Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Warehouses De Pauw SA (WDPSF, Financial) achieved EUR500 million in new investments with an average yield of 7%, marking a significant milestone in the company's history.
- The company maintains a strong balance sheet with a loan-to-value and net debt to EBITDA ratio of 6.8x, supporting its growth strategy.
- WDPSF's investment pipeline is well-diversified across regions, with over 70% in Western Europe, enhancing its geographical footprint.
- The company has successfully indexed leases by more than 3% and achieved a positive rent reversion of 15% on 200,000 square meters, indicating strong rental growth potential.
- WDPSF is advancing its energy projects, aiming for 350 million megawatt peak of solar panels, and is developing a significant battery park in Genk, showcasing its commitment to sustainable energy solutions.
Negative Points
- The company faces challenges with a slight decline in occupancy rates, now below 98%, which is the lowest since the first half of 2019.
- There are concerns about sluggish occupier demand, particularly in consumer-driven sectors like fashion and FMCG, which could impact future growth.
- WDPSF experienced a 12.5% decline in solar income, attributed to both weather conditions and pricing mix, affecting its renewable energy revenue.
- The development pipeline has a pre-letting rate of 77%, with some projects, like the one in Kerkrade, having lower pre-letting rates, posing potential risks.
- The cost of debt is expected to rise to around 2% by the end of 2024, which could impact the company's financial flexibility.
Q & A Highlights
Q: Can you comment on the yield achieved in Germany and the Netherlands?
A: In the Netherlands, the yield is 6% on the forward funding deal and 7% on development. In Germany, it's 5% net. (Joost Uwents, Co-CEO; Mickael Van de Hauwe, CFO)
Q: Why did a project in Germany not go through in Q1?
A: The project faced permit discussions and community planning changes, leading to uncertainty about timing. We decided to remove it from the list for now. (Joost Uwents, Co-CEO)
Q: How do you see the next quarter evolving given sluggish occupier demand and lower yields in Germany?
A: We aim to create value through a combination of acquisitions and developments, adapting to market conditions. The demand for logistics space remains strong. (Joost Uwents, Co-CEO)
Q: What is your view on occupier demand and potential vacancy rates by the end of the year?
A: We don't foresee significant changes in vacancy rates. The demand for logistics space remains strong, though some frictional vacancy may occur due to tenant movements. (Mickael Van de Hauwe, CFO)
Q: Can you provide details on the recent Romanian acquisitions and their drivers?
A: The acquisitions strengthen existing clusters and tap into regional logistics hubs. Romania serves as a regional hub for logistics beyond local consumption. (Joost Uwents, Co-CEO)
Q: What is the status of the battery storage project in Genk?
A: The project is progressing with permits filed and expected by year-end. It aims for a 10% IRR, with grid connection anticipated by 2028. (Mickael Van de Hauwe, CFO)
Q: How do you see the cost of debt evolving by the end of 2024?
A: The cost of debt is expected to increase slightly, reaching around 2% by the end of the year. (Mickael Van de Hauwe, CFO)
Q: Are there any risks of tenant bankruptcies in the coming quarters?
A: Currently, there are no signs of imminent bankruptcies. Payment behavior is good, and we don't foresee significant issues. (Mickael Van de Hauwe, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
