Icade Sa Ord

Welcome to the ECOD nine-month trading update conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to Nicolas Jolie, CEO. Please go ahead.

Good morning. Nicolas Jolie speaking. Thank you all for being here today on this call. Along with Bruno Valentin, we are delighted to present this morning ECAD 2025 nine months update. This presentation will be, of course, followed by a Q&A session. Let's move to slide five for an overview of the main messages. To date, ECAD completed or signed preliminary agreements for €430 million in disposals. This includes a reduction of the group exposure to healthcare activities by circa €210 million and the sale of mature or non-strategic assets for €220 million. The investment division reported a very good rental activity with circa 166,000 square meters signed or renewed to date. This volume was boosted in October by the renewal of 41,000 square meters in eco-building with KPMG. For several months, the financial occupancy rate has improved, notably for well-positioned offices and light industrial assets. On the property development front, H1 trends are continuing into H2. By the end of September, ECAB recorded stable order volumes with a total value decrease of minus 5%. Lastly, we reaffirm today our 2025 Group Net Current Cash Flow Guidance between 3.40 and 3.60 euros per share. On slides 6 and 7, we focus on the good progress made on disposals. Early August, ICAD signed an agreement with BNP-PRM to sell its state in a diversified portfolio of 23 healthcare assets, accounting for circa 15% of its exposure to the healthcare real estate sector. This transaction with one of France's leading real estate investment management firms confirms the quality of Elsker portfolio in Italy. The sales represents circa 173 million euros for ICAD in line with the asset values included in the group NAD as of June 30th, 2025. The proceeds from the sale will repay the shareholder loan from ICAD to IHESKER Europe almost in full. The deal is scheduled to close at the end of the year. In addition, year-to-date, ICANN reduced its exposure to Premier healthcare by €36 million through two smaller transactions completed in the first half of 2025. The proxied investment division also secured €220 million in disposal of non-strategic or mature assets. Since the out-year results, preliminary agreements were signed on additional assets for €115 million, namely an office asset covering 1,800 square meters on Avenue Charles de Gaulle in Neuilly-sur-Seine for €17 million, the remainder of the B&B hotel portfolio for circa €30 million, and the entire Mauvin Business Park in the north of Paris, representing 21,000 square meters for €69 million. This successful transaction is the direct result of the hard work of our asset management teams who managed to bring the occupancy rate of this park up to 100% by the end of June. All of these transactions represented an average yield of about 6.1% and were completed at prices above the net asset value as of the end of December 2024. Let's look now at the performance of investment division on slide 9. Over the first nine months of the year, the rental market remained challenging, with take-up in the greater Paris region down 8% year-on-year. The subdued economic environment and French political instability continue to wire corporate real estate decisions. As we observed in the previous month, there has been still, in Q3 2025, a lack of new leases signed for spaces over 5,000 sqm. In this environment, ICAD teams delivered a very solid performance with around 125 sqm signed or renewed by the end of September. These agreements represent an annual rental income of 29 million euros with a world of 6.8 years. These achievements demonstrate our ability to secure large leases over 5,000 square meters, and to support our clients over many years, like ClubMed, who has been our tenant within Pont-Franc for 30 years. It also shows our expertise in creating spaces tailored to our client needs, as we have done with Soprasteria in the Rangis Business Park. The total financial occupancy rate stood at 84% as of September 30, 2025. In the west position of his segment, the financial occupancy rates stood at 88.8%, up plus 0.08 points compared to the end of December 2024. Following in particular, the lease is signed for more than 3,000 square meters in the I-5 building and nearly 2,000 square meters in the Echo Tower. After including the CD413 lease in the Pulse building, scheduled to start in Q4 2025, the financial occupancy rate of work position offices stood at over 90%. In the light industrial segment, the occupancy rate stood at 19.4% plus 1.5 points versus December 2024, thanks to leases signed in the Mauvin and Port-de-Paris business tax. In addition to the 125,000 square meters, we are very pleased to announce that we renewed in October the lease with KPMG for approximately 41,000 square meters. This lease has a firm commitment until 2031. In total, ICAD has signed or renewed more than 60,000 square meters since the beginning of 2025 in the La Défense Paris Défenseria, which offers significantly lower rents than Paris CBD, while still being very well served by public transport. Let's now move on to the operational performance of the development business line on slide 11. The trends have remained consistent with the first half of the year. The development division recorded a stable orders volume with 2,815 units totaling €722 million down by 5%. 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 peanut tax scheme, which led to a sharp contraction in individual investor activity, i.e. minus 43% year-on-year. The momentum was more positive for owner-occupier orders, which increased by 14%, supported by favorable measures promoting home ownership. Work orders showed an 11% increase in volume but a 6% decrease in value. This discrepancy between volume and value changes is explained by a temporary shift in the product mix. Institutional investors continue to support business activity as they accounted for 51% of orders in volume terms year-to-date. It is also worth noting that institutional investor activity has historically been stronger in the second half of the year with circa 60% of bulk orders made in Q4 in both 2023 and 2024. I now turn the floor over to Bruno to present the change in revenues. Thank you, Nicolas.

Let's move to slide 14, which represents the trend in consolidated revenue as of September 13, 2025. It has total IFRS revenue is down by 9%, due to lower revenue from both the property investment and the development divisions. Let's dive into the financial performance and property investment division in slide 14. In line with the figures reported in the first half of the year, gross return income decreased by 6% to 263 million euros, mainly due to tenant departures last year and the gradual crystallization of negative reduction and renewals. These effects were partially offset by the positive impact of indexation, which has gradually moderated but still contributed plus 3.2% and by early termination fees mainly related to the 2B reposition offices. Move to slide 15. On property development side, economic revenue amounted to 729 million euros as of September 13, 2025, done by 12% year-on-year. This decline results, firstly, from a drop in commercial segment with revenue done by 42% year-on-year due to the completion of major project at the end coupled with the low volume of new contracts signed in 2025, and secondly, from the progressive decline in residential backlog. I will hand over to Nicolas for the conclusion.

Many thanks, Bruno. So let's move on to slide 17 for the 2025 guidance. we 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 of approximately 67 cents per share, excluding the impact of disposals. As of September 2025, the income already recorded by ECAD we presented 92% of annual net current cash flow from non-strategic activities. Let me remind you that the contribution from non-strategic activities does not include the payment of a potential interim dividend from Premier Ex-Care in 2025. Well, to conclude, in an environment that remains complex and uncertain, ECAD teams achieved a number of successes during the quarter. as illustrated by the continued execution of our disposal plan and very strong leasing performance. We remain focused on implementing our strategy with priorities that include improving the occupancy rate of our assets, diversifying our portfolio, and rigorously managing our balance sheet. And with that, let's start the question and answer session.

If you wish to ask a question, please dial pound key five on your telephone keypad. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Florent Moroshu-Behr from AutoBHF. Please go ahead.

Yes, good morning. So, thank you for this presentation. So, two questions for me, if I can. So, my first question, so, would be in offices, so, You have said that improving the occupancy rate is a high priority. So maybe could we say some words on your next challenges in offices for notably for the end of 2025 and then 2026? What shall we expect? Maybe second question on healthcare assets. So have you any comments to make for the other assets to be still to to be still sold in ESCA. And maybe last question on the 2933 Champs-Elysees. Any comment on your intention to dispose or not at the end of this asset? Thank you very much.

Okay.

Morning, Florent. Thanks for your question. Well, maybe start with the financial occupancy rate. While you saw that there was some recent improvements indeed in the occupancy rates, for wealth position and light industrial segments. As I said, including the positive effect of PERS by the end of 2025, the occupancy rate will be above 90% for the wealth position. Light industrial, 90.4%. Well, of course, there will be a slight negative impact to be expected post-disposal of the mobile business part, but things are getting better month after month. Once again, this remains and shall remain the first priority for the teams as for the investment division. Maybe to give you a bit some visibility on what to expect in 2026 regarding the expiries, I would say it's globally the same trend as in 2025, of course, with some expiries to be expected concerning the 2D reposition asset. More than half of the expiries will occur in H1 2026. We shall be in a position to give you some good visibility for the full year 2025 result presentation. On the second question, on the healthcare portfolio, well, clearly, given the political environment in France, which does not help and could discourage some international investors, our first priority is to focus on the international side. We've shared some good news with the Italian portfolio that shall be closed at the end of the year. We are also focusing a lot on the Portuguese assets, which are, as you know, high-quality assets that can attract and solicit interest. And we are also marketing The small remaining part of the Italian portfolio, which is constituted of five assets representing roughly 20 million euros. On trends, once again, there's no major news to share, even the French context, but we are still exploring some additional routes, sale of non-core assets, additional swaps, as we've done during the H1. And on the Champs-Élysées asset, of course, We won't comment specifically on the asset or the process, but we'll keep being consistent with our DNA, which is to capture the maximum of the value creation. And once again, for this asset, in our view, a large part of the value has been already created through the eviction of tenants and the obtaining of the permit, and there's a good window because they have very strong liquidity on the investment market for core plus and value-add assets in Paris CBD. We saw a lot of transactions there with loads of cash. So clearly, with those two, an opportunistic approach, in our view, shall be considered. Once again, the key decision will be made on value creation.

Okay. Thank you very much.

Thank you, Florent.

The next question comes from Stefan Ifonzo from Jefferies. Please go ahead.

Yes, good morning, and thank you for taking my question. First, on the EcoTower, could you please share the reversion rates reflected in this renewal? Second, on ECAT promotion, should we expect additional provisions or impairments since market parameters have changed? And finally, on asset values, market data pulls to further yield expansion. So what should we expect in terms of asset value decline in H2, or at least what assumptions are you using in your business plan? Thank you.

Okay. Thanks for your question. Well, starting on the Echo Tower, maybe just before sharing thoughts on the economics, let's take a minute to celebrate, which is really good news, rewarding the hard work of the team. that's been working on this for several months now. As we shared with you, we tried to anticipate as much as possible the large break options we're facing, and we have some strong relationship with our major tenants, so we were really happy to succeed in that. Of course, we cannot share the detailed figure, Maybe I like the one thing is that as put in the PR, the signature rent is in line with the RV as we usually do. Of course, this crystallized a significant negative reversion. It was the highest negative reversion potential in the portfolio that shall be captured after the end of the actual lease from October 2027. But I'm sure that if you put some raw figures you can be able to estimate this roughly. As for the incentives, they are slightly above the market trend, but in my view remain fully consistent with the very large surface that is considered. We are talking here about circa 41,000 square meters. So this concludes on the Eco Tower is in my view an emblematic transaction testifying once again the good dynamics of the area. and that default district and the strong relationship we have with our tenants. Maybe jumping on yours. Yeah.

I have in mind that the reversionary potential was minus 11%. So taking into account this renewal, where does it stand now?

Yeah, this accounts for roughly two points. out of those 11 on the average portfolio. Okay, thank you. Yeah, but this, once again, will be captured at the end of the actual lead in 2027, because until then, we are still on the current rate. Okay?

Is that clear?

Okay, that's good. Thank you. Jumping on your second question, on ICAD promotion, of course, The market trend is still very tough, as you saw. On the residential business, we've been deeply impacted by the end of the P&L tax scheme. That had a negative impact on orders of individual investors who are roughly minus 43%. As shared, there's better dynamic for owner-occupier. The bulk sales still represent more than half of the total order. with a historical volume very strong in the Q4, and of course very low activity in the commercial division, and that shall be the case in the years to come. So we are still very selective in our operations. There may be one or two operations identified with more difficult than expected. We've done the job on the world portfolio in June 2024, so there's no thing that is expected once again on that. And I would say that for the global activity, there are no recovery, in my view, expected before 2027, especially due to the political agenda. As you know, next year will be the local election on the town. So this is usually years with very low level of building permits.

So in your view, the provision and implements that you recorded maybe two years ago are conservative enough at this stage?

Yeah, we went through the whole portfolio on that. As I said, given the context, there still can be some operations selectively that can have some issues. But once again, on the whole portfolio, the job has been done.

Okay.

And on the last question, on the evolution of the asset value, where you saw in H1 that there was a small deceleration of the asset value decline, minus 2.8%. Remember world in light for light, both from negative impact of residual yield decompression and to a lesser extent, lower expectation for indexation clearly. Black industrial were more resilient, of course, but if we focus on offices, well, it's still difficult to confirm the timing of value stabilization as there are still very few transactions on the market to assess properly the target cap rate. And on top of that, there are still some persistently high sovereign yields. But nevertheless, as you saw, we had a strong Divestment activity during the first nine months of the year and the sale of core assets completed year-to-date confirm the level of our actual NAV.

The next question comes from Celine Sue Wynn from Barclays. Please go ahead.

Good morning, Nicola. I got two questions, please. The first one is about the guidance. In the press release, you said that the disposal of the Italian healthcare portfolio could impact the NCCF, depending on the closing date. So, could you please give us a number around this? And the second one is around your outlook. You sound very cautious. I would almost say quite negative on your outlook for 2026. And we know your S&P credit rating currently is negative. Are you expecting a credit downgrade coming? Thank you.

Quickly on the first one, well, globally the impact of the disposal of the Italian portfolio will be not significant on the cash flows because it's expected to occur at the very end of the Q4, so not significant. On the outlook, well, Cautious, clearly, because 2026 globally will remain very tough in my view on market conditions. Well, you get this political agenda in France that will definitely have an impact on the pace of recovery. We are facing persistently high sovereign yields. That won't help. And thirdly, there's a lower positive indexation to be expected in 2026. On top of those macro effects, more specifically on ECAT side, Well, as I said on the property development, given the political agenda, there's no expectation in our view of recovery in 2026. And on the investment side, I was mentioning a lower positive impact on indexation that we expect roughly at 1%, so much lower than expected some months ago. And as you know, there are still some negative reversion to be crystallized in the cash flow. Of course, this is already, as you know, in the NAV, but still to be crystallized lease after lease in the cash flows, and there are still some departures, mainly on the to-be repositioned assets, that will still wire on the like for like, clearly. So, not negative, but clearly, cautiousness is, in our view, on both businesses and the macro, is necessary, and maybe Bruno, you want to? The LTV? Yes.

Yes, so we remain highly focused on the same key, of course, the LTV reach, the three points. First one, the disposal achieved over the last nine months helped to keep the LTV ratio under control. Secondly, we have a limited committed level of capex in the pipeline. But nevertheless, we remain subject to variation in asset evaluation.

And Celine, you were mentioning, I saw the outlook net, but the current outlook is stable.

Sorry, I thought your outlook was negative.

No, no, this is stable. Triple B stable.

Thank you. Thank you.

The next question comes from Michael Finn from Green Street. Please go ahead.

Yes. I was just curious, given the change in the sources of funds, since it seems, you know, slightly better than it was, I'm curious if there is any change in the uses of those funds as well. Should I assume that the strategy is in line with the investor day from Feb of 24?

Yeah, Michael. Well, we are still in line with . As I shared in my conclusion, we are focused on our existing portfolio and the occupancy rate. We are also focusing on diversifying our exposure to additional asset classes such as PBSA or data centers, for example. There were no major news to be shared during this Q3, but clearly we intend to reallocate into relative developments the cash that comes from the divestment, but we are still bringing in line with the main guidelines of the reshaped strategic plan that we've shared in February 2024.

Okay, thank you. You're welcome.

The next question comes from Samuel King from BNP Paribas Exane. Please go ahead.

Hi, good morning. Thanks for the presentation. Just one clarification question on earnings guidance, please, and specifically on the contribution from non-strategic operations. I understand that it excludes a potential interim dividend from Premier Healthcare. But am I right in thinking it also excludes a potential dividend from IHE, which last year was around 10 million? And if so, is the decision made if IHE pays a dividend? Because, you know, in theory, the disposal and repayment of shareholder loans should improve the financial position of IHE and therefore its ability to pay a dividend this year.

Yeah. Thanks, Samuel, for your question. Well, indeed, there was no assumption of an interim dividend on Premier Health Care and no dividend on EHE, but we don't expect a dividend on EHE. Most of the cash flows were drawn through the shareholder loan, so nothing to expect on this regarding EHE. And as for Premier Health Care, we'll see there's an interim dividend before the year end, and if this is the case, of course, we will be telling the market that it's the case. But indeed, you were right. On the current guidance, the 67 cents does not include any interim dividend on premium or any dividend on the issue.

Okay. Thank you. Thank you.

The next question comes from Valerie Jacob from Bernstein. Please go ahead.

Hi, good morning. I just wanted to ask a follow-up question on your rating with SNP. My understanding was that SNP had assumed approximately 700 million in order for your outlook not to be downgraded. I mean, I know you are at this table, but I'm talking about an outlook downgrade. So I was wondering, you've only done 400 so far. If you don't sell Champs-Élysées in 2025, Is there a risk that your outlook can be non-graded, or maybe if you can share some discussion you're having with S&P? Thank you.

Well, today, once again, we are consistent with the trajectory we've shared. We've demonstrated our ability to sell assets, even sell assets at the right price. As we said, it was above and above. There's a few opportunities in the pipeline that make us confident being able to secure the debt on debt plus equity threshold at 50%. So at this stage, nothing specific to worth sharing.

So if you don't sell anything until the end of the year, there is no risk in your view that your outlook is going to be downgraded. Is it what you're saying?

Well, it's not for me to say. I mean... It's S&P to say, but clearly today we've demonstrated that we are able to secure our debt on debt plus equity trajectory. And on top of that, the additional two KPIs are very comfortable headroom regarding the guidelines set by S&P.

Okay, thank you.

You're welcome.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay. Thank you very much. Happy to have shared this part of the morning with you. Looking forward to talking to you. Have a nice day. Bye-bye.