Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong recovery in the Dutch market with retail sales up by 4% and footfall increasing by 5%, and almost 10% for full service centers.
- Positive leasing spreads for the core portfolio at 1%+, indicating stable rental levels.
- Improved balance sheet with a Fitch credit rating of BBB stable, the strongest since 2019.
- Increase in valuations driven by higher ERVs, with a 3%+ rise in the first half of 2024.
- Significant progress in the LifeCentral strategy, with daily life now comprising 67% of the portfolio, enhancing resilience.
Negative Points
- Direct result in the first half of 2024 was impacted by bankruptcies, particularly in Belgium.
- Higher financial expenses in H1, though expected to normalize in H2.
- Occupancy cost ratios have increased slightly, with Belgium and the Netherlands now at 13% and 14%, respectively.
- The French investment market remains very quiet, delaying asset disposals.
- Average financing costs are expected to rise, potentially reaching closer to 4% by year-end.
Q & A Highlights
Q: Are you considering a reverse merger like the one announced by the FirstNet?
A: No, we are not working on a merger at the moment. We have already achieved significant cost savings in Belgium and our marginal cost of debt is approaching Belgian levels. (Matthijs Storm, Managing Director, Executive Director)
Q: Do you think the level of OCR for fashion and footwear retailers is sustainable?
A: Yes, the OCR for fashion at 15%-16% is sustainable as it includes both discount and higher-priced fashion retailers. We will address any outliers above 20%. (Matthijs Storm, Managing Director, Executive Director)
Q: How do you see average financing costs evolving in the second half of the year?
A: We expect the average financing cost to move up from the current 3.46% to closer to 4% by the end of the year. (Dennis De Vreede, Non-Executive Non-Independent Director)
Q: When do you foresee French asset disposals?
A: The French investment market is currently very quiet. We expect news on Dutch disposals and/or joint ventures in the second half of the year, but French asset sales will take longer. (Matthijs Storm, Managing Director, Executive Director)
Q: Could you give some color on the type of assets you have put on the market for sale?
A: One asset is a completed full service center, another is 100% occupied but cannot be transformed into a full service center, and the third is a full service center under joint venture discussions. (Matthijs Storm, Managing Director, Executive Director)
Q: How can your debt profile improve by lending more money?
A: We have strengthened our balance sheet through disposals and raising longer-term debt. Our debt profile is managed by maturities, moving from less than three years to 3.4 years. (Dennis De Vreede, Non-Executive Non-Independent Director)
Q: Is the current EPRA cost ratio of 24% a good base case assumption going forward?
A: Yes, we aim to maintain around 22%-23% as our internal target. (Dennis De Vreede, Non-Executive Non-Independent Director)
Q: What are the main assumptions for your full year 2025 EUR1.75 guidance?
A: We have not included any acquisitions or disposals. We assume no further ECB rate cuts and only inflation for like-for-like rental growth. (Matthijs Storm, Managing Director, Executive Director)
Q: What would be the impact on your interest costs if the ECB cuts by a quarter point?
A: Our floating portion is about 23% of our debt portfolio, so a quarter-point cut would have a proportional impact on that portion. (Dennis De Vreede, Non-Executive Non-Independent Director)
Q: Are there any possible acquisitions in Belgium?
A: Yes, Belgium is a logical market for us to grow. We have reorganized the company and are ready for growth in the Belgian portfolio. (Matthijs Storm, Managing Director, Executive Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
