Release Date: October 18, 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) reported a 5% growth in earnings per share, aligning with their target of EUR1.47 by year-end.
- The company added EUR600 million in value to its balance sheet, reaching a total of EUR4.7 billion, indicating strong financial growth.
- WDPSF maintains a high and stable occupancy rate of 98%, showcasing the quality and demand for their portfolio.
- The company successfully executed EUR600 million in new investments, with a blend of equity and debt deals in Belgium and France.
- WDPSF's balance sheet remains strong and liquid, providing significant investment potential and supporting future growth initiatives.
Negative Points
- There is a noted slowdown in tenant demand, impacting tenant retention and development pipeline expectations.
- The company anticipates a drop in client retention from 90% to 80% for 2025, indicating potential challenges in maintaining occupancy.
- Economic uncertainty is causing delays in new developments, as clients adopt a wait-and-see approach before committing to large investments.
- The market is experiencing a cyclical downturn, with stocks bottoming out and clients reducing surplus inventory.
- Speculation about potential acquisitions, such as the rumored [or shop] portfolio, raises concerns about the impact on yield expectations.
Q & A Highlights
Q: Can you provide details on the slowdown in tenant demand and its impact on tenant retention and development pipeline?
A: Joost Uwents, Co-CEO, explained that the warehouse sector is late cyclical, and as the economic cycle ends, tenant demand decreases due to surplus stock. The internal utilization rate has dropped from 120% to 80-75%, but long-term contracts and high occupancy rates protect against significant impacts. The expectation for 2025 is a drop in client retention from 90% to 80%, but this is manageable with opportunities for rent increases.
Q: Is there any truth to the market rumors about WDP acquiring a large portfolio, and how would it affect your yield outlook?
A: Joost Uwents stated that they cannot comment on specific market rumors due to NDAs. However, he mentioned that the market in France is opening up, and there are possibilities for acquisitions. Any potential acquisition would be within the current balance sheet capabilities and would not necessarily affect the 7% yield outlook.
Q: What can we expect for like-for-like growth in 2025, considering indexation and rent renewals?
A: Mickael Van de Hauwe, CFO, indicated that the indexation part should be around 2.2% based on inflation forecasts. They aim to extract an additional EUR1 per square meter over the entire portfolio, translating to about 40 basis points per year on top of indexation. Occupancy rate guidance will be provided with the full-year results.
Q: How do you assess the risk of potential bankruptcies in your tenant portfolio?
A: Mickael Van de Hauwe noted that the tenant base is regularly analyzed, and the risk is spread across sectors and companies. The weaker part of the portfolio is in the SME segment, which is more cyclical, but this represents only about 5% of the portfolio. Tenant payment behavior remains good, and there are protections in place, such as bank guarantees.
Q: How does the current supply of new developments impact the market, and what is the risk of oversupply?
A: The current supply is mostly pre-let, with speculative developments accounting for about 20%. This could impact vacancy rates by 50 to 100 basis points. However, development pipelines are shrinking, and the sector can adapt quickly to market changes, maintaining stable occupancy rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
