Dear ladies and gentlemen, welcome to the conference call of Vonovia SE. 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 the zero on your telephone for an operator assistance. May I now hand you over to Rene, who will lead you through the conference. Please go ahead. Thank you, Martin, and welcome to our Q1 2022 earnings call. Your hosts today are, once again, CEO Rolf Buch and CFO Philip Grosse. I assume you've all had a chance to download today's presentation, and in case you have not, please do find it on our website under Latest Publications. Rolf and Philip Grosse will now lead you through this presentation, and of course, we'll be happy to answer your questions afterwards. Without further ado, let me hand you over to Rolf. Thank you, Rene, and also a warm welcome from my side. Let's start with page three and the highlights of this presentation. First, Q1 results. I think we had a good start in the year. Adjusted EBITDA is up by 44%, or probably more correct, 10% excluding Deutsche Wohnen. Group FFO is up by 44% or almost 8% excluding Deutsche Wohnen. Group FFO per share, which is probably the most important figure, is up by 12%. EPRA NTA based on the new EPRA definition is 63.55, 1.2%. Philip will probably explain to you a little bit what happens with valuation. LTV, 43.7, so in the corridor on net debt to EBITDA, 14.5, which will increase to peak level during the year up to 16, and then will have a continuous built-in decline thereafter. Second, we have some positive changes on the guidance. Philip will provide more details later, but essentially, there are three items. Rent growth, we are now saying it is at least 3.3%. You see that there were some very good Mietspiegel coming in during the beginning of this year. We will see further Mietspiegel coming in and also probably effect of index rent. That's why we are not daring to give you a complete new guidance, but we are just saying it's at least 3.3%. And then we have an increased Recurring Sales volume by 10%. Of course, we have reduced our investment program to a magnitude of EUR 1.3 million-EUR 1.5 million as we intend to switch most of the 2022 development to Development to Hold to Development to Sell. Let me make a remark here. You know that we have counted the development to hold business as part of our investment program. I think development to hold is more similar to an acquisition. That's why if you apply our acquisition criteria, mainly FFO per share and asset value per share accretion, development to hold in the moment does not fit with our acquisition criteria anymore. That's why we will go to sell the buildings. Third is inflation rate and inflation and interest rates. I think it is a very important topic for our business. We had to form a clear view on how inflation will impact our business, and you will see in the presentations that we have developed a solid opinion on this. Inflation will find its way into rental growth as Mietspiegel are not fixed by politicians, but are a reflection of actual market data. Index rates are a good way to accelerate the development for at least fully modernized properties. We do not consider affordability to become an issue anytime soon, in light with the wide range of salary and wage increases and the elevated government support. On values, we observe that prices for existing properties have moved alongside new construction prices. With a strong increase in price for new construction, we do not see how that trend should break. In terms of overall valuation, the only period of slight weakness in the last 50 years was during a time of high vacancy, so the opposite of what we have, what we have to see today. Fourth, our priority in this new environment with increased cost of capital has changed. We are implementing a number of immediate actions for the year 2022. As announced already, no incremental debt. Philip is not allowing to take additional debt on the books. That means that we have to have 100% organic funding for the reduced investment program. Majority of development to hold. That's why we switched to sell. We will speed up the recurring sales volume. Of course, no larger portfolio acquisition, which includes also no acquisition of Adler shares. In addition, we are working on three main pillars to focus for the year 2023. Putting more emphasis on asset-light business models as we look to offer our services, skills, and experience to third parties. We are working on the feasibility study to build joint venture structures in our balance sheet as we look to attract private capital and possibly build a structure that could enable us to arbitrage between public and private debt. Third, we will review our capital and location strategy. You know that our portfolio strategy is nearly 10 years old because it was developed with the IPO. This probably needs some revision. It's also clear that we are not in a hurry because it doesn't make sense to sell immediately portfolios where we know that in the next 12 months, the value will go up and then put the money in cash on the bank account because we have no other needs for this. That's why it's probably good that we take the time, develop a new capital and location strategy, and then we'll execute this in the year 2023 and following. Let's go on page four. Before Philip goes through the financial results and our revised investment program, let's take only four areas where inflation can be relevant and explain what is our view. The four elements are inflation is relevant for rent, for P&L effects, for rates, and for values. Rental costs. Market rent costs follow the inflation in Germany with the time lag. Index rent can be a good way to accelerate that development, and the investment of rent growth is de facto inflation protected. P&L. The impact of inflation on our P&L is very manageable. Since about 80% of our rental EBITDA are margin, only the remaining 20% are exposed to inflation. Every 1% rent growth can absorb 5% of inflation. We have payback chances as well. Third, interest rate. The best hedge against rising rates is our eight-year average maturity. Increased funding costs have a limited impact on our overall cost of debt. As you will see later, the average cost of debt is not expected to move very much in the coming years. At the same time, real rates are deep in the negative territory while real estate is widely considered a good proxy to hedge inflation. Asset prices. This is maybe where opinions differ the most. Times of inflation are usually times of asset value appreciation. We also have a few slides to give you some color in this debate, including a pretty stable spread between the values of existing buildings versus new construction and what is the real driver behind behind the resi prices, especially for our product. Let's move on page five. Let's begin with inflation and rent growth, and a recap of what Mietspiegel are and what Mietspiegel are not. Since rental contracts in Germany are evergreens without regular renewals or renegotiation of rents, there need to be a mechanism to allow rent growth for sitting tenants. This is what the Mietspiegel was built for and what the Mietspiegel does. If you look on the ownership structure in Germany's fragmented market, it becomes clear that the Mietspiegel needs to work for everybody. The question is not, will Vonovia be allowed to grow with inflation over time? The relevant question is, how can the majority of the market survive if rent growth develops below inflation for a longer period of time? The answer is that the most market participants cannot survive in this scenario. That is why the Mietspiegel with its look-back period and average effect is important for the whole system. Mietspiegel are not fixed by lawmakers. They have to be based on scientific methodologies. Representative data that is a true and fair representation of the local rent level and using a scientifically recognized methodology that must be properly documented. To be clear, this is not me saying it. This is straight a quote from the manual of the Federal Institute for Research on Building, Urban Affairs and Spatial Development. This is the government who defines these rules. Mietspiegel defines a benchmark for local comparable rents, and they are calculated on the basis of rent levels that were agreed in the market for comparable apartments during the last six years. Look at this way. Mietspiegels are Germany's social market economy instrument for the residential rental market, averaging out the volatility. Page six. As a reminder, we are all used to market rents growing at 1% or 1.25% because this is what we all saw during the last 20 years. That was because inflation was at this level. If you look at the 1970s, we see much higher rental growth because inflation was running at a higher level as well. It is not politicians that somehow keeps the rental level down. It's a reflection of the market. That is what the Mietspiegel does. It average out development because of the six-year look-back period. Since rents for new construction, for new lettings, for modernization, and also for index lease agreements have to take into account, higher rents will automatically feed into the future data set, and that will be used to determine the rental level for sitting tenants going forward. On page seven, you will see that while inflation will be reflected in Mietspiegel only over time, there is an immediate way to increase rent with inflation, and that is by way of inflation-linked rental contracts. The basis for this is governed in Germany's Civil Code, in this case, § 557b BGB, just like the Mietspiegel is governed by § 558 BGB, and the modernization allowance is regulated by § 559 BGB. If you have an index-linked rental contract, rent can be adjusted once a year on the basis of the CPI, as determined by the Federal Statistical Office. This can be done on an open end or for a certain period of time. What is important to know is that rental agreements with an index rent are not subject to increase via Mietspiegel, and the landlord is generally not allowed to use modernization loans to pass on a percentage of the investment amount. In the past, with low inflation and vast modernization potential, index rents usually for us did not make any sense, except for new construction, where we use index lease agreements as a standard already today. No surprises that the number of index rent contracts for Vonovia is low, with only around 5,000 so far. With higher inflation rates and an increasing pool of modernized properties, we can use index rent more frequently wherever they are an advantage for us. In broad numbers, we estimate that we have around 140,000 apartments where index rent makes sense once a new tenant moves in. This number is excluding Deutsche Wohnen portfolio, where we still need to analyze for index rent potentials. Especially these apartments where we have made Upgrade Building investments and where Optimize Apartment investments have either been made already or will be made when the apartment became vacant. In the end, we will need to decide case by case to see what makes more sense for us. Also bearing in mind that the Mietspiegel potential is high as well. This is our normal job as asset managers. To help you a little bit with the rough math, assuming a fluctuation rate of 9% on the 140,000 apartments means that we get up to 13,000 apartments annually where we will implement index rents. Page eight also gives you a little view on why it is important to decide it case by case. Coming back on the argument that Mietspiegels are based on market data and not based on government's decisions. We have been seeing some very encouraging new Mietspiegel so far this year. The chart on the right shows sustainable increase between the previous Mietspiegel and the most recent one. It's probably fair to say that given the six years look-back period, inflation has not really been much of a factor in these increases. It's probably more the fact that on the long run, Mietspiegel cannot deny market development. Of course, there's also some level of influence by way of setting the data samples, including or excluding premium or discounts for certain features. The overall market development cannot be ignored for the long term. Over the medium term, Mietspiegel have to reflect what is going on in the market and this supply and demand imbalance and high level of inflation, it is clear to us that there is higher rental growth to come. Of course, on page nine, we address the fact that a few market participants are afraid that higher rental growth will not be possible because the tenant has to pay more additional money for energy and other expenses. The well-known affordability gap. That concern seems to ignore that not only salaries and wages are seeing very meaningful increases, but we are also seeing the government stepping up their support in multiple ways. They have decided that going forward there will be automatic increases in the most elements. They are avoiding in Germany the yellow vest phenomenon in France. We see strong support to make sure that the lower and middle-class incomes will not lose purchasing power. I don't think it needs to go through all examples, but we have included on the pages. It is obvious that affordability does not seem a problem and an issue in the foreseeable future, at least for our clients. Moving on. The second point of inflation is our P&L. This is page 10. We are showing an illustrative sensitivity of different inflation assumptions and different rental growth assumptions. So this is just illustration. On the first three columns, we are using the old guidance of the 3.3% rental growth. No matter what I assume for inflation, whether it is 6%, 8%, or 10%, the rental growth always creates a buffer that is higher than the impact of inflation. The simulation on the right side is more or less the same sense. The three columns on the right follow the same logic, only with higher rental growth, assuming the medium-term effect reflected in the prior, which I explained to you in the prior slide. Obviously, the buffer is higher as a result of higher rental growth. To make it short, a high margin business is a very good protection against inflation. Page 11 is all about interest rates. Left-hand chart shows how higher financing rates impact the overall average interest rate only marginally because of the 8-year average maturity profile. For this illustrative view, we have assumed that we refinance the 2023 and 2024 debt at our current refinancing rates. This does not include any opportunistic disposal, which of course, would limit the impact even further. On the right-hand side, we have plotted the real rates as real rates over the last 50 years. Adjusted for inflation, bond yields have never been lower than today. They are deep in the negative territory, while the assets we own are widely considered a good proxy to hedge inflation. Going back down to page 12. Finally, the inflation. The fourth point, inflation and values. I cannot count the times I have heard that higher rates automatically lead to pressure on values because of higher interest rates means higher discount rates, and therefore values have to go down. It may work like this in a digital lab of an Excel spreadsheet, but not in a market where demand far exceeds supply and real rates continue to be in negative territories. Over the last 50 years, whether interest rates were high or low, house prices have been going up, except for when there was a high level of vacancy. Following the construction boom after German reunification, we saw a spike in vacancy and that led to slightly decreasing prices. As vacancy came down, prices started to increase again, and the value growth of the last 10 years comes on the back of very low vacancy levels. Supply and demand is a stronger driver for prices than interest rates or inflation. Another reason why we believe upward pressure on values will continue is a very similar value development of existing homes compared to new construction and land prices. Of course, new construction has a higher value, but the gap between existing and new homes has been very stable over the last 50 years. This is actually not a surprise. With new construction prices growing at more than 10%, do we really believe that values for existing homes will stay at their current level and not move up? We don't. Going to page 14. The page compares Vonovia's and the market in two counts. The chart on the left is Vonovia's fair value per square meter compared to the average fair value of condos in the same market, as well as new constructions in that market. The chart on the right side is the same exercise only for rent levels. Vonovia's in-place rent versus asking rent for existing properties and new constructions. The bottom line is the same for both views. There is a substantial gap between our numbers and where the market is. Don't take me wrong, I'm not arguing that our fair values in Stuttgart are going to be above EUR 8,000 anytime soon, or that our average rent level in Berlin will be EUR 16 in the near future. With these huge gaps between Vonovia and the market, with inflation usually leading to property appreciation, and with new construction becoming a lot more expensive during inflation, we accept Vonovia's value to continue to appreciate as there is no reason why the pricing gap of condos and new construction should widen in a supply-constrained market. You see, we have developed and we have a very clear view about what inflation will do to our business. Inflation, I consider as the best friend of resi. With this, I hand over to Philip. Thank you, Rolf, and also a very warm welcome from my side. Let's move to page 15, please. As you can see on the slide, we have seen high absolute growth numbers for our segment revenue, EBITDA and group FFO, which of course is largely driven by the inclusion of Deutsche Wohnen, which of course was not included in Q1 last year. The same actually goes for interest expenses. They are higher because of the higher absolute debt volume as a result of the acquisition of Deutsche Wohnen. If you look at Vonovia on a stand-alone basis, excluding Deutsche Wohnen, you also have seen very healthy growth rates. Total segment revenue up 18%, adjusted EBITDA up 10%, group FFO up 8%. Moving to page 16, to take a somewhat closer look on the different segments, and I will start with the rental segment on page 16, as I said. As a reminder here, our four individual segments are Vonovia stand-alone only, excluding Deutsche Wohnen, and that is until we have completed the financial integration of Deutsche Wohnen, so most likely starting as of next year, that will change. During this time, you will see Deutsche Wohnen as an additional segment for the time being. Vonovia's rental operated on a slightly smaller portfolio volume of roughly 5,000 units in Q1 2022 compared to the prior year quarter. On that basis, we saw organic improvements on rental growth and vacancy reduction, which were only partially offset by slightly higher maintenance and operating expenses. Looking at our EBITDA margin, that expanded to more than 80%. Page seventeen on our operating KPIs. Organic rent growth was 3.9%, and that is including the one-off from reversing the Berlin rent-free law in April last year. Excluding for that, we are at 3.3%. Vacancy rate was down 40 basis points, reflecting the unbroken demand we see for our properties. Also, rent receivables remain at very low level, even slightly below what we saw before COVID-19. Maintenance, as I said before, slightly up on a per square meter basis compared to last year. Yeah. On page eighteen, a brief update on the carbon dioxide tax. The government will start the burden sharing from 2023 onwards. The cost allocation will be based on the building's energy consumption. As a reminder, the CO2 tax is dynamic. It was or is starting at EUR 25 this year, going up to EUR 55-EUR 65 by 2026. You can see the distribution between tenants and landlords on the left-hand side. The more energy efficient a building, the lower the share to be paid by the landlord. That outcome actually is much better than what we had originally, or originally planned for, which was a 50/50 split. While there are still some details to be determined, our analysis is that Vonovia will start with a share of roughly 35% on average. Obviously, as we continue with our investment program, that will do something with the energy efficiency of a building, and our share of the cost we will assume will decline over time. Our estimate for the next four years is that the CO2 tax will cost us roughly EUR 40 million in aggregate until and including 2026, and this number already includes the portfolio of Deutsche Wohnen. On page 19, the value add business. Here in Q1, we saw continued growth both in external and internal revenue. Part of that growth is due to the phasing as we have made price adjustments for our energy distribution. I would expect that this kind of one-off effect will level out throughout the remainder of the year. The main challenge here really remains, we have a material shortage of labor. That means we cannot do the amount of work with internal resources that we have originally planned, and we need to rely more on subcontractors which are more expensive than in-sourcing, and that is somewhat biting into our margin. For Q1 this year, that meant our external growth was almost fully absorbed by higher costs in this challenging environment. Moving to page 20 on recurring sales. Our volume this quarter was a bit lower than the prior year. That had to do more with Q1 last year really being an exceptional year. While volume was a bit lower, the fair value step up was quite a bit higher. It's 47%, for an EBITDA contribution of EUR 41 million. What is equally important is the EBITDA contribution is cash conversion. Cash proceeds after cost and after taxes, because these are the funds that we are able to reinvest in our investment program for our standing portfolio. For Q1, that conversion rate as in previous years was around 90%, translating into EUR 126 million of free cash flow. Our development segment on page 21 contributed almost EUR 62 million of EBITDA, substantially more than in the prior year. That was partly driven by a larger to-sell project that we have completed in the beginning of this year. Not only were the volumes bigger in to hold and to sell, we also saw higher margins on both channels between 20%-30%. As I will explain later, we are currently reviewing our volumes to hold versus to sell. For 2022, we intend to move the majority of to-hold developments into to sell. Beyond that, we will review the allocation in context of our overall capital allocation strategy. Page 22. This really on the total number of completions in Q1, 777 units, of which 266 were to hold, the remainder to sell. We are no longer breaking down the overall long-term pipeline between to hold to sell, as this allocation is currently being reviewed. As I said, only a small part of this pipeline is for to hold, and we have here all flexibility to shift from to hold into the to sell segment. That is not a problem at all. Let's move to page 23. That is on EPRA NTA. I think our definition change has been well reflected, so hopefully no surprise by looking at the numbers. In line with the general market practice, as a reminder, we are no longer adding back the transaction costs, and we are adding back the full deferred taxes for our to hold portfolio. If you want to better understand the changes, we have also included the NTA as of the year-end 2021 based on the old definition, so you can see where the differences come from. Be it what it may, as a result of that, NTA is up 1.2% on this new definition. This is really driven largely by the impairment of the remaining real estate related goodwill. So we are done on that front. The remaining goodwill we have is less sensitive to our cost of capital. Please also note that we had to do a technical, and really only a technical, Q1 valuation because the expected value change was above the threshold defined by our auditors, and that prompted that technical valuation update. This is simply a function of almost EUR 100 billion of real estate values we are accounting for in our balance sheet. This update, and that is important, does not include any yield compression. While positive market dynamics clearly continue, as Rolf said, one quarter is simply too short to observe the sufficient amount of data for measuring yield compression, and the development of discount and capitalization rates across the different locations. As a consequence of that, we have limited our Q1 valuation to a model update of the relevant portfolio data. This led to a valuation result of roughly EUR 405 million, essentially accounting for the additional rent we have collected in Q1, and that's being capitalized at the current capitalization rates. The next valuation will be as usual with H1 2022. Similar to the practice in previous years, we will be analyzing the 20 largest locations in Germany, plus Sweden, plus Vienna. This valuation will then also include the positive impact from yield compression. My expectation, as I said, is that we will continue to see yield compression in H1. But preempting a potential question in the Q&A, we will not be giving any quantitative guidance on that. Moving to page 24 on our debt structure. I don't think I need to go through our maturity profile in detail, as you will be familiar with it. Rolf already mentioned that there is very limited impact that rising rates have in the near term. Let me reiterate the main parameters that I think are relevant. The robustness of our capital structure in combination with the funding mix, LTV, net debt to EBITDA, fixed-hedged debt ratio, and the overall long-term maturity profile. With 2022 refinancing largely addressed, and very limited impact for 2023, we are confident that our capital structure remains very sound. On page 25 for LTV and net debt to EBITDA. LTV was just shy of 44%, so very much in line with what we have reported for year-end pro forma for the asset disposals in Berlin, which meanwhile have occurred. Net debt to EBITDA, which is for me really the leading debt KPI in today's environment, was at 14.5x. To remove the distortion from comparing the spot number net debt with the cumulative number EBITDA, we have calculated that number as the average debt over the last five quarters in relation to the EBITDA of the last 12 months. What that means is that if we look at it on a continued basis, our net debt to EBITDA is going to be at around 16 times as we increase our EBITDA, but also include more quarters of higher debt volumes. As Rolf mentioned earlier, our working assumption is that we will not issue any incremental debt in the current environment. If you keep the net debt position stable, the net debt to EBITDA reduction is a function of increasing EBITDA. We did a simple sensitivity analysis on this slide, assuming a 4%, 8%, 12% growth for 2023 on the EBITDA. The reduction we see in that given multiple is fairly pronounced in between 0.6x-1.6x in 2023 alone. If you factor in that we have been guiding for slightly above EUR 100 million of synergies, that alone is accounting for a reduction of 0.5x. Moving to page 26, as a reminder what our investment program includes. To be clear, these are not mandatory investments that we need to make. I would argue that the Upgrade Building investments are probably quasi-mandatory as we want to be CO2 neutral by 2045. The rest really is discretionary growth investments that we can choose to do or not to do. In times of higher cost of capital, as we currently experience, we are taking a very close look at these investments to decide what we want to do and that we don't want to do. Among the three main buckets, optimize apartments, Upgrade Building, and new construction, the story for 2022 is actually fairly straightforward. We are reducing our previous guidance of between EUR 2.1 billion-EUR 2.5 billion to between EUR 1.3 billion-EUR 1.5 billion. This reduction comes exclusively from our intention to switch the majority of development to hold into the development to sell. The remaining investment into space creation will be largely driven by new square meters that we build through floor additions and new buildings on land and in between buildings we already own. Part of that is also for the development to hold in Austria on a smaller scale as this provides the long-term pipeline for our very attractive privatization business in that region. The investment into optimized apartments and upgrade building remain unchanged because in terms of numbers, it continues to work even in days of higher cost of capital, which in today's world are more in the region of 4.5%, for Vonovia. On page 27, we show a new level of detail regarding the net initial yields and the IRRs of our different investment strategies. If you look at the table on the bottom, we have three different basic investment scenarios. First, we do either Upgrade Building or Optimize Apartment only. Here you can see, the net initial yields in the past have ranged in between 5%-8%. The IRR has been between 7%-11%. Very attractive, and as you can see by the numbers, scoring well with our increased cost of capital. Second, we do Upgrade Building in combination with optimized apartments. It has modernized apartments in modernized buildings. Past initial yields and IRRs were of course similar to the first scenario, but we can do index rents for these modernized apartments and put them on a faster rent growth trajectory. We've also included two scenarios, one with 3% and one with 6% inflation. Of course, the IRRs in these scenarios are considerably higher than in the first case because the rent is growing with inflation right away. Reality on the ground is a bit more granular, but I think the table shows the overall potential for our portfolio as we increase the share of modernized buildings with modernized apartments and put them on an index rent. Finally, on the third investment scenario, new construction. The net initial yield is quite a bit lower, even including the development profits, of roughly 20%-25%. From a net initial yield point of view, they are challenging with our current cost of capital. Still, IRRs are very attractive, though. Since we do index rents for new constructions, the IRR in higher inflation environment are even more attractive. In the context of overall capital allocation, we intend to shift much of the development volume from Development to hold to Development to sell and limit new construction largely to space creation on land and in buildings that we already own. Moving to page 28, some illustration on organic funding. Increased cost of capital means that we need to review our funding sources and how we allocate our capital. The overall premise is that, as I said before, our debt does not increase. In this environment, we want to fund portfolio investments through the group FFO after cash dividends plus the free cash from Recurring Sales. Space creation investments are to be funded through capital recycling. With that, I hand over to Rolf for a quick word on Adler. Thank you, Philip. We are dedicating page 29 with an attempt to reduce the questions on Adler in the Q&A session. I don't know if we will be successful. Because of course, Adler is grabbing a lot of headlines, while the implications for Vonovia are very limited. You all know why we became involved. There was an opportunity, and we seized this to secure optionality for our shareholders. We have since learned that most of you value no risk higher than attractive potential opportunities. That is why our opportunistic involvement has led to the ownership of 20.5% in Adler. [This] has become nothing more than a financial investment. We are not buyers of Adler shares. Our decisions from the beginning were based on our conviction that starting with the yielding portfolio and then accounting for the different risk, there was much more value in Adler than the equity market believed. The KPMG report and the recent market reaction do not change that view. In fact, the acquisitions are signs in the past. We expect the new chairman to clearly show that Adler has broken with the past, and it's on its way to become an investable company again. At this point, we have no reason to believe that he will not be able to do just that. I'm actually personally convinced that Stefan will do exactly what is needed. The recent news, though, on board changes and the messaging of recent earnings calls seem to confirm that view. We will monitor the further developments but see no need to take any decision in a hurry, given the small size that this stake has in the context of our overall balance sheet. With this, back to Philip. Yeah, very quick to summarize on guidance. I mean, first, we confirm guidance on revenue, adjusted EBITDA and Group FFO, where we have seen some updates. It's first on organic rent growth, where we've gone from around 3.3% to at least 3.6%. That has a certain degree of conservatism in it, as we cannot reliably estimate how quickly rent growth picks up in each region across the country. The positive examples Rolf has shown you year to date are encouraging, but they only affect a relatively small share of our portfolio. The second update to our guidance is on recurring sales, and that's really with a view to support organic funding, which we have increased by 10%. Here, too, we want to be somewhat cautious initially because we want to make sure that we do not increase the volume too fast, and jeopardize the margins. Going forward, I think there is room to even further uplift that number in the years to come. Finally, maybe most importantly, that is on the investment program, where, as I said, we are reducing that to EUR 1.3-EUR 1.5 billion portfolio investments. In the standing portfolio, but in between EUR 1-EUR 1.1 billion are unchanged. The investments into space creation, development to hold, are significantly reduced to EUR 0.3-EUR 0.4 billion as we have to switch from development to hold into development to sell. With that, back to Rolf. Thank you, Philip. Before we get to the Q&A, let me say a few words on our priorities that we have in the new environment of increased cost of capital. Let me start by saying that the fundamentals of our business and our business model have not changed. We are taking our decision based on megatrends, urbanization, climate change and demographic change. Our portfolio is located in urban growth areas for which we see only long-term positive fundamentals. ESG is firmly anchored in our business model, and we are the innovator of CO2 reduction in our industry. We have built the best-in-class operating platform and are the market leader in asset and property management with superior scale and efficiency. Everybody who wants to own resi buildings in Germany, Sweden or Austria needs a platform like this. Our immediate and near-term action take place from a position of strength and a healthy business model. In light of the increase of corporate capital that we are facing from higher equity and debt funding costs. We have to take immediate actions to make sure that this healthy business model is completely independent from funding from the capital market. No more incremental debt. Only organic funding of the reduced investment program. Substantial reduction of the Development to hold volume as we look to switch most of this volume into Development to sell. We have seen the figures from Philip. The IRRs what we have in the Development to hold are very attractive for a lot of market players. It is not an issue at all to sell double-digit IRRs. Increasing Recurring Sales volume to fund the investment program. Reduce capitalized maintenance following years of generous CapEx, significant above market standards and of course, no larger portfolio acquisition, which includes Adler Group. At the same time, we have near-term actions, which basically break down in three categories. Building up asset-light business models where we offer our services, skill and experience to third party. This is actually what Helene von Roeder is doing in his, in her new role. Second, as said in the beginning, we are reviewing our capital allocation strategy. Third, we are analyzing the possibility of setting up joint venture partnerships with institutional investors. We observe a very strong demand for our product, and we want to build a structure where we can arbitrage between the listed and the non-listed equity. We will take the time we need to address all the relevant points, including the legal structure, the right portfolio structure, tax structures, a lot of other things. At the end of the day, what we want to achieve is a structure similar to the debt side where we can go whether it makes more sense for us given, at a given time, so private or public. Page 20-32 is the summary. Our operating business, including the integration of Deutsche Wohnen, is fully on track, and the environment in our residential market remains highly favorable. Not only supply-demand, but also inflation will continue to support asset valuation, and the comparison with the market shows a big gap as our properties are valued conservatively by comparison. At the same time, inflation also drives rental growth with a time delay. There are many cases where we will be able to speed up this growth through index rents, as explained, but over the long term, the time of higher rent costs will impact all our properties over time. Third, the cost of capital has increased sustainably in a short amount of time that leads to review our funding sources and capital allocation. As I said, we have to make our business model completely independent of funding by debt or equity. This includes immediate action, as I laid out, and also potential near-term actions that we are currently working on. With this, back to Rene. Thank you very much, Rolf and Philip, and I will hand it back to Martin as the operator to kindly open the Q&A part. Thank you. We will now begin our question- and- answer session. If you have a question for our speakers, 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 question is answered before it's 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. We have a first question. It's from Charles Boissier of UBS. The line is now open for you. Yeah. Many thanks for the presentation. Four questions from my side. The first one is on capital allocation. You mentioned the use of proceeds from JV partnerships could include share buyback and or investment program. You also mentioned no incremental debt. To clarify, right now you're not at a stage to consider reducing debt. Still, if I may, on capital allocation. Can we go question by question? Can we go question by the first question? Yeah, yeah. For sure. Sure. Of course. Of course. Of course. Yeah. On that point, Charles, the simple answer is yes. We are calibrating our business in a way that we can source all investment requirements by what is remaining from group FFO post-dividend plus Recurring Sales. For the time being, no reduction in debt. If we move along with the JV structure, if we move along to free up equity, we will discuss at the appropriate point in time what to do with the proceeds. One point is clear, to the extent we lose EBITDA, we also will proportionately reduce debt. Charles, only one add to this. We have a very clear view that during the year 2022, values will go up, not to use the word significant. So it does not make sense for us to sell assets now in a hurry and put the money in the bank account. You know, we are fully refinanced for the year 2022. We might also expect this disposal of the healthcare assets. That's why we have to make sure that we do not have too much cash in the bank account. Also in this context, it is not our position to be in a hurry and to reduce portfolios and then have too much cash on the balance sheet. Sure. The second bullet point, review of capital allocation strategy. Is that a separate point from JV partnerships? What exactly does it refer to? You know, in the IPO and since the IPO, we had a portfolio strategy dividing, saying there's buildings where we can do Upgrade Building, Optimize Apartment. Then we had these famous non-core, which were actually buildings which we said, "Okay, we are not the best owner." I think the capital value allocation strategy is actually answering a little bit the same. We have today in our portfolio assets where we are not the best owner because our cost of equity is more expensive than others. In the same context, we have assets in our portfolio where we are probably the best operator, but not the best owner. This leads to this JV structures. But there might be also assets which are just better to be sold. We have to define also what we are going to do with the money which we are realizing by selling the assets, which means there might be a share buyback, but this is in competition to speed up our investment program on existing assets. I think this is what we have to redefine. We are coming actually probably for 2023 with a new version. A part of it to free cash is the JV structures, but it's not the only one. Thanks. Secondly, on prices, obviously you sound very confident, so I will not challenge you. You mentioned a few times prices going up, even maybe significantly in 2022. Just on the transition to index rent, where you provided more disclosure today, would that lead to a change in value assumption as well for your portfolio just because the indexation is then completely different than in the past? This depends on the assumption of inflation. If you assume an inflation of 5%, of course you are right. This depends on the assumption of inflation. To be also very clear, and to make it again a clear point, it is not always the best for every property to change to index rent. If you have a Mietspiegel increase, a foreseeable Mietspiegel increase of 11%, it is probably better to ride the Mietspiegel and later to switch. Or if you have modernization potential, as Philip described, you are riding the modernization, which gives you an 8% yield, and then after the full modernization is finished, to switch to index rents. The only case where it is simple is if you have new construction which are higher than the Mietspiegel. There you immediately start with index rents. It's a component which was not relevant in the past because it was always less advantageous to go to index rents if you're assuming an interest inflation environment of 1% or 1.5%, because every Mietspiegel will beat the 1.5% inflation. In the moment, if you are coming in an inflation environment of 5%, the world is changing. This is what we have to figure out asset by asset. You know us, we will find a technical way to do it industrialized and not by human beings. Okay. Third, on your investment programs, as you are cutting portfolio investments to EUR 1 billion and shifting from hold to sell, I would deduce your portfolio will contain fewer new builds. Does that mean the CO2 reduction target you guided just at year-end for the next three years, the 31.6 kgs, is that still sustainable? If so, would that mean that basically your current plan is still that you would catch up with investments again post 2022? No, to be very clear, this has no meaningful impact. If you are selling on a EUR 100 billion portfolio, EUR 900 million, this has nothing, no impact on the CO2 emission. The majority of the CO2 emission is done by the investment program in Upgrade Building, which we will not touch. The decision to do less new construction on our balance sheet does not impact at all our CO2 targets. Okay. Okay, clear. My fourth question on the elections, not the federal ones which of course have passed. Was wondering if you have any views on the debates on housing in your largest region, North Rhine-Westphalia, where the regional election is taking place in two weeks, I think. Because I think traditionally, North Rhine-Westphalia was always quite a moderate region in terms of regulation. Thank you. Yes, I think, to be very clear, we have a good relation to both parties which will be there, so I don't care. To be also very clear, in the moment, we have a perfect storm here in Germany. The reduction or the new construction will go dramatically down. We are not the only one who is shifting. There are still a lot of people who will buy it, but the people who are able to construct, construction material is missing, labor is missing. The 400,000 new construction, don't quote me, but the government can forget it. At the same time, we see refugees, and the refugees need apartment because this is women with children, so you cannot put them in the refugee home. Any government in Germany or in North Rhine-Westphalia, they have to do something. Otherwise, we are running into a big crisis, which is good for us because this will push values. I see a complete alignment with all parties at the moment. Thank you. The conflict- Sorry, I interrupt you. The conflict between government and resi industry is gone. Okay. All right. Thank you very much. The next question is by Marc Mozzi, Bank of America. The line is now open for you. Thank you. Very good afternoon all. Following up on what Charles just mentioned on his capital allocation. Can I have your thought about why, number one, you're only considering just JVs for the disposal of your portfolio? What are the underlying reason and why not selling 100% as you've been targeting at the time of the IPO of Deutsche Wohnen for the remaining 30,000 units, which we've never heard about anymore? Number one, why JV is not 100% disposals? Is there any tax consequences here we should take into account? Number two, why not pay down- Can we do question by question or is it, because then before? It's a related one. Okay. Okay. The idea is why not selling asset 100% to pay down debt? Because if I look at your marginal cost of debt right now for the next 10 years, it's 3.3% on the bond market, i.e., it's cheaper to pay down debt to prevent refinancing EUR 3 billion-EUR 4 billion every year than to keep cash on your balance sheet, as you said, and even considering share buyback, which actually make no sense to me. Better to pay down debt at this price. Just having your thought on that. That's the first question. Thank you. First of all, I think I have not refused on the concept of selling just assets. The JV is, for me, a more intelligent way to sell assets, because then we keep a margin for the asset and property management. We are not excluding the straight sale of assets. I completely agree, if our marginal cost of debt, if we have to renew debt, it is probably might be an option to sell properties and to not refinance. The condition is that you need to have a refinancing event. For 2022, we nearly have no refinancing event. As I mentioned, in 2023, there might be some disposals coming from healthcare business, for example. I don't know how many refinancing events we will see in 2023. That's why we are doing the asset allocation strategy, where we define which part of our portfolio is first to be sold. Then if we have need for cash, of course, the selling is competing with renewing debt. At this time, at the moment. Okay. Marc, let me add, 100% disposal is triggering real estate transfer tax, and an asset deal is triggering deferred taxes. There is a lot of tax leakage, and the JV structure is the far smarter thing to do. Just one hint to refinancing cost. Here we are currently in a situation that the secured banking market is far more attractive than the unsecured bond market. As in the banking market, we continue to talk about spreads in between 80-90 basis points for a 10-year tenor. Your 3.3% cost of debt are slightly overstated. You are more in the region of 2.5%-2.6%. Yeah. Well, looking at Bloomberg, this is a price, but, you know, I'm not- Marc Mozzi, Marc Mozzi, Marc Mozzi again, I think you have seen in our answers that it has to be structured properly, because for example, if you have a new build, which we just put in our balance sheet, which is probably in one legal entity, in this case, you don't have real estate transfer tax if you sell the legal entity. Of course, you have not deferred taxes because it's just recently in our balance sheet. That's why we have to sort the portfolio under this new parameter. That's why I'm happy that we have some time because refinancing is not the question of the next 12 months. We will use- Yeah, but you- We will use this time to sort the portfolio to find which packets can be sold without JV, which packets is better to be sold with JV and which should not be sold. We will see where the market is going. Still, it's interesting that in June 2021, when you launched the bid on Deutsche Wohnen, you were mentioning up to 45,000 units for this for sale. We are kind of restarting from scratch to reconsider disposal for now. To be very clear, we have the announced 45,000, we sold 15 and we would, as you know, we're Vonovia, we have a clear vision on the healthcare portfolio. More or less the magnitude of selling is done, right? If you add these two together, it's equal to the announcement which we have done in the presentation, more or less. Yeah. They are even more to me. That's fine. Can I have a view on what has been the EUR 1.1 billion of depreciation and amortization you had in Q1, which makes you having a loss in Q1? What is this? This is the brief notion I've given on the slide on EPRA NTA. We have been able to impair the remaining real estate related goodwill, and that is simply a function of the risk-free rate and the model increased. Our cost of capital increased, and given that the headroom is very sensitive to changes in the WACC, we had an impairment. With that, we are actually done, because if I look at the remaining goodwill, which is assigned towards the Value-Add business predominantly and partly the Development business, here, there is far less sensitivity on weighted average cost of capital. I think only if you see increases in between 200-300 basis points, it starts to kick in. For me, a good thing because I think, you know, my view, real estate related goodwill, I don't want to see in the balance sheet, for good reason. The definition on EPRA NTA has changed versus previous EPRA NAV, to account for that fact. Okay. Another question on your cash generation or cash outflow. If I move from development to hold to development to sell, anywhere in development to sell, I still have a working capital, a change in working capital consumption here. So you're gonna still have the need for cash until you're gonna be able to sell those assets. Or can you be in a position to pre-sell those assets in block and then just to use that funding to build those assets? Yes. It's grim. No, look, Marc, in principle, you can do that. You can do forward sales and you basically fund development with that. That usually comes at a price point. Now, if I look at the investment volume we have targeted for this year, by shifting development to hold into the development to sell segment, it's EUR 1.5 billion that is fully funded. There is no need to compromise on the margin. Obviously we only undertake developments if we have a clear perspective on attractive yields and gross margins we can achieve. If that, for whatever reason, will not be the case any longer, we simply stop it. Marc, to be very clear, today, if we are talking about Development to Sell, we are normally talking about condo sales of the development. Of course, the switch to hold to sell includes that in the future we will do development in block sales. Okay. Because these are blocks which were built to be actually operated by Vonovia as a rental building. You have seen in the slide, what I learned is there is investors out there which are happy with an IRR of 5%, 6%, 7%. We deliver with our buildings IRR on double-digit IRRs, as you can see in the same slide. We see no issue to get people ready to buy this. Kind of. My final question is, how does this reallocation of capital to build for sale from development impact your expectation for midterm rental growth? Because part of your rental growth expected in the future was based on this development to hold. Yeah, fair question. It's not a topic for 2022, because the investment-driven rental growth from new construction is basically the full- year effect of developments we have taken on our balance sheet last year or beginning of this year. I think mathematically, it's some 10 basis points of rental growth which it will cost us. You've seen our guidance, which we have actually slightly increased in the wording, so we will compensate for that. For 2023, if we were to continue a part of the rental growth, it's basically sacrificed for the advantage of monetizing on attractive gross margins. On the other hand, Marc, as you have seen, and I have spent a lot of pages, our view is that rental growth in our existing portfolio will go up by index rent, but also by the normal Mietspiegel. This will be most probably overcompensated without giving you a guidance for 2023. Thank you very much. That's it for me. The next question is by Andres Toome of Green Street. The line is now open for you. Hi, good afternoon. I had a question about the Mietspiegel prints you provided on slide 8. I'm just wondering because you do have a fairly long list of conditions in the footnote, in terms of how much you can actually push through for rent increases. I'm just wondering how much you think out of those prints you can actually push through to tenants. Also a question around Kappungsgrenze, which I think was recently reduced, but you do still have that as 50%, listed there. No, as a first point is not reduced. It's still in the planning. At the moment, in high inflation environment, we have to come to get rid of all these caps which are fixed, right? Also the EUR 2 and EUR 3 cap for modernization in a high inflation environment, this is not realistic anymore. This is the same with the percentage cap, because if you have an inflation of 7% and 8%, and this refers to what I have said, you cannot have a cap of 12%. This is not a law, and I don't think that it will become a law. The first question, of course, is very detailed. This depends on building to building and then city by city. So I cannot... I just don't have the data on this because it would be a long list. Fair enough. In terms of just thinking through kind of the run rate, organic growth just stemming from the market or the Mietspiegel kind of component, which has been now running at somewhere around low 1% per annum, for the last couple of years, where do you see that going when you also think about the presentation you made about Mietspiegel going higher in your view? If you look, I cannot give you the figure, which is probably that's why we are not giving a new guidance to the rental growth. If you look on this page, you are seeing that because, you know, the Mietspiegel actually comes out or this Mietspiegel came out every two years. You are seeing that more or less the old Mietspiegel refer to this 1%-1.5%. Right? Because you have to divide it by two. While the new ones are significant higher. With all the caveat, and I cannot really say, but you have a feeling how much speed up in the organic rental growth is happening in these cities. These cities, of course, only reflect a short, a small portion of our portfolio. The big new Mietspiegel are coming next year for Dortmund, Kiel, Berlin. These are the big new Mietspiegel for our big portfolios, which will come out next year. We are not unhappy that they are coming out next year because then we have seen one year of inflation already. Understood. Yeah. Can you remind what's the situation in Berlin so far? You've made some promises to be quite tempered with rent increases. How much of that Mietspiegel can you actually push through? Yeah, this is just a question of time, right? We said that we limit the rental growth for the next two years to 1% on average. If the Mietspiegel came in, then it's probably just we are not increasing rent in 2023, but in 2024. The rent increase is not foregone, huh? It's just coming in later. For the long-term perspective, if it comes to values or the long-term cash flow profile, this agreement which we made with Berlin doesn't impact our business at all. Understood. Maybe just also the data you presented on slide six about kind of the higher inflation period in the 1970s. You do have the rents running quite a lot ahead of inflation, actually. I was just wondering, can you give any sort of indication about what was the market environment back then as it kind of relates to regulation? What were, you know, rents less regulated at the time, just allowing more rent growth to go through? No, at this time, it was even more nonprofit companies providing this rent. The whole sector was nonprofit regime. The legislation has not mattered. Of course, it has changed, but the system of Mietspiegel was the same. This was partly also social rent regulated by a different system. In the end, it was. It is not saying that this slide is completely different from the regime what we are seeing today. Okay. My final question relates to Recurring Sales. You've increased the guidance a little bit there. I'm just wondering, you do kind of highlight that there is quite a big stock of units that's already kind of gone through the legal process. I guess as it pertains to just being able to sell those single units, just wondering, is there any restriction from your end not to sell more units per annum, maybe to increase it even further? To be very clear, there is some technical restrictions because this is a lot of work to be done, so we have to hire more people, which is theoretically possible. We can do, but this takes a little bit some time to get people at the moment in Germany is difficult because we have labor shortage all over the place. This is, of course, theoretically difficult, right. Our thinking is more we are defining actually our Upgrade Building and Optimize Apartment programs. We know how much cash we need to finance these two, and this defines actually the speed of the disposal. Understood. All right. Thank you. That's all from my end. The next question is by Sander Bunck of Barclays. The line is now open for you. Hi. Good morning, team, and thanks very much. I have two questions. I'll do them one by one. The first one, I was just trying to get a bit of a better understanding how the valuation process currently works, because obviously you provide some very compelling arguments for why you believe that values will continue to go up and probably for the very foreseeable future. But on the other hand, yourself citing an increased cost of capital and basically switching off from development or acquiring for yourself, basically indicating that to some extent, the market is a bit too expensive for your liking. I'm sure if that's the case for you, then that may be the case for others as well. I'm just trying to kind of understand how the valuers look at both the arguments in both case. Related to that, does it basically mean that, like how relevant is the move in the German ten-year or credit spreads, as a result? That would be the first one. To be very clear, if you are talking to long-term investors, which we partly have in our own share ownership, but also some external, so pension funds, private equity. If they see an IRR of 13%-14%, they are getting nervous because this is a great investment for them. That's why they are probably ready to pay for this even if that IRR goes down, which means that the initial yield will go down immediately. They don't care about the initial yield. This is reality because they have a long-term view. This is what is happening. These assets, if I would be owner of Vonovia myself and not dependent on the capital market, I would buy this asset as much as I could, to be very clear, because in the long run, this is a very attractive proposition. In the moment, our cost of capital is too expensive, so that's why it doesn't make sense. There's a lot of capital out there which is desperate to get it. To be also very clear, the policy, what I understand from all the insurance companies, is going to shift to resi in Germany, but this is all direct investment. Okay. Basically what you're implying there as well is that the increase in the German sovereign ten-year has for many buyers like no impact on their underwriting acquisitions and as a result, it basically will not feed into CBRE's updated valuation, or am I looking at incorrectly? I think these buyers are often buying with equity only, right? Sure. Yeah, yeah. No, I understand. Obviously, your relevant, your benchmark obviously is changing as well. Yeah. If you look at the 10-year DCF, most of the value is actually in the question how you capitalize the cash flow in year 10. That is by looking at prices which are paid by the transaction market. Given that we have long-term investors who take a fundamentally different view than currently the capital market does on how rent develop and by that how capital will appreciate, which is another word in saying that there's a high discrepancy between net initial yield and IRRs. These investors are basing their purchase decision on. We do not see any changes in the transaction market. Therefore, the rise in interest rates is actually compensated. For me, it's very logical because as long as we are in a world in which inflation far exceeds the rises, the increases we have seen in interest rates, that should actually work to the advantage of further capital appreciation. That is what we see. Sure. Okay. Just also related to that, does the privatization market provide additional support to asset values? I mean, obviously, if you're privatizing, there's a huge margin. Does that provide support for the values or do the values not necessarily take that into account? It provides support to our organic funding, but how we appraise and how we value our portfolio is based on the institutional market. It's not based on the condo market. To be also very clear, why these people are buying these condos, these individual condos like hell for prices which we consider actually very high. It's very simple. They have to protect their money against inflation. That's why they are buying assets. Sure. Okay. Very simple. That's very useful. The second question I had is a slightly a more longer term one. I'm trying to get a sense or a feeling how earnings growth or group FFO is gonna evolve over the next couple of years, basically taking into account that on the one hand, obviously you have some support from potentially higher rent growth from inflation. On the other hand, there's increased selling activity going on to bring down net debt to EBITDA or maybe less contribution from development to hold. I'm trying to understand how to look at earnings growth and how earnings growth of today should basically compare, say, in five years time. Is it basically still this very steady growth profile? Is kind of the organic growth that we're seeing from the to hold portfolio, will that to some extent be offset by further sales and potentially some slightly higher financing rates? There's a lot of questions. Just to make sure that we are not misunderstood. What Philip said is that debt to EBITDA ratio has to go down, and in the same time he explained that while EBITDA is growing, this will be inbuilt. What he was not saying is that we are selling assets to get this ratio down. What he said again, if we are selling assets, we are losing EBITDA, and then the debt has to go down, right? We are not saying that we have to sell the assets to get this ratio down. This will get down just technically as explained. If you look at our Sure. You're also talking about JV partners, right? Yes. Of course, then we have to reduce the debt, but then we also get a lot of equity in, right? This is a part of the equity then has to be used to pay down debt. To be also very clear, of course, we are not giving you guidance. If you look back on the history on our operating model, and this has nothing to do with interest rates and everything. Our EBITDA growth is actually relatively stable. If you look back on the past, this is not varying a lot. It is more or less the growth rate of 8%-10%. Because I have told you the business model is not changing, megatrends is not changing, the demand patterns are going in our favor. Without giving you a guidance, I don't see any reason why this figure should change immediately or massively. Okay. Continue to focus on FFO growth for sure going forward because the disposal will not offset any organic growth. Is that basically the messaging? I don't get your question. Sorry. Can you repeat it? Yeah. Just to confirm, like, basically the message from you is that even in the kind of over the next five years, that organic growth will outpace the potential impact from JV partner restructuring and potential higher costs of debt, i.e. FFO per share will still growth taking into account those yeah two potential effects that could dampen some of the FFO growth. Is that basically the point? I think outgrow is a kind of wrong notion, but when we free up equity, that will not sit on our balance sheet. We will proportionately pay down debt, but there is a remaining equity portion, and that is going to be reinvested. That is going to be reinvested in a way that it works with our criteria and that it is accretive. That is whatever the appropriate reinvestment is at the given point in time. That might be, as well said, scaling up our investment program for our existing portfolio, which, as you've seen in the numbers, is generating very attractive initial yields and even more IRRs. It might be that it's our own stock, if that is at the appropriate point in time, the better use of proceeds. The JV structure is kind of very much linked to the question how to best reinvest the money. If I leave that aside and look at the business as it stands, then the question on how organically our business is developing is very much a function vis-à-vis the past of how inflation is feeding in the top line growth. Because this is what has changed, and this is what we spend a considerable amount of time on to hopefully make clear that this is not instantly to be seen, but to be expected over time given the systematic of how the regulation is working in Germany. To repeat what I have said, probably only in a phrase, we have spent a lot of time because the concept of inflation is relatively new, that inflation is going on this magnitude. I think what a lot of people are telling us is that we should not expect that inflation is going down very soon. This is at least what we are hearing. I think this is a new assumption we have to work on, and that's why we have spent so much time on inflation. We came to the conclusion that inflation is the best what can happen to us. Sure. Okay. Very clear. Thank you very much, team. The next question is by Pieter Runneboom of Kempen. The line is now open for you. Hi, team. Thanks for this presentation. You briefly touched upon the healthcare portfolio sale. Could you share maybe with us your latest view on this portfolio and how the appetite is in the current market? To be very clear, we are at Vonovia, and to be compliant, this is a decision of the Deutsche Wohnen board. We are just a shareholder. What I have learned from them is that there's high demand, that also they need to do some preparation because it's a significant portfolio and they have not taken a formal decision. I understand that they are in the process of preparing everything that it can be sold. The decision has to be taken later if all the data are available. I repeat, we as major shareholder, we think it is a good decision to sell this portfolio. Okay, thanks. The next question is by Manuel Martin of ODDO BHF. The line is now open for you. Yes, hello. Thank you for taking my questions. I've two questions, one by one. The first one is a bit of a housekeeping questions. Could you give us an update maybe on possible supply chain disruptions or supply chain phenomena in your refurbishment and project development business? That would be the first question. Thank you. To be very clear, supply chain issue or material availability is an issue. People availability is an issue. Both is an issue. Keep in mind that, for example, 60% of the steel used for construction is produced in Ukraine or Russia. You cannot use the steel, or you can, but it's too expensive to use the steel produced in Germany, for example. It is not replaceable. We have issues in all fields. There's dramatic issues in heat pumps and solar collectors. We don't have enough electricians to put the solar collectors on the roof. We don't have enough people who can calculate heat pumps. It's a massive issue, which impacts us less than smaller players, because obviously it is clear that Vonovia can still source these elements easier than somebody who is much smaller. This is a scale advantage, but the market is very tight. Okay, I understand. When you said- To be very clear, we don't have the supply chain issues from China. This is more Ukraine, and this is availability of people. We are not suffering from the closure of the Chinese ports. Okay, that's clear. When you say people availability, that's the second question. I was thinking about your craftsmen organization. Is the number of people working there stable or do you see that you're losing people because of Ukraine workers going to Ukraine or people becoming just old enough to retire? Is there something that you can see in your organization? No, retirement is not a real issue. We are still a young organization, this is not the issue. Yes, we see, and this is dramatic, we see a lot of young men going to Ukraine to defend their country, which used to work on our construction places. Of course, I have a lot of respect of these people. We are able to recruit to replace these people by new recruitment. It is not easy, and that's why we are, you probably have heard that we are now recruiting also people outside Europe, because electricity is the same in Colombia than in Germany. It is an issue. We manage it, but this is an operational issue. Don't be concerned, we will manage it in the future. Okay. All right. Thank you. The next question is by Jonathan Kownator of Goldman Sachs. The line is now open for you. Hi. Good afternoon. Thank you for taking my question. I wanted to come back to one of the earlier points mentioned, about the amount of construction that is taking place currently, the amount of modernization that is taking place currently, and what the government can do to evolve that. You also talk about caps potentially having to evolve, that hard numbers are not appropriate. Where are we following the federal elections in the evolution of the thinking from the government, and how are you expecting to roll this into your what is the timing? Where is the debate? What can the government do to improve the situation currently, given also the need to accelerate probably modernization and new development to reduce energy consumption? Thanks. I think this is all very new. The government still has to realize that we are coming in an inflation environment with higher cost of capital. This is just they have to realize it because they have to realize at the same time a lot of different other things. To be very clear, this was on our long-term perspective. As you know, today, our average cost for modernization is EUR 1.40, and we have a cap at EUR 3. We still have a lot, long way to go. I'm just saying we have to use the new inflation debate about inflation now to change this because it has to be changed one day, either in five years or in 10 years, but it has to be changed. I think you can take the dynamic to talk about this now because we have real issues in getting the 400,000 built in Germany. For example, yesterday, I don't know if you have seen it. Yesterday, the Verband Privater Bauherren in Bavaria has announced that the members are fully stopped all construction. Okay. What do you think the government is going to do about it? What is the debate on subsidies? Is that evolving? Is that stalling? Debate on new rents? To be clear, with subsidies you cannot solve the supply chain issues, yeah. With subsidies, you cannot solve the issue that you don't have enough people. With subsidies you cannot solve the issue that the speed of solar panels has probably to be tripled or four times. It is not only a question of subsidy anymore, it's a question of how we can do it. Probably, what we see in the moment is that the government is hoping that Vonovia's of these figures are actually helping to solve the issues. We also have limited capacities. We are in a situation, everybody wants to have cars, and the car industry is not able to deliver. Yeah. Yeah. Very clear. The next question is by Thomas Neuhold of Kepler Cheuvreux. Your line is now open for you. Good afternoon, gentlemen. Thank you very much for taking my questions. The first one is on this inflation debate. Can you give us an update of the plans of the government to limit rent increases to 11% over three years in tight markets? Is this still on the agenda? It's formally not taken off the agenda, this I can tell you. Of course there is debates. It doesn't make sense anymore. Okay, thanks. The second question is on the profitability outlook for the development business. Do you think that house price inflation will be high enough to offset soaring construction costs in the next quarters? When I think, what you see in the slides is that I was impressed by the slides as I saw the first time. It's actually, it's very simple. People are taking the construction cost, put a margin on top of it and then sell it. What we see is actually the margin stays more or less the same independent of construction cost. You think that's also going to be the case in the next quarters? It was the case in the last 50 years. Okay. What we see is a high appetite. Look on the IRRs we have shown you. This is why we have detailed our investment program. Look on the IRRs you can achieve if you have an assumption of a 6% inflation, what this IRR is, and then tell me if people are not ready to pay for it. It doesn't matter if it's two percentage points less. It's still a very attractive business. Mm-hmm. Okay. What I need really, we all needed a lot of time to understand what is the impact of inflation on our business. Okay. The next question is on your leverage. Can you give us an indication from your point of view, what is a reasonable net debt EBITDA multiple you should reach in the medium term? What I think is reasonable, and that's kind of the short- to medium-term target 15x. That works very well with the rating agencies also in their definition. Plus, it allows us to be 100% flexible essentially in how we play the debt market secured versus unsecured. Because in the secured market, the equivalent of 15x net debt to EBITDA is what you can efficiently finance in the secured banking market. Mm-hmm. Understood. It's not a lot of movement into that respect. Also, the reiteration of what Rolf said, there's no need to actively de-lever, the multiple will de-lever organically as we increase EBITDA. My last questions are on the Adler Group situation. Looking at the bond market, your company's specific spreads widened since the publication of the forensic report about Adler. Can you please share your views on the indications of the findings in the forensic reports and the fact that the auditor issued a disclaimer of opinion on the annual report of Adler? We are not in the position to talk for Adler, so we are just a shareholder. I think we don't have any issues there. I repeat, we all know that the management of Adler in the past was a disaster. I know Stefan, I know Thomas Zinnöcker. I know that they are doing a good job. They know the business. I have 100% confidence that the bad management attitude in Adler is over. I don't see any impact on Vonovia. Did you make up your mind already if you will support the re-election of the current board members at Adler the next AGM? What do you plan to propose to add other persons to the board of directors at Adler? To be very clear, if I'm a shareholder and I don't think if I would ask you in front that you will answer this question, so we will not answer the question as well. Okay. Understand. Thanks a lot. The last question is by Marios Pastou of Société Générale. The line is now open for you. Hi there. Thank you for taking my question. Just a very quick follow-up on the shift in the build to hold to the build to sell pipeline. I just wanted to check what the flexibility is here. For example, are you able to develop a building in the mindset of a build to hold property and then at the very last minute switch this over? Is there any implications on things like planning or specification that you need to consider. Also just on the shift, are we thinking of this shift in terms of the combined Vonovia, Deutsche Wohnen, and pipeline because there is some sizable build to hold development that was planned in Deutsche Wohnen's own construction pipeline. Are we now considering this as one and thinking of the shift over to the Development to Sell category in that respect too? Thank you. To be very clear, the Development to hold was actually a completely new building, which normally as a standard, we are doing it separate unit by unit. We are building it by individual land registers anyway. But technically the easiest to sell it is just to sell it to a pension fund which operates as we would operate. Normally, you know, we have a service business, the bid, which is actually doing the operations. We are working for very well-known pension funds, where actually they are buying the buildings and then we operate it for them. No change. This is easy. This is just a decision. The next decision is you can structure a forward deal if you need the cash now, or you are selling it if the building is finished and this land can let rented out. There's different moments where you can sell it, but this is a very liquid market and a high appetite. This is what you're doing. You are normally, if you have a building development to hold, the normal would not be that you sell that individual apartments. This can be possible, but it's not the normal way. You do it at block sale. Okay, thank you. Just on the pipeline of the separate Deutsche Wohnen construction plans, are we also gonna be seeing this combined shift over from Development to hold to sell similar ways to that portfolio? The formal answer is that this is a decision of the Deutsche Wohnen management, but I assume they have no different view on the cost of capital and the implication of that. Another way of saying I assume yes. Okay. Thank you very much. There are no further questions, and so I hand back to Rene. Thanks, Martin, and thanks everyone for joining today. As a reminder, we will report H1 2022 results on August third. Until then, we'll be doing quite a lot of investor outreach and hope to see many of you in the coming days and weeks. A list of events is on page 53 of today's presentation and of course always online on our website. We're looking forward to continuing this dialogue with you and of course, as always, please do get in touch with any questions you have. That's it from us for today. Stay happy and healthy, and have a great day everyone. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.