Release Date: July 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NSI NV (FRA:N4RN, Financial) has a strong focus on Amsterdam, which remains a key market with high liquidity and strong economic prospects.
- The company is diversifying its portfolio beyond office spaces, including assets like life science clusters, student complexes, and residential buildings.
- NSI NV (FRA:N4RN) continues to lead in sustainability, with 98% of its assets labeled and 43% at an excellent level, far above the Dutch market average.
- The company has a solid balance sheet with low Loan-to-Value (LTV) ratios, providing room for financing growth.
- NSI NV (FRA:N4RN) has successfully reduced its vacancy rate from 9.5% to 5% in the Amsterdam region, indicating strong demand for its properties.
Negative Points
- Operating expenses have increased by 13% compared to last year, impacting the operating margin.
- Net rental income has seen a slight drop despite improvements in gross rental income.
- The company faces higher financing costs due to rising variable interest rates and lower income on swaps.
- The process of converting office spaces to residential use is complex and time-consuming, with expected starts only by 2027.
- Liquidity in the market remains low, making asset rotation and disposals challenging.
Q & A Highlights
Q: How is the administrative process on office-to-residential conversions in the Netherlands, and what type of yield can be expected?
A: The process involves demolishing existing structures and building new ones, requiring lease expiries and zoning changes with the local municipality. This takes time, with the first projects likely starting in 2027. Market yields for residential are currently just below 5%. (Bernd Stahli, CEO)
Q: Is the EUR150 million asset rotation target still relevant, and does the 2024 guidance include potential disposals?
A: The guidance does not include potential disposals, which would impact 2025 more than 2024. The EUR150 million target was based on previous capital commitments, which have since changed. Asset rotation is ongoing, focusing on selling assets in Eindhoven, Den Bosch, and Hoofddorp to concentrate more on Amsterdam. (Bernd Stahli, CEO)
Q: Have there been discussions with the new core shareholder regarding potential synergies, given their mix of office and leisure assets?
A: We do not choose our shareholders; they choose us. While we appreciate their investment, there are no specific synergies to discuss at this time. (Bernd Stahli, CEO)
Q: Is the assumed tax rate of 3% to 5% for 2024 different from the initial guidance given at the 2023 full-year numbers?
A: The initial assumption was made before the restructuring to adjust for the new tax environment. The 3% to 5% rate is now clarified for 2024. (Bernd Stahli, CEO)
Q: Do you think NSI's assets are now in line with market yields, given the reported yield expansion by CBRE?
A: Our gross initial yield has shifted from 6% to 8%, reflecting a 200 basis point increase, which aligns with market trends. We can't comment on CBRE's specific reports but can confirm our own data. (Bernd Stahli, CEO)
Q: What yield are you looking for when considering acquisitions?
A: Yield is not the only metric; we also consider risk and return. Ideal acquisitions may include well-located, vacant buildings in Amsterdam that require redevelopment. (Bernd Stahli, CEO)
Q: What was the original tax rate assumption for the guidance?
A: The original assumption was made before restructuring. The current guidance includes a clarified tax rate of 3% to 5%. (Bernd Stahli, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
