Icade Sa Ord

Hello and welcome to the conference call eCAD results as of March 31st 2025. Please note this conference is being recorded and for the duration of the call your lines will be on listen only. However, you'll have the opportunity to ask questions. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you'll be connected to an operator. I will now hand you over to your hosts, Nicolas Joly, CEO, and Bruno Valentin, CFO, to begin today's conference. Thank you.

Good morning. Nicolas Joly speaking. Well, thanks to everyone for being on the call today. Well, I'm happy to be here today with ICAD's new CFO, Bruno Valentin, who's just joined the group last week. Delighted to welcome him to the team, and I'm sure he will make a great contribution to the financial team and to ECAD. So this morning, we are pleased to present ECAD's results as of March 31st, 2025. This presentation will be, of course, followed by a Q&A session. So let's move to slide five for an overview of the main messages of the first quarter of the year. The Investment Division reported a good rental activity with circa 50,000 square meters signed or renewed during the quarter. This volume was boosted in particular by the signing of Pearl's building with the Cincinnati Departmental Council for 29,000 square meters. The resilience of the financial occupancy rates for well-positioned assets was confirmed at 88.4%, excluding the positive impact of Pearl's. Revenues were pretty stable with like-for-like growth of 0.5%. ECAD's property development business grew in volume and value supported by good momentum in the residential segment. However, we remain cautious about the pace of recovery given the still uncertain environment and French political agenda. On balance sheet aspects, ECAD confirmed its very strong liquidity position at 2.3 billion euros at the end of March. Additionally, in April, the group signed 190 million euros of revolving credit facilities in attractive conditions in line with existing finances. Lastly, we reaffirmed today our 2025 Group Net Current Cash Flow Guidance presented last February. Let's look now at performance by business divisions starting with commercial investments. The leasing market got off to a slow start in Q1 2025, with a take-up of 420,000 square meters, down minus 6% compared to the same period last year. Activity was driven by medium-sized transactions of between 1,000 and 5,000 square meters, and by positive momentum on the outskirts of Paris. During the first quarter, ECAD's team passed a very good performance with circa 50,000 square meters signed or renewed. These signatures and renewals represent a manual rental income of 12 million euros and a world of 9.1 years. In particular, ICAD signed the largest deal of the quarter with the Seine-Saint-Denis Departmental Council for the entire Pulse building in Seine-Saint-Denis for a 12-year term with no break options. The teams also managed to sign a lease on an extra 4,200 square meters in the jump building in Aubervilliers with the same tenant. These leases on these assets are due to start in late 2025, early 2026. ICAD also signed or renewed nine leases covering a total of more than 5,000 square meters in La Défense and Péridefense areas in Q1 2025. The financial occupancy rate stood at 83.1% as of March 31, 2025, minus 1.6 points compared with December 31, 2024. The decline in the occupancy rate mainly concerns offices to be repositioned as expected. In the well-positioned office segment, the financial occupancy rate remained resilient at 88.4% thanks to leases signing the next building in Lyon and the Toureco building in La Défense. Taking into account the lease signed in February 2025 for Perth, the financial occupancy rate of well-positioned offices stood at 91.1%. Let's now move on to the operational performance of the development business line. Continuing the trend observed in H2 2024, we've seen a good sales momentum in the residential sector. At the end of March 2025, the property development division recorded 697 orders, totaling €209 million, up by plus 16% in volume and plus 22% in value, driven by both individual and bulk orders. Individual orders represented 432 units for 148 million euros. The growth in value was due to a different product mix with an acceleration in the scale of upscale development projects such as 58 Victor Hugo in Neuilly and CMR Lafayette in Lyon. Institutional sales were also up, but this is also due to base effect given a low volume in 2021-2024. The institutional investors accounted for 38% of orders in volume terms, which is, as you know, generally less than the final share on a full-year basis. Let's move to slide 10, in which we present the trend in consolidated revenue as of March 31, 2025. ECAD's total IFRS revenue saw an increase of plus 1.2%, coming from a slight growth in revenues in the two business lines. Let's jump directly to the next slide for details on property investment divisions. As of March 31, 2025, gross rental income from property investment remained stable at circa €94 million. On a like-for-like basis, the change was plus 0.5% year-on-year. Gross rental income was adversely affected, as expected, by current departures in 2024 and negative reversion on renewals. Indexation had a positive impact of plus 3.3%, but at a slower pace than last year. It should be noted that rental income was also boosted this quarter by the positive effect of early termination fees received on Office to Seize to be repositioned. Economic revenue from property development amounted to €254 million as of March 31, 2025, down minus 2.2% compared to the same period last year. The changes in revenue reflect differences in performance between market segments. Revenue from the residential segment totaled €205 million, up by plus €16 million compared to the end of March 2024, In Q1, this increase continued to be fueled by the good sales momentum seen in H2 2024 among individual investors and first-time buyers for home sold individually. Revenue from the commercial segment was down by minus 32 million euros compared with the same period in 2024. This due to the completion of major projects as Envergure in Rome at the end of 2024 and the absence of new commercial contracts signed in 2025. To be noted also that the economic revenue includes the proceeds from the sale of the Tobiak building for 19.5 million euros completed in Q1 2025. Let's move on to slide 14 for the 2025 guidance. Based on the group results as of March 31, 2025 and year-end forecasts, the Group Net Current Cash Flow 2025 guidance isn't changed. We expect, indeed, Group Net Current Cash Flow of between 3.40 and 3.60 euros per share in 2025. To be noted that the Group Net Current Cash Flow includes 67 cents per share coming from non-strategic operations. For the sake of clarity, this amount has already has been estimated without the impact of disposal of these activities or the repayment of a CAAS loan granted to the usher. The guidance will be adjusted in due course as and when disposals are made during the year. Well, to wrap up, I would say that the limited growth in sales in the first quarter 2025 reflects in particular some departures in 2024 and the slowdown in commercial property development activity. Nevertheless, ECAD's team achieved a number of very good operational successes at the start of the year, including robust leasing activity with the full relating of the showcase post-building and growth in housing orders in the property development division. The teams are fully mobilized to continue in this direction and in the deployment of reshaped strategy plans. Let's start the question and answer session.

Thank you, sir. As a reminder, if you would like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. And if you change your mind and want to withdraw your question, please press star 2. And please ensure your lines are unmuted locally as you'll be prompted when to ask your question. The first question comes from a line of Veronique Mittens from Kampen. Please go ahead.

Good morning, all. Thank you very much for your presentation. For me, some questions around your rental income and the like for like of that. So I noticed that the well-positioned offers are minus 4.3. Is that purely driven by the post-billing? That's vacated, where on the other side, you see offers to be repositioned at plus 24%. So what's exactly... in there. And then lastly, on the light industrial, again, there was also a slight drop in vacancy and a like-for-like below indexation. So I was wondering if you could give an update what you're seeing in that segment and how leasing activity and discussions are going there. Thank you.

Yeah. Hello, Veronique. Thanks for your question. Well, starting with the first question regarding the like-for-like, more especially on the well-positioned offices, This indeed comes from two main effects. The first one, as you highlighted, is mostly the departure of the Olympic Committee on the Pulse Building. This is for the first one. And the second effect is a base effect, as we received €2 million of indemnities on the wealth position asset last year in Q1 2024. Regarding this like-for-like on wealth position, We do not expect any further deterioration in 2025 regarding also the financial occupancy rate and the rents growth. And about the occupancy rate regarding light industrial, where there's a slight decline indeed in line with our expectation, given the announced departures that are now taking effect. On the light industrial, nevertheless, there was some good news to be expected with a signature done in April, which represents more than one point in the occupancy rate. We've talked about that in the annual results. We had just delivered roughly 5,000 square meters of buildings that have now been let through the signature of a new lease in April.

Okay, that's very clear. Thank you. On rent levels in the light industrial segment, is there still some positive reversion left? Or what's your expectation there?

Well, clearly the light industrial asset class is, in our view, a business that could be impacted by the macroeconomic context. But nevertheless, that is the reason why we are focusing on the primus location. And regarding that, fortunately, ECAD offers unique location selective on prime lettings. we are able to crystallize some positive reversion in the new leases we are signing. But once again, this should, in our view, stabilize given the macro in the coming months and years.

Okay, very clear. Thank you.

Thank you, Véronique. Our next question comes from a line of Stéphane Afonso from Jefferies. Please go ahead.

Yes, good morning, and thank you for taking my questions. Two questions, if I may. The first one on offices, would it be possible to provide an update on the Eco Tower, particularly in terms of lease experience, as I understand that the lease with KPMG is set to expire by the end of the year. Also on offices, are there currently any advanced negotiations in asset disposals? And finally, on ECAT promotion, Others increased in volume in value terms, and it suggests that prices have increased, I think, a digit. And I was wondering to what extent has the mixed effect contributed to this growth? Thank you. Okay.

Thank you, Stéphane, for the question. Starting with offices on the Echo Tower, indeed, we saw that... This clearly benefits from the improvement in the macro dynamics of La Défense district, as you saw. And we've signed some new leases last year and this year on the Echo Tower. Indeed, the major tenant of the Echo Tower is KPMG, as you know, with an end of the lease, which is in 2027, exactly. As you know, we have a close relationship with all our tenants and especially with our major tenants. So, of course, we are in close discussion with KPMG regarding what they intend to do in 2027. But discussions are great with them and the Echo Tower is honestly attractive in our view as an asset benefiting from the strong fundamentals of La Défense and the fact that it offers affordable rents, which given the outlook on the macro could be attractive for some tenants in our view. As for asset disposal, well, no major announcement to be made since February, but once again we stick to our strategy, focusing on the one hand on disposal of non-strategic assets and also some mature assets when we are able to find some liquidity. such as what we've done last year. And that's exactly what we intend to do this year. So maybe more to come for the half-year result. But we see that there are still some money when the assets are mature on strong fundamentals markets. And as for ICAD promotion, as I said, sharing the results on Q1, indeed, there was some good news, positive figures, especially on the individual. On the value in Q1, as I said, the main reason comes from the fact that there is a mixed And especially, this was driven by some sales made on development, which is the refurbishment of a former hotel asset into some more premium housing lots, which are doing quite well, actually. So this is one of the reasons expecting the difference between value and volume evolution regarding individuals. OK. Thank you. OK. Thanks, Stephen.

Before proceeding to the next question, as a reminder, if you would like to join the queue for questions, please press star 1 on your keypad. The next question comes from the line of Sam King from BNP Paribas. Please go ahead.

Hi, morning, guys. Just one question, please, on the Paris occupational market. You mentioned that it's been a slow start to Q1 with take-up down 6% year-on-year, but Also, one of your peers reports this morning that Lada Font's take-up is up 15% year-on-year. So we'd just be interested in what you're seeing on a regional-specific basis within Greater Paris, as it seems like there's quite a wide divergence of performance. Thanks. Yeah.

Thank you, Sam, for the question. Well, exactly that's what we saw. There was a slight decrease, minus 6%. Indeed, in the take-up of space in the Paris region. And this was quite significant. heterogeneous performance by zone, and indeed the Western questions, including La Défense, has done quite well with plus 16% at roughly 130,000 square meters. It was driven by mostly the first ring. This is exactly what we see in the discussion we have with some prospects, where you are able to offer the well-positioned assets with the good criteria and when you are located on the major transport hub where you are able to relate. So that's exactly what we see on a daily basis through the discussion the operational teams have with some existing tenants on site and new potential tenants with whom we are discussing. And that supported As you saw, the strong figures on our operational performance this quarter, because signing 50,000 square meters for the first quarter of the year is definitely a very good performance.

Sure, that's helpful. Thank you.

Thanks, Sam. The next question comes from a line of Eleanor Frew from Barclays. Please go ahead.

Hi, Steve. Thank you for the presentation. Just one from me. On the 2D repositioned occupants, I think you flagged you expect to lose rent there this year, but maybe how does that 50% occupancy compare to your expectations, and where do you expect the occupancy in that segment to end up at the end of the year?

Okay. Hello, Eleanor. Thanks for your question. Yeah, indeed, it's in line with our expectation, as we've shared earlier. Transparently with you, we expect most of the to-be-repositioned assets to be vacated and emptied out at one point. That's exactly what we see. Even if from time to time we are able to secure some pragmatic discussion with some tenants, such as SNCF on Le Monet with 15,000 square meters, that's what we shared on the full year results. But nevertheless, at one point, we expect those buildings to be emptied out. So clearly, in a way, the occupancy rates on those assets at one point does not have a full relevancy, I would say, because at one point, they'll be emptying out fully. So this is in line with what we expect. Have in mind that, as shared during the full year result, there are still a bunch of to-be-repositioned assets contributing to the expiry schedule for 2025, roughly 13 million euros. But that's the reason why we expect this occupancy rate to keep on lowering down while in the same time the operational teams are fully committed to redevelop those assets successfully because, for example, I've talked about the CGMR Lafayette redevelopment in Lyon, and clearly this one, supporting the good figures on housing lots in the property development division for this quarter, well, those 100 housing lots redevelopment comes from a former office building to reposition. So while those buildings are emptying out, the operational team is fully committed to work on the redevelopment scenarios.

Thanks very much.

Thanks, Ilona. The next question comes from a line of Niraj Kumar, also from Barclays. Please go ahead.

Morning, everyone. Just a quick one from my side. How are you thinking about the refinancing of 2025 and 2026 debt maturities? Do you think the bond market is attractive for a potential refinancing?

Ilona, thanks for your question. Well, as for the financing, clearly the financing costs are impacted by the volatility on credit and equity markets, clearly. But we have been cautious in our guidance with the target cost of funding to maintain that between 4.5% and 5%. So that's what we expect. We are looking at the opportunity in order to manage, as we've done in the past, closely our balance sheet and the lines that will mature in 2026 and 2027. All right.

Thank you.

Thanks, Dorian.

A final reminder on how to ask a question. Please press star 1 on your keypad to join the queue. The next question comes from the line of Florent Laroche-Joubert from Odo BHS. Please go ahead.

Hi, Nicolas. So thanks for this presentation. I would have one question actually on the guidance. So we understand that you remain cautious at this stage for the rest of the year. Your guidance can be considered as conservative. So how can we consider today's guidance as a flow And what could drive, so based on these figures at the end of 2021, what could drive now or later in the year to an upgrade of the guidance?

Okay. Hello, Florent. Thanks for your question. Well, once again, if we look back at the guidance, so 2025 guidance, so between 3.40 and 3.60 euro per share, We took indeed a cautious approach on business lines, given the current environment. As for the investment division, we plan a decrease in rental income due to decline of positive effect of indexation and the full year effect of 2020-2014 end departures, which is already, as you see in the figure, quite crystallized in the Q1 figures. And as for the property development business, We expect improvement in profitability after the strong impairment losses in 2024, expecting to return to break even in 2025. But even if there are some positive signs, well, I mean, good news can always wait. So that's the reason why we remain cautious. There are still some uncertain political and tax environments in France, and there's the global macro. And as for the healthcare activities, We try to figure a dedicated assumption of 67 cents. You know how this is based to be easier for you to model. And we, of course, update this figure when and how the disposal will be made regarding the healthcare.

Okay. Thank you very much.

Thanks, Ron. There are no further questions, so I'll hand back over to you to take questions from webcast if this is the case.

OK.

There are no further questions coming from phone lines, so I'll hand it over back to you.

OK, great. Thank you very much. Well, we were happy with Bruno to have you around the call today. Looking forward to seeing you soon and share, of course, the Alfea in July. But looking forward to seeing you before that. Have a nice day and enjoy the rest of the week. Bye-bye.

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