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Edited Transcript of CCAG.DE earnings conference call or presentation 13-Aug-19 11:30am GMT

Half Year 2019 Corestate Capital Holding SA Earnings Call

LUXEMBOURG Aug 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Corestate Capital Holding SA earnings conference call or presentation Tuesday, August 13, 2019 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kai Gregor Klinger

CORESTATE Capital Holding S.A. - Head of IR & Capital Markets

* Lars Schnidrig

CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO

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Conference Call Participants

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* Andre Remke

Baader-Helvea Equity Research - Co-Head of Equity Research & Equity Analyst

* Georg Kanders

Bankhaus Lampe KG, Research Division - Investment Analyst

* Kai Malte Klose

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

* Manuel Martin

ODDO BHF Corporate & Markets, Research Division - Analyst

* Thomas Carstairs

Commerzbank AG, Research Division - Senior Equity Analyst

* Thomas Neuhold

Kepler Cheuvreux, Research Division - Head of Research of Austria

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Presentation

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [1]

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Hello, everyone. A warm welcome to our earnings call today for the presentation of our half year results. As usual, I'd like to direct your attention to the forward-looking statement and disclaimer wording on Page 2 of our presentation. The safe harbor language applies to the presentation and all comments we'll be making today. I would also like to mention that everything is being recorded. After the call, a replay will be available on our website.

Our CEO, Lars Schnidrig, and I will guide you through the presentation, followed by the usual Q&A session. The time frame for today's call is about 30 minutes.

Now it's my pleasure to turn the call over to Lars. Lars, the floor is yours.

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [2]

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Thank you, Kai. And also from my side, a very warm welcome to all of you. The first half of the year was a very decent one for CORESTATE. The markets remain in good shape for our business, and this is reflected in our figures and operations. Our core business, real estate assets under management, went up by 4.4 percentage since the end of 2018, reaching EUR 21.6 billion, a record high. We will give you some more details on our AUM a bit later on.

We made a very important step in our international growth strategy by the signing of the acquisition of STAM Europe. STAM is a very well-established real estate investment manager in Paris with promising exposure to the French market and will deliver after closing, most likely in the fourth quarter, another 8% to 9% external growth to our real estate assets under management. Our operational performance in the first half as well as in the second quarter of 2019 was fully in line with our internal budgets and our full year targets. All our subsidiaries contributed to this.

For us, a clear and across-the-board commitment to ESG standard is becoming more and more important. We have made our comprehensive approach and objectives transparent a couple of weeks ago by publishing our first sustainability report for the whole group. I will give you further details on our specific goals in a few minutes.

In typical seasonality, we have used our balance sheet strength for client exposure. This is reflected in the short-time increase of our warehousing activities with promising assets all in prosperous German cities and in the sweet spot of our clients' interest. As we regularly do, we already placed 2 assets from our warehousing, one in Bavaria, one in North Rhine-Westphalia, successfully this year. The others are also on different stages of the placement process with a clear plan for the deconsolidation.

We closely monitor the market conditions and the impacts on our product range and pipeline. And we realized an ongoing favorable economic environment for real estate in Germany and in Europe with an unabated investor appetite to our offerings, especially in the micro living and private debt.

Now please turn to Page 4. I would like to give you now a bit more color on our most recent acquisition, STAM Europe. They will bring in roughly EUR 1.9 billion assets under management with a majority in office and logistics but also some very interesting residential products. STAM is expected to deliver around EUR 12 million sales in 2019 and an EBITDA of EUR 5.5 million.

What is our general rationale for the acquisition? We want to, as mentioned several times before, establish a leading European real estate asset manager. And as such, France is a core place to be. We wanted to buy not only some assets in Paris and other promising cities but to get along with people, combining deep knowledge, excellent contacts and a commitment to our goals and strategy. That is why we make sure, through a staggered long-term incentive scheme, that the CEO and key management remain on board. The founder will step aside and retire as planned. And also very important, STAM brings a broad new international base -- client base, which is an ideal synergy approach. Lastly, we see very good chances to expand our already well-running network of micro-living assets into France.

In general, we have ensured confidentiality about the purchase price, but we can disclose that we will pay after final approval of the French regulator roughly 2/3 in cash and 1/3 in our own shares, where we can use our repurchased shares from April. The underlying multiples are on the upper edge of what we have paid in the past.

Now please turn to Page 5. For us as a company and for me personally, a clear and reliable ESG commitment is key for further entrepreneurial success. We not only see a lot of potential clients who simply expect us to deliver on ESG standards, so these issues become very commercial, but we also feel it is our need to do our bit on environmental and social questions. That's why we committed ourselves to a clear grid of quantitative and qualitative goals with short- and midterm impacts: for example, the reduction of carbon dioxide emissions by 20% to 2025, an increase of energy efficiency of 30% and to consume 20% less water also by 2025. You see these and our other aims on this chart, and you can be sure that I personally look after us doing everything that is needed to deliver on them. We already made steps to improve our corporate governance by implementing a new management structure, including an Executive Management Committee and an Operational Committee; an entirely new compliance regime; and enhanced risk management.

Additionally, we resolved our Senior Advisory Circle and enlarged our Supervisory Board. We are absolutely convinced that the large asset manager only gets new clients, especially from outside Germany and outside Europe, if he is INREV- and UNPRI-compliant. That is why we are a member of both. To demonstrate our ESG commitment, you will find our first ESG report published in June on our web page.

Speaking about the Internet. We also put a lot of efforts into our client service and digitalization in the first half of 2019, including a really compelling new homepage with a clear client focus and an online portal for our customers. In addition, we launched our own digital distribution platform, Accontis, which gives our clients access to our product and which will be enlarged even further in the upcoming months.

Now please turn to Page 6. You know that chart from our previous calls. It shows you the development of our assets under management, and it is a very appropriate sum-up of our product offering, the market's appetite and our future growth path. As said before, our core business, the real estate assets under management, have reached once again a new record high with an organic increase of 4.4% since end of 2018. Simultaneously, our non-real estate portfolio went down in the first 6 months as scheduled by roughly EUR 0.4 billion AUMs. With the anticipated integration of STAM Europe, we were slowly but surely approaching EUR 30 billion assets under management.

When you look at the percentage distribution of our assets, you will realize that our main organic assets under management growth is coming from our assets class micro living, residential and office. Despite of a close to fully let status in appealing locations and very attractive returns, our retail assets are lagging behind in the backdrop of the current market sentiment towards off-line retailer. In general, we see an incredible demand in Germany but also abroad for our student housing and service apartment product range. We will continue riding this very commercial wave and bring several new assets to the market till year-end, for example, in Cologne or Berlin. But this will not be the end. For the upcoming years, we will enter local markets, for instance, in Valencia, in Gdansk, in Salamanca, Düsseldorf, Hamburg, Zurich and looking heavily also to Benelux, Ireland and the Nordics.

Our steady sourcing pipeline remains more or less unchanged at around EUR 6 billion with roughly 1/4 in advanced contractual status and a higher percentage of transactions in the final stadium of exclusivity with ongoing due diligence procedures and SPA negotiations. This is one of many reasons why we are very confident about a prosperous second half of 2019.

Now let's please turn to Page 7. Let me speak a bit about HFS, our mezzanine business. In brief, we have stable margins and stable fund volume. At the end of 2019, the committed fund volume was around EUR 1.25 billion, of which roughly 80% was drawn. This money goes predominantly to German residential development with an overwhelming majority in the top 7 cities. We are currently financing there 57 different projects. The average mezzanine tranche is around EUR 22 million, and we have charged end of June an actual interest rate of 19.52 percentage across all our projects, old and new.

When you look at the distribution of our financing to the cities, you will realize that the 6 largest positions go out to top 7 cities and to booming Leipzig. So as it was in the past, our main focus is risk diversification, and this is happening very effectively as you can see on this chart.

Now please turn to Page 8, and I hand over to Kai.

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [3]

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Thank you, Lars. On this chart, you will find some basic information on our H1 revenue streams. All in all, our aggregated revenues amount to EUR 121 million, and that's completely in line with our budgets and operational objectives. We are also fully on track to deliver on our 2019 sales guidance.

In the first 6 months, we had EUR 15.5 million acquisition-related fees reflecting our already growing real estate AUMs. We expect this figure will get doubled in H2 driven by our compelling pipeline of new deals and strong client interest.

The largest portion of our revenues was once again asset and property management fees worth EUR 64 million, including a EUR 23.6 million pro rata temporary contribution from the coupon participation fee of HFS. The amount of the coupon participation fee decreased temporary slightly due to in-year valuation effects from fund accounting variations in repayments of bigger outstanding tranches and recommitments to new projects. This fluctuation will get caught up in the upcoming months, and actually, this has already happened in a larger part in July.

Lars mentioned before interest margins, fund volume, quality of projects and locations as well as demand for new investments are very stable and compelling. We have also high visibility on our promote fee for 2019, which will pick up in Q4 towards a small to mid-double-digit million area. One main driver this year will be a bigger placement of bundled micro-living assets in Spain and in Germany as well as some other smaller transactions where we are already on an advanced deal stage with very high investor interest. Our impressive product performance is reflected in the revenue stream from alignment capital, showing out -- showing our skin in the game in our assets and thus mirroring any value uplift and attractive client dividends.

Maybe at this point, a smaller, quite technical explication on the new sub-position in the alignment capital, a P&L segment of our H1 report. Gain/loss from fair value measurements of financial instruments related to real estate, which was before included in the P&L line dividends from alignment capital. Our accounting differentiates here between dividends, which were already resolved and distributed, and fair value assessed rides on an expected very likely dividend payment due to already almost likely generated gains in one of our investment vehicles.

Coming back to our revenue stream. Our warehousing business and earnings of EUR 25 million is a snapshot of our short-term balance sheet exposure to our client growth. Therefore, we see increasing rental income and service charges in Q1 and Q2 of in total EUR 10 million as well as around EUR 4 million from further successful asset placement into clients' funds. Here, you can assume more to come in H2.

On the flip side, our, again, effective income from other warehousing activities of in total roughly EUR 11 million will be on a much lower level in H2 because the majority of these assets will get placed during this quarter.

Please turn now to Page 2 -- Page 9, pardon.

On this chart, you'll see some key P&L figures. Please let me focus a bit more on the expenditures. In brief, our expenses from real estate investment management stood at EUR 40.3 million. Alignment capital expenses amounted to EUR 4.6 million, and warehousing expenses came out at EUR 10.2 million. Our combined ratio of operational expenses stood at around 45%, so temporarily higher than our year-end picture will be. This was mainly due to accrued expenses for a number of transactions we expected to sign in the next couple of weeks and months.

Rising costs for back- and middle-office services are as well reflected in the OpEx figure. This mirrors what we've said several times: regulatory burdens, reporting duties and expanding client standards will continue to challenge asset managers, and only larger ones can mitigate this by scale. And this will mainly drive market consolidation and M&A activity in the future. As we speak about it, we also had in the second quarter of 2019 an increase in M&A-related costs as well as a negative contractual onetime position of about EUR 2 million, which both led to a higher level of G&A expenses.

On the other hand, our other income shows in Q2 a positive accounting effect from expiring obligations. Main impact comes from a lapse of prospective liabilities from retail products in the U.S. and in Europe on level of our subsidiary, Hannover Leasing, but we have to reverse around EUR 6.9 million of underlying provisions.

Our EBITDA after 6 months stood at EUR 68.9 million, translating in an EBITDA margin of around 57%. The new IFRS 16 regulation, especially the requirement to treat rents as depreciation, had some minor effects on our EBITDA and D&A. Depreciation and amortization amounted to EUR 16.8 million, resulting in an EBIT of EUR 52.2 million.

We spoke several times today about our usage of the balance sheet for further client growth. This, combined with the corresponding debt, led to an increase in our financial result. But once again, this balance sheet exposure will be reduced, and this will have an impact not only on our revenues and earnings but also on our financial result.

In H1 2019, we had an unusually low tax rate of around 6% due to positive tax effect from deferred tax assets. But we expect to turn -- to return to our normal corridor of between 12% and 14% tax rate by the end of the year. This delivers a reported half year net profit of EUR 36.9 million.

Lastly, as always, our net position adjustments below EBITDA line. The amortization of the capitalized asset management contracts amount in H1 to EUR 6.2 million as well as DTA of noncontrolling interest of minus EUR 0.9 million leads to an adjusted net profit of EUR 47.8 million.

Please turn now to Page 10. Let me give you some key balance sheet figures as end of June 2019. In 2018, we put, as you all know, a lot of efforts in cleaning up the debt side of our balance sheet from the outcome of our major 2017 acquisitions. So we only have 2 major financing instruments: a senior unsecured bond with currently 29 -- EUR 294 million and a convertible bond with currently EUR 190 million as well as bank and other debt standing at EUR 184 million, including EUR 127 million warehousing debt.

Our cash amounted to EUR 45 million, which leads to a net debt figure of EUR 623 million. Thus, at the end of H1 2019, our LTM financial leverage ratio was temporary at 3.5x following the in-year balance sheet exposure for clients.

The assets booked and structured assets held for sale, inventories and other short-term assets will be placed with clients in the upcoming months. So our financial leverage will go down to the lower half of our target range of 2 to 3x latest by end of 2019. This reduction of the financial leverage is a clear commitment from our side.

As you have already seen in our H1 P&L, the temporary use of our balance sheet for client purposes is quite profit-yielding and allows us to deploy our cash in a favorable way. In general, our long-term balance sheet proportions are healthy and in excellent shape. The equity ratio is again around 40%. Debt is long term secured through 2 major instruments. The goodwill position from M&A will get tested periodically with a lot of headroom and flexibility according to consistently prudent PPA procedures and underlying subsidiaries with thriving and growing operations.

So please now turn the Page to #11, and I'm happy to hand over again to Lars.

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [4]

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Lastly, what can you expect from us in the next couple of months? As I said several times before, all our operations are running at full steam, and we expect a lot of deals to take place until end of 2019. For instance, we have just signed end of last week another mid- to high double-digit million micro-living deal in a top 7 city, North Rhine-Westphalia, with one of our pension scheme clients. Furthermore, we are currently in the placement process for several promising assets in micro living, mixed use and residential as well as on a stand-alone basis and in portfolio structure to institutional investors. So since many weeks, all our transaction colleagues are doing extra hours.

One example is an initiative from our subsidiary, Hannover Leasing, to restart the open-end real estate fund business with promising product focusing on megatrends like urbanization and demographic changes. I cannot name all products and projects currently underway. But to drop a few, we will bring a retail asset near Düsseldorf to our clients as well as a decent portfolio of micro-living assets in Spain and in Copenhagen. And we expect the placement of our latest acquisition in Bremen by year-end.

In addition, we are very active in the 2 probably most promising cities in Eastern Germany, Leipzig and Dresden, where we will soon offer residential assets to our customers. In addition, we replaced the before-mentioned different assets from our balance sheet with existing and new clients. HFS, our mezzanine business, will get expanded in different risk/return classes and, as such, opened up for new investors.

So in a nutshell, you see a company with all its operations in very good shape. And that's why we once again confirm our full year targets. We will reach aggregated revenues of EUR 285 million to EUR 295 million and EBITDA of between EUR 165 million to EUR 175 million and adjusted net profit of between EUR 130 million and EUR 140 million.

Now we can open the floor to our Q&A session. Before we start, I want to extend a warm -- very warm welcome to Julius Stinauer from Hauck & Aufhäuser. He has started his coverage last week. Welcome on board, Julius.

With this, I will hand over to the operator to start the Q&A.

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Questions and Answers

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Operator [1]

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The first question received is from Thomas Neuhold of Kepler Cheuvreux.

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Thomas Neuhold, Kepler Cheuvreux, Research Division - Head of Research of Austria [2]

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I have several ones, so I think the best is if we go through them one by one. Firstly, on the results, I was wondering why the coupon participation fee dropped from EUR 28 million to EUR 24 million despite a pretty stable asset base. So what was happening there?

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [3]

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Yes, Thomas. It's Lars. So first of all, as said, average interest rate is around 19.5%, so very stable. As you said, the committed fund volume is at record high of EUR 1.25 billion. So what we see is that we have a slight decrease from in-year valuation effects in the fund accounting. So we have variations when you compare it to the former year in redemptions. So that means that we will see rather a larger cluster of repayments in the second half year. And what does it mean? That means we catch up the valuation effects, which we have seen in the first half year now.

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Thomas Neuhold, Kepler Cheuvreux, Research Division - Head of Research of Austria [4]

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Okay. And a second question on H1 result is you mentioned the higher OpEx, especially accrued expenses for upcoming business and M&A-related costs. Can you quantify these 2 cost items, please?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [5]

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Yes. Roughly, on the M&A side -- it's Kai. We are talking about EUR 2 million to EUR 3 million for one sale transaction and the STAM acquisition. Plus, we had another onetime effect, which I already mentioned, about EUR 2 million from computation payment to one contractual obligation.

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Thomas Neuhold, Kepler Cheuvreux, Research Division - Head of Research of Austria [6]

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And these accrued expenses for upcoming business, how much was that roughly?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [7]

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That's a very good question. And actually, I can't quantify it. But if you want, I will come back after the call and give you a rough number, but I have to double-check this with our controlling because this is -- so at the end of the year, we can talk about between EUR 85 million and maybe EUR 95 million costs in our real estate investment management segment as a rough number.

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [8]

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And maybe, Thomas -- it's Lars. To give you some color around that, given that most of our business was closed in the second half year, we, of course, have costs initiated to create, if you want, or to prepare this business. And that means once the transaction are closed, these costs were not, so to say, realized again. And therefore, these are ramp-up costs, which is unfortunately the nature of our business given the seasonality.

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Thomas Neuhold, Kepler Cheuvreux, Research Division - Head of Research of Austria [9]

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Okay, understood. And then the next question is on the mezzanine financing business. According to press reports, you supposedly have quite high client concentration. I know you don't want to do this typical client exposure. But is it possible maybe to provide us with some color on your current structure in this business? Are there any clients which account on a consolidated basis for more than 10% or even 20% of this business?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [10]

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It's Kai. Thomas, unfortunately, we can't disclose this because at the end of the day, we would talk about a third party. And of course, but never mind, we have roughly 30 different developers currently that we are doing business with. There are bigger ones and smaller ones. Of course, our -- predominantly risk is not so much the developer for itself, but it's the location and the project where we are in the second lien of the book there. So roughly out of these 30 different developers, we have maybe 5 or 6 ones where we have bigger tickets with, but not really a sort of a cluster risk in the region or in the project.

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [11]

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And maybe to add, target is -- you have always volatility because we have so much demand obviously in the top 7 cities from developers. And as you can see, because the fund, I think for the first time, since beginning of the year, record high at 1.5 -- EUR 1.25 billion. So it can be volatile in terms of that you have larger exposures with 1 or 2 or 3 of these top 5, 6 clients. But in general, our risk policy is around 15% max on the leading developers in Germany throughout the year.

So -- but again, we would be stupid if the market is booming and we are in the right locations with the right project and the right project and the right product and the right product is residential and not get this financed.

And please always keep in mind, I said this in each and every roadshow, the German developer market is so highly fragmented, but the larger projects and the larger project that's currently the political world can only be built by the larger developers, and these larger developers are our clients. So per definition, in this business, if we want to support also the political world, U.S. exposure and also a larger exposure to the leading developers in this country.

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Thomas Neuhold, Kepler Cheuvreux, Research Division - Head of Research of Austria [12]

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Okay. Maybe to put the question a little bit differently. We have more and more developers being stocklisted and there's excess of equity in the debt market, and some of them raised recently fresh equity and debt, so stating to replace expenses mezzanine or other sources of financing. Do you think you can replace potential paybacks from such clients as new clients were not stocklisted in the long run or in the midterm?

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [13]

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100%. You see this on -- that we have -- that we use our balance sheet money because we have overdemand over the funds constant -- I would say on a constant base. In addition, please always keep in mind, we will further diversify in terms of risk return products. We are offering our clients that we'll also potentially substitute such what you are talking about, and we will go into new regions.

So I mean talking about the whole loan, this is a multibillion business where we are competing with the still remaining mortgage banks. I think it's around 5 or 6 that are really active. And it's a clear advantage for the developers or for our client if he has one partner in crime not only in terms of costs, but in particular, in terms of process. And as you know, process security is extremely important when it comes to financing residential development in the top 7 cities.

So to answer your question, not only that we have overdemand, but in addition, we want rather to expand this business by going into other products, which are more risk averse in this context.

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Thomas Neuhold, Kepler Cheuvreux, Research Division - Head of Research of Austria [14]

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Understood. And my last question is on the micro-living segment. You mentioned that you have roughly 6,000 units under development. Can you provide at least more details if these units will go in the new existing fund structure when the development will be finalized with volume in terms of euros you're talking about? And what kind of different fees that you get out of this development project?

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [15]

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Many, many questions, Thomas, which I can't answer all at this stage. But in general, when you look at the -- there are 2 cases. The one is what we have done in Germany very successfully, actually, Thomas and his team for the last 10 years. So we have developed their multiple service commendations.

The second is when we look abroad, and you take the case study which we developed, so to say, in Spain. There, we are currently -- have 3 projects that we are currently in, I would say, in placing models. Madrid, Valencia and Seville. One is in operations. One is under development. One is in planning status. And what are we doing? We are discussing this with larger international institutional clients to further broaden our investor base. So as you know, 99% roughly, our clients are German. So it's an ideal asset to attract international clients, and these international clients usually ask for more gross asset value than only 3 projects. So what we are doing is to elaborate, to execute a Spanish strategy with them.

When we're talking about our other developments or where we have secured land plots like in Poland, for instance, and then we take a new client in. So that means our organic growth will concentrate on undersupplied larger cities where this product is needed. But it will lead at the end of the day there that we will constantly grow our international client base because we have the right product, attractive yield, and international clients are simply looking for that.

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Operator [16]

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The next question received is from Kai Klose from Berenberg.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [17]

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I also have a couple of questions, if I may. The first one is on Page 38 of the report. Could you indicate or explain why we had a reduction in the asset management fees and the total OEMs went up by 4.4%?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [18]

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Maybe I will answer this question. The main impact of slightly lower level of asset and property management will come from the participation fees. And so with that, we have also a minor impact from variations and volatility in year. But again, to underpin this, asset and property management will also go up until end of the year.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [19]

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Yes, property management fee went up in the first half compared to the first half last year. But revenue from -- purely from asset management fees went down to EUR 23.6 million from EUR 26.8 million in the first half last year. But it also -- is it escalated?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [20]

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Maybe -- there, we have some constructions in our structures where we have yield, fund yield and accounting in, and this gets in our P&L at the end of the fund year. So this is not -- it's actually today in the fund, but we can book it only at the end of the fund year for itself.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [21]

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Okay. Did not understand that correctly. But could you also indicate what you expect for the coupon participation fee for the full year basis? Do you expect this to come out at the same level as of 2018?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [22]

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Yes. Roughly, we are talking about around 55 -- between EUR 50 million and EUR 55 million, maybe on the upper end of that range.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [23]

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And if I then add to the reversal of provisions of about EUR 12 million in the first half. Is this -- does this income on top to your earnings expectation for the full year? Or does this have to cover the partially higher costs which you have reported for the first half?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [24]

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So currently, we have only the picture of the first half year. We have to do many, many deals until end of the year. And we don't want to speculate too much about what will be the final picture at the end of -- currently, we feel very comfortable with our guidance. And of course, it can be that we have some accounting windfalls or accounting tailwinds, but now to speculate about a potential add-on on our guidance doesn't make any sense today.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [25]

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Okay. And then I have another question on the micro-living properties, which you currently -- which you're currently planning to transfer into a fund. Do I understand it correctly that they are currently owned by CORESTATE? And if so, where do show up on the balance sheet? And if they are going to be transferred, what's the transaction volume?

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [26]

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So partly, they are -- you'll see them in the balance sheet, the land plot. But others are already placed partly with our family office ultra-high net worth, and yes.

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [27]

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So the typical transaction part would be starting to acquire land plot then to structure, make the architectural of the planning to structure an investment proposal and sell this to our same institutional clients. And then of course, it gets out of our balance sheet.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [28]

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And is this all of the -- or is this also the EUR 6 billion development sourcing pipeline, which is shown on Page 6 of the presentation?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [29]

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No, that's not included, of course, because it's already -- and to acquire a land plot, we are talking about maybe a single-digit million amount. So the impact would be super minor.

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Kai Malte Klose, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [30]

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Okay. And maybe the 2 last questions would be, could you indicate what would be -- what was the signed and closed transaction volume year-to-date? And the last question, could you indicate or could you explain what is the progress by appointing another member of the Supervisory Board, which you indicated at the beginning of the year.

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [31]

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So actually, I don't have the final number, but also we are talking about -- of our transaction volume. Between sign and closing, of course, we are talking now maybe around EUR 1 billion already signed, closed transaction and booked a little bit smaller. But if you want to -- if you want, I can double check this with our controlling and provide the number in the aftermath of the call to you.

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [32]

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And regarding the Supervisory Board, we have started a process, and yes. So what does it mean? I can't guarantee you when we will report their own progress because, obviously, we want to have the right, yes, if you want, person. But we will update once we have done that, but we are in the process.

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Operator [33]

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The next question received is from Andre Remke from Baader Bank.

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Andre Remke, Baader-Helvea Equity Research - Co-Head of Equity Research & Equity Analyst [34]

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Also from my side, a number of questions, starting with your acquisition, the expected 2019 sales and EBITDA. Could we take this as a good indication for -- also for the future? Or how recurring was, as a result, will be this result for this year? That's the first question, please.

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [35]

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So on the numbers we refer to was for the full year. And this, you can assume that's recurring, yes, from STAM Europe.

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Andre Remke, Baader-Helvea Equity Research - Co-Head of Equity Research & Equity Analyst [36]

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Okay. Then you read net asset under management growth of, let's say, roughly EUR 0.9 billion. So in the first half, what is based on investments? And what comes from potential valuation uplift, if there are any?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [37]

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So valuation uplifts are quite minor. So most are actually, transactions are increasing AUMs by placing price to our clients. So actually, I don't have the valuation impact, but it would be...

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [38]

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But it's minor, first half.

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Andre Remke, Baader-Helvea Equity Research - Co-Head of Equity Research & Equity Analyst [39]

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And so let's take the EUR 0.9 billion -- let's say, EUR 1 billion net additions this year, what is the award transaction volume? Is it all acquisition-related? Or does this also include any disposals in a meaningful size? Let's say, transaction volume is higher than this EUR 1 billion?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [40]

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No, actually, we only had disposals on our noncore portfolio of roughly EUR 400 million, EUR 0.4 billion. And there, we don't have any excess or [ostensibly] in because this is part of the rundown portfolio of Hannover Leasing, where we don't kind of apply such fee structures. So roughly, the -- then in our real estate AUM, close to EUR 1 billion is a net and gross number.

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Andre Remke, Baader-Helvea Equity Research - Co-Head of Equity Research & Equity Analyst [41]

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Okay. Perfect. So next question, you -- on your plans to expand the debt business, you already last discussed this in the last call, you indicated some plans for the second half of this year. Speaking long term or midterm, what could be a kind of volume here? And what kind of margins will -- will the margins be lower than the mezz business due to the lower risk? Any indication here would be helpful. Probably not for this year but...

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [42]

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Yes. So given that as a senior position and we compete them, therefore, with the senior mortgage bank lending, margins will be much lower. Absolute. So you are really in the first rank in the so-called German Deckungsstock. Obviously, for 2020, I would expect a couple of hundred millions, and then let's see how it develops, put it this way.

But this is a multi-billion market. So -- but as usual, first, you need to enter this market, and then you can further maybe take a larger share in this market. But again, for internal budgets for 2020, we're speaking of a couple of hundred million.

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Andre Remke, Baader-Helvea Equity Research - Co-Head of Equity Research & Equity Analyst [43]

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And so it will be a meaningful size?

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [44]

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Yes. Sure.

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Andre Remke, Baader-Helvea Equity Research - Co-Head of Equity Research & Equity Analyst [45]

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Okay. Good. So the last question you -- after the share buybacks and using this for probably for STAM, are further repurchases possible? Or what are the criterias here? Will you only initiate for the share buybacks ahead of potential M&A? Or could be this, in general, a strategy?

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [46]

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So we have 2 main drivers for growth. And besides the European expansion of our micro-living activities, it's also M&A, and that will continue. So that means beside that and looking at the valuation of the stock, share buybacks is always an option. But of course, you know that I can't disclose now when and if we do it, but you can be sure it's always an option on our side.

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Andre Remke, Baader-Helvea Equity Research - Co-Head of Equity Research & Equity Analyst [47]

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And what is the legal frame at the moment left? 10% or maximum structure? Are there any limitations?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [48]

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Yes, of course, there are limitations, but we have renewed our potential program on our last AGM end of April. And they -- right.

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Andre Remke, Baader-Helvea Equity Research - Co-Head of Equity Research & Equity Analyst [49]

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So it's the usual 10%.

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [50]

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Right.

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Operator [51]

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

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Georg Kanders, Bankhaus Lampe KG, Research Division - Investment Analyst [52]

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Regarding with [less openness] could you provide the number of the property management fees?

The second question I have is regarding the exposure to Spain. Is this -- this is then the volume of a separate fund in HFS? Or is it part of the existing funds?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [53]

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So the property management fee is EUR 14.8 million. And your question regarding Spain HFS, it's a different fund. Regulatory needs to be a different structure.

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Operator [54]

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(Operator Instructions) And the next question is from Tom Carstairs from Commerz.

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Thomas Carstairs, Commerzbank AG, Research Division - Senior Equity Analyst [55]

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Okay. Assuming you can hear me.

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [56]

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Yes, we hear you.

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Thomas Carstairs, Commerzbank AG, Research Division - Senior Equity Analyst [57]

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Okay. Just to follow up on the coupon, we appreciate what you said about the first half year, EUR 23.6 million I've got here for the first half. Can you give us any feeling for what the second half will be from a coupon participation fee perspective?

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [58]

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I already mentioned with Kai Klose, we are talking between EUR 50 million and EUR 55 million for 2019, and there may be a touch more on the upper end of that range.

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Thomas Carstairs, Commerzbank AG, Research Division - Senior Equity Analyst [59]

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Okay. Because my second question was going to check the EUR 50 million to EUR 55 million, what that referred to.

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Operator [60]

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And the next question received is from Manuel Martin from ODDO BHF.

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Manuel Martin, ODDO BHF Corporate & Markets, Research Division - Analyst [61]

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Two questions from my side, one by one. First question is regarding your non-real estate AUM that is fading away. Could you give us maybe an idea of which kind of margin that this may set? Because I might imagine that this improved a little bit your margin.

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [62]

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Quite minor. We are talking there between or around 15 bps. So EUR 400 million, which we have lost now has a super minor impact on our P&L. And of course, every new asset which we are currently putting our AUMs, this is, of course, much higher-yielding. You're absolutely right.

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Manuel Martin, ODDO BHF Corporate & Markets, Research Division - Analyst [63]

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Okay. Second question, could you give us some color on your fundraising activities domestically? And on an international basis, maybe you can give us an update there where you are and where you want to go for the remaining year?

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [64]

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Sure. So there is much progress and much on its way. As you are aware, the company as it states today, with all the transformation that we have seen in the last 2 year, is in a stage now that it is institutionalized. And given that we have the right product and have also the, I would really say, market-leading comprehensive ESG strategy, this attracts clients. The combination between comprehensive client focus, stakeholder focus, ESG strategy and the right product, it makes sense. So that means we are currently discussing our main products with several, larger, really top-notch institutional clients. And I'm very convinced that we will see some very prospering client relations in particular in the second half of the year.

So -- and as you may also know, we have started the group-wide equity raising in form of our group-wide Head of Equity Raising, Douglas Edwards, who joined in January. We have paired up meanwhile with another female colleague, Sandra Burrows, who joined from Blackstone also more than a year ago, the whole client service team. So we are making progress there, and this you will see in clients, in -- as I said, in top-notch, highly regarded clients throughout the second half of the year. And of course, we will expand this in the next 1, 2, 3 years. That's an ongoing process now.

So we feel very, very comfortable that we have done the right steps there, not only in terms of how we have institutionalized the whole business, the whole strategy, but also that we are obviously -- and this is a great complement to our colleagues, have developed the right product also several years ago, and that pays off now.

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Operator [65]

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

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Kai Gregor Klinger, CORESTATE Capital Holding S.A. - Head of IR & Capital Markets [66]

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So thank you. Last but not least, we would like to welcome you to our second Capital Markets Day taking place in Frankfurt in the Hotel Sofitel Opera on September 12 between 10:30 a.m. and 3 p.m. The invitation with a detailed program will follow over the next couple of days.

So we appreciate your interest, your attention and your questions today and wish you a nice remaining summer holiday season. And of course, looking forward to welcome you in Frankfurt, which -- September or maybe to meet in person in one of our roadshows after summer. Thank you very, very much.

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Lars Schnidrig, CORESTATE Capital Holding S.A. - Chairman of Management Board, CEO & CFO [67]

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Thank you. Bye-bye.