Eurocommercial Pptys N V

Hello and welcome to the Eurocommercial Half Year Results 2024. My name is Laura and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Luca Lucaroni, Investor Relations Director, to begin today's conference. Thank you.

Good morning to everybody. My name is Luca Lucaroni, Investor Relations Director. I'm happy to open the call where our CEO, Evertian Van Garderen, and our CFO, Roberto Fraticelli, will present your commercial results for the half year 2024. The agenda for the conference call is presented on this slide. Ever at the Janva Garden, we talk about the operational results of the company, including the leasing activity during the first six months of the year, and about ESG. Roberto Fraticelli will discuss in more detail the property valuation and the financial results. We will then open the call for any questions and remarks you may have.

Thank you, Luca, for introducing us and presenting the agenda for today. Good morning, everyone, and thank you for joining us this morning. As Luca said, I will start with an overview of the operations of your commercial during the first six months of 2024, and we'll finish this presentation later on with some closing remarks on the share buyback program, the dividends paid, and the guidance update for 2024. Although the entire property portfolio was externally valued as per 30 June, and there were some small uplifts in each of the countries, the portfolio weightings by value over the four countries did not change compared to December, 2023. Italy is still at 44%. Sweden and France remain the same, both at 21%. Whereas Belgium covers 40% of the portfolio. The total value is now just over 3.8 billion, and there were no changes in our portfolio of 24 shopping centers. This slide illustrates the geographical diversification and the locations of our 24 shopping centers within our four countries. The company produced a good operational performance in the first half of 2024. On the slide, you see an overview of all the important operational metrics for the first six months of the year, which underpin that statement. I will comment in more detail on these metrics in the remainder of this presentation. Much lower inflation and therefore much lower indexation compared to 2023 determined a like-for-like rental growth for the first six months of 2024, which resulted in a growth of 4.5%. Indexation was still the main driver of the growth together with turnover rent in particularly in Italy. 40% of the Italian rental growth was produced by turnover rent with the three flagships, Carosello, Fiordaliso and Igili being responsible for the majority of the turnover rent contribution. You can see from the 10 year like for like rental growth overview that the first half of 2024 was not a record. But 4.5% is still a good growth figure compared to the growth reported over the last 10 years. The like-for-like rental growth for the portfolio and the four countries is always calculated on the basis of 12-month data. We compare the tenancy schedules as per 30 June 2024 with the tenancy schedules as per 30 June 2023. So basically, we compare two photographs. We achieved an average rental uplift of 2.5% on 261 renewals and re-lettings. Last year, that number was 235. And this is on top of indexation. These lease transactions represent 16% of the minimum guaranteed rent of the portfolio. We were able to attract new tenants with our 100 new lettings, achieving an uplift of 5.8% as retailers and brands continue to recognize our centers as important destinations in their expansion plans. This leasing activity is continuing with already 135 new leases signed in the first half of this year, achieving an uplift of around 4.1% on average. Low vacancy is usually a good indicator of the quality of the properties. Over the last four years, we have reported vacancy rates in our property portfolio ranging between 1.3% to 1.8%, and we continue to do so. The average since June 2020 was 1.5%. The APRA vacancy rate remained very low at 1.7% in June 24 for the entire portfolio. It was slightly down from the vacancy rate reported for March 24. Vacancy in Belgium, France and Italy reduced. The vacancy in Sweden is temporarily up due to part of the space, which became vacant when the ICA hypermarket moved out in April to open next door to our Ingesta shopping center in their shopping. The majority of the space is already re-led to Coop on a 15 year lease and to Normaal on a new 10 year lease. And they will both open in November. The sales in the stores of our shopping centers in the first half of 2024 were up by 1.8% compared to a year ago. In France and Sweden, the inflation was higher compared to the other countries, which is reflected in the higher sales figures for those countries. For Italy, the sales were also hampered by the re-merchandising project in Carosello, where there were temporary vacancies due to construction works. and therefore the involved units are excluded from the figures. In addition, the poor weather in the spring and early summer in Italy affected the sales of summer clothing. The company has always been known for its low occupancy cost ratios and we're therefore pleased to report a 9.8% occupancy cost ratio for our portfolio as for 30 June 2024 compared to 9.5% in December 23. This slight increase is the result of high recent rental growth, mainly due to indexation. However, this percentage is still one of the lowest in the industry and implies that the rents are affordable for our tenants. An interesting trend is that the composition of the occupancy costs has changed over the years. Service charges are a slightly smaller part, whereas rent is a slightly bigger part of the costs. This is a healthy trend and shows that we're able to lower the service charges in favor of more rent. And this is clear evidence that our strategy to lower service charge for tenants with the aim to improve the rent levels and therefore achieve rental growth is working. This slide illustrates the strategic re-merchandising project at Walloway Shopping that has now almost been completed, involving several major anchor stores. On the 17th of April this year, Zara opened their full concept flagship store of 3,300 square meters, doubling their floor space in a new central mall location. This was shortly followed by C&A, who relocated and opened a 1,500 square meter store that was previously occupied by Zara. Meanwhile, Inno has started the full refurbishment of their 12,000-square-meter three-level department store, while Carrefour recently replaced Walloway's supermarket match, introducing the latest version of their Carrefour market concept, which in terms of quality is much more closely aligned to Walloway's immensely wealthy primary catchment. A similar project is underway in our Milan flagship Carrozzello. where Media World recently relocated into the former Cohen department store, which is around 3,000 square meters, thereby creating the retail space and opportunity for this important re-merchandising, which is focused on a new full format Zara of around 4,600 square meters, who will triple the size of their former store. The new Zara store is being built together with a new 800 square meter store for Bershka, and an enlarged Stradivarius store of 550 square meters. These Inditex stores will be completely and fully open for trading in early October this year, and will collectively become their flagship representation, serving the eastern region of Milan. In Sweden, at Grand Samarkand, Växjö, the development is well underway for a new external retail store for the expanding value retail The 8,200 square meter unit has been led on a 10-year lease and is scheduled to open in March 2025. The project cost, including land, is about 11 million and is expected to provide a return of at least 8%. We recently developed a similar store for EcoHallen at Nerschöping, which is illustrated in the picture at the bottom left of this slide, and sold the investment at the yield of 6%. Over the last five years, the health and beauty sector has increased its presence in our galleries by 24% in terms of floor area and by 32% in terms of rental income. Rituals have recently opened three more stores in our shopping centers, bringing their total number in our portfolio to 11, with another store due to open in Fiordalisa this autumn. New international brands expanding across our markets include the French fragrance designer Adopt, who have opened recently in Passage du Havre and Les Atlantes. Wiken Cosmetics, who have opened three additional stores in our Italian portfolio, taking the number to six, while their main competitor, Kiko, are now looking for larger stores and also investigating the Belgian and Swedish markets. The sector is also seeing the expansion of specialist beauty centers such as MediMarket, who are substantially increasing their footprint and their unit size to provide a range of in-store treatments in addition to the normal product range. MediMarket have recently signed for an enlarged unit in Walloway, which is 680 square meters, and will shortly open in Cremona Pole. The food beverage sector is continuing its rapid expansion following the COVID-19 restrictions with a range of new brands, concepts and formats. The sector now represents 9% of our gallery floor space, an increase of 23% in GLA and of 31% in rental income. To satisfy the increasing demand from both customers and operators, We have recently completed several F&B projects in all our markets, repositioning F&B as a central pillar of attraction, increasing both footfall and dwell time. The sports sector also continues its rapid expansion with the increasing popularity of branded sport and leisure fashion. The sports sector now represents around 10% of a gallery floor space, an increase of 24% over the last five years. this demand has resulted in a significant increase in rental income and also the rent per square meter of 64 percent and 32 percent respectively many of these brands are increasingly operating cross-border with jd sports being particularly prominent with whom we have already six stores covering france and italy increasing demand for sneakers and training shoes has seen the expansion of specialist footwear retailers such as Courir, Foot Locker, Snipes, and Skechers. This slide looks at the fastest growing brands in our shopping centers over the last five years. I just mentioned JD Sports, but on this slide, I would also like particular reference to Normale, the expanding Danish value retailer who is present in all our seven Swedish shopping centers and are also performing well in France. both in Passage du Havre and now also in Modeau in the suburbs north of Paris. Normale are also seriously investigating the Italian market, and we fully expect to have their presence in our portfolio soon. Fashion continues to be the cornerstone of our galleries, representing around 40% in terms of floor space. However, the big change in this sector is that it now comprises fewer but much more larger stores. This is most evident with Inditex as illustrated in the re-merchandising project I've just shown in Bolloway and Carosello, where they are doubling and even tripling their store size in order to showcase the latest full Zara concept. All the Inditex brands are expanding their representation, and we currently have 24 of their stores, mainly in Italy and Belgium. Equally, H&M already doubled the size of their stores in our Swedish centers before the pandemic. taking their typical unit size to 3,000 square meters, including H&M home. Before I hand over to Roberto for discussing the financial results, I would like to say a few words about some of the ESG activities listed on this slide. We continue with the double materiality assessment to identify key ESG topics and to evaluate your commercial's impact on the environment and society. Our approach ensures compliance with the Corporate Sustainability Reporting Directive and its standards. This process will be finalized in the third quarter of 2024 so that we're ready for reporting over 2025 in compliance with the CSRD and with limited assurance provided by our auditors. The recertification of our assets under new BREEAM in use protocol version 6 is progressing well, and we just received the certificates for our French assets with either excellent or very good scores. We continue to make further progress with our sustainable finance goals, having just reached agreement on the commercial terms for additional green and sustainability-linked loans for financing in Belgian and Italian and Swedish shopping centers, which loans Roberto will cover in more detail as part of the financial review. This slide provides the major ESG achievements reported over 2023, but also an update on the percentage of green leases out of the total leases per country and the electric vehicle charges in our shopping centers, which should reach a number of 494 by the end of this year. And this is the moment to hand over to Roberto Fraticelli, who will discuss in more detail the valuations of our property portfolio, the funding and the financial results.