Icade Sa Ord

Good day, ladies and gentlemen, and welcome to ECAD 2025 half-year results presentation. Please note this event is being recorded. At this time, all participants are in listen-only mode. We will be facilitating a Q&A session towards the end of today's prepared remarks. If you would like to ask a question, you might do so by pressing star 1 on your telephone keypad. I will now turn the call over to your host for today, Nicolas Joly, CEO, and Bruno Valentin, CFO. You may begin. Thank you.

Good morning. Nicolas Joly speaking. Thank you all for being here today on this call. Along with Bruno Valentin, we are delighted to present this morning ECAT 2025 offshore results. This presentation will be, of course, followed by a Q&A session. Let's move on to slide four for an overview of the key messages for the first half of 2025. ECHAT delivered strong living activity with nearly 80,000 square meters signed or renewed, contributing to an improved occupancy rate for well-positioned office and light industrial assets. In parallel, The property investment division secured over €100 million in disposal of non-strategic and core assets in line with NAB. In the first half of 2025, ECAD posted a resilient net current cash flow from strategic activities compared to the same period last year. However, the contributions from the property investment and development businesses differed from 2024. Indeed, while rental income declined, the profitability of the development segment improved following a deep review of our operations in early 2024 to adapt to evolving market conditions. Against this backdrop and in a complex market environment that calls for caution, we are confirming our full year guidance for GroupNet current cash flow. This semester, we proactively manage our balance sheet and further strengthen our liquidity position with the successful issuance of a 500 million euro 10-year green bond in May and the closing of 290 million euro in backup credit times. On the ESG front, ECAP distinguished itself in 2024 as the first publicly listed company in Europe to submit two separate shareholder resolutions on climate and biodiversity. At our general meeting held in May 2025, we once again put these resolutions to a vote, presenting the group's performance in reducing carbon intensity, lowering CO2 emissions, and contributing to biodiversity preservation. Both resolutions received overwhelming support, with approval rates above 99%. On pages 5 and 6, you will find the key figures for the first half of 2025. At group level, ECAD reported a net current cash flow of 2.03 euros per share. Cash flow from strategic activities, namely property investment and property development, was nearly stable at 1.44 euros per share compared to 1.47 euros per share in H1 2024. NTA NAV declined by around 6% to 56.6 euros per share, mainly reflecting the decrease in the value of the property portfolio and the payment of the interim dividend. On the liability side, the loan-to-value ratio stood at 38.1% at the end of June versus 36.5% at the end of December 2024, reflecting the decline in asset values, and a still limited volume of disposals. The net debt-to-ABDA ratio improved to 8.3 times thanks to a recovery in development margins this semester. Interest coverage remains very solid at 7.4 times, with an average cost of debt stable at 1.6%. In the property investment business, gross rental income amounted to €178 million, down 4.3% on a like-for-like basis, mainly due to tenant departures. The gross asset value of the portfolio stood at 6.2 billion euros, reflecting a minus 2.8% decline on a like-for-like basis. The EPRANET initial yield remained stable at around 5.3%. In the property development business, economic revenue declined to 501 million euros, versus 583 million euros in the same period last year. However, the operating margin turned positive again, reaching 2.3%. Let's look now at performance by business division, starting with property investment. Let's move on to page nine, which covers the latest market trends. In the first half of 2025, the rental market remained challenging with take-up in the greater Paris region down 12%, a persistently high vacancy rate of both 10%, and incentive averaging around 28%. In an uncertain economic and political environment, tenant decision-making processes have become longer. However, the trend toward more affordable, peripheral and well-connected areas continues to gain traction, particularly in locations like La Défense. On the investment side, market conditions appear to be slightly improving, with a modest increase in transaction volumes and greater investor liquidity, especially for larger deals, notably in the core plus and value-add segments. That said, liquidity remains mostly concentrated in central locations for now. In this context, each had recorded solid leasing activity with approximately 79,000 square meters signed or renewed in H1 2025 compared to 133,000 square meters over the full year 2024. These leases represent annual rental income of 20 million euros with a world of 7.4 years. This performance highlights the strong demand for ECAT's well-located office assets that need high standouts. A standout example is the full relating of the Pulse building in Saint-Denis, totaling 29,000 square meters. We also demonstrated our ability to effectively manage business parks, such as the Mauvin site in the north of Paris. Following the signing of two leases this semester, for over 7,000 square meter of light industrial space. The 21,000 square meter park is now fully lit. Thanks to this strong commercial momentum, our occupancy rate improved to 88.8% for world position offices and 89.5% for light industrial assets. It's worth noting that these figures does not yet reflect the positive impact of the pulse relating attendant occupation will begin later this year. We now turn to page 11, which focuses on asset rotation. In the first half of 2025, ETIAD secured over 100 million euros in disposal of non-strategic and mature assets, including, firstly, the disposal of the Nancy Regional University Hospital, CHRU, representing a value of 55 million euros, following the early termination of the public-private partnership and the transfer of associated liabilities back to the CHRE. Secondly, the sale of a portfolio of five BNB hotels to a leading investor for 36 million euros at an average yield of around 7% in line with the NAV as of December 31, 2024. A third transaction is under a signed promise to sell a mixed-use office and retail building in Marseille, covering 3,300 square meters and valued at 14 million euros. This deal, also aligned with the Navy, illustrates the continued liquidity in the market for core and smaller-sized assets with yields of approximately 6%. Let's move on to page 12, which highlights our current project pipelines. We have a diversified pipeline with limited capex of around 300 million Euro planned over the next three years. This pipeline is expected to generate approximately 50 million Euro in additional annualized rental income. The first half of 2025, we'll launch three new core office projects delivering attractive yields on cost above 7%. These include two developments, Seed and Bloom, located in the heart of Lyon-Pardieu Business District, as well as Centreda, an office project in Toulouse, fully pre-led to Sopra. In line with the group's CSR ambition, ECAD is fully committed to ensuring that all ongoing developments achieve top certifications, such as HQE and BIM Excellence, all aligned with the EU taxonomy criteria. In the first half of 2025, ECAD continued to advance its strategy to diversify its asset portfolio. Notably, in the student housing segment, ECAD signed a partnership agreement in July 2025 with Cardinal Campus, a student residence operator who will manage a future portfolio of assets on ECAD's behalf under a white label arrangement. In June 2025, the Profit Investment Division already positioned itself to invest in a student residence in Ivry-sur-Seine, a joint development with the Filia Group. The project includes 194 units, totaling approximately 3,600 square meters, with construction set to begin in June 2026 and delivery planned for 2028. Additionally, two to three other student residence projects in the Paris region, representing around 750 beds by 2028, have already been identified in collaboration with the Property Development Division. Let's now move on to the operational performance of the development business line. The first half of 2025 remained challenging for the industry, especially in the second quarter. The Development Division recorded a stable orders volume with 2,116 units totaling €496 million down by 8%. Activity in the individual segment declined by 11% in volume, in line with the overall market. This decline occurred in an unfavorable tax environment marked by the end of the PINEL tax scheme, which led to a sharp contraction in individual investor activity. with a minus 35% compared to H1, 2024. The momentum was more positive for owner-copier orders, which increased by 10%, supported by favorable measures promoting homeownership. Bulk orders showed a 10% increase in volume, but an 8% decrease in value. The discrepancy between volume and value changes is explained by a temporary shift in the product mix. Institutional investors continue to drive business activity, as they accounted for 54% of orders in volume terms in H1 2025. It is also worth noting that institutional investor activity has historically been stronger in the second half of the year, with over two thirds of bulk sales made in H2 in both 2023 and 2024. During the first half of 2025, the group demonstrated its commitment to building the city of 2050, in line with its ambitions outlined in the Reshape Strategy Plan. Notably, ECAD, together with SET, published the first barometer on French city fringes. The study's findings highlight the potential of 1.6 million housing units 15,000 hectares of economic land, and 10,000 hectares here marked for ecological restoration. ECAD aims to play a significant role in the transformation of these commercial areas. In this context, during the first half of 2012-2035, ECAD acquired a portfolio of 11 real estate sites from Casino for €32 million. The portfolio consists of parking lots, and developed land, building, and ancillary units related to stores. Two of these sites were co-invested with CDC Abita. These sites offer a total development potential of approximately 3,500 housing units and over 50,000 square meters of retail space with an estimated potential revenue of around 1 billion euros. These development projects will take between 10 and 15 years to be completed. They include a holding phase of the assets prior to obtaining administrative approvals and relocating tenants, followed by the launch of traditional off-campus development programs. And I will turn the floor over to Bruno to present the financial results.

Thank you, Nicolas. Let's move to the financial results. Please find the group's main P&L KPI on slide 20. For the first semester, ECAP's consolidated IFRS revenue was down by minus 10% to 630 million euros, including a 5% drop in gross rental income from the property investment division and a 12% fall in property development revenue. EBITDA stood at 145 million euros, up on the same period in 2024, when 85 million euros of impairment losses were booked following the review of the property development portfolio. The broke net financing expense increased to minus 22 million euros from minus 7 million euros due to lower short-term investment income and lower dividends from the healthcare business. The group's net current cash flow amounted to 144 million euros. Net current cash flow from strategic activities remained relatively stable at 109 million euros compared with 111 million euros in H1 2024. The key takeaways about the net current cash flow from strategic operations are as follows. lower return income from the property investment division for minus 17 cents per share, an increase in the net property margin of property development activity for 39 cents per share, and a decline in finance income for 21 cents per share. I will come back to this in more detail in the following slides. Let's dive into the financial performance of property investment division in slide 22. Growth return income decreased by 5.1%, mainly due to tenant departure recording in the recent months and the gradual capitalization of negative lease renewals. These effects were partially offset by the positive impact of indexation, which has gradually moderated and still contributed plus 3.4% as well as early termination fees, mainly related to the to-be repositioned offices. It's also worth noting that the net return income was negatively impacted by higher vacancy costs. On property development side, economic revenue amounted to 501 million euros as of June 30, 2025, down by 14% year-on-year. This declined many results, from a decrease in residential book sales, down by 32% in value terms, and a sharp drop in commercial segment, with revenues down by 39% year on year, due to the completion of a major project at the end of 2024, coupled with the low volume of new contracts signed in 2025. The net property margin improved mechanically in H1 2025 following the impairments booked in H1 2024. However, the declining volume and the continued margin pressure of certain projects launched prior to 2024 has negatively impacted the overall margin of the business. Let's move on to slide 25. The half-year financial results extended to normalize after a 24-year marked by a very high volume of finance income. Specifically, financial income for investment declined by more than 10 million euros due to both volume and interest rate effects. Additionally, dividend received from outskirts in healthcare activities decreased by 10.5 million euros, reflecting the absence of dividends paid by IHE this year. The cost of growth debt remains stable, with the average cost still low at around 1.6%. The debt projected for H2 2025 is to the edge, and the average cost of debt for the full year 2025 is expected to remain below 1.8% factoring in the new bond issue completed last May. Let's turn to ECAD's balance sheet. Slide 27 focuses on change in the value of the investment portfolio. As Nicolas explained, the fair value of property investment portfolio stood at 6.2 billion euros given a decrease in value of minus 2.8% on LIFO-like basis. The APRA net initial yield was 5.3% pretty stable versus December 2024. The APRA TAPRAT net initial yield was 6.2%. Slide 28 shows the slowdown in value adjustment across our portfolio by asset class. For web position offices, the adjustment over the semester stood at minus 2.7%, confirming the slowdown in the declining values semester after semester. Light industrial assets continue to show resilience, with their value increasing by 0.4% this semester. As of June 2025, ETRA A Navy per share was equal to 56.6 euros, declining roughly by 6%. This year-on-year change is mainly due to the lower value of the property investment portfolio, representing 2.7 euros per share, and the interim dividend paid in March 2025 amounting to 2.2 euros per share. Let's move on to debt management. The first half of 2025 was marked by strong achievements. Firstly, a 10-year green bond insurance of 500 million euros. Secondly, a bond bank of medium-term notes maturing in 26, 27, and 28 for a nominal amount of 268 million euros. Finally, the signing of $290 million in credit facilities included $190 million in additional lines. Together, this transition has enabled us to extend the average maturity of debt, reinforce our liquidity position to anticipate upcoming debt maturities, and increase our share of sustainable financing. As such, we have achieved our target of having 35% of our financing green or linked ESG objectives more than a year ahead of plan. Slide 31 is dedicated to our debt maturity schedule and liquidity position. At the end of June, ICAD has a strong liquidity position composed of $1 billion in net cash and $1.8 billion in in unused committed revolving credit facilities. This liquidity covered would date maturity to 2029. Now, I will hand over to Nicolas for the conclusion and detail on the 2025 outlook.

Many thanks, Bruno. Let's move on to slide 33 for the 2025 guidance. Based on the group's offshore results and expectations for H2, we remain cautious and reaffirm our 2025 guidance of a group net current cash flow of between 3.40 and 3.60 euro per share. This includes net current cash flow from non-strategic operations with approximately 67 cents per share, excluding the impact of disposals. As of June 30, 2025, the annual net current cash flow from non-strategic activities is already secured at over 85%. Considering the income already recorded by ECAD in H1, including firstly the dividend from Premier Healthcare, and secondly the finance income from the shareholder loan to EHE Healthcare Europe, accounted for over six months. Let me remind you that the contribution from non-strategic activities does not include the payment of a potential interim dividend from Premier Health Care in 2025. In conclusion, the first half of 2025 remained challenging for the real estate sector. Nonetheless, we have continued to demonstrate our resilience through good leading performance in the product investment division stabilization of the development activity, and tight control of our capex focused on profitable projects. We're also gradually making progress in diversifying our portfolio. And I would like to thank sincerely ECAD's team for their strong daily commitment. And with that, let's start the question and answer session.

Thank you, ladies and gentlemen. We will start the Q&A session now. So if you would like to ask a question, you might do so by pressing star one on your telephone keypad. And to redraw your question, it's star two. The first question comes from the line of Florent Laroche-Goubert calling from OdoBHF. Please go ahead.

Good morning, Nicolas. Good morning, Bruno. Thank you for this presentation. I would have two questions, if I may. My first question on OVC, so You have had a very strong losing activity in ASH1. Could you please maybe give us your view for losing activity in ASH2 and maybe any color on how the occupancy in offices can evolve in ASH2? So that would be my first question. And my second question would be on the healthcare activity. We can see that you have some discussions. Any view of any major deals that could be completed in 2025? Thank you very much.

Thank you, Florent, for your two questions. Yeah, indeed, taking the first question about the leasing activity in H1, we had a very strong leasing activity with nearly 80,000 square meters final renews. And clearly with that, we came to the stabilization of the financial occupancy rate. And of course, we expect this occupancy rate for both wealth position and light industrial assets clearly to move up now. You know that for the wealth position office, this figure of the 88.8% does not include yet the positive effect of the PULSE that has been signed and that should go into the ratio by the end of 2025. So that's the reason why we expect an occupancy ratio above 90%. That's also our target for the light industrial asset. And as for the remaining to be repositioned asset, as already shared, you know that for us, this indicator is not really relevant because at one point, Those assets are deemed to be vacated. That's the reason why we work on repositioning scenario. But in the meantime, we are having very pragmatic discussion to save every euro possible as long as possible. So that's for the occupancy. Regarding the healthcare, well, indeed, you saw that on the presentation there was no major news to be shared today, but clearly you saw that we stick to our strategy to sell. That led to the slight decrease in our exposure in Premier Health Care on the first semester from 22.5% at the end of 24 to 21.6% at the end of June 2025. This came from two operations. The first one was the signing of the share swap we've already shared at the beginning of the year with Premier, and the second operation comes from the sale by Premier Health Care in June of a non-strategic nursing home asset in France. This allowed ICAD to perceive 6 million euros through a capital reduction by Premier Health Care. So clearly, that's what we intend to keep on doing. And in the meantime, you saw that we also worked on the agreement with Premier and the other historical shareholders to grant the extension of the cold option that was deemed to expire mid 2025. Clearly this because ECAD has reaffirmed its strategy to sell and Premier and the existing shareholders also reaffirmed their strategy to invest in this SPV. So the idea clearly was to align the legal strategy framework to the indicative timeline we all have in mind. Once again, to be crystal clear, we've extended the historical agreement. So this call option, as it used to be, are non-binding, clearly. That's a call option benefiting to Primia and the other shareholders. And maybe a word on the international SPV also. Just to say that there's still an ongoing marketing of the Italian portfolio. Well, clearly, it takes a bit of time. But just to remind you the figures, we are talking here about roughly 300 million euro portfolio, which represents roughly twice the size of the investment volume in the healthcare Italian market. So it's quite reasonable to say that it might take some time, but there are still some appetite on this portfolio. Be sure we will keep you posted. as soon as we can and when there's something to be shared regarding the health care progresses.

Okay.

Thank you very much. Thank you, Claude. The next question comes from the line of Stephan Afonso calling from Jefferies. Please go ahead.

Yes. Good morning and thank you for taking my questions. First on ICADSante. So we understand that the Primia has extended its option. And my first question is whether this extension was made under the same terms as initially agreed in particular regarding the NAD clause. And secondly, this move seems to suggest that Primonia is more confident in the ability to finance the acquisition, more likely not before 2026. Therefore, would they still try to bring or could they now complete the deal alone now? That's my first two questions.

Yeah, thank you. Thank you, Stéphane. Yes, as I just said, indeed, we've extended the call option in the exact same terms from the previous agreement. So clearly, those call options, should they be exercised, shall be exercised at ENEGY, clearly. and the benefit to Premier and also the other historical shareholder as it used to be. As for the potential third party investor that could join the club deal either at Premier level or either directly, I mean that's still an option that could make sense that is not excluded either by Premier, the other shareholder or us. So it's still also an option that is open.

Thank you. And maybe one last question regarding the Marion project. There are market rumors suggesting that you may be considering a sale of this asset. If so, what would be the rationale there?

Well, I'm sure you've all seen that currently there's some good liquidity on the investment market for corporates and value-add assets in various CBE. There's an increase in larger deals. More and more bidders, loads of cash on the last transaction. And as for the Marignon asset, on our side, we've already created a lot of value through the attention of a non-recourse building permit that allows us to transform the former movie theaters areas into retail areas. So clearly, we've already went through a significant step in the value creation. And we are now at a crossroad, clearly. we can either roll out the full redevelopment of the project and the asset with, as you saw, quite a limited amount of capex, because we are talking here about less than 70 million euro, or we could either take the opportunity of a potential disposal, given the favorable context, I would say, today. Well, the key will be the value creation. We will have, regarding these assets, a very opportunistic approach. The idea for us is how is the best way to maximize and monetize the value creation, either today, either at the end of the development.

Okay.

Thank you. Thank you, Stéphane.

The next question comes from the line of Jonathan Nato calling from Goldman Sachs. Please go ahead.

Jonathan?

Well, we are going to take the next question then from Anna Escalante calling from Morgan Stanley. Please go ahead.

Morning. I have one question. When looking at your strategic operations, things appear to be stabilizing or at least a bit less negative than before. So I know there are many moving parts here and that some are more difficult to predict than others, but maybe you could please tell us when would you expect to see the draft in earnings in this strategic operation segment, meaning the net current cash flow, obviously.

Yeah. Yeah, I know.

Well, I would say that, firstly, regarding the cash flows, we are focusing at this stage on the first step that we just talked about with Florent. The first step regarding the investment division is clearly focusing on the occupancy rate. First thing first. And clearly, we think we've reached a trough in the occupancy rate regarding the world position and light industrial assets through the recent improvements we've shared. Once said that, I would say, considering more globally the sector concept, I would say that the market environment still remains challenging and uncertain, which makes it difficult, of course, at this stage, July 2025, to provide a precise outlook for 2026. I would say that more globally, what we expect is recovery more likely in 2027. for both business lines for two reasons. Firstly, regarding the investment division, we need time for the diversification strategy to pay off and start delivering some new cash flows, as you saw in the pipeline. And as for the development side, we'd say that the activity, as already shared, is more expected to pick up in 2027 after both the municipal election and potentially the presidential election. So that's the reason why I think more globally on our activities and cash flow recovery, more expected likely in 2027.

Thank you. Very clear. Thank you, Anna.

The next question comes from the line of Valerie. Jacob, calling from Bernstein. Please go ahead.

Hello, good morning. I've got a question concerning your balance sheets. I mean, your LTV went, you know, went up quite a lot over the past year, and I think if I look at, you know, you said that saving the healthcare is taking time, and there is no certainty that the values you know, won't go down further. So I was wondering if you could share some thoughts you're having with, you know, the rating agencies and how you think about, you know, your financial indicator and what can you do to improve it in the short term if you need to. Thank you.

Regarding ATV, we have no change in our financial strategy. We keep targeted civil ratio, this means below 35% including duties, over the origin of the strategic plan, thanks to the disposal. And we prove again this semester our ability to sell more than 100 million euros at the ANAV. That is the first point. And maybe related to the rating, I think, as you know, we have already done grading in 2024. And on the pre-debt CAPIA, you have no issue about the net debt to EBITDA, and we have a comparable ICR. Of course, ATV ratio is expected to decrease with the disposal volume anticipated in the following months.

So the next question comes from the line of Michael Finn calling from Green Street. Please go ahead.

Yes. I have a few questions. My first one is on the scale of the... I'm just curious if you actually looked at any other options other than the current one. And I'm curious where exactly is the... where is the bid price from the other options? Because I suspect that it's probably quite a lot lower than the current math.

You're talking, Michael, you're talking about the options on the healthcare?

Yes, yes.

Yeah, sorry, I just said to Stéphane that the exact same terms as before, so clearly the option has to be exercised at NAV.

Yes, but I'm just curious if over the last... few years if you have also looked at other options other than the current plan that you have. And I'm curious, where would the pricing be on that, you know, on those other options? Yeah, that's my first question.

Yeah, well, you see that we went through many different ways. We're talking about the previous two operations crystallized this semester. The share swap agreement with Predica was at NAV. for a total amount of 30 million euro, and as for the capital reduction, that has been done consecutively to the sale of the non-strategic asset. It has also been done at NAV, of course, at the size of the VI core. That said, if we also talk about the potential opportunity of having some third-party investors getting into the club deal, I would say that, I mean, we'll be pragmatic I'm not saying that we necessarily have to sell at D&AD and only D&AD. I mean, it's a matter of time and volume. If someone comes with a large volume and the right timing, I mean, we can work on a satisfactory discount to be both attractive and pragmatic on our site. What we don't want to do is reach a level where the discount should be too significant because, once again, We are talking here about fully stabilized assets, 100% less, that deliver predictable and sustainable cash flow with values that have stabilized globally over the past months and years in a market where there are some more positive signals on the healthcare, I would say, as you saw on both listed companies, but also some real estate asset transactions. So that's the reason why. We will not do this at any cost. But clearly, we could be pragmatic and accept some discount if someone comes with a significant volume daily.

Yeah, okay. And are you able to say over the last year or two, has someone come to you with an offer that perhaps the offer price is a bit too low, but at least there is an offer there? Can you, or has it just not happened?

Well, you know, we had some interest, but as soon as some people are coming to you in a very opportunistic and aggressive mode regarding the shares, you quite quickly have to say, well, at this price, no need to write it down. But if you take, for example, the international SPV, that's exactly also what we had when we were marketing the Portuguese assets. Clearly, and for those, we received some real LOI with commitment, but with very aggressive discount. That was the reason why at that time, in 2023, we decided to withdraw this portfolio from the market. So we had, and also to be fully clear, we had also some international investors, a potential mark of interest in 2024, for shares in Premier Healthcare, but clearly the uncertainty in the French political context at that time, because it was the time where the Bernier government fall, made the international investor take a small step back from France for a while. That's the reason why also it took a bit some more time. But yeah, on stabilized assets, we have some people that are okay to to dive in, being very aggressive. But the idea is to find how we can have the pragmatic and acceptable discount and not to oversize one.

Okay. And I guess that's – is that probably 5% to maybe 10% in your view?

I won't give any proper figures because, once again, it really depends on the volume. I mean, if someone – is coming and say, well, I'm going to buy the remaining 700 or 800. It's quite different from someone who won't buy 50 million or 100 million.

Yeah, of course. Okay.

So it's quite hard just to say a proper figure. Right. We won't stick necessarily euro by euro to the energy. That's what I'm saying.

We are pragmatic. Interesting. Okay. Okay. Final question, if I may, on the IHE assets that are currently in the market. I remember the portfolio in Portugal, I believe. One of the issues that you highlighted was the Walt was quite short there. I'm just curious. The Walt was quite short there. I'm just curious if it's a similar issue in Italy or if all those issues have been fixed. No, no, no.

No, no, clearly. Indeed, in Portugal, well, in Portugal there was two things. Once again, we had quite a narrow market for a 200 million portfolio for once, and indeed, secondly, the world was around six years, which was quite low. That's why we are having the discussion, well, Premier is having discussion with the tenants in order to extend because there are some potential extensions to be financed. So this should come under a global agreement. But as for Italy, this is completely different. We are talking here about a portfolio where you get some MCO but also some nursing homes, and all of that comes with a lot of work. I would say that the main issue for the Italian portfolio is what I explained, is the matter of size. Yes, okay. A 300 million portfolio on – 150 or 200 million euro investment volume yearly on this market necessarily takes some time. But there's no world issue on the Italian portfolio.

Okay, great.

Thank you very much for your question. Thank you.

Next question comes from the line of Jonathan Onatoro calling from Goldman Sachs. Please go ahead.

Please ensure your line remains unmuted locally.

Can you hear me now? Yes, happy to have you back. Finally, thank you. Two questions, if I may, and sorry if some have been answered already, but the first question was just on the leasing, obviously, good volumes of deals. Can you talk about the sort of reversion that was, well, either captured or lost on these deals? And the second question, notice that EPRA LTE is actually increasing quite a bit, and I wasn't sure because your normal LTE wasn't increasing as much, so I just wanted to check there the reason.

Thank you. Okay. So I will take on the reversion, and Bruno will answer you on the EPRA LTE. On the reversion globally, on the global figure, no major update to share on the reversion potential on well-positioned office. Just to remind you that at the end of December 2024, it was minus 11%. You have that in mind. And globally, on the leasing activity and large volume, well, the signatures and renewal are globally enlarged. with DRVs with incentive in line with the market. So, I mean, nothing has changed. We are indeed gradually crystallizing signatures after signatures this negative reversion potential. That is, of course, already factored in in the NLE, as you know, but no major change on the reversion, especially on the 80,000 square meters that has been signed during the semester.

And can you share perhaps a bit where these deals were signed? Were they done close to Paris or which business parts they were?

Yeah, sure. Well, it was a bit everywhere, actually, and on many asset classes because, of course, the main transaction that was highlighted already in the first quarter result was the Pulse transaction. So nearly 30,000 square meters in the northern Parisian region. That might be the second largest transaction talking about living during the semester on the whole Parisian region. So that demonstrates that even in an area that is definitely struggling, when you fit the right criteria at the right price, you are able to find a tenant. But we had also some transaction on the asset, on the light industrial asset class. We violated the , for example, with which is a company dedicated to quantum computing and also with which is in construction development. And with that, the business park is now fully left. We are talking here about 21,000 square meter business park. And on top of that, we have some transaction in La Défense. We have some transaction in our other building. More globally, everywhere, I would say.

Okay. Okay. So, are you seeing incentives widen or decrease? I mean, I know they're decreasing a bit in La Défense as well. Is that what you're experiencing, or are you still seeing, like, sort of stabilized level of incentives?

As for the incentive, no major change, I would say. Of course, in the peripheral areas, I would say that the power of negotiation is definitely still in the end of the tenants rather than in the end of the landlord. But now we've reached a stabilization. Nonetheless, clearly, as for the incentive, we are at the highest level ever, I would say. But hopefully, within the new fundamentals and the attractiveness from areas like La Défense getting better and better, and that might be strengthening through the, I would say, the uncertainty in the macro. I mean, what we see is that companies take more time to decide, but they are clearly looking more and more at affordable prices. I mean, it has come back at their first one priority, at least the people we are discussing with. So hopefully, at one point, the level of incentive should lower down.

Okay, clear.

And maybe a word from Bruno on your APRA on TV question?

Yes, regarding APRA on TV, at the end of June, in our calculation, you have to note that we have 100% of our dividend paid in March, but also at the beginning of July. So it means we have the full dividend in the net debt. That is the first point. And, of course, we should improve with disposal volume anticipated in the following months that we already explained.

Okay. So your reported LTV was increasing less than the APRA LTV, which reached, I think, 47% or something like that. Any reason why you have this shift?

I'm not sure to have perfectly understand your question.

I'm just saying, no, no, I'm just, I don't have the figures in front of me, but the LTV, your reported LTV is increasing by a certain amount, and your EFRA LTV is increasing by more than that.

Yes, that's why Bruno was explaining that in the EFRA LTV calculation, We take 100% of the dividends, while in the other ratio, we only take what has been paid during the first semester.

Okay, very good.

That's the main reason for widening the gap.

Very good.

Thank you. That should, of course, narrow in the second semester regarding this point.

Thank you very much.

Okay. The next question is from Akanshka Anand calling from City. Please go ahead.

Hi, morning, guys. Can you hear me all right?

Yeah, very good. Happy to have you on the phone.

Okay, two questions from my side. The first one is a continuation of the previous question on leasing, actually. So the new leases that have been signed in H1, are you seeing a difference in the tenant mix? And what I mean by that, that is the incremental demand from tenants who are already in that area where the leasing is happening, or are you seeing an increasing spillover from the CBD? Because the difference in rents between CBD and outside is definitely widening. or is the demand more from people who were outside of Paris and trying to move into the Ile-de-France region? And if you could just provide like an approximate proportional split between the leasing in terms of these three types of tenants that I mentioned, and what could be the headwinds, maybe in the second half or going forward, that we might not see this incremental or at least a similar level of demand for leasing.

Okay. Thank you very much for your question. What I would say on our asset, we haven't seen necessarily some large move from Paris CBD outside on peripheral offices. But what we've seen clearly is like people that are in La Défense don't necessarily now go out from La Défense, which was the case maybe two years, 18 months ago. And clearly now there's more and more interest on peripheral offices. People move from one peripheral office to another, seeking for more centrality, clearly. And that's one of the major fundamental that drives the attractiveness of La Défense, I would say. And that's the reason why for our transaction, globally, it was people on peripheral offices that were already outside Paris, mainly, and that went from one asset to another, or that were already on the existing buildings, and that we were renewed or stayed in the building. That's what we saw. Talking about offices, not talking about light industrial where the dynamics are still very good as shared regarding the movement. And as for the headwinds, I would say that what we saw more globally on the Parisian region, even if it was not really the case for ICA, but on the second quarter, clearly people took more time. even the macro, the uncertainty on the worldwide macro but also the French macro. We'll see in the next quarter if the companies are still in a wait-and-see mode or either they are eager to make some transactions. So I would say that could be one of the major headwinds regarding the dynamic of the market, even if the brokers estimate a landing point around 1.7, 1.8 million square meter at the end of the year. So slightly below last year, but globally still quite dynamic. And that could be also some positive sign for peripheral offices, What I was saying about the fact that on the priorities on which the companies focus for their decision, clearly the level of rent and the fact that they are looking for affordable rent now, I mean, as a protection given the world uncertainty for the years to come, could drive the demand for peripheral offices. That could be a positive catalyst.

That's very clear. And my second question, could you just remind us what the portfolio mix is expected to be post the completion of the current strategic plan?

Well, we don't give proper figures, once again. But clearly, as you know, we intend to increase our diversification in very relative and dynamic asset class where we have some strategy, key differentiating assets and know-how. So it's light industrial, and you saw that we are able to create some value on assets like Le Moulin. Of course, PDSA, student housing, and we've already secured the first investment of roughly 200 beds in Ygris-sur-Seine, and also data centers. I haven't talked about data centers, but we are still working on that, clearly. So all in all, that diversification should dilute the current side of the office exposure. Nonetheless, we are still convinced that there's a future for our office. That's the reason why we are being selective but still looking at office development when the location is AAA and when the investment is reduced. That's the reason why we set up this 7% yield on cost on the three new office developments we've made in Lyon for two assets and Toulouse for one asset. So the part on office should be diluted, but we don't have a specific figure in mind to be shown.

Okay, that's understood. Thank you.

Thank you very much.

And the next question is from Veronique Mertens calling from Pepin. Please go ahead.

Thank you for taking my question and for the presentation. Maybe one quick one on the development segment. I noticed that you stopped reporting the NCCF contribution from the development segment, or at least the split between the two. What's exactly the reason for that, and is it fair to assume that it is still a negative contribution, especially since I saw that your net debt increased by 43% over the half year? And if so, what's the expectation for the full year from the development segment? Thank you.

Yes, as you know now, ACAD is an integrated player with investment and development businesses. And we changed a bit the presentation because we would like to improve the analytical presentation to make it easier to understand the group's performance. So now you have an operation indicator for each business. And related for the other part of the P&L, we have a consolidated view and mainly on the debt management, of course, financial results. And for us, it's a better view to appreciate the performance of the group. And of course, we have no change versus initial expectation of the two business lines that we already explained.

And maybe to add a word on the global trend on property development business, you saw that it was the end of the P&L scheme that had a negative impact on the orders by individual investors. Also, very low activity in commercial division. Clearly, there's no major office development project to be launched. But We are back now in current economic operating margin to positive territory at plus 2.3%. This is also the mechanic impact of the deep review we've made in 2024, and so we are back on profitability after those impairments. In the meantime, apart from the P&M, we also focus on the working capital to keep it under control, as you saw with the disposal of the Tobiac asset. close monitoring on the stock, and talking about potential positive signals for the market. We spent a lot of time discussing with political institutions to support the sector. Maybe an example, currently there are discussions to boost private rental investments with this private landlord status, the statut du buyer privé, that could in a way replace The PNEL has a private incentive scheme giving individuals a dedicated status of private landlord, and hopefully this is something that could come into force at the beginning of 2026. That's globally for the whole environment for the property development business.

Okay. Thank you. Thank you very much.

Thank you very much, Véronique.

Ladies and gentlemen, there are no further questions, so I will hand you back to your host to conclude today's conference. Thank you.

Well, thank you all for being here on this call. Have a nice day. Looking forward to seeing all of you on the road trips to come. Enjoy the summer and looking back at you.

Ladies and gentlemen, thank you for joining today's call. You may now disconnect.