Icade Sa Ord

Good day and welcome to today's ECAD Fouvier 2024 results presentation. Throughout today's recorded presentation, all participants will be in a listen-only mode. Later, we will conduct a question and answer session. You may register for questions at any time by pressing star 1 on your telephone keypad. And now, I'd like to hand the call over to your host, Mr. Nicolas Julli, CEO. Please go ahead, sir.

Thank you. Good morning. Nicolas Julli speaking. Thank you all for being here today on this call. Along with Christelle de Robillard, we are delighted to present this morning our 2024 earnings. This presentation will be, of course, followed by a Q&A session. So let's start to slide four for an overview of the main messages for the full year 2024. In 2024, the good net current cash flow amounts to 3.98 euros per share above the guidance. This is mainly explained by the resilience of the property investment division, with revenue growth supported by indexation. The operational performance of property development is contrasted with the first half, marked by an exhaustive review of our operation to adjust to market conditions, and a second half, more positive, with an upturn in individual orders. One year after the announcement of Richette's strategic plan, we will be happy today to share with you the first concrete steps taken in 2024. In addition, at the end of 2024, the BRICS balance sheet remains solid with reasonable LTV and high level of liquidity. For 2024, we will be proposing a dividend of 4.31 euros per share at the annual general meeting, including 2.54 euros per share coming from the dividend due following the completion of the first step of the sale of health care business in 2023. For 2025, we remain cautious in a still complex market, which leads us to estimate a good net current cash flow between 3.40 and 3.60 euros per share. We will come back, of course, to this later. On page 5, you will find the key figures for the year 2024. At group level, ECAD posted a solid net current cash flow equal to €302 million. Cash flow from strategic activities, i.e. property investments and property developments, was slightly down at €223 million. NAB and TA decreased by around 11% to €60.1 per share, reflecting in particular the falling value of the property portfolio. In terms of liabilities, the ITV ratio reached 36.5% at the end of the year, versus 33.5% one year before. Net debt to a VBA stood at 10 times at the end of December 2024. In the car investment business, gross rental income came to €369 million, up 2.5% on a life-or-life basis, driven in particular by the effect of indexation. The gross asset value of the portfolio came to €6.4 billion, which reflected a minus 7.1% decline on the land for land basis. The EPRANET initial yield was roughly stable at 5.2%. In the property development business, economic revenues were stable at €1.2 billion. The margin was negatively impacted by impairments accounted in H1-2024. Let's look now at performance by business division starting with property investment. Let's move on to page 8 about the latest market trends. In 2024, the commercial investment division continued to operate in a complex living environment, totaling 1.75 million square meters less in 2024 in the Paris region. As we reported last February, three criteria in the choice of office assets remained. Location is the need to be close to a transport hub, alignment with the best environmental standards, quality of service offering, and flexibility. We are also seeing increasing price differentials for prime assets between the central areas of Paris, above 1,000 euros per square meter, and other more peripheral but well-connected areas at around 550 euros per square meter. These areas are comparatively enjoying a recall of interest, which explains the greater dynamism seen in 2024 in an area such as La Défense. In this context, ECAD recorded a good level of leasing activity with around 133,000 square meters signed or renewed in 2024. These signatures and renewals represent an annual rental income of 35 million euros and a world of 6.4 years. First of all, the leading activity demonstrated the upside for ECAD's well-positioned offices, meeting the highest standards in quality location. The dynamic rental activity also illustrated the good level of demand for our business parts and an opportunistic approach we have on the to-be-repositioned assets. As expected, The financial occupancy rate was down to 84.7% as of December 31st, 2024, given the departure of tenants in 2024. On slide 10, one of the highlights of the new year has been the relating of the entire process set in Sony for 29,000 square meters. Barely three months after the departure of the Olympic Games Committee, ICAD's team successfully relets this emblematic asset to the Departmental Consulate of St. John. This pre-let agreement, at 12 years, was signed on the basis of an economic rent in line with the market. Deals to be signed in June will take effect from late 2025, early 2026. Taking into account the relating of terms, the occupancy rates for well-positioned assets is 90.7% versus 88% at the end of 2024. Let's move on to page 11, related to the additional rents coming from deliveries and current pipelines. In 2024, ICA delivered two office assets representing a total of 5.8 million euros of annualized headline rents. The pipeline represents additional reviews of 45 million euros on an annual basis. We have good visibility over these revenues as are secured following the continued marketing of the SMB team to Schneider Electric. The pipeline represents relatively limited capex of less than 300 million euros by 2027. We now turn to page 12, devoted to asset rotation. The office investment market remained very calm in 2024, with an investment volume of around 15 billion euros stable compared with last year. Against this backdrop, we succeeded in concluding the sale of four assets for 82 million euros. These core assets, located in Marseille, Lyon, and Neuilly, were sold above their last price value with an aggregate yield of 5.8%. At the beginning of February, ICAD also exited early from the perfect private partnership with the Nancy Hospital by terminating the hospital long list and transferring the associated debts to the hospital. This transaction enabled ECAD to sell a non-strategic asset at NAV or E55 million euros. Let's now move on to the operational performance of the development business line. 2024 was a complex year, with an uncertain and changing economic and political environment interests. Against this backdrop, however, the volume of orders remained stable thanks to a good momentum in the second half of the year among individuals. ICAD recorded 5,300 units orders for 1.3 billion euros, relatively stable compared with 2023. This momentum was supported by a 17% increase in volume and a 7% rise in value in individual orders. Improvement in this segment was driven by the decrease in interest rates, the adaptation of our commercial offer, and the purchase of some operations from developers. In 2024, the contribution from social and intermediate housing institutional investors to the activity was more limited, with both volume and value decline. On page 15, we present some emblematic projects launched this year that have met with rapid success. In particular, the Ketini Reef Cromwell development on the outskirts of Dijon, which achieved a pre-sales rate of 94% in less than nine months. Project Time had already been presented in our capital market day one year ago. This is a residential program developed on our land readers in the north of Paris, in place of former office projects. Marketing is doing very well, with 68% pre-sold in six months. Finally, a platform which has been 100% sold illustrates our ability to manage large-scale, niche-use projects, a digital and emerging technology campus, and a student residence. The success of these new projects has helped us to maintain our residential backlog at 1.6 billion euros at the end of 2024, partially securing our 2025 revenues. Now let's jump to the section that reshaped that. First of all, and in line with the pillars of ReShape's strategy plan, we've made some good progress in 2024 in analyzing the office portfolio to be repositioned and in carrying out conversion projects for certain assets. During the year, the Property Investment Division sold two assets in Lyon and Plessis-Robinson to the Property Development Division at their appraised value for conversion into others. As of December 2024, the portfolio of the to-be-repositioned assets represents a growth asset value of roughly 600 million euros, or 11% of the office portfolio, compared with 14% at the end of December 2023. It accounts for an annualized IFRS rental income of 38 million euros. To be noted that future projects have already been identified for roughly 70% of the growth asset value. In 2024, ICAP has also taken the first step towards diversifying its asset portfolio, particularly in standard residences and data centers. On page 18, we are happy to announce a new partnership we just signed in February with Cardinal Campus. The objective is to operate our future asset portfolio under a wide level through management contracts. The partnership agreement is due to be signed in H1 2025. At this stage, our ambition is to develop between 500 and 1,000 beds a year through organic growth. The chief goal will be relying on our development business, which benefits from an excellent national coverage and a very good track record in the development of 700 densities. Our portfolio of assets to be repositioned will also provide us with some development opportunities. Slide 19 shows the progress we've made up to now, on data centers project during the year. Firstly, the data center to be led to Equinix and located in the Porte de Paris business park has well progressed. Works started indeed in 2024 and the delivery scheduled for June to 2026. Secondly, we've reached new milestones in the hyperscale data center project located in the Paris business park. We have indeed requested the development and secured access to energy from RTE for the requested 130 milliwatt hour by 2031. Let's move on to slide 20 and 21 to illustrate our commitment to building the 2050 city, which is more mixed-use and more sustainable in our view. In particular, the group confirmed in a white paper titled Entrez-Ville, Quartier-Ville, its intention to work on transforming the city fringes, which represents a pool of opportunities to address the challenge of housing crisis reindustrialization, and the adaptation of cities to climate change. Having this in mind, ECAD signed a firm agreement with Casino in December 2024 for the acquisition of a portfolio of 11 real estate sites for 50 million euros. These sites have a development potential of approximately 3,500 housing units and over 50,000 square meters of retail space. On the energy side, ETI posted in 2024 a very solid performance in terms of reducing carbon emissions. Indeed, between 2019 and 2024, the property investment division reduced its carbon intensity by minus 43%. The property development division reduced its carbon intensity by minus 20%. And the corporate carbon emissions went down by minus 20%. In absolute terms, the ECAP Group's greenhouse gas emissions fell by minus 44%, thanks to, on the one hand, the contribution of all divisions, and on the other hand, the impact of lower activity, of course, in the property development division. Given these strong results, we reaffirm our ambitious pathway for 2030. I now turn the floor over to Christelle to present the financial results.

Thank you, Nicolas. Now, let's move on to the presentation of our 2024 financial results. The group's net year end cash flow amounted to €302 million, or €3.98 per share, above the guidance. Net year end cash flow from strategic operations fell slightly to €223 million, compared with €233 million in 2023, due to differences in performance between the business lines. Net current cash flow from property investment rose by 30 million euros compared with last year, thanks in particular to higher rental income and lower financial expenses. The property development dividend net current cash flow fell by 36 million euros compared with 2023, mainly due to working permit losses and projects in the portfolio. I'll come back to this in more detail later. Let's move on to slide 24. As of December 2024, EFRA NAV per share was equal to €60.1, declining roughly by 11%. This year-on-year change is due in particular to the evolution in the value of the private investment portfolio, in presenting 5.8 euro per share and the dividend paid in 2024 for 4.8 euro per share. Let's dive into the financial performance of property investment division in slide 26. There are three messages to take away from this slide. Firstly, the property investment division revenues came to 369 million euro in 2024, 5 million euros versus last year. Secondly, the light-for-light growth stood at plus 2.5%. It is supported by the positive impact of indexation, plus 5.1%, that was partly offset by the effect of cement departures and negative reversion and renewals. Lastly, growth was driven by the performance of the one-position offices and light industrial segments, which saw revenues rise respectively by plus 5.3% and plus 4.6% on a late July basis. We have also updated the reversionary potential on well-positioned assets. As anticipated, this has deteriorated slightly as a result of indexation rising from minus 8.7% at end 2023 to minus 11.3% at end 2024. As already mentioned, net terms cash flow from the Property Investment Division increased by 30 million euros compared with last year. The improvement in net rental income is coming from the positive life-for-life contribution and a combined effect of increasing penalties for resurfacing premises and departure of certain tenants, reduced energy costs, and, thirdly, limited customer risk. The strong net financial income also contributed to the improvement of the net current cash flow over the years. Slide 28 focuses on changes in the value of the investment portfolio. As Nicolas mentioned, the decrease in value amounts to minus 7.1% on a life-for-life basis. The APRA net initial yield was 5.2%, marginals lower than in December 2023, reflecting notably the impact of the increase in vacancy and effect of franchising. The APRA top-top net initial yield is 6.3%. Page 29 shows the slowdown in value adjustment in our portfolio per asset class. For well-positioned offices, The adjustment over the year corresponded to minus 6.7% after a fall of almost minus 70% in 2023. The slowdown in the falling values has been confirmed half year after half year. Light industrial assets are proving resilient with their value rising by 1.9% this year. Let's turn now to the results of the property development business on slide 31. In 2024, natural cash flow from private development fell sharply to minus 30 million euros. This was mainly due to the impairment boost in the first half, following a complete review of the portfolio of operations. This write-down had a negative impact of 34 million euros on natural cash flow. Excluding the impact of this impairment, the natural cash flow would be relatively in line with last year, at €4 million compared with €6 million in 2023, thanks to the close monitoring of operating costs and financial results. The major effort to streamline the property development portfolio has resulted in a very tight management of working capital, which was at an optimized level at the end of the year. Working capital improved sharply and amounted to €300 million, or 25% of economic revenue, at the end of 2024, versus 44% of revenues last year. This improvement is the result of a rigorous management at several levels, such as decrease in landholding operations, close monitoring of the collection of receivables, and a selective policy in launching new operations, resulting in a minus 28% year-on-year fall in work path. To be noted that a commitment to sell the total debt assets for 19.5 million euros was also signed early 2025 as part of this ongoing effort to control working capital. Let's move now on to debt management. The 2024 performance was marked by a very good financial result. Apart from income coming from the residual state in the healthcare business imposed of interest on the loan to IHC Healthcare Europe and dividends received from this entity, the increase in the financial results reflects a rigorous management of cost of debt and an optimization of cash management. Only one, the cost of debt remains very low and has even improved in 2024 to 1.52% compared with 1.60% last year, thanks to additional hedging. The projected 2025 debt is hedged at 92%. On the other hand, the group recorded substantial income this year, up by €12 million compared with 2023, with an average cash volume of €5 billion invested at around 3.90%. Let's move on to slide 35. ECAD maintained a very strong liquidity position of 2.6 billion euros, covering its debt maturities until 2029. In 2024, we successfully bought back 350 million euros of bonds, enabling us to proactively manage the debt maturity schedule and reduce the next 2025 and 2026 bond maturities. We also issued €149 million of new bonds maturing in 2013 and 2031, allowing us to benefit from good financial conditions and to extend slightly the maturity of our debt. Slide 36 presents our key balance sheet ratios as of December 31, 2024. STV was up 3 points at 36.5%, reflecting the change in the value of the property portfolio in 2024. The net debt to EBITDA ratio rose to 10 times. This deterioration is not only due to the impact on EBITDA of impairment losses recorded in the property development business. This impact accounts for 2.2 points of the improving the ratio. Let's move on to slide 37 for an update on the disposal of the healthcare business. We confirm the group's strategy of selling the healthcare portfolio in its entirety, despite the absence of any new deals concluded in 2024. In an investment market that has deteriorated in 2023, ECAL has been working on alternative solutions to continue the investment of the healthcare business. In January 2025, the group signed an agreement with PREDICA, the life insurance subsidiary of Credit Agricole Assurance, to extend shares in Premier Health Care for shares in a one-position office asset in New York. The transaction would allow ICA to reduce its exposure to Premier Health Care to 21.7%. The transaction is scheduled to close in June 2025. of conditions present. At IHE level, the process of saving the Italian portfolio of a diamond is still underway. Two factors are encouraging the disposal process to continue. On the one hand, the gradual recovery of the investment market in the healthcare sector with some transactions completed in 2024. On the other hand, the resilience of the second class which recorded a value decrease of only minus 1.7% in 2024. In this context, we are continuing discussion with Prime RM, sub-party investor, and current shareholders of Prime LSK. However, the current market environment has led us to postpone the timetable for completion. The sale of the French and international portfolio is planned to take place progressively in 2025 and 2026. At December 31, 2024, the value of ICA's stake in the healthcare business was stable at 1.3 billion euros. I hand over to Nicolas for the conclusion and details on the dividend and 2025 outlook.

Many thanks, Christelle. On the total 2024 dividend, that will be submitted to general meeting approval amount to 4.31 euro per share. It includes 2.54 euro per share coming from the remaining dividends due after the completion of the first step of the sales of Ex-Care Business in 2023. The dividend will be paid into installment in March and July. Let's move on to slide 40 for the 2025 guidance. It had aspects a good net current cash flow of between 3.40 and 3.60 euros per share in 2025. Property revenues are expected to decline in 2025, mainly due to a lower positive impact of indexation and the full year impact of tenants that left in 2024. On the development side, we will benefit from a positive base effect after the impairments accounted in 2024, but we remain cautious about the pace of recovery in 2025. To be noted that the group net current cash flow includes 67 cents per share from non-strategic operations. For the sake of clarity, this amount has been estimated without the impact of potential disposal on these activities or the repayment of ECAT's loan granted through the issue. The guidance will be adjusted in due course as and when disposals are made during the year. To conclude, in an always challenging environment, ICAD demonstrated in 2020 for the resilience of its business model. I'd like also to thank all ICAD's teams for their strong commitment this year, which has enabled the group to take concrete steps towards implementing the initiative strategy plan. We remain cautious for 2025, but will be determined to take new steps across all our strategic priorities. Moreover, I'd like to take this opportunity to officially announce the departure of Christelle, who will be taking on, in Q2, a very exciting position at her former company, Aeroport de Paris. Well, Christelle, I'd like to thank you most warmly for everything you brought to the group over the last few months and for carrying out your role with great commitment and professionalism. It was a great pleasure for me and for all of us having you on board during this year. And I sincerely wish you all the best in your future work.

Thank you very much, Nicolas, for your confidence and the opportunity you have given me to join ICAD. Even if I regret not having contributed even more to the deployment of Reshape, I am proud of the work already accomplished over the years. Let me, by the way, Thank all my teams and my fellow ex-commanders. ECAS confirmation is well underway, and I know that the company will be able to rely on the mobilization of all to successfully meet future challenges.

Thank you, Christian. And with that, let's start the question and answer session.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please signal by pressing star 1. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. And please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. And our first question is from Stefan Afonso from Jefferies. Please go ahead.

Yes, good morning and thank you for the presentations. Three questions on my side. Firstly, I would appreciate if you could elaborate on the guidance. What are the main assumptions behind the top range of the guidance? And do you think that 2025 could see the trough for the core of the current cash flow? And finally, could you elaborate on the options held by Primea to require ECADs in many states that I understand will expire in H1? And basically, if Primordial does not complete the acquisition by then, could you consider keeping your remaining stake in EarthCare? Thank you.

Yes, thank you very much, Stéphane. Well, as for the 2025 guidance, as you saw, we are expecting a 2025 natural cash flow between 340 and 360 euros per share. We took a cautious approach on business line, given the current environment. So as for the investment division, we plan a decrease in rental income due to the decline of positive effect of index-linked rent reviews and the fusion negative effect of 2024 tenant departures. As for the property development business, as I said, we expect improvement in profitability after the strong impairment losses in 2024. We expect return to break even in 2025, but nevertheless remain cautious due to unfavorable political and tax environment of those. And as for the remaining $0.67 on health care activities, as I said, we have estimated it without taking into account the future disposal of IHR and Prenia, even if, of course, our disposal strategy remains unchanged. In this part, we divulge depending on the pace of disposal.

Yeah, yes, Evan? Yes, yes. I'm trying to understand the difference in terms of assumptions between the top range of the guidance and the low end, but just focusing on core network and dashboard. Please.

Well, as I said, mostly on the property development business, we are just at the beginning of the year. So even if we had early signs of recovery, as you saw in the individuals, it's a bit too early to tell, especially with the evolution of the tax environment. So hopefully we'll be able to give you more visibility during half-year and maybe just readjust the guidance. But at this stage, we prefer to have this 20-cent bracket in order to remain cautious. Okay. Is that clear for you? Yes. Okay. And as for the cash flows, well, with 2025 will be the drop. Definitely, that's what we are working on. As I said, we saw some resilient activity nevertheless in the investment division, although the context is still quite tough. We have still the impact in 2025 of the full year of the tenant departure in 2024. 2025 should be better. So hopefully, 2025, yeah, should be the draw from the . As for the option from Primonial, you know that Primonial benefit from co-option held by in Premier Health Care. Those co-options expire mid-2025. Nevertheless, this does not impact our willingness to exit, and this does not impact Premier's real interest in strengthening its position in healthcare. So this shall not have any major impact on the willingness of achieving the transaction, and we still have, of course, the ability to discuss with third-party investors and even the existing shareholder of the VI code, As Christian was mentioning, you saw that we were able to structure a dedicated swap with Predica that also confirmed that the NAV remains a relevant proxy for such transaction. Nevertheless, of course, we shall be still opportunistic depending in terms of the volume and potential timing of any transaction.

Okay. Thank you. Thank you very much. Thank you.

Thank you. We will now move to our next question from . Please go ahead.

Good morning, Nicolas. So good morning, . So thank you for this presentation. I would have two questions. Please, so my first question would be about the evolution of your occupancy rate in offices, so excluding the effect of birth. So what could we expect with your leading challenges in 2025? And my second question, so, would be on the dividend. So, if we exclude the exceptional contribution of 2.54 euro of the healthcare business, your payout ratio appears to be quite weak. So, what would be your dividend policy going forward for next year? Thank you very much.

Okay. Thank you for all. Thanks for your question. Taking the first one about the occupancy rate, the expected, well, we expect stabilization in the occupancy rate on the short term. As you know, negotiations and marketing take time, even in the case of a good transaction like this, of course, it takes time. The decline we observed at the end of 24 in occupancy rate was in line with our expectation. I mean, the announced departure taking effect. It was driven in particular, you saw that, by the trends on assets to be repositioned, which are clearly emptying out. So on the red position, you know, the occupancy rate was at 8% versus 91% at the end of 23. We are close to this level, including the punch transaction. And on the light industrial, there was a small erosion at the end of the year, but coming from standard rotation. And there's a delivery of a dedicated project, large project, 5,600 square meters, which is currently being marketed, but for which we are confident we're getting soon. And as for the division policy for 2024, well, This dividend is inconsistent with what has been said today. Clearly, we took the commitment to distribute the dividends related to the first stage of the health care disposal in 2023 over two years. So that's what we do today by including the remaining balance of the 2.54 euro in the total dividend. Having said that, and as for the remaining, we stick to what we've said. being we want to limit the dividends to retain cash to preserve our redeployment capacity and finance future growth until we have finalized the repositioning of the group. That's the reason why the remaining 177 euro per share corresponds to the amount calculated on the basis of the SIC obligation. So roughly, it comes with an equivalent payout ratio of 42% roughly. This is similar to what we've done during the past year, because excluding the dividends coming from the first stage of DSK, last year was equivalent payout ratio on the cash flows around 50%, so clearly. So we don't guide on our dividend policy for the coming year, but we'll stick to this philosophy.

Okay, thank you very much.

Thank you.

Thank you. We will now take our next question from John Kalinator from Goldman Sachs. Please go ahead.

Good morning. Thank you for taking my question. So I just wanted to follow up on sort of evolution of rental income and particularly at this stage you have 38 million of annualized rents in the to be repositioned assets. Can we understand how you expect that to evolve over the next one or two years, please? That would be my first question.

Okay. Thank you, John. Well, on this one, clearly, as I said, we are expecting those buildings to empty out, clearly. And if you have a look on the expiry schedule, we put a dedicated focus on these expiries on the year 2025 in the appendixes of the presentation. And you will see that out of the 56 million euros of potential break option of end of leases, 13 million euros come from the 2B repositioned office. So it's part of the 38 you were mentioning. Mostly, we are expecting those to be emptying out, and it shall be the case all the time. Nevertheless, as you also saw in the presentation, we are really opportunistic on those transactions, so we are not looking at negative reversion, but we are eager to make some pragmatic deals, such as the one we've done with the SNCF on Le Monet building, securing for an extra few years the 15,000 square meters on this building. So it's achievable from time to time, but once again, the strategy remains the same, is recreating liquidity by a reconversion scenario for the building. But in the meantime, we fight for every euro, and if we are in a position to make an opportunistic deal, a very pragmatic deal, we'll do so.

Okay. There is a second question, please, just on the property development, obviously. Your starts were, I think, down 28% for 2025, or for early this year at least. Can you help us understand the type of volumes that you expect? Obviously, you highlighted that the backlog was still good, but how should we think about volumes for the property development division over the next one or two years?

Well, about the volume, we have some visibility issues. quite good over the coming year due to the visibility we have on the backlog, concerning the 1.6 billion backlog. As you know, maybe a world more globally on the development activity over the next month, what we expect. Well, we saw some recent positive signs in the market due to the falling interest rates over the 2024 year. led to some increase in individual order and also decline in cancellation rates. That's good news for us. We also now have some visibility on some new positive measures in the law, with the zero-rate loan extended for one year and also some in-earned tax exemption measures, which has a good sign, shall not compensate fully the impact at the end of the PNEL Tax Incentive Scheme, but nevertheless they are renewed. But having said that, the political and tax context still calls for caution in our view, especially because we have some local municipal election on the agenda in March 2026, and it's always not so good for the global activity. And on our side, we have some historical operation with lower margin remaining in the portfolio that are still to develop. And as you saw, we are also taking some opportunistic and gradual move, taking over some new operation with the larger margin from some other property developers.

Okay. Okay, but does backlog, I mean, does backlog support the fact that your volumes could be flat in 2025 or higher or lower? I mean, it depends a bit on timing that you decide to launch these projects, right, and these launches down so that that was the sort of aim of the question, right?

Yeah, once again, it's a bit too early to tell. We are just at the beginning of the year, and there also we speak to our philosophy and policy. very selective on what we've done. We went through the whole portfolio last June, so we want to remain really selective on what we launch. So it's really early to tell what will be the landmark at the end of the year, but nevertheless, we have this backlog that should help strengthen the activity.

Thank you, Louis.

Thank you. We'll now move to our next question from Marcus Kulesa from Bank of America. Please go ahead.

Hi. Good morning, everyone. Thank you for taking the question. I just wanted, I have three questions. The first one, coming back to the primary option, so just to make clear we have understood that if there's no exercise, they're out of, officially there's no acquisition from then of a phase two. Maybe we go with the first question first.

Okay, sure. Thank you, Marcus. Well, no, on the option, the only thing we say is that the call options, they are benefiting on our shares. They expire mid-2025. I mean, that's the contract. That does not mean that Premier won't buy at the end the shares, that ICAD at the end won't sell the shares. It was just the legal framework that was signed in 2023. But I mean, if tomorrow Premier still want to buy the shares at the NAD, we'd be happy to sell to them. And they are in their strategy, no change. It's just a matter of their inflow in the short term that don't allow them to exercise the code and to buy the shares in the short term. That's the reason why.

Okay, thank you. My next question is also coming back on the dividend cuts of your recurring dividend. So I understand the rationale behind. Why haven't you communicated a bit ahead on this? This is one of the main drivers, I think, on the share price.

Well, as for the dividend, once again, we've always said that We took the commitment to distribute the health care over two years. That's what we've done. And on the other part, the recurring, we've always said that our philosophy is to retain as much cash as possible. So it's, of course, more difficult to give a proper guidance on that when you are not on the pure payout ratio on the cash flow. But we were pretty clear on the philosophy, and that's where we stand today.

Okay, so we can expect next year the same level of dividend or is it right here to make it go? Because next year also probably, given the guidance, you want to preserve some cash flow if there's no big disposals.

Well, once again, we are not guiding on the dividend policy for the year scope to come. We will do so once we have finalized the repositioning of the boom. But in the meantime, we stick to that. So there's no payout ratio to be guided on, clearly. The one thing we can say is that where we stand today, apart from the healthcare business, it's like a payout of 42% on the recurring with this 1.77 euro per share on the remaining part. It was an equivalent payout ratio on the past year on the recurring of roughly 50%. That's one thing we can say. And on top of that, shall we make some extra disposal on the premium healthcare business? Of course, we should be compelled also to give some additional dividends, such as what we did with the first step.

Okay, thank you. My last question is on your asset values and cap rates. Your asset values still went down some bit, but at 7%, and at the same time, cap rates went down on your APRA net initiative. So, Should I understand what the rental value or market rental values or values assumption are down massively because you have a little bit of rent growth and asset values coming down, so cap rate should have gone up, no?

Well, on the asset value, so we saw that, indeed, they went down a bit. On the April yield, I mean, you have to look up on the net initial yield on the one hand, that was slightly down, but that's due to the way it's calculated on the EFRA methodology. You have some free rent period, for example. We had one dedicated building on which it was a free rent period at the end of the year, so at this time it accounts to zero. So that's why you have, in my view, not only to look at initially, but also on the top of EFRA, you have to look at both, actually. And the top-up was slightly on this one. So that's the reason why.

Okay.

Has your rent-free period or your incentives massively changed this year or beginning of 2025? So has it been gone up, the rent-free beginning?

No, no, there was no dramatic change. Once again, when we signed a relate and you saw that we signed Almost 100,000 new square meters we found at the ARBs with the same level of incentives that was observed in the past. Especially, for example, on DUPUS, which was the largest transaction, where the economic rent was in line with what was expected. So no major change to answer properly the question.

Okay, thank you. Can you give you a number of your negative reversions? Sorry, I'm... Sure, sure.

Actually, Marcus, we already did, because it's in the presentation. As we speak to you, we gave an update on the figures. Remember, we shared this figure with ReShape one year ago. On the one position of EC, it was minus 8.7%, and now it's minus 11.2% on the one position, which is Honestly, minus 0.3%, sorry, on the World Politician Office, which was quite expected due to the fact that during the 2024 year, the rents were still fueled by a strong indexation, roughly 5%, while in the same time, the ARVs were pretty stable, stable plus. That's the reason the gap widened a bit from what has been shared with Richet.

Okay. Thank you very much.

And just a word, talking about the values, I'm sure you have in mind that all of this negative reversion potential is already included in the NAD, of course, because it directly comes from the appraisal work. Yes.

Thank you. We will now take our next question from Alex Polsteren from Camden. Please go ahead.

Yes, hi, good morning. Thank you for the presentation, Tim. Just one question left from my side, and that's on the operating margins. They made quite a big jump. I was wondering if you could go through the drivers and highlight if it's more of a one-off or if we should expect this to stabilize in the coming years.

Okay, thanks, Alex.

Yes, thanks a lot for this question. Indeed, yes. Our late overnight net income has increased significantly by plus 6.4%. So this is mainly due to three effects. First of all, we had a reduction in provision for trade receivables. We recorded important provisions in 2023 that were not reconducted in 2024. Second element, we had an increase in expenses recharged to tenants. So this was a positive one-off impact that shouldn't be reconducted in the short term. And lastly, a more sustainable economy, but more marginally, linked to a decrease in energy costs. So looking forward, We should be somewhere between the performance of 2023 and 2024.

All right. Perfect.

Thank you. Thank you. Thank you. As a reminder, to ask a question, please signal by pressing star 1. Our next question is from Adam Shepton from Green Street. Please go ahead.

Good morning. Just one question for me. Just thinking about the proceeds and uses slide from your investor day last year, so $4.2 billion between healthcare and other disposals and then the dividends and then $1.8 billion of capital redeployment and $1.7 billion of debt repayment is what you cited a year ago. I think it's fair to say you're probably behind track on the disposal side of things. Only sort of $80 million left. excluding healthcare in the last year. What are your priorities on the uses side between the various 1.8 billion of capital deployment and then the 1.7 billion of debt repayments, let's say, in the next, you know, between now and mid-26, but where are the priorities?

Okay. Thank you very much, Adam. Well, as for the uses and proceeds shared one year ago, well, we are still in line with with what we've shared about ReShape. Maybe the one question is more about the timing of execution that the confidence we have on executing the strategic plan over those five years. So it's still perfectly fit. Our priorities in terms of investment is on the pipeline and clearly on diversification also due to the fact that what we are focusing on is value creation. Clearly, when we are investing, we want to invest at yield on cost roughly between 6.5% and 10%, aiming at value creation of 15%, 20% globally. So that's what we'll be focusing on. But in the same time, we remember that the fourth pillar of reshape is our financial straight and rigorous policy. So we'll try to keep a good balance between those two in order to be able to redeploy capital fully. So, of course, this depends on the pace of the disposal. Of course, the F-Scare, but also the other type of disposal also coming from the investment division. But we could also rely on potential partnership with some third-party investors with minority investment, for example, not to delay and postpone our investment. So that's what we are focusing on in order to redeploy and reshape, having in mind that in the short term, there's not so many capex to be invested, because, for example, if you take the large data center development we have in Rangy, in the coming months, we'll be focusing on securing the building permits also. So here, we're talking about 100,000 euros, not thousands or hundreds of millions euros.

Okay, that makes sense. I mean, I think... debt repayment of 1.7 billion euros that you cited a year ago, that still remains a priority ahead of, say, the half a billion of potential acquisitions, which is also on the slide. But if the sales proceeds are slower, then the debt repayment will remain the priority ahead of, for example, acquisitions or other capex that you cite. Can you confirm that's what you'd like to communicate?

Well, as you said, we're quite happy with the situation and the good balance we have between our financial policy and our ability to redeploy capital clearly. And talking about the health variance of acquisition within the months coming and years coming, of course, we should have some more visibility on this. For example, on the student housing, that could be part of those acquisitions or money to be redirected in the pipeline sourced by the development net line. And clearly, we'd be adapting the pace of investment to the pace of disposal and or potential third-party partnership we could structure on. Okay?

Okay. That makes sense. Thank you.

Thank you, Adam.

Thank you. And we have a question from Sam King from BNP Paribas Exam. Please go ahead.

Hi, good morning, guys. Just two questions from me, please. The first is coming back to the lease expiry schedule and break options in FY25 that total 56 million. I appreciate you've already commented that around 16 million of that is in the 2B reposition portfolio and will be lost to vacancy. But just interested on how much of the remaining balance in the well-positioned portfolio do you expect to lose next year? That's the first question. And then the second one is just a clarification question on balance sheet and leverage. Do you have any debt covenants, the net debt to EBITDA, or is it just the 11 times threshold under the S&P credit rating? Thanks.

Well, I'll take the one on the expiring schedule. Well, as I said, roughly, we expect the 2B reposition offices accounting for 13 million euros out of the 56 million euros of potential break option or expiry next year to be negated. And once at that, on the remaining assets, globally, what we expect is like back to normal, I would say. And you have the information, I think, globally, two-thirds of the potential break option are expiry rates, so it won't exist on average over the three past years. So globally, that's what we expect on the expiry schedule. And I'll let Christelle answer on that. Your other question?

Yeah, on your second question, so you have a dedicated part in our press release regarding bank covenants, so I confirm that there is no covenant regarding net debt to EBITDA. The only bank covenants we have concern LTV, ICR, value of the property portfolio, and security interest in assets. So as you can see in the press release, we have a comfortable room of manoeuvre regarding these different covenants, and we remain comfortably within the limits. But indeed, you're right, the only guidelines we have in terms of net debt to EBITDA, confirm the guidelines given by S&P for our rating, for which I remain renowned to, that the threshold has been revised when our rating was upgraded at the end of last year, and so it is now expected to be below 11 times.

Great. Thank you.

Thank you. That's all questions we had today from the Audio Alliance, and I would like to hand back over to our speakers for any webcast questions. Thank you.

Okay, thank you. So we have two written questions from . So the first one, could you please confirm that disposal mainly comes from the well-positioned office portfolio? And the second one, what is the backlog remaining in the office portfolio?

Yeah, as for the disposal, well, you saw in the results that a part was coming on the well-positioned offices, of course, the ones that are located in the provinces, typically natural assets on which we've done the work that now core, rather some small volume that can attract some investors. And that's the reason why we were able to achieve disposal at the NAV. But that does not only come from that, because on top of those 82 million euros, Well, there was also the termination of the public-private partnership with the Nancy Hospital, accounting for 55 million euros. So, clearly, our disposal, on top of the health care activities, will come from both work position office, when value creation jobs have been done, it's our job to crystallize and monetize that, but also from non-strategic assets, such as the Nancy Hospital, or, for example, And as for the depreciation on the 2B reposition asset, well, maybe if we look back in the mirror, talking about the evolution of the valuation of the 2B reposition asset from the peak of the valuation in June 2022, we are now at a minus 60% decrease in the valuation on the to-be repositioned assets. So clearly, we've come a long way. We are not anymore based on pure fee valuation. It's really different. And in the meantime, on the well position of it, the total adjustment on the valuation was also significant at minus 30%, but of course, nothing compared to this.

Yes, there is another written question from Mirage Kumar. Do you plan to come to bond markets to refinance your 2025-2026 debt maturities? Okay, thank you for your question. So, indeed, as you know, we have some bond maturing in 2025 for €350 million at the end of the year after we bought back, as I mentioned earlier on, 150 million euros on this maturity. We will also have important maturities in 2026 for 550 million euros of bond and 300 million euros of mortgage loan. So clearly, we could go and we could tap the market to refinance this maturity. All the more as it to enable us to extend our debt maturity, which is an important key indicator for us. We can take another one from . How should we assess your dividend for the coming year? And what are the expectations from CDC and PREDICA?

Well, thank you, Mark, for your question. Well, the dividend policy, as I already said, we don't guide on the dividend policy for the year to come, but we stick to this philosophy. The dividend shares for the 2024, but also 2023 based on this was supported by our two main shareholders. And that's, I mean, that's what we expect. That's what we stick to this. That's what we said. And we keep on doing what we said. So I think we don't have any questions anymore. Thank you very much for attending this call, and thanks for your questions. That's all for the team. Once again, because I'd like to thank them strongly, warmly, because while facing quite a tough environment in the short term, they haven't lost sight of the research strategic plan. As you saw, we went through some first concrete steps, so thanks to the whole team for their strong commitment this year and for the year to come and certain updates. So looking forward to seeing you all in the coming days. Have a nice day until then. Bye-bye.

Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.