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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen, and welcome to the conference call of CA Immo regarding interim report for the third quarter 2018. [Operator Instructions]
Let me now turn the floor over to the company.
Hello, everybody. This is Keegan Viscius. My first time on an earnings call, so nice to meet everybody, and hope to get to meet a number of you in person over the next couple weeks and months. This is my third week on the job. So I've taken over as the Chief Investment Officer. My responsibilities here will primarily cover the investment management and the asset management sides of the business. Previously, I was a Senior Vice President with Starwood Capital based in London, where I had primary market coverage over the Northern European markets, so Netherlands, Germany and Central Europe. I'm delighted to be here. I think it's important to clarify that there is no formal or informal relationship anymore with Starwood. My employment there terminated on the 31st of October, and there is nothing that can undermine the integrity of the management board and my position on the management board. So, so far, 2 weeks in, very happy, and it's been a warm welcome from the staff here. We're also delighted to have Starwood as a core strategic investor who is supportive of the strategy of the company and the direction that the business is going in. My primary understanding of their rationale behind the investment in CA Immo is that we have a strong foundation and an impressive track record of delivering large-scale projects with high quality, that we have a defensive position with strong balance sheet, a tremendous amount of in-house talent across the entire value chain, so construction, development management, asset management and investment management. And we're truly positioned to become a leader in the European sector and a premier player in the Austrian, German and CEE markets. Looking at a few changes from a government's point of view. Mr. Hans Volckens decided to terminate his mandate as CFO and has stepped down from the company. The mandate of Mr. Andreas Quint was extended by 1 year. Two Supervisory Board members, Ms. Gabriele Düker and Professor Sven Bienert have resigned. And Starwood have delegated 3 members to the Supervisory Board, Sarah Broughton, Laura Rubin and Jeff Dishner by exercising 3 of their golden shares with the registered shares. Looking at general outlook. I think CA Immo is exposed to countries with very positive macro and appealing dynamics, looking at the safe haven status of Germany and Austria, where there is a structural undersupply in particular in the office sector and a demand shift in terms of office demand, looking at markets like Berlin. While there is a complementary exposure to the high-growth markets of Central Europe, where there's a low basis of stock per capita and, again, strong demand from both internal and external occupiers. We need to be cognizant of some of the potential clouds on the horizon, looking at a slowdown in global growth expectations and potential restrictions to global trade and fiscal tightening. But overall, I think the continuation of the strong momentum that the business has seen over the last number of quarters is expected to continue. And we can go into a little more detail on that in a few minutes. But the overall outlook that we have is a balanced optimism with a focus on managing costs while being able to deliver alpha through the on-the-ground platforms and best-in-class teams that we have. So perhaps, I hand over to Christoph to go through some of the numbers, and nice to be on the call for the first time.
Hi, everyone. This is Christoph speaking. I'm happy to run you through our 3Q numbers briefly before handing back over to Keegan, who will later talk a little bit about the portfolio development, markets and outlook and our strategy implementation. I will jump right to Page 3, which gives an overview where we stand after 9 months. And it pretty much translates we've seen in the first half of the year and have continued throughout the third quarter as well. So we have a nice top line increase, and net rental income came in at EUR 130.5 million. That's translating to EUR 1.40 per share. As you'll see here, there's not a big difference anymore in contrast to the previous 2 years as we didn't really buy back shares in 2018. So the per share numbers basically relate to the ones on absolute terms. But we're able to keep up operating margin, defined as net rental income to rental income, above 90%. And what drove the top line in 3Q and also on a 9-month basis is, first of all, the Warsaw Spire acquisition we did in 3Q last year. That's a positive impact of roughly EUR 1.5 million rental income in 3Q. To recall, we incorporated the KPMG office in Berlin, which is our own development, fully let, came in, in March this year, nicely contributed as well. And we did a large-scale letting in Berlin last year. And we did an excellent property, which also had a positive impact still in 3Q. FFO I stands at EUR 93.7 million after 9 months; on a euro per share, plus 12% up on a yearly basis. So fully on track with respect to the full year guidance of EUR 115 million.
FFO per share -- FFO II per share, slightly down simply because of lower trading activity. I mean, that's something we've seen or expect in the coming quarters as well, apart from the sales we are going to queue on the power pipeline, setting the nonstrategic developments, in particular, residential. There's not a lot of investment portfolio sales which are scheduled for the time being.
NAV per share is up 6% year-to-date, adjusted for a dividend of EUR 0.80 we paid out in May this year. It stands at -- the EPRA NAV stands at EUR 31.13 per share at the end of September. Net profit, slightly down compared to the previous year. But keep in mind that we have a pretty significant convertible valuation effect, which amounts to almost EUR 24 million after 9 months. This is something we did not have in 2017. So if you would adjust the earnings before tax for that noncash valuation effect, it would be up 13%. So just a technical -- when it comes into play here. On Page 4, the P&L in more detail and focusing on 3Q. As mentioned before, top line, up. Net rental income, up 5%, driven by the 3 factors mentioned. Increase in indirect expenses is something which might catch your eye. It has to do with advisory fees we booked in 3Q. Nothing lethal. And also, slightly higher development expenses, which have to be seen in connection with income -- the high income from services. So as you know, our administrative cost also contains the costs which relates to our service business, which is primarily the omniCon third-party business. And that's also the reason we see a slightly higher number here in annual comparison. So EBITDA, slightly down, given the lower trading activity, as mentioned before. And I think one of the most positive aspects of 3Q is a revaluation gain in Austria, which was achieved by the letting of around 14,000 square meters in one of our Lände 3 offices. We were able to sign a rental agreement with Volksbank long term at a favorable lease, and this led to a EUR 15 million revaluation gain in 3Q. That's our major product, the EUR 44 million you see here booked in the third quarter. The other effects in terms of revaluations, the usual suspects, I would say. So we have positive gains related to our development projects in Germany, the EUR 4 million, for instance, and our property in Munich has gained in value as well. So pretty much what we've seen in the last 2 quarters as well. So the convertible effect was mentioned, it was minus EUR 8.4 million in 3Q. So this will have to be adjusted compared to the previous year. And if you do it, as mentioned before, the EBT, which reached around EUR 182 million after 9 months, will have been up 13% adjusted for the convertible effects.
Page 5 summarizes the FFO, as mentioned before. On a -- in annual comparison, the 3Q FFO, which stood at EUR 0.33 in 3Q, was up 9%; and taking the year-to-date number, a plus of 12% at around EUR 1 per share. So obviously, our 3Q FFO number is down compared to 2Q just because, as most of you are aware, we booked the Immobilien dividend of around EUR 4 million into 2Q. On a yearly basis, though, we are nicely up. And looking at the full year guidance of EUR 115 million, I mean, this looks very comfortable. So there is EUR 21 million left for 4Q. And still keep in mind that 4Q is always characterized by higher admin expenses. We have the profit revaluation costs, and we always have higher personnel costs in 4Q. And on top of that, we are going to have interest from the corporate bond we issued in 3Q, which was part of the balance sheet end of September. But we cannot see the interest on a pro rata basis in 4Q. And then as we've seen in previous years, 4Q is always a month -- a quarter where you have simply higher maintenance spend towards the end of the year. So all in all, we still feel pretty comfortable with the EUR 115 million plus we guided at the beginning of the year. FFO in more detail on Page 6. I think most of that was mentioned. Financing costs were stable at around EUR 8 million a quarter, which has to be seen to be positive, given we have a higher amount of debt, EUR 1.9 billion as at the end of September this year compared to EUR 1.7 billion last year. So we were able to keep the interest expense flat on the debt in our book. The FFO I adjustments, primarily advisory fees, which do not relate to the recurring business of around EUR 1.1 million, and interest expenses related to financial authority payments, which relate to different periods and also to trading activities. Balance sheet as of the end of September on Page 7. A pretty stable picture here. Cash of around EUR 480 million looks very comfortable. This, as mentioned before, contains the corporate bond we issued in the month of September of EUR 150 million. Nevertheless, the bond money -- bond proceeds were spent pretty much immediately for the Campus 6.1 acquisition we did in Bucharest, and it triggers around EUR 53 million cash out. And we acquired the Spire C in Warsaw, which led to an outflow of around EUR 100 million in October. Otherwise, the debt ratio is pretty stable. Net LTV, 34%; equity ratio, still close to 50%, in line with our targets. The NAV on Page 8, also mentioned at the beginning, we were able to show a 6% gain yesterday on the EPRA NAV. Adjusted for the dividend we paid out in May, on a year-on-year basis compared to the end of September 2017, the EPRA NAV is up 11%. On the financing side, Page 10. As stated in previous calls, I think we pretty much reached the low in our average financing cost now. We were stable at 1.7%, all in, and a maturity of almost 7 years. So I think we did a lot of exercising the path to optimize our debt book. And where we stand right now is pretty much what we can do in terms of the current structure. Certainly, it will cost you further increase in the average debt maturity, which we have brought down from around 44, 43-ish to go to now almost 7. The 6.7 years also include all the financings related to the properties under construction, meaning that the EUR 1 billion pipeline we are running in Germany is fully financed. And the assets we intend to keep, which is roughly EUR 800 million out of the EUR 1 billion, is not just financed for the 2- or 3-year construction period, but also for the longer term, meaning we have basically a fixed interest for a 10-year period for all the projects under construction. Hedging ratio is slightly up compared to the previous quarter, 96%, so pretty much everything in terms of debt, financial liability from our book is fixed or hedged. The focus, then, not hedged related to assets we are going to sell in the short term. Page 11 gives an overview of the maturity profile. I think the only new development here is the corporate bonds we issued in the 3Q, with a volume of EUR 150 million, debt price earned for a 7.5-year term at 1.875% coupon on the yield and was around 2%. So this is -- we decided to do a 7.5-year term in order to have a queue in 2026 just to nicely balance all the maturities. And otherwise, pretty stable picture here. We have now a roughly 50-50 split, 50% on issued debt, corporate bonds plus the one convertible we have outstanding; and the remainder, secured debt across our core markets. And Page 12 just summarizes what we just said in terms of financing costs for the individual markets and debt maturities. And with that, I hand over to Keegan again who is going to run you through the portfolio.
So looking at the portfolio, Page 14. Germany continues to account for the largest single market in terms of portfolio value. GAV is up from EUR 3.8 billion to EUR 4.1 billion. No major changes in terms of the overall portfolio composition on the previous quarter. Looking at the income-producing portfolio split on Page 15. EUR 3.4 billion of the EUR 4.1 billion are income-producing properties, so over 80% of the overall portfolio is income-producing. In Q3, the Vienna, Visionary, Prague, among others, were incorporated into the book. And in Q4, we will be adding Campus 6.1 in Bucharest, InterCity in Frankfurt and Orhideea in Bucharest as well.
Looking at Slide 16, occupancy is up at 95.3% compared to previous quarters. The portfolio is generating a 6.1% gross initial yield. Like-for-like rental growth in Q3 was 3%, so slightly down from Q1 and Q2 at 5.5% and 4.1%, respectively, though, a lot of long-term leases were pushed through, and we're seeing a weighted average lease term of the portfolio now at 4.1 years. Skipping ahead a little bit, maybe to jump to Page 23, looking at the pipeline. I think the company has seen a tremendous amount of growth over the last couple of years. And we have a really positive vision for the future. There's about EUR 1 billion of projects that are currently under construction expected to come online before 2021, of which EUR 800 million of gross asset values is expected to be rolled into the whole portfolio and not be sold. So looking at the yield on cost at 6%, it's predominantly majority of these assets are in the core German markets. We're seeing a good spread in terms of our development costs to where the market is currently trading at the moment. Moving on to Page 24. You'll see that since 2013, there's been about EUR 800 million of acquisitions of predominantly income-producing assets in CEE, which also includes the buyout of historical joint venture partners, for instance, in the Europolis portfolio in Prague. I think we're really well-positioned in terms of our CEE exposure. We're rotating out of the non-core markets. We've exited Ukraine. We've exited Bulgaria. And the portfolio is very much concentrated on the prime established submarkets of the CEE capital cities. And we expect that there'll be further growth in those markets and further just general macro and occupational growth in those markets. Looking at Slide 25. You can see a little bit of the bridge in terms of the book value over time. So the additions of Campus 6.1, Visionary, Spire C as well as some of the completions of projects from the portfolio that we intend to keep. The GAV of those 4 projects was EUR 260 million. 82,000 square meters was brought online, representing about EUR 16 million of rental income on a fully occupied run-rate basis and a yield of cost of 7%. So I think that's a pretty aggressive addition to the portfolio and a positive outlook for the next number of years. Moving to Slide 33. We can talk a little bit about that EUR 1 billion and EUR 800 million for our own portfolio that's under construction. Orhideea Tower in Bucharest, as mentioned earlier, that's something that will be coming online later this year in Q4. Same with InterCity Hotel in Frankfurt. There's a number of projects in Berlin, MY.B, MY.O in Munich, NEO in Munich and the large Frankfurt tower, Tower ONE, that we expect to complete during the course of 2021. Looking at Page 34. Some of the assets, which are under construction and are not for the whole portfolio that will be sold, are predominantly the residential projects in Mainz and Munich as well as the Cube and BT 1, both which have been forward sold. BT 1 to the future occupier and the Cube to TH Henderson. So those are rotating out of the portfolio when they complete. So that's it from my side.
Okay. Thanks for listening, everybody. And we are very happy to proceed with questions.
[Operator Instructions] And the first question for today comes from Stefan Scharff. He's calling from SRC Research.
Stefan from SRC. The first question is about the financial results, yes, the other financial results of minus EUR 22 million. I think a part of it is -- at least a part of it is noncash, and you mentioned the convertible valuation effect. Perhaps you can give us a little bit more color here or split about this topic.
Stefan, very happy to. I mean, it's basically a sum of add backs, valuation amount and the convertible effect. So as mentioned before, around EUR 24 million -- EUR 23.6 million exactly is the convertible valuation effect. So the remainder was slightly positive and mostly basically within FX gain, which appears minus EUR 21.9 million over the 9 months.
Okay. The second question is about the taxation. You have a tax rate for the first 9 months of about 26%, which seems to be quite high. You mentioned that there were some one-off effects after some tax audits. Perhaps you can give us also some color here.
Yes, as you remember, we sold Tower 185 at the end of last year, but we actually closed in January this year. So the 1Q number contained roughly EUR 20 million tax effect linked to the tower. That's something we explained back then. So the tower sold last year, well, actually, the tax effect happened in 1Q '18. That's the reason the tax rate and the current tax number seems to be on the high side in 2018.
Okay. If you ever look at the development portfolio, half of it -- more or less half of it is the one in Frankfurt here with us. Can you tell a little bit more about your plans for the pre-let status? You have about 27% now, and it's a project for the next 3 years. Do you have agenda or more tenants to move in or to sign a contract? Or you will wait a little bit longer to attract a bigger number of possible tenants for this one property?
Keegan here. Thanks for the question. You're right, it is currently about 27% pre-leased. There is good momentum in the market when you look at the underlying Frankfurt market dynamics. So though vacancy is falling and though there are a number of projects, we do see a high degree of occupational demand. So the winds are going in the right direction in that regard. We also believe that the Frankfurt market is moving towards Europe affitto when you look at how the banking district is headed towards Mainzer Landstrasse, the regeneration of the whole central train station area. So we think we're on the right side of the city, in an area that's getting more critical mass. That being said, there's a number of discussions that are ongoing with various tenants at various stages, some advanced, some a little bit less so, that we're feeling pretty good about. And we'll hopefully be able to come back to you in short order and report some good news.
Okay. You did some good bets in Bucharest and in Prague, and I'm sure you expect yield compression, at least this will be my guess. So are there more deals to follow in, let's say, the next 1 or 2 quarters?
Yes, I mean, I think we always have to look at the opportunities on an ad hoc basis as well, too. We're very bullish on our core markets in Central Europe, so Warsaw, Prague, Budapest, Bucharest primarily. Some of these markets, I think, were underweight and there's more potential to do. Like you say, there's a yield spread in Central Europe compared to Germany despite the integration of the economy with the Western European value chains. And so we do expect over the longer term, as these markets continue to mature, that there will be yield compression. When you also look at capital value per square meter, it is low in comparison to Western European capital city averages. And these are also difficult markets, Prague in particular, in order to get planning permission. So the barriers to future supply coming online are quite difficult. So we're definitely keeping our eyes open in these markets. We're starting to see the first traces of rental growth really come through in markets like Prague. You're seeing vacancy fall substantially in markets like Warsaw. We're bullish on a number of the different submarkets in these cities and are working together with the team to try and find more things to do.
Okay. What's your opinion about Warsaw? I would say that there is -- there are some offers in the market, and I'm not sure about the yield development in Warsaw. Your opinion is positive here?
No, we like -- Poland as a macro, we're positive, right, so it's seeing good GDP growth. I think it's also interesting to look at some of the demographic trends, right, so we're bullish on urban locations, right? So you look at the population and urbanization trends that have been happening and we expect will continue to happen. And I think this is the first time in however many years that actual net migration out of the U.K. of EU citizens has occurred, and you're seeing this wave of people come back to these capital cities after kind of migrating abroad over the last 10, 15 years. So from a demographic point of view, we're very positive on the urbanization trends of cities like Warsaw and Prague in particular. We think the economies are robust and still growing and that there's the convergence to Western European levels. I think it's a bit of a hedged bet as well, too, because as the economies grow, there's internal demand in consumption and occupational demand that's generated. However, in the event that there is a bit of a global slowdown, if there is a little bit of a macro slowdown, labor cost should kind of stabilize or even decline, which will again make these markets interesting from a back-office and an outsourcing point of view. You're seeing in Warsaw, in particular, a tremendous amount of demand from large financial institutions, JPMorgan, Goldman Sachs, Eighth Street and all these guys; as well as in our building, right, Frontex, EU Border Agency. So really high-quality credit tenants who are picking these markets. Vacancy has come down a lot, over 15% to under 10%. Again, I think when you look at rents compared to Western European standards, there is a lot of room to run. And the buildings that we own are buildings that I think are very modern and attractive from an employment point of view. And in a market where you have low-single digit unemployment, like you do in Warsaw and Prague, one of the USPs that these employers have to offer their potential candidates and their recruits is the quality and location of their office buildings. So if you look at the 2 Spire buildings, for instance, that we acquired in Warsaw, I mean, fundamentally, in my view, this is CBD, right? These are well accessible both by car and public transportation. They have really interesting kind of landscape urban design with tons of amenities around it. And I think in the future, over the long term, these are sustainable locations where people will want to be based, and we're in one of the best locations in that regard. So I think that there's kind of protection on the down side, but also you're seeing the ability or the outlook where you could envision continued rental growth because people are paying for quality and the macro winds are behind you.
Okay. One follow-up on Poland. You described that Poland has a good development, and I fully agree. I could see that some other companies, investors or developers are interested in the secondary cities in Poland, like, let's say, Breslau or Gdansk or Kraków. Would it be an idea also to invest there a little bit to get even a little bit more yield? Or you say this is too far from your strategy?
I mean, I think when you look at one of our USPs as a business, right, it's the on-the-ground teams. So we've got 20 people in Prague, 20 people in Prague, a whole office in Berlin, Frankfurt, Munich, here in Vienna. And so these are really our core markets and having the ability to add alpha by out-managing buildings and managing buildings better than our peer groups who don't have that skill set in houses. It's something that I think delivers tremendous value for all stakeholders here. So I think that is something that we need to be considerate of and how far from home do you go. And I think we've talked about the development pipeline that we have in place where everything that could be started is started, and that gives us a good balance for growth, internal and organic growth over the next kind of 3, 4 years. However, I think when you look externally, there are certain markets where there is perhaps potential to build critical mass. And I think that's the key point, right? This business is and has the potential to continue and to grow into being the gateway city stop, right? When you look at the listed real estate states in Europe, where you have concentrated positions of office and urban benchmarks in cities with critical mass, size and scale and where you can have, not a dominant, but a significant market share in order to create leverage over tenants, but also to offer your tenants opportunities as they move and expand and grow and stuff. So I think when you look at a market like Germany, there's a handful of cities that don't have a footprint where we could potentially have a footprint: Hamburg, Stuttgart, Düsseldorf and this part of the country. And if I look at Central Europe, I would say Poland is the only market where you have regional cities with that critical mass, exactly you say Kraków, right, almost 1 million people. It's got over 1 million square meters of office stock. You see high-tech tenants in these markets, right, Google is a big occupier. You see a lot of the Swiss insurers. And so -- and I think what you're actually seeing, given the quality of the underlying talent pool there, right, where you have good universities, you have a lot of access to labor, you have a high quality of living, you have low labor cost comparative to Western European or even capital city standards, is you're seeing that the type of occupiers in these markets are moving up the value chain, right? So it's not just simple back-office or outsourcing, but it's actuarial underwriting, it's tech, it's innovative labs and stuff like that. So I definitely think we need to keep our eyes open and to be scanning these markets and looking for opportunities, though balancing that off against what is possible in the capital cities and the existing kind of core cities of the portfolio at the moment.
And the next question comes from Max Gerber. He's calling from Baader Bank.
I have actually withdrawn my question. But if I'm already on the line, can you shed some more light on the further diversification of your asset base that you mentioned in your press release, i.e., which markets or asset classes are you considering to invest in besides the ones that you have just mentioned?
I think by diversification, that's also diversification geography-wise as well. I think primarily, the business is underpinned by office, urban benchmark, mixed-use assets and residential build-for-sale predominantly, yes. Hotel, for instance, can be a component of those urban benchmark assets. Though I think we are very much trying to stick and stay focused on the sectors that we know well and the stages of the investment cycle that we're able to execute on. So I think when it comes to diversification, it's more continuing to build up our exposure on a balanced way so that we're not having any overweight exposure to specific cities or specific countries. And even there, looking at on a city level, the submarket diversification, right, so looking for the established submarkets and the emerging submarkets that we think have the potential to retain the occupational demand and appeal over the medium to long term and making sure that we have a balanced exposure in those various markets, right?
We don't have any more questions at the moment. [Operator Instructions] And we have one question from Jakub Caithaml.
This is Jakub from Wood. I just wanted to follow up on this topic which we discussed, this geographic expansion. Don't you fear that when you would be buying standing assets in German cities, you may be disadvantaged as you may be competing with players with lower cost of capital than you have?
Yes, I think you're looking for assets where you can add value across the investment cycle. So not necessarily a mandate or a requirement to buy income-producing assets, but we have a permanent equity base with a long-term horizon and the ability perhaps to leverage those in-house capabilities that we have in order to look for the development potentials, the refurbishment potentials in addition to the income-producing. So yes, there is a lot of competition in the markets these days. And again, there is no requirement in terms of a fixed target in terms of what we want to deploy in these new markets because we have this embedded growth. But it's an option where, again, I do feel that the skill set internally gives us an advantage and an edge versus our peers in terms of the ability to develop the ability to permit, the ability to asset manage, and that's something that I think we can leverage, right? We have a blue-chip reputation in terms of delivering high-quality products for institutional tenants in multiple different cities, so tenants follow us into our buildings. And those relationships are things that we need to look at leveraging when looking at new markets.
Next up, we have James Crombie. He's calling from Petrus Advisers.
Just really a couple of questions here. I'll just ask them one at a time just not to dump them on you all at once. Just wondering if you've got an update on the CFO hiring process.
So it's in progress at the moment. There is a short list of candidates who are being interviewed, and the Supervisory Board hopes to come back to us during the course of Q4 or towards the end of the year to update.
Excellent, excellent. And then, Keegan, one for you specifically. Now that you've joined Immo, do you plan to update or change the existing strategies, both on a development and acquisitions point of view?
Well, I mean, I think the strategy of the business is very appealing. And I understand as well that was one of the things that attracted some of our core shareholders to the business, right? When you look at it again, to reiterate, we have a really impressive track record of delivering these large-scale projects. We have a defensive position with a strong balance sheet. We have tremendous in-house talent, and we're positioned to become, I think, a European market leader and a sector champion with critical mass. And you have this embedded internal potential for growth, and it's a focused concentrated story. So I don't think that there's any necessity in terms of changing the strategy or shifting the sector focus. I believe firmly that we have exposure to some of the most exciting European markets, right, that provide an asymmetric hedge, the safe haven status of Germany and Austria, which are structurally undersupplied. Again, look at markets like Berlin where a lot of our pipeline is. You have historically not seen the DACH companies. You haven't seen the institutional occupier in that market, but you're seeing that shift right now. Again, hard markets to build in, but you're seeing guys like Siemens coming from Munich and investing EUR 600 million in order to establish a presence in these markets. And I think we can really capture that growth. I think in terms of strategy, it's continuation of focusing and concentrating our business. So divesting out of the non-core markets, Ukraine, Bulgaria, for instance, and really concentrating on these urban benchmark locations.
Okay. Excellent. That all makes sense. Just on the financing cost in Austria, it's 1.9% unhedged, I think. That used to be higher than Poland and the Czech Republic, just not quite the development I expected there. Is there any plan to bring that down? Or can you explain why that might be quite a bit higher there?
We will have to -- James, Christoph here. We will have to bring it down, certainly. I think the reason we're a bit higher here is just historical contracts we signed, there is -- I mean, we broke all the financings or swaps, which made economic sense. We let here dating back to 4, 5 years ago, so which just doesn't make sense to break it. That's the reason, obviously, for the new financings to be substantially below that.
Okay. Excellent, excellent. And just talking about the land bank in Munich, a little bit of an update to date. I was just wondering about the rest of it, which is the majority of it. Have you got any updated plans there or anything to comment on?
Well, I mean, I think everything that can be started has been started. So that's important to note that we're focusing a tremendous amount of resources on making sure that we're getting the planning where we have the planning and the permits where we need the permits. And so there is a strong focus for certain sites and certain markets. There are certain structural reasons why work can't start sooner, for instance, maybe a metro is being built under the site, and we need to wait for the tunnel to come across our site before we can start working on the foundations and so there. So that is definitely something that we're consistently looking at how can we make sure that we're moving forward as fast as possible on these projects.
Okay. Excellent. And last one from me, just on acquisitions. Keegan, it sounds like you've outlined a very dynamic strategy there in buying new buildings to complement the existing portfolio. Just wondering, is this a -- why aren't we seeing any of that coming through in 2018? Is that a long-dated plan or is it sort of embryonic?
I think you're starting to actually see it come through in 2018, and we expect more of it in the future, right, obviously looking at what is economically accretive, right, so always evaluating the balance but also what is strategically accretive. Right? And over the last 12, 18 months, you've seen a number of new acquisitions, which before that, it was kind of a bit of a dry spell, right? So we've acquired 2 buildings in Warsaw, 1 building in Prague, 1 building in Bucharest, have bought in the joint ventures and stuff, all predominantly happening over the course of the last 12, 18 months. So I think you're now actually kind of seeing a turn in terms of the direction of the business. But there is a very acute awareness in terms of managing expectations and having a balanced risk profile and being cognizant of the global macro and micro market dynamics and what is accretive, what is accretive to shareholders and stakeholders, what is strategically accretive to the business and having discipline in terms of what we're looking at, where we're looking at it, why we're looking at it. So...
And that was the last question for today.
Okay. Thank you very much, everybody. Thank you for participating. And yes, if anybody have additional questions, you know how to reach me and you can reach Keegan as well. So looking forward to talking to you soon. Bye-bye.
Yes. Thank you.
The conference is no longer being recorded.