please do not hesitate to reach out. Otherwise, you know, we wish you a nice end of the day, and looking forward to speaking to you next time. Thank you very much. Have a nice day. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.