Good day and welcome to the Instone Real Estate Group Q2 2022 results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Burkhard Sawazki, Head of IR. Please go ahead, sir. Thank you. Good morning, everyone. Thank you for joining our Q2 earnings call. Our management team, which is represented by our CEO, Kruno Crepulja, and our CFO, Foruhar Madjlessi, will walk you through our presentation and give you an update on our current business performance and our reinstated financial outlook. This will be followed by a Q&A session. With this, I hand over to Kruno. Good morning, everyone. I'm glad you could join us for Q2 2022 earnings call. Against backdrop of the historic increase in rates and the sharp rise in costs of building materials, we reported solid Q2 results, and we maintained a high profitability. We are clearly benefiting from a high share of pre-sold units ratio, which is currently a key strength. We have already locked in future revenues of some EUR 1.3 billion, which provides a very solid basis for our business performance going forward. We have to acknowledge that in overall very uncertain macro environment, many institutional, but also private investors are currently in a wait-and-see mode. However, we are expecting stabilization, and maybe we are already seeing first indications of this and a moderate recovery in the remainder of the year. We have updated our business plan accordingly, and this is also reflected in our new financial guidance for the current financial year. However, let me start our presentation with a summary of the highlights of the current business performance on slide five. As indicated during our last conversations, we decided to conduct an independent appraisal of our entire project portfolio to enhance transparency of the intrinsic value of the company. The renowned consulting firm, BNP Paribas Real Estate, has run a valuation of our entire project portfolio as of March 31. The analysts came to the conclusion that our reported book values contain hidden reserves. The stated value implies an EPRA NTA at the end of Q1 of EUR 14.21 per share. The historic rise in interest rates year to date and the strong volatility, especially in June, when rates at least reached a temporary peak, triggered a headwind for our business. It had a negative impact on affordability for certain customer groups, and it triggered an overall high level of uncertainty in combination with the overall prevailing macro risks. Large parts of institutional investors, despite the fundamental needs to invest into real estate, decided to remain on the sidelines for the time being, and also our sales ratio in the single unit sales dropped significantly. A stabilization of interest rates and rising investment pressure towards year-end could, however, be catalysts for a moderate recovery of transaction markets, especially in the Q4. Despite declining transactions volumes, the pricing for new build apartments in metropolitan areas remained largely stable in Q2. We are currently not offering discounts. The situation of procurement markets remains tense. Due to the supply chain disruptions as a result of the war in Ukraine, we have seen a jump in costs for important building materials. However, in recent weeks, we have observed first indications of a certain easing of the situation, including decreasing prices for construction steel. Instone benefits from an overall strong reputation in the market. This also includes the situation in financing markets. Despite turbulences in the bond market, we recently signed the terms for the issue of a new promissory note with a volume of EUR 50 million at very attractive terms, a coupon of 4.5% for 5-year maturity. This is again strong confirmation of Instone's sound credit profile. Let's now take a brief look at our financial KPIs for H1 2022. Our adjusted revenues amounted to EUR 268 million, slightly above previous year's level, which is also supported by a high volume of apartments already sold. The high share of pre-sold units is key stabilizing factor for our business. Our gross margin stayed at a very high level of more than 25%, which is still in line with our targets for the entire financial year. In the Q2, we have booked higher costs for existing projects, but the margin stayed at a very healthy level of 22.5%, especially in comparison to other industry peers. Due to the decreasing margin from a very high level and slightly higher tax rate, our adjusted earnings after tax dropped to some EUR 19.6 million. Our business model is a structural key beneficiary of the over-demand situation in German housing market, which will be reinforced by cancellations or postponements of new construction projects of many of our competitors. This will help us further improve our competitive position. Nevertheless, we have to acknowledge that short-term visibility is low as large parts of investors prefer to stay in a wait-and-see mode in the current uncertain market environment. Therefore, we decided to choose a prudent approach for our updated business plan, and we have incorporated a sustained reduced sales speed until the end of this year. Accordingly, our new guidance for the financial year 2022 assumes adjusted revenues of EUR 600 million- EUR 675 million, a sustained high gross margin of at least 25% and adjusted earnings after tax of EUR 40 million- EUR 50 million. The payout ratio is expected to remain stable at 30% of EAT. In the current environment, we will also be more selective on the acquisition side, and we expect a positive Operating Cash Flow. To provide some more insight into the current demand situation in recent months, we have provided you an update of our retail sales ratio on slide six. This chart clearly demonstrates that the demand remained at a very robust level above the long-term mean until June. As we had already flagged during our last earnings call, the strong rise in interest rates and the high volatility in the bond market ultimately triggered a steady slowdown over the last weeks, which is also reinforced by a typical seasonal effect over the summer period. We are now seeing first signs of stabilization in our reservation numbers. In this regard, we anticipate a certain normalization after the summer break, but we expect sales speed to remain below the level we have seen over the past two years. The most active buyers in the market currently appear to be private investors with only a moderate leverage. After a positive price development in Q1, our prices remained overall stable in Q2. We are now not offering additional incentives, and we have a preference to maintain high margins over short-term push of sales volumes. On the following slide seven and eight, we provide an overview of relevant macro indicators. We all know that the market environment, especially since the start of the Russian invasion, is anything but normal. We have seen a historic jump in mortgage rates from some 1% - 3.5% within a couple of months. This, of course, had a negative impact on the affordability of our product for individual customer groups. Additionally, the sharp rise in rates has triggered enormous uncertainty among private and institutional investors. Despite a general intention to invest in real estate, investors have decided to stand temporarily at the sidelines until there's more clarity. The recent stabilization and even decline in rates is clearly helpful in this respect. Important to note is also that the availability of debt is not an issue. The volume of mortgage loans to private households clearly exceeds the previous year's level. We expect that investment pressure of institutional investors will rise in the final quarter, and therefore we expect more liquid markets towards the end of the year. The decline in transaction volumes also makes it more difficult for investors to assess the development of market prices. Research providers observe stable or slightly rising prices during the Q2, which is also pretty much in line with our own sales activities. Again, we believe the postponement or even cancellation of new development projects clearly mitigates the risk for major price corrections in the market. The rise in interest rates is, as you know, a consequence of the accelerating inflationary pressure and the resulting change in the policy of central banks. The pronounced inflationary pressure for important building materials has, of course, a direct negative impact on the supply side of our business. In the first half of 2022, we have seen the fastest growth in construction costs in many decades. Construction costs increased by more than 17% year-on-year in Q2. As we highlighted in our last calls, we are able to mitigate the effects due to a high share of pre-agreed fixed price contracts. However, we are of course not able to completely compensate for these effects. We feel a certain negative effect in our margins, but are still confident that we can reach a margin which is largely in line with our previous guidance. Besides, it is quite encouraging that we are currently seeing indications of a broad-based decline of important commodities. We currently see an uncertain easing in our material costs, including construction steel, but the sustainability of this trend is still very uncertain. We currently expect a rise in construction costs of some 15% year-over-year. Nevertheless, we are confident, as mentioned, that we can maintain a high margin of at least 25% also in 2022 due to fixed price contracts and also due to subsidies for energy efficient buildings. Despite the short-term headwinds, we are convinced that the medium-term outlook for our product has improved even further. The changed environment of construction and financing costs will trigger a change in the competitive landscape. There will be decrease in new supply in the market. Our product, new build apartments, has gained in relative attractiveness compared with existing housing stock. Especially during the current energy crisis, it is becoming obvious that besides general sustainability aspects, our highly energy efficient buildings offer significant cost advantages for property owners and tenants with regards to their utility bill. The energy consumption of our properties is some 80% below the average existing housing building in Germany. Natural gas only accounts for some 2% of the direct energy supply of our projects. Compared with investments in existing housing stock, there is no CapEx backlog for energy investments in our properties. Our properties give investors the opportunity to invest in a product that meets the requirements of the EU taxonomy. Decreasing the supply will support upward pressure on rents due to rising scarcity in the market. New build properties in well-connected urban locations are currently typically rented out at index-linked or staggered rental contracts. That means they are offering strong inflation protection with an attractive real yield of maybe around 3% in most metropolitan areas. Moving to our portfolio section on slide 11. Our project portfolio increased slightly year to date. As of end of June, the gross development value of our portfolio stands at around EUR 7.7 billion. This forms a strong basis for a growing business in the coming years. Nevertheless, despite the high level of short-term uncertainty in the market in the current macro environment, we have decided to become very selective with regard to new acquisitions. We will invest less than initially planned, and we are now expecting a positive Operating Cash Flow in 2022. Accordingly, we are further de-risking our strong balance sheet. Slide 12 provides a breakdown of our current project portfolio as of the Q2 reporting date. The portfolio is made up of 54 projects with some 16,600 residential units. Some 87% of the GDV is distributed to the most attractive metropolitan areas of Germany and the remaining part in very attractive B-cities. This chart does not include our JV projects which come on top. The proportionate GDV of our three joint venture projects amounts to some EUR 500 million. On the right-hand side, you can see the usual breakdown of the current development status of our portfolio. Of the nearly EUR 7.7 billion of GDV, which is shown here, around EUR 3.1 billion is already under construction or pre-construction, and thereof, 92% of some EUR 2.9 billion has already been sold. Of the EUR 2.9 billion, some EUR 1.3 billion have not been recognized as revenues yet, representing a solid basis for future revenues and earnings. With that, I would like to hand over to Foruhar for the financials. Thank you, Kruno, and good morning, everyone from my side. Kruno has provided an overview of our results and a detailed view of the current operating environment. I'd like to walk you through our Q2 results and provide a bit of background to our guidance and outlook for 2022. Let's dive right into our numbers on page 14. Against a difficult operating environment, we feel we have achieved respectable H1 results with revenues exceeding the comparable 2021 figure and a gross margin of 25.7% right at the top of our initial margin guidance range of 25%-26%. As Kruno has explained, we have deliberately decided to scale back institutional sales unless feasible at favorable terms and maintain full price discipline in all our retail projects. You can expect us to continue to prioritize margin over short-term revenues. As a result, full year revenues will fall short of our initial targets. We will still achieve EUR 600 million-EUR 675 million of revenues for the full year 2022 and a gross margin exceeding 25%. Our portfolio remains highly attractive and profitable. As new construction activity in the residential sector decreases and with energy efficiency and favorable regulation for new build property becoming ever more important, pent-up demand for our product is ultimately only going to increase. Next to our project related work, our focus includes the platform costs. We have been able to contain platform costs reasonably well for the first half of 2022, with savings versus the prior year period of approximately EUR 3.5 million. Against our previous guidance of EUR 90 million for 2022 platform costs, we're now aiming to reduce our platform related expenses to less than EUR 80 million for the full year. This will be achieved based on pursuing selected new hires only, a focus on cost discipline with general and admin expenses, as well as adequately managing variable compensation for all our employees. Looking at our H1 bottom line of EUR 19.6 million and based on our revenue targets, we will achieve earnings of EUR 40 million-EUR 50 million for the full year. Let's move to page 15 to illustrate our top line expectation. Looking at the left-hand sales chart first. H2 sales are expected to exceed H1 sales based primarily on new project starts and two smaller sized institutional sales. For the full year, we expect to achieve sales contracts of around EUR 350 million. Looking at the right-hand chart as previously outlined, in addition to new sales contracts, our revenues will benefit primarily from construction progress in relation to our EUR 2.9 billion pre-sold properties. A minor part of 2022 H2 revenues only is linked to new sales, underpinning the resilience of our revenue guidance. Hence, construction starts and construction progress in relation to our pre-sold projects are the key drivers of revenue recognition from now to year-end. We have, in our view, taken a conservative view of how construction activity will evolve. That is particularly true for the bottom half of the indicated revenue range. Coming back to our Q2 financial position on page 16. Moderate leverage continues to characterize our business. With 23% our LTC remains at a low level, and so does our net debt to EBITDA at 1.8x. This conservative leverage does provide downside protection as well as financial flexibility. I will talk about our latest financing and maturity profile in a minute. Page 17 lays out our Operating Cash Flow as well as our liquidity position. Pre our new land investments, the business has generated EUR 90 million of cash flow, a strong number considering the current environment. We will continue to benefit from milestone payments related to our vast amount of institutional and condo pre-sales. Of the contracted EUR 2.9 billion euro pre-sales, EUR 1.7 billion euros are still due to be paid to Instone subject to construction progress. Separately, our business is well funded with more than EUR 200 million of cash, as well as EUR 170 million euros of undrawn corporate credit facilities. In addition, it is important to understand that our project financing lines cover essentially all our outstanding construction payments. Page 18 provides an overview of our debt maturity schedule. We've just agreed a new EUR 50 million 5-year corporate financing by way of a promissory note with a group of pension funds at favorable 4.5% interest costs. I'd like you to focus on the maturity schedule as of August 11. As you can see, we now have no major maturities before August 2025. I'd like to also remind you of our corporate level debt agreements, all of which essentially exclude any secured project level debt for purposes of covenant calculations. This favorable treatment of project debt provides ample headroom relative to current leverage levels, even in a downside scenario. Moving to the results of our external valuation and our EPRA NTA calculation on page 19. As we have explained in our Q1 call, we have retained BNP to provide an independent valuation of our project portfolio as of March 30, 2022. You will find the BNP report on our company website methodology. Separately, we have provided an illustrative calculation table in the appendix to explain BNP's residual value approach. According to the BNP report, the market value of our projects at which a willing buyer and a willing seller would agree to transact amounts to EUR 2.5 billion. In order to calculate our NTA, we have followed EPRA's best practice guidance. For completeness, you will find EPRA NRV and EPRA NDV calculations in the appendix. As you can see, the BNP valuation implies a fair value uplift of EUR 113 million relative to the book value of our properties, and an NTA of EUR 14.21 per share, a substantial premium to our current share price. Before moving on, I'd like to make just two additional remarks. One, in deriving its market value, BNP has assessed expected sales prices as well as construction costs, and added a further 5% construction cost buffer to its cost assessment. In addition, BNP derives the residual value for the properties by applying a so-called assessed profit and risk share that we would find, in some cases, to be rather conservative. Second, as opposed to the landlords, we do not generate cash flows or value through the mere ownership of our inventories. In fact, our inventories should be regarded as raw material, which we refine and upgrade through the development and construction process. Hence, the embedded value of our inventories is substantially higher than the NTA implies. Our prospective NAV provides you with a good proxy for the value embedded in our inventories. As of June 30th, that number stands at EUR 40 per share. Moving to page 21, I'd like to briefly summarize again our reinstated 2022 guidance. We expect to achieve EUR 600 million-EUR 675 million revenues based primarily on construction progress in relation to pre-sold projects. In addition to the tangible institutional sales discussions, the upper end of that range does assume very limited revenue contributions from incremental sales. Second, our gross margin is essentially unchanged versus our initial guidance, a strong sign of the resilience in our portfolio. Benefiting from previous house price inflation, energy subsidies for new build projects, a conservative cost budgeting and last but not least, a more favorable mix of projects versus our initial 2022 guidance, which was based on a larger number of somewhat lower margin institutional sales. Third, our net income can be expected between EUR 40 million and EUR 50 million, a relatively wide range, the top of which will be achievable subject to potential incremental institutional sales. All of the above is based on sales contracts for the full year amounting to around EUR 350 million. One more point. Without providing any more detail, I would like to share with you one more data point that should provide an understanding of the relative strength of our position, not least due to our substantial level of pre-sold property. Assuming no further sales of any of our projects from June 30, 2022 onwards, and based on our current expectation of construction progress. We have already secured revenues for fiscal year 2023 of around EUR 550 million. We need to ask for more time to monitor both retail sales and institutional investor appetite to provide more details or full guidance for next year. However, I thought the secured revenue figure was worth sharing early on as this is clearly a pretty reliable data point in almost any market environment. With that, we are ready to take your questions. Thank you, speakers. Ladies and gentlemen, if you'd like to ask a question, please signal by pressing star one on your phone keypad. If you're using a speakerphone, please do make sure your mute function is turned off to allow your signal to reach us. Once again, please press star one to ask a question. We have our first question from Mr. Philipp Kaiser of Warburg Research. Please go ahead, sir. Your line is open. Yeah. Thanks a lot. Thanks for the presentation, and congratulations on the Q2 figures. Just a couple of small follow-up questions. I would prefer to go through them one by one. First, starting with a significant increase in other operating income. Could you shed some light on what the drivers are behind that increase? Okay. Would you like to go to your questions first? I would prefer to do it one by one. It is a combination of a regular recurring release from provisions for guarantees for our completed buildings. It is a degree of LTIP-related share price performance. There are subsidies that we receive for energy-efficient buildings that are booked through our other operating profits. Oh, okay. Perfect. Thanks a lot. Given the substantial increase in the building materials in the recent months, could you indicate, on average, the current construction cost per square meter you currently observe in the market? So looking at I have to differentiate between, you know, our current core business and, you know, that the projects are different if they have one or two garage floors. This is extremely. I would say there's some range, but approximately, I would say that the pure construction costs amount to approximately EUR 2,600 per square meter net space. Okay, perfect. Thanks a lot. As you also mentioned on the call that you're kind of assuming buying less projects than you expected. I think given the current environment, it's hard to give us a concrete acquisition target for this year. Am I right, or do you have anything particular? I would say that, you know, it will be significantly below the initial plan. I think that that's from our perspective clear, and we want to be here very, I would say, selective. If we see distressed situations from, you know, landowners who have problems to refinance a project and we can jump in for very attractive terms, I would say this is one of our main focuses. If we see the chances coming up, then we will generate those. Clearly, I would assume a significantly lower number for this year. I think next year, we will catch up, and we will have more clarity, transparency of the market, et cetera. I'm pretty sure that we will clearly benefit from this current market environment and our strong balance sheet, but we will be very selective. Okay. Fully understand. Do you see kind of first like regional more smaller competitors already struggling or like what's kind of the current competitive competition in the market? Do you think any kind of chances in the second half? What we see currently is that there is the one or the other, you know, activity by people trying to sell their lands. There are also other, I would say, activities where some of those are waiting to see what is happening further. Like, wait-and-see modes, like the investors currently are in. I would expect real chances coming up more in the last quarter this year, maybe Q1 next year, mainly driven by companies who have a high debt position and have to refinance and are suffering by increasing construction costs. These are the, I would say, the interesting spots for us looking at. Okay, perfect. Thanks. Coming to the new guidance for 2022, I think like issuing a new guidance in this current environment is like indication for an increased visibility. As far as I understood, and you mentioned already in the call, most of the sales generated in the second half will be based on milestone payments from progression in the construction, and only a minor part will come from yeah, new expected sales. Kind of a substantial increase in energy costs, particularly as discussed in Germany, for the second half will not really have a major impact on the guidance or how to read this then. I think you can assume that the increased energy costs are part of our assumptions regarding cost price inflation. Other than on the construction side and for the materials, we have very limited requirements for energy in our few offices. Okay. Kind of, like, say like an increase in energy costs for the private sector, which might even slow down the demand even more in the second half shouldn't be a big issue as like most of the revenues came from milestone payment. Is that right or? Yeah, you can. I mean Going forward one. Sorry. Just one comment before Kruno. You can then add. Our revenue recognition is not tied to milestone payments. It's just the construction progress that drives the revenues. As you can see on the chart on page 15, I'd say about 80% plus of our second half revenues will be based on construction progress in projects that have been pre-sold, while the revenue recognition for new sales is only a minor portion. In that sense, I think the guidance is relatively robust. Yeah. Additionally, I would say that, you know, the rise in energy costs is clearly a positive driver for new build in comparison- Okay. To existing properties. Okay. Okay, I fully understand. Perfect. Thanks a lot. There are no major bottlenecks referring to the supply chain that might kind of slow down construction progress in the second half. As you mentioned already, like, kind of an easing in building material prices, there are also indications for an easing in the supply chain for particular raw materials. Philipp, I would turn this around. I would say that in our guidance, we have already discounted a relevant portion of construction activity to be impaired by the current environment. Okay, perfect. The last question from my side regarding the midterm guidance. Could you shed some light on the underlying assumptions after like the recent guidance cuts, how do you all reach the numbers in 2026? I think on that point, it very much depends on our ability to invest into new projects this year next. That will be the key determinant. It is clear that, you know, given the current restrictions on our sides of new investments and the more selected approach to new investments, there is clearly, you know, the risk of achieving that target have increased. Okay. Thanks a lot. Very, very helpful. That's all from my side. Yeah. Thank you. Thank you, sir. Our next question comes from Thomas Rothäusler of Deutsche Bank. Please go ahead, sir. Your line's open. Hi. Morning together. A couple of questions. The first one actually on demand for apartments, which came down significantly since May. I mean, have you seen any signal of recovery considering the recent drop of interest rates recently? Hi, Thomas. Yes, you know that we have very early been very transparent about declining demand, and that's the reason why we have set up our first guidance. Now we already see in the reservation numbers that the binding quality is stabilizing. Maybe it's a bit too early, but there are clearly first positive signs that the sales speed is stabilizing and showing a positive direction. This is our current view into the market. Also important to say is that we are still selling and you know that our initial target is to sell until completion. We are still with our current sales numbers in the projects on this path. We still will achieve our let's say full sale until completion of the project. It's stabilizing actually at relatively low levels. Is that correct or- Yeah. Can you speak of recovery? Yeah, it's currently difficult because, you know, when you look at the same number last year in summer, we have been in the binding quality at a number of approximately one, which is comparable to the number we are currently seeing. There is some impact by the summer break. Overall, what Foruhar said is that, it's not realistic to get to the binding quality of three or four we have seen in the last two years. I'm not too pessimistic to get to the binding quality, which has been the average of the last years. Okay. Regarding pricing, I mean, house prices, I think you have mentioned to expect flat pricing levels. Am I right that that was like your previous assumption was some growth? Like, was it 5% or you reduced that, or? We initially in the Q1 said that we see a house price inflation number between 4%-5%. It's now on the year-to-year basis more at the level of approximately 1.5%-2%, mainly driven by the Q1 this year. For the remaining quarters, I would expect a flat house price inflation number. It's very hard now to look forward further. There are let's say indicators which of course have been negative, rising interest rates, et cetera. On the other hand, we have to say that we see less construction activities, which means that the supply of flats will go down drastically, which will increase further pressure on investors and owner occupiers going forward. It's very hard to give a precise forecast going forward. For this year, we can say that we see positive HPI number, approximate data level of 2%, but lower than the initial view Q1. Also again, we have reflected this all in our numbers. Yeah. Yeah. Okay. That's helpful. I mean, maybe you can provide some view on how insti investors currently look at the product and what has changed for them, because it seems like you're rather cautious on assuming insti sales. Yeah, that would be helpful. I mean, if you speak to these investors, what are they looking for? How have the return requirements changed? Let's look at from two or three angles on this question. I think important to say is that nobody's assuming that rent prices will go down. Mm-hmm. This is the first, let's say, answer. The second is, when you look at the rising energy costs, which clearly will hit existing properties with a low energy standard. The new builds offers, let's say a quite better solution going forward. Overall, I would say in the attractivity of the question where to invest, new build is clearly benefiting from the rising energy costs. And also again, you can index the rent prices going forward for new builds, which secures you when you think about, you know, inflation, et cetera. This is really a securing element. Again, we discussed. Mm-hmm. The problem I think currently is and that's the reason why we haven't planned significant institutional space for this year. It's clear that the institutional buyers are currently waiting to see what is happening. My personal view is what will happen, the supply goes down, and you know that many of the investment companies, they have to invest. They have the pressure to invest. This pressure is clearly hitting, let's say, lower supply of flats going forward. Next 1-2 years, I don't believe that, you know, we will see rising supply. It goes down. Therefore, I wouldn't be too pessimistic here. I think they will come back. We have been very cautious in our guidance for this year, due to the fact that we don't want to get under pressure to sell. We want to sell for the right price point. That's, yeah, what I can say. Maybe, Foruhar, you can add, [Jeff], yeah. I think that's a pretty complete picture. I mean, I think the regulatory and environmental or energy consumption benefits of new build are pretty obvious. In the current environment, I think any transaction business is clearly coming to a halt almost. We're still having a couple of promising discussions or very advanced discussions. You know, as we said for this year, we're not counting on selling and in line with what we're doing on the retail side. We're not offering incentives, you know, we're also not discounting our properties when we talk to institutions. Yeah. Actually it's a reflection of very low market liquidity, basically. Okay. That's. The last question I have is actually on the ramp-up plan for the affordable product, which I understand you turned a bit more cautious. Can you provide more color on this? What you plan also in regards to platform costs, what we can expect and what's the impact on. I mean, that means, of course, you limit the growth potential also in the future. I don't think that we are limiting the growth potential. I think we might find ourselves in a situation where we're delaying things, but it's just not prudent now to go out and as much as we had initially budgeted for new land investments. As you know, it takes 3-5 years before, or maybe even 4-5 years before new investments can be converted into revenues. We'll see. I mean, I think we have a very strong EUR 7.7 billion existing pipeline. If we don't invest in line with budget for, let's say more than 12 months or even 18 months, then achieving the longer-term targets will be more difficult. Yeah. Okay. Got it. Yeah. Maybe one addition here. I think what we will see clearly from my perspective due to this is related mainly to the increasing construction costs of companies who have a very, I would say, high debt on the balance sheet, maybe mezzanine, and then they are hit by rising construction costs and get under pressure. I think that we will maybe lower, of course, our investment for this year, let's say. I think there will come up chances to get invested. The question here is clearly, are those projects more mature, which means with more master planned parts where we can start construction earlier. That's what I want to say. It could be that we will invest more next year, beginning of next year, but maybe more major projects and still get to our midterm targets. It depends on what are the chances we are seeing in the market. Could we compensate the postponement of investments by a different profile of projects? This we will have to see. It's now too early to say, but I'm here, not too pessimistic. Yeah. I mean, today there was the announcement of one of your peers actually to sell two projects in Frankfurt at 15% discount to fair value. Just an example, I guess. Yeah. This could be the examples. You know, there will be pressure, and we have the very strong position when you look at our balance sheets and our debt position. You see that we are still getting financing for very attractive terms. We are in a very strong position to benefit from a situation where others get under stress. This is from my perspective. Yeah, this is really a very positive situation for us. Here we want to stay disciplined. We don't want to, you know, invest in the first chance. We want to see are there maybe better chances, and we want to have a full picture. It's now too early to say, I'm investing today. Maybe it will last a few months, but we have the money to invest. Yeah. Makes sense. Thank you. You're welcome, Thomas. Thank you, sir. We go on to our next question from Thomas Neuhold of Kepler Cheuvreux. Please go ahead. Your line is open, sir. Good morning, gentlemen. Thank you very much for the presentation. There's only one topic left, which I would like to discuss, which is the gross margin outlook. If I remember correctly, you stated in Q1 that you have fixed roughly 70% of your expected construction volume for 2022. The last construction inflation figure we got from Germany was close to 18%. I was wondering firstly, if you could give us an indication, if you would have had to pay market prices, by how much gross margin would have been lower in the first half. Can you give us an indication, what impact the flattening off of house price inflation and the ongoing strong construction cost inflation could have on your margin situation next year? Maybe I can start before you can add. For this year, Thomas, you have seen that we are still able to get to the gross margin we initially guided. Initially, we guided 25%-26%. Now our guidance is that we will stay above 25%, which means that we have been very strong here. We have had project buffers and we have benefited from subsidies, et cetera. This was well managed, I would say. When you think about the EUR 1.3 billion of project portfolio revenues, which are already sold but not reflected or not generated, we assume here a gross margin which will be slightly below 25%. which means, from my perspective that we are still able to generate very attractive margins. Here the cost price inflation is fully reflected. I can't give you a precise number now for 2023, as Foruhar said. Here we are too early to give any guidance for 2023. I hope this is answering your question. Maybe, Foruhar, you can add. Thomas, I think that's the. You know, we are pretty confident about the profitability of the portfolio, whether that's 25, 24, you know, any, anywhere in between or maybe slightly lower or slightly higher. It is just I think impossible to say from today's perspective. What I can say, what you also find in our GDV bridge is that as we get closer to completion of our planning processes, there's also upside versus our planning or previous assumptions in terms of density and in many instances that does also enhance revenue. So the cost side is one side. The revenue side, even if there is no per square meter price inflation, there is still upside in the portfolio that can actually be you know relatively significant. All of these facts, as I said before, I think we need to observe the market a bit more and see where we stand and what the mix is of product that we bring to market next year, before we can be more precise about the outlook. Okay. Thank you. You're welcome, Thomas. Thank you, sir. Speakers, we have no further questions at this time. Yeah, thank you for your participation. The IR team will be available for you also after this call. Just send us an email or give us a call. Thank you and goodbye. Thank you. Thank you, everyone. This concludes today's conference. Thank you for your participation, and you may now disconnect.