Stoneweg Europe Stapled Trust (SET) Earnings Call Transcript

Good afternoon, and welcome to the Cromwell European REIT's First Half 2024 Results Call. We will begin with a presentation by the Cromwell European REIT management team followed by Q&A. [Operator Instructions] Now, I will hand across to the CEO of the Manager of the Cromwell European REIT, Simon Garing. Simon, over to you.

Thanks, Kiara, and welcome to everyone dialing in this afternoon. We appreciate it's a busy time. So, thank you for joining us for the Cromwell European REIT's first half briefing call. So as a reminder, CEREIT is the largest diversified pan-European logistics and office REIT listed here in Singapore, attractively priced at around a 35% discount to our recently announced NAV and a 10% annualized DPU yield based on the dividend that we announced today of [ 7.05 cents ]. CEREIT's portfolio comprises of 107 properties across 10 countries, valued at over [ EUR 2.2 billion ]. The portfolio is now 54% weighted to logistics with 44% to office and with a 90% allocation thereabouts to Western Europe. Recalling that the predominantly freehold nature offers value-add opportunities throughout the portfolio and is managed locally by a team of more than 200 on-the-ground Cromwell team members across Europe. Turning to Page 4 to set the scene. So, over the last 2.5 years, a perfect storm was caused by high inflation, rising interest rates, slower economic growth, heightened geopolitical conflicts, which all put pressure on Singapore REITs, as well as specifically our REIT, both operational performance, increasing cost of capital and stunting growth. Now, 2.5 years ago, we took several significant actions to protect CEREIT's balance sheet of core that we forecast could be impacted from all of these elements. So, we paused acquisitions. We divested non-strategic assets at a premium to val. We deferred non-essential CapEx and minimized the portfolio valuation downside. The impact over the 2.5 years as we announced a couple of weeks ago, is only 3.5% over that 2.5 period, which has kept NAV relatively high at EUR 2.09 per unit. We completed all of our debt refinancing due in the last 3 years, leaving a very long runway to our next debt maturity in November next year. During this period with valuations around the world falling, we maintained net gearing below 40% and managed the rise in interest costs and margins with our all-in debt costs increasing 144 basis points from 1.7% back in the beginning of 2022 to 3.2% today. Unfortunately, all of these measures had a negative impact to DPU of approximately 2.5 euro cents annualized as compared to before the cycle turned in the beginning of 2022. However, we weathered the storm without raising dilutive equity or expensive sponsor debt. We increased the portfolio weighting to a majority to Logistics and Light Industrial. We've improved the overall asset quality. We've delivered on the EUR 60 million of AEI and development projects, all while maintaining a 100% distribution payout ratio for you, the investor. So now, with the storm largely behind us, we can take a more balanced approach and look to take advantage of opportunities over the next 12 months with greater confidence. And this is really reflected in this next chart where the market has recognized our strategy and coupled with the stabilization in the European commercial markets as well as the beginning of the interest rate cuts from last month in Europe, the positive impact is starting to be reflected in CEREIT's unit price performance shown in this chart. And so again, we're pleased that we're the second best performing Singapore REIT this year, again, being endorsed by an increase in inflows by institutional investors, which now make up 23% of the register. And that's at a time when you've seen from the SGX that typically institution investors have been leaving Singapore REIT. But in our case, they've been building, which is quite pleasing from an endorsement perspective. So, looking more broadly on the macro picture with ECB cutting rates for the first time in 5 years last month and expecting to cut twice more for the remaining part of the year, European real estate fundamentals should gradually improve in the second half of this year. The left-hand chart shows the 3-month Euribor trending down. 5-year euro swap rates are even lower at 2.4%, which will help stabilize the real estate cap rates with the positive spreads to finance costs now very constructive for European assets, as shown on the right-hand chart. So, underpinning our greater confidence is the resilience of the portfolio occupancy, remaining high at 93.6%, even in the times of the softer economic conditions caused by the rise in rates. Our teams on the ground re-leased over 100,000 square meters or 5.8% of the portfolio in the first half, adding to the already high 15% that was renewed last year. And you'll see in the appendix to the slides attached in our SGX announcement, a further 70% of lease expiries for the remainder of this year have already been derisked. This is at a far higher proportion than this time last year. The WALE has extended out to a long 4.8 years, again, giving us that confidence of the resilience. The 5.2% positive rent reversion was again well above the Eurozone inflation of 2.4% for the period. And this continues to reflect that CEREIT's portfolio is generally under rented by around 6%. And couple that with low vacancies, again, that gives the valuers more confidence in our cash flows. And therefore, you saw that reflected by the lift in our valuations that we announced last month. One of our key strengths in the portfolio is the size and scale. We have over 1,000 leases over 850 tenants across almost 2 million square meters. There's no concentration risk in any one particular country, building, industry sector or tenant type. Most of our top 10 tenant customers are either global MNCs or government agencies with high credit ratings. Our top 10 tenant customers also account for less than 23%. And therefore, again, that diversification underpins the security of our cash flows. So, turning to Slide 9. High ESG standards attract tenants and capital. CEREIT is fortunate that we've been recently rated by MSCI AA, only 1 of 3 Singapore REITs to attain this high level of rating. Almost half of our debt now has the sustainability linked KPIs, which are shown on the right-hand side table to which, as we outperform, we get lower interest rates. We are ahead of these targets. I'm especially pleased that in the first half of the year, 82% of our portfolio is now BREEAM or LEED certified, well exceeding the 20% or so average certification across all of Europe's office stock. And this is really borne out by the next chart where we show here corporate commitments to ESG targets are accelerating the demand for quality green certified office space, further validating our strategy. The left-hand side chart shows over 3,000 European corporates have signed up to SBTi targets in the last 2 years, a 4-fold increase. Tenants are re-orientating their office space requirements towards ESG certified office space that helps them fulfill their own targets. And in some cases, they're willing to pay us higher rents. This resulted in a large gap between prime ESG certified office space demand and the availability of the supply in the market. And on the right-hand side, based on Jones Lang's research, there is 1.7 million square meters of available supply compared to over 3.9 million square meters of tenant demand for this type of space. So, we're very well positioned to benefit from this supply/demand mismatch. And so, I'll now hand over to Shane to cover the financial result highlights. Thank you, Shane.

Thank you, Simon. It's pleasing to report a resilient operating performance has continued into the second quarter, reflecting stabilization in the European market, albeit we still feel the impact of both rising borrowing costs and our defensive actions in selling assets in order to keep the gearing below 40%. This resulted in a 9.5% drop in DPU to 7.05 cents for the first half year. A couple of highlights for the period include firstly, the NPI, which was up 2.3% on a like-for-like basis. The rent reversion was a pleasing 5.2%, taking into account the benefit coming from new leases signed in Nervesa 21. And thirdly, from a capital management perspective, net gearing has been maintained below 40%, actually at 38.9% now due to EUR 260 million of divestments that have taken place in the last 2 years. So, if we turn now to the P&L. This slide shows the key line items that form the distributable income. The first half '24 NPI was 4.4% below the first half last year, mostly due to the divestments, in particular, 2 large assets sold in Italy last year. Firstly, Bari Europa in November and Piazza Affari in June. As I mentioned, on a like-for-like basis, the NPL was 2.3% higher. Finance costs were 14% higher than last year as the average all-in interest rate increased from 2.58% to 3.23%, driven by higher rates on floating borrowings and higher margins on refinance loans. It was pleasing to note that other expenses and income tax were both lower than last year, all in all, due to the asset sales and higher interest costs. DPU, as I mentioned, 9.5% down. And it's best to see this described on the waterfall chart on the next page. This really shows the key drivers to the results. What we've done is we split the disposals to show the impact of the Bari Europa sale. As a reminder, this was a large Police Academy in Bari, Italy, which was on a 6-month rolling lease and it was sold in October last year. Although, the yield was high, the risk was very high too. And if the tenant left, it would have been a very difficult property to re-lease. So, this was an important sale and a significant premium to its valuation. Asset sales and the higher finance costs are the key items driving the DPU, almost 1.5 cents impact on this first half year result. There was a one-off item that was already mentioned in the first quarter being EUR 1.2 million of reinstatement income from Padova, a property that we owned previously in Italy, providing some positive offset. And the NPI on a like-for-like basis grew modestly in the first half due to revenue growth from indexation at around 3% and income from new leases signed, particularly in Haagse Poort in the Netherlands. Operating costs once again have been well managed this quarter. For the half year, total expenses were flat compared to the previous year. And if we look on a like-for-like basis, the net non-recoverable expenses were 3.3% lower than last year. Also, cash collection remains high at 97% over the period. This chart highlights the consistencies in our DPU during COVID and during the current interest rate induced recession like period. Although, we do expect a lower DPU going forward based on repricing the bond at today's market rates compared to the existing 2% coupon that we enjoy. However, today's result annualizes to a yield of over 10% based on today's unit price. This page shows the distribution timetable for the half year distribution. Important dates are the last day of trading, cum entitlement to the DPU of 14 August and a payment date of 27 September. Also as a reminder, for those investors electing to receive the distribution in euros, election forms need to be sent in by the 10th of September. And we have turned -- we've kept the DRP turned off again given the discount between the market price and the net asset value. Now, turning to our valuations for 30th of June, which were actually announced to the market on the 3rd of July. The headwinds of high interest rates that have affected asset valuations over the past 2 years have abated somewhat. It is pleasing to report a 0.6% increase in the portfolio valuations for the first half of this year and that's prior to taking into account capital expenditure. And this is the first like-for-like increase in the last 2 years. The strategy to pivot the portfolio to logistics and life industrial sector has benefited the portfolio again for another valuation round with this sector recording a valuation gain of EUR 23.4 million, which is 2% up on the December valuations. The improvement was primarily due to the approximately 2% market rent growth across the sector, while cap rates have stabilized, reflecting the continued interest from investors. Also, the office portfolio valuations, the pace of decline has moderated substantially to just 1% in the last 6 months compared to a 4.6% decline registered in the December valuations. And 2 of our 5 office markets actually registered slight valuation gains this time around. Over the last 6 months, the terminal cap rate exit yield and discount rate for the total portfolio have remained relatively flat. The portfolio's initial yield is 6.3%, while the reversionary yield is 7.7%. This reflects the valuer's views that over the medium term, there will be rising rental income. Turning now to the balance sheet, which remained in a good liquidity position with cash high at EUR 63 million and with the EUR 26 million drawn under the EUR 200 million RCF being repaid during this quarter. As mentioned, no debt expires until the end of next year and asset sales of more than EUR 260 million have provided the funding for developments and CapEx. The NAV was slightly lower due to the marginal loss after taking into account the capital expenditure and the balance sheet. So, after all of the refinancing last year, we now have a long runway to the maturity of the bond in November 2025. We are actively engaging bond investors ahead of next year's maturity. While we're also having ongoing discussions with both existing and new lenders on alternative facilities. With the RCF being repaid, the all-in interest rate actually dropped a little from 3.23% in the first quarter to 3.16% at 30th of June. In line with the recent MAS consultation paper that was released, we have shown a scenario here where interest cover may only fall to 2.6% on the scenario proposed by MAS, which is a 10% reduction in EBITDA and a 100 basis point increase in interest rates. So, this provides a significant buffer to the proposed limits. And we have been actively managing interest rate risk with both hedged and fixed rate debt, which helps to shelter the full impact of interest rate increases. As you can see, the all-in interest rate of 3.16%, is only 144 basis points higher than it was in June '22, where as you can see, the 3-month Euribor has increased by 400 basis points over this period. The forecast for interest rates to drop as you can see in the chart, should coincide nicely with the timing of our refinancing needs in early 2025. And lastly for me, the capital management metrics remain comfortable with plenty of buffer to the covenants within our EMTN program and debt facilities. We have EUR 63 million in cash and EUR 200 million of committed undrawn facilities available, providing substantial liquidity. While the Board takes note of the additional flexibility that MAS is proposing in amending the LTV and ICR limits, it has not changed its policy of 35% to 40% gearing. As an indication, valuations would have to drop by EUR 450 million or 20% to get even close to the 50% LTV. And with that, now I'll pass to Andreas to tell us more about portfolio and asset management.

Thanks, Shane. Good afternoon. Portfolio occupancy was at 93.6% at the end of the first half 2024 with occupancy of core countries such as The Netherlands, Italy and Germany, well above 94%. This is underpinned by more than 100,000 square meter of leasing completed so far in this year-to-date, including fully leasing up Nervesa soon after completion. CEREIT Czech and Slovakian portfolio's occupancy increased by 4.4 and 4.1 percentage points, respectively, due to a new 7-year lease totaling 3,400 square meters in our development project, Lovosice ONE and a new 6-year lease totaling 3,700 square meters in our development project, Nove Mesto ONE. Key focus is on the lease up of circa 10,700 square meter vacancy in Sognevej in Denmark. However, part of this vacancy via office, which are more difficult to lease out. Lovosice ONE in Czech Republic with lease-up of 2 vacant units would contribute 33 basis points to CEREIT's occupancy rate as improvement. In fact, we recently signed a lease for one of these units taken up by an existing tenant who wants to expand with lease start in September 2024, so that would impact Q3 occupancy rate. This tenant also extended existing lease to reset to a 5-year lease term. In our Logistics Light Industrial portfolio, we continue to see good rental reversion of 4% in the first half, reflecting low vacancies and limited supply in the sector across Europe. The portfolio is slightly under-rented with passing rents 7.4% lower than market rents. 43,000 square meters of new or renewed leases were signed in the first half, while tenant retention was on the lower side with 32% in the first half, which is due primarily to 2 Logistics Light Industrial leases in Denmark. One retail lease in Italy and one logistic lease in the Czech Republic. Various new leases in units smaller than 1,000 square meter attracted even double-digit rent reversions in Denmark, France and the Netherlands. Sector WALE remains unchanged at 5.1 years versus the prior quarter. Talking about occupancy in the Logistics Light Industrial portfolio, which improved in previous quarter by 0.3% to 94.8%. Though, this is still well below the record occupancy levels seen in the year before. As already explained in previous results presentation, the inclusion of the 2 new developments, Lovosice ONE in Czech Republic, Nove Mesto ONE in Slovakia into occupancy statistics in the fourth quarter '23 resulted in a drop of occupancy since they were not fully leased up at delivery. However, we are progressing well with the remaining vacant units as mentioned before. Danish occupancy rate dropped by 5 percentage points, mainly due to 1 rent guarantee ending in our Priorparken 800 asset and another tenant using space in the same asset. On the positive side, the occupancy rates in Germany, France and Slovakia are well above 95%. And for U.K. and Italy, all assets are fully leased. We are targeting to bring occupancy for the Logistics Light Industrial portfolio back to 95% plus by the end of 2024. Now, talking about the markets. European logistics market was less active in the first half, in particular, if compared to the extraordinary active years in 2021 and 2022. Strong occupier activity in recent years triggered a substantial supply response, which is now completing. Coupled with lower leasing activity during the soft economic lull, market vacancy across Europe has drifted slightly higher to approximately 4.6% compared to the 3.9% in 2023. But this is still at a very low level in short terms. More specifically, logistics vacancy across its 8 markets is over 3.2%. In the short term, vacancy may arise from further completions, but the development pipeline is now falling. And as occupier demand rises again with economic growth and near-shoring, the long-term trend is likely to be for lower vacancy as the new chart shows on the right-hand side. Rents were flat or rose across the main European markets in the second quarter. The key leases in the quarter were the 9- and 10-year leases signed in Parc du Prunay in France with the planned rental reversion of 8.4%. Our Veemarkt assets in Amsterdam is in prime location and continues to enjoy 100% occupancy with the waiting list of tenants who want to come in. Now, moving to the office portfolio. Leasing activity in CEREIT's office sector in the first half totaled 59,000 square meters with new leases and renewals signed at a positive 5.7% rental reversion. This was driven primarily by demand for our Grade A offices, including the new leases in Nervesa 21. The portfolio is underwriting with passing rents 4.1% lower than market rents. Tenant customer retention rate for office was at 86% in the first half and we already derisked some of our large office leases with 2025 expiries. WALE improved to 4.5 years in the first half, up from 3.6 years a year before, mainly due to the renewal of a large anchor tenant at Haagse Poort in The Netherlands. The overall office occupancy increased by 100 basis points to 90.7% compared to the first quarter, which is mainly due to full lease up of the redevelopment in Nervesa 21. One 9-year lease of 1,100 square meter in our Assago asset, also located in Milan and one new 5-year lease, 1,600 square meters in Bastion in The Netherlands. Occupancy in Poland stabilized at just under 90% due to the sale of the vacant office asset Grojecka 5, while we are in discussions for renewals with our larger tenants with 2025-2026 expiries for our Krakow assets, Green Office and Avatar. Occupancy fell slightly, again in Finland, explained by structural trends in office and a higher share of working from home in Finland from which our assets are more impacted due to their peripheral location and higher building age. We continue to sell down our Finish exposure with one office asset sale closed in the second quarter and one more is in advanced stage of negotiations. There has been a lot of press about the U.S. and Chinese office markets. For comparison, the left-hand chart shows the recent take-up of office space in Europe. So, while last year's leasing was lower than in 2022, it was still a substantial 22 million square meters of office take-up. The CBRE data indicates that European office take-up in the second quarter rose by 2% quarterly and as expected, was similar to the last year. Overall, vacancy increased by 1 percentage point to 8.6% in the second quarter with a 2-tier market of prime offices in strong locations and secondary and tertiary stock in weaker locations. The 3-year forecast bar chart for 2022 to '26 shows that CBRE expects activity to pick up in the next few years, in part in line with the recovery in economic growth. The right-hand chart shows CBRE's forecast of peaking vacancy this year around the current 9% mark. Moving to the next slide, office leasing highlights. Pleasingly, we have renewed our largest tenant portfolio for a further 5 years in The Hague. We are well progressed in our plans to undertake a major repositioning project to lift Haagse Poort to Paris-proof energy rating and other attractive amenities. We are working with our key tenant at Haagse Poort in a unique partnership approach as we share a common vision to improve energy efficiency, reduce carbon emission and improve staff amenities and the local environment. We expect to see a substantial uptick in rents and valuation as a result of these deals. Nervesa 21 is now fully let in the first half 2024 with 3 new leases signed in the second quarter and with planned rent reversion of 74%, reflecting the premiere positioning of the property. [ Via Nervesa ] Milan has also assisted driving up the Italian office portfolio occupancy to now 93.7%. Nervesa 21 has been the first office redevelopment project in CEREIT portfolio and we deem it a success story. Nervesa 21 announced to leave in December 2020, we assessed various strategic options and concluded an office [indiscernible] refurbishment would provide the best returns for unitholders. Our strategy reposition included very high ESG aspirations, which proved to be the key success factor of quick lease up with 100% tenancy achieved just a few months after delivery. Return-wise, the rise in construction costs in an overheated Milan construction market and the market yield shift ate a part of the underwritten development profit, while market rents increased significantly at the same time to levels far above underwriting, which has protected the other part of the development pocket. More importantly, CEREIT unitholders now enjoy full leased, create office building and a colocation with a comparably high 6.6% yield on costs. [indiscernible] development and local asset management teams, the project was delivered in time and in line with the final budget that CEREIT had approved prior to start of construction. Nervesa 21 is also a testimony for CEREIT's high ESG aspirations. The building was certified with a LEED Platinum rating and 91 points ranked as second best in terms of LEED certified office buildings in Italy. Energy intensity based on the science deemed to achieve at least 40% energy reduction compared to pre-refurbishment level, but we aim to implement more measures such as smart building technology to move towards 50% energy savings. Energy purchase is 100% renewable, which is another trial to comply to carbon pathway. During demolition and strip out material recycling was around 90% to mitigate imported carbon from this project. Looking ahead, we have a EUR 200 million plus of short to medium-term development pipeline opportunities in the CEREIT portfolio. As mentioned earlier, we are very progressed in our plans for Haagse Poort, targeting plan concern in the next 12 to 18 months. We are in discussions with various tenants at Maxima alone, which is now fully stripped out and ready to redevelop into a LEED Platinum building, which is a premium positioning in Rome that meets a high demand from international corporate occupiers, but also from public authorities, given Grade A vacancy in Rome is only around 1%. The remaining 2 projects, Ruyterkade in Amsterdam and Parc des Docks in Paris are more complex and require longer consultation periods with multilayers of improving stake with us and [indiscernible] channels. We expect the Amsterdam project approvals to be ready in 2026-2027 for construction, while the time line for the larger-scale Parc des Docks project remains further out. In the meantime, we ensure high levels of income returns from both assets. Now, I will hand back to Simon for economic and market overview and conclusion.

Thank you, Andreas. So, turning to Page 37. While the economic picture for Europe has improved, the recovery so far has not met expectations, particularly in the cyclical sectors. Real wage growth and easier monetary policy are expected to aid recovery. The Eurozone's GDP grew by 0.3% in the quarter and is projected to rise by 0.8% for the year and 1.7% in next year. A significant recovery is expected only after further rate cuts according to Oxford Economics. On the financial market side, credit spreads have compressed from the beginning of the year and have stabilized after the short-term volatility caused by the recent French snap election and the recent DOJ move. The Eurozone inflation was 2.6% in July, slightly up from 2.5% in June with the cost of services rising slightly faster than food and energy. The ECB cut rates by 25 basis points for the first time in 5 years in June with the next rate cut expected in September, followed by a further cut in December. This is also implied by the forward curves we can see. So, looking at the transaction market activity on Page 39, volumes have declined in the last few years in response to the rise in interest rates and the geopolitical uncertainty. As shown in this slide, European transaction volumes were EUR 44 billion in the quarter comparable to this time last year. Frequent estimates that EUR 350 billion of private equity funds was committed, but not yet invested dry powder will also help stabilize the market with more than 1x annual volume worth of equity available. So, before I move to the conclusion, I'd like to highlight Cromwell Group's announcement on the 23rd of May. Cromwell Group has agreed to sell its 28% stake in CEREIT units, 100% of the Manager of CEREIT and 100% of Cromwell European's business to Stoneweg. Stoneweg is a global multi-strat real estate experienced adviser and asset manager with EUR 4 billion in assets based in Geneva, Switzerland. It has significant real estate investments and funds that it manages in Switzerland, Spain and the U.S., including managing a listed Swiss real estate company of around [ EUR 1.5 billion ]. At completion of the sale, Stoneweg will manage around EUR 8 billion of AUM and this provides CEREIT and new as the unitholders with complementary asset transaction and capital management prowess and bringing deeper banking and capital market relationships to complement and supplement what we already have here. I would like to reiterate that Stoneweg beg have committed to support CEREIT's investment strategy and longer-term growth aspirations while maintaining the high level of corporate governance, including the Board independence that CEREIT is renowned and we recently received the top 6 ranking in the STI governance index for that. There are no anticipated changes to the CEREIT management team and the independent directors. So, we look forward to working with our new sponsor once all the customary closing conditions are finalized. So in conclusion, with interest rate cuts underway in Europe, improving credit market conditions, stable cap rates, continued rent growth and the proposed amendments back here in Singapore to the MAS LTV and ICR limits are all contributing to stabilizing operating and valuation conditions, both in Europe and here. This should lead to improving investor confidence in European-focused REITs. So, as a result, we are well positioned for the next stage of the cycle. We can now take a more balanced approach and look to take advantage of opportunities for growth over the next 12 months with more confidence. We are nearing the end of the current divestment strategy because of this extra confidence and comfort we have in our current portfolio and the valuation outlook with approximately EUR 90 million still to go of nonstrategic divestments over the next 1 to 2 years, which will also increase our weighting to Logistics and Light Industrial and recycle into our development and AEI program. We continue to stay laser-focused on refinancing the November bond and minimize the negative DPU impact from the transition from the old 0 rate environment. We believe CEREIT offers a compelling investor proposition with a resilient high-yielding logistics-focused portfolio and experienced local asset management teams with sustainable ESG plans and within comfortable gearing levels all at a 35% discount to NAV and a 10% annualized DPU yield and soon with a new strong dedicated European sponsor, exciting times for us all ahead. Thank you for your time. Kiara, there ends the prepared remarks. If you'd like to turn over to investors and unitholders for questions. Thank you.

[Operator Instructions] Our first question is around the new majority ownership and sponsorship that's recently taken place. And the question comes from Michael and one from Ramesh. Can you please guide on the implications from the recent change in majority ownership and sponsorship? Will there be any change in leadership? And will there be any name change for the REIT in the near future?

Thank you for the questions. So, as I said in the prepared remarks and Elena has put up here on the screen. Firstly, Stoneweg is a very experienced hand of managing and investing on behalf of their unitholders and their investors throughout Europe and the U.S. So, as part of a very long and detailed due diligence period, at the end of that, obviously part of the transaction to acquire the units and the management company, they themselves have come out publicly to say that they support the strategy of the REIT, they support the governance structure of the REIT and they support the current management team and independent directors. So, we certainly don't expect any of those changes. So, the changes that we mentioned today around our greater confidence in the outlook relative to the last 30 months, which has been about weathering the storm, it coincides now with the cut in interest rates stabilizing valuations, slightly improving economic growth. That coincides with the changing of the baton of sponsor from Cromwell Group to Stoneweg over the coming months. So, we look forward to that.

Our next question comes from Felix and from Ramesh. Can management please talk to any cost-cutting exercises in the near term? And if you could please talk to any cost structures and whether they've stabilized, especially around the OpEx, maintenance, labor and interest rates, please?