Aedifica NV/SA (AED.BR) Earnings Call Transcript & Summary

Okay. Good morning, everybody. Welcome at the half year result presentation of Aedifica. We will, as usual, walk you through the results and add some color to the results that we published this morning. Starting from the highlights that we identified for the first half of the year. I think what you probably have read already this morning that we are presenting solid to strong results for the first half year. Portfolio value standing at EUR 6.2 billion, generating EUR 181 million top line, leading to EUR 123 million result, EPRA earnings that is, which we will explain in further detail during this call. I think that one of the main events during the first half year is the fact that we exited from the Swedish market, leading to 7 countries in which we are doing business today. Also important to flag is that we see that the positive trend in terms of like-for-like valuation of the investment properties continues in the first half of 2025. When looking at the investment program, as announced, we are working on refueling our pipelines. We will go into further detail also in that respect. And when looking at the balance sheet, I think that we are -- as was already the case in previous quarters, presenting a quite sound and strong balance sheet with 42% debt-to-asset ratio. Now this is about the highlights before I pass on to Ingrid, who will dive into in more detail about results and balance sheet. Maybe just bringing to your attention that as announced, we are working once again on growth in the sense that we're working on refueling our investment and development pipeline. We have given guideline for 2025, meaning that we are expecting to increase the pipeline and order portfolio with EUR 250 million of new investments and/or projects. As of today, we are standing at EUR 121 million of new investments and projects added. As you can see on the map, focused on 3 countries being Finland, where we have a combination of standing assets and new developments that we are adding to the pipeline, but also in the U.K. and Ireland, where we have been active. Looking at the existing pipeline, 7 projects have been delivered, which is roughly EUR 65 million. If you said that or compare that to the guidance that we have given, I think it's clear that we're well on our way on executing and delivering on the strategy that we announced for Aedifica. So once again, you can see that we're more than halfway in terms of the EUR 250 million guidance that we've given for new investments and projects, and we're quite confident that we will be able to deliver on the EUR 250 million, go into that later. Project completions, more than halfway and I'm fully expecting to deliver on the guidance. And then asset rotation, I think there, the main thing to be flagged is that the deals that we absolutely wanted to do in 2025 have been done and I'm mainly referring to the exit in Sweden. So that means that we're more than halfway. The remaining EUR 70 million, to be quite honest, is becoming for us more a nice to have than really a must-have, but we are still working on some transactions as we speak. Now this being said, so in terms of highlights, I think I flagged what we needed to flag, and I'll let Ingrid dive into the details of results and the balance sheet.

Okay. Good morning. So my turn to guide you through our income statement and our financial strategy going forward. So first of all, let's have a look on the income statement. So what you can see here are the EPRA earnings as already noticed probably in our half year results. EPRA earnings are up compared to previous year with 4%, leading to EUR 123 million, EUR 2.59 per share. This increase is mainly driven by the increase in rental income of more than 9%, combined with a good cost control, helping to increase the EBIT margin towards 86.6%. For the full year, I do expect that in the second year half, this EBIT margin might slightly decrease, but we do expect full year that we will still be above the 86%. Then let's have a look on the financial charges. So you see an increase in the financial charges compared to previous year, but still, we can report a low average cost of debt of 2.2%, supported by the hedging. Hedging currently stands at 87%. And also for the 2 years that are coming, hedging percentage remains high, above 80%. And then gradually in 2028, we have some more refinancing to be done on fixed interest rate debt. Then the main difference this year is coming from the corporate taxes. As you are all well aware, there came an end to the regime of the fiscal [indiscernible] in the Netherlands. So this has an impact in the accruals of the current taxes in the Netherlands where the full year, we are expecting that it will be an amount around EUR 5 million. And when you start comparing with 2024, I also need to bring a reminder that in 2024, we benefited from a one-off refund of EUR 4.2 million, which, of course, is no longer the case in the numbers that you see on 2025. Then moving over to the net result by including the noncash elements. So first of all, the changes in fair value of the investment properties. So the valuation itself was positive on the first year half, a like-for-like change of 0.5%, where we mainly see increases in the valuation of the assets in the U.K., the Netherlands, Ireland, driven by the indexation. Then we have the line gains and losses on disposals, where you see a loss of almost EUR 12 million. As a reminder, this is a loss that is related to the disposal of the portfolio in Sweden, which we already reported at the end of Q1. The Swedish portfolio was sold with a slight loss less than 4% compared to the fair value. But there is also the impact of the currency translation, which in the past was booked under the equity. And following the disposal of the assets in Sweden, this amount is recycled in the P&L. In itself, it has no impact on the NTA because in the past, it was already included in the equity. And then you also see that the deferred taxes went up with EUR 11 million. This is driven by the difference between the fair value and the fiscal value of the assets, mainly in the Netherlands and this -- East Finland. The increase of the rental income. So rental income went up from EUR 165 million towards EUR 180 million. First of all, we have the impact of the acquisitions and the deliveries, a bit more than EUR 10 million, partly compensated by the disposals. And secondly, we also have what we can call the organic growth in the portfolio, driven by the indexation, plus EUR 4.2 million and the impact of the contingent rents. So contingent rents are mainly coming from the U.K. and supported by the strong performance of the U.K. operators. As we already announced in the guidance this year, we have a catch-up of historical contingent rents, which were invoiced in Q1. So you can consider that an amount of EUR 4 million is nonrecurring, is exceptional and has been booked in Q1. For the remaining of the year, we are expecting that on a full year basis, we will have what you could call normal contingent funds, but still based on the operational performance of the operators of around EUR 1.5 million to EUR 2 million. On this slide, you can see the same increase of the rental income that this time presented on a by-country basis. So like I just explained, there is a strong increase in the U.K. following acquisitions and deliveries, but also supported by those contingent rents. And in Finland, it's mainly coming from portfolio growth. In the like-for-like calculation itself, there is an increase of 3% that can be split between 2.5% coming from rent indexation, 0.2% rent reversion and 0.3% coming from the currency exchanges. The historical catch-up is not included in the like-for-like, so we deducted that from the calculations. Finland is showing a somewhat lower like-for-like 0.7%. This is driven by the fact that the inflation in Finland currently is quite low and most of the lease agreements were indexed at the beginning of January. All other countries, I would say, show a like-for-like that is very close to the inflation in each of the countries. Germany laying a little bit behind because in Germany, you do not have the full impact of the inflation and it only is traded when a certain threshold is reached. Moving over to our balance sheet. So the debt-to-asset ratio, 42.4%. If we deduct the excess cash that we had on the bank accounts at the end of June, it's around 42%. More importantly is that when we do the forecasting that we are expecting that by year-end, our debt-to-asset ratio will be around 41%. Traditionally, the debt-to-asset ratio is at the highest point at the end of Q2 following the payment of the dividend. Then our funding, our financial resources. So first of all, we have a total financial debt of EUR 2.5 billion, out of which the resources are 55% coming from bank facilities and 45% is coming out of debt capital markets. With the banks, we continue to work on the refinancing of all of the debts that are maturing. So as you can see on this slide, our debt maturity schedule is well spread over the time. Most of the maturities for 2025 are currently handled. We still have EUR 50 million of drawn and undrawn facilities that probably will be refinanced in the coming weeks. It also means that we have headroom available on committed credit lines of approximately EUR 600 million, and this is already after deducting the backup facilities for the commercial paper program. So we have enough financing in place to cover all needs until the end of 2026. Moving back to the previous slide. So what you can see on this slide are our main debt KPIs, I would say. First of all, the interest cover ratio, still very solid at 6x. The covenant with the bank stands at 2x. Also going forward, we do expect that although the interest cover ratio will slightly decrease in the coming years following an increase in financial charges, but we will expect that we will remain above the 5x for the coming 2 to 3 years. Net debt to EBITDA also decreased compared to the previous reporting 8.2x. We barely have any secured financing. So most of the financing is done on unsecured basis and only 4% of the assets are unencumbered. We still benefit from a BBB credit rating from S&P. As you all might have picked up is that following the announcement of the transaction on Cofinimmo, there has been a positive credit watch where S&P is stating that if the transaction completes following the announced terms, this could have a positive impact on the credit rating. So I can hand over back to Stefaan.

Thank you. Walking you quickly through the main portfolio features as at the 30th of June of this year. I guess not a lot of surprises here. The focus of the company still is to a large extent on elderly care and senior housing. The 88% that you see on this slide is basically 1% higher than the number that you saw at the end of the first quarter, but that increase is mainly due to the exit in Sweden, where we did not have any exposure to elderly care homes and senior housing. So in itself, no surprises. When looking at the geographical footprint of the portfolio, once again, I think you will find something very similar to what you have seen in the recent past. So the main 4 countries each around 20% still are U.K. in first instance, followed by Belgium, Finland and Germany. We do see Ireland over the past couple of years growing a lot, now standing at 7% with the Netherlands standing at a quite stable 11%. Maybe also flagging that we delivered our first project in Spain a couple of weeks ago. So the minus 1% now is basically representing one asset in Spain. Looking then at the tenants, and I think that, as usual, this is probably the more interesting topic. Now first of all, what you do see here is the tenant diversification, which in itself has not really changed. Our main client remains Clariane standing at 10%. So what you see here is, I think, a quite well spread tenant pool, more than 140 different groups. You will find the bigger European players, you will find national heroes, local heroes, but also some not-for-profit players. Also drawing your attention here to the Finnish municipalities, which are good for 4% of the total outstanding contractual rents of the whole of the portfolio, but it means that when looking at the Finnish portfolio, municipalities, so public operators are a very, very important part of our Finnish activities. And we do expect that to remain the case also in the future, might be even growing, though we do see private operators becoming more and more active in the Finnish market. Again, we'll talk about that later. Talking about occupancy, there's a couple of remarks I think we can add to this slide. Now first of all, when looking at the coverage, what you see is that for 5 of the 7 countries that we're doing business in, we have a very strong coverage, up to 100% in 2 of the countries, but well above 90% in 2 others and in the Netherlands now at 82%. Now this coverage is increasing. Okay. Spain, we only have one asset which has recently been delivered, so it's not really relevant. The Finnish market remains the one where we are putting a lot of efforts into place to try and convince operators to be more transparent and communicate about occupancy and financial KPI. It is work in progress, but we did make some progress as we reached an agreement with the first operator and working on an agreement with the second operator. So this being said, not expecting to see a high coverage in Finland in the next 1 or 2 quarters, but at least it seems like the trend is changing also there for the better. And as usual, you know that we refer to Attendo publications where you can get some flavor about what is really happening in the operating market in Finland. Now this being said, when looking at the occupancy numbers themselves, first message clearly is that the average occupancy in the care homes in the 5 countries where we do have sufficient information remains around 90%. So it's a high number. Looking at the different countries, you will see that as was the case in the previous -- in the previous quarters, sorry. Some of the countries are at 90% or above 90%. What we do see in those countries is that a certain seasonality is starting to kick in, meaning somewhat higher numbers or slightly higher numbers after the summer, slightly lower numbers after the winter, but that is the type of seasonality that we also noticed before COVID. So that basically means that we're getting really back to a normal pre-COVID situation in these countries. I think what to us is more striking and more important is what is happening in Germany now. We now see Germany in our portfolio coming in at 87%. But if you look at the like-for-like growth, which is basically comparing mature assets at March 2024 and at March 2025, we do see almost 400 bps like-for-like growth in occupancy, so which is a clear indication that also in Germany, the trend has changed and occupancy is absolutely picking up. Now what does this mean in terms of rent covers and operational -- operating margins of the operators? Well, as this was the case in previous quarters, we can show you the rent cover for the whole of the U.K. portfolio of Aedifica, which remains at a very, very high level above 2, very strong rent cover on the back of very strong operating margins well above 25% floating with 30% in the U.K. portfolio. We are working and collecting more info in some of the other countries like Finland and Belgium. So I promised this already before, but it is evolving in the right direction. So hopefully, in the near future, we will be able to also show you rent covers for the Belgium and the Irish portfolio. Now this being said, to add some flavor to what we see happening in the countries. I think that, first of all, we can confirm that U.K. and Ireland remain very, very strong performance in terms of operating performance. We do see a lot of positive indicators and trends in countries like Finland. We're once again referring to Attendo, which recently, and I think it was 2 weeks ago, flat, slight improvement of their margins. But more importantly, for the first time, if I'm not mistaken, not just referred to increased fees they're getting from the well-being countries, but they basically also referred for the first time to the positive impact of the somewhat lower staffing requirements that apply in Finland since the 1st of January. So they do start to see the first positive impact of that on their margins. What we also see in Finland is clearly that our development pool is growing. and that some of the bigger operators, private operators like, for instance, Attendo, but also [ mainline ] are absolutely turning back into growth modus. So quite a lot of positive trends in Finland. Looking at the Dutch market, we do see a very stable market, which recently a new study published by BDO indicating that in the -- I think it was mostly talking about the intramural part of the market, but this being said, they flagged that they now see fee increases outpacing cost increases, which once again, on the back of growing occupancy, seeing also revenue per resident growing is what we want to see and it's clearly what is also happening in the Netherlands now. Maybe also about the German market, where we have seen some issues over the past couple of years. Once again, I think that we can confirm that the positive trend that we saw is still continuing. We mentioned already in the past that high cost in certain regions are increasing to levels which seems to be very promising. We keep hearing from the German team that also the idea of allowing more flexibility in staffing requirements is also starting to kick in, in more regions, which should be helpful for the German operators. And as we just flagged, we did see this quarter really the occupancy in our portfolio improving. So that makes us also quite positive about what will be happening in the German market in the near future. This being said, we do see a positive trend, and we confirm the positive trend that we have been talking about regarding operators over the past couple of quarters. Now as I I keep repeating myself, does not mean that there is not still a risk of certain incidents and then talking about incidents. We flagged in the press release that when looking at Colisee, we only can confirm what we said at the end of the first quarter. Rents are paid at June 30 and occupancy of the Colisee, but in the case Aedifica's, basically the Armonea in Belgium portfolio, occupancy in that portfolio is absolutely in line, actually above the average of the Belgian market. So there's nothing new that we can tell you at this point in time about Colisee. About Argentum, which is German operator that at least for part of its portfolio went into insolvency. There's only 2 assets involved in the Aedifica portfolio. One of these assets is an absolutely top performer and is, by the way, in a self-managed insolvency of Argentum. So we do not expect any impact on that asset. coming out of this insolvency procedure. The other asset is one that we were redeveloping and that will be if everything goes well, but will be transferred out of the insolvency to a new operator in 2 days from now on August 1. So that is an issue that we are -- well, if things go well, has been solved by now. I think that, that concludes a bit on what we have to tell about what we see happening with operators. So we do see a positive trend that continues, and we do see slightly -- we do see gradually improvement of operator performance in Europe on average. Walking you through some other features. Now first, the lease maturity still stands or the WALT at least stands at 18 years. We have a 100% occupancy rate within the portfolio. And I think that what is important to flag also is that when looking at the maturity of the leases, only 1% of leases will expire in the next 5 years. I think that in itself is also a quite strong feature. Looking then at the portfolio valuation, as I mentioned at the beginning of this session, that maybe the trend continues or the positive trend continues. Looking at the fair value yield as at June 30, we do see an average fair value yield -- gross fair value yield of 6% for the whole of the portfolio. But when looking at what happened like-for-like, I think that now 18 months on a row, we do see stable to slightly increasing valuation, which meant for Q2 2025, an increase of 0.21%. If you look at the whole of the first half year, it's 0.5%, but also important is to notice that it is now slightly positive for all of the countries in the portfolio. So the trend is more and more confirmed. And then one slide that we particularly find interesting this time because it is an indication of the fact that we do see -- gradually do see a more dynamic health care real estate investment markets in Europe. Our pipeline year-to-date, this is not the exact June 30 number because we took into account some of the deals that landed just after June 30. But year-to-date, our pipeline is standing at EUR 178 million. I think that interesting is to have a look at the geographical split where historically, we used to have a huge pipeline in Germany. We do still have a pipeline in Germany, but it's basically --or it's, to a large extent, one bigger project that is being executed right now. Historically a legacy project, but that has been renegotiated. But I think it's more important to look at the other countries that are becoming more important. And I guess without surprise, we're talking about the U.K., Ireland and Finland. I can confirm that our Finnish in-house development team is building up once again a pipeline at the yield targets that we're looking for and that we're also building up a pool of potential future projects that might become committed and that we expect to become committed in the next quarters, whereas both in the U.K., but certainly also in Ireland, we do see still a lot of potential. I think that this is reflecting in reality of operator performance in these countries, which allows us to find an interesting balance between the cost of construction, our own cost of capital and the rent payment capacity of operators. And that clearly reflects into this geographical split. In terms of expected delivery date, you will see that we still expect EUR 43 million of projects to be delivered this year and then roughly EUR 65 million and EUR 70 million in '26 and '27. Maybe reminding you that all of these projects are 100% pre-let. So there is no speculative development going on within Aedifica. But I think the main feature here is now that we finally reached the 6.5% initial yield on cost -- average yield on cost for the whole of this pipeline. You heard us talking in the past about the targets that we're setting. I think now the legacy deals are behind us. The past is behind us. We're now building a new pipeline, which is clearly reflecting the yield on cost that we want to see around 6.5%. And then perhaps underlining and stressing that we do expect to be able to continue refueling this pipeline. When talking to the country teams and our investment team, I can confirm that on average, we do see a much larger, bigger pool of potential deals that we are analyzing continuously. So that is a first indication of a more dynamic investment market. We also have more important, what we call preapproved deals or pool of deals, meaning deals that we have analyzed that have green light within the company, but that still need to become committed. So we really do see a more active investment market in Europe, which gradually is keeps improving. Then maybe just as a quick reminder, Aedifica is, well, was founded in October 2005. So we have our 20th anniversary this year that we already celebrated with the team, and this puts me in a position to thank the team for the efforts that have been made over the past 20 years and over the past couple of years, and that is basically a big part of the success of Aedifica over this period in time. With some more detail on where these people are working, but you see that we have a very international team with a relatively small mean and lean HQ in Brussels and then most of the other people dedicated to one of the countries in which we are doing business with the somewhat bigger number in Finland, clearly reflecting the fact that we have a full development in-house team in Finland. And that then brings us to the outlook, which I will let Ingrid.

Okay. So at the beginning of the year, we have given guidance that for 2025 for the full year results, we are expecting EPRA EPS of EUR 5.01 per share, and we announced a proposed dividend of EUR 4 per share. Now after this 6 months, the results that we have just shown to the market this morning, they are ahead of budget. So -- but at the same point in time, we also take into consideration that we have the exchange offer on Cofinimmo that is outstanding and where certain elements are currently unknown like the exact timing and also the number of shares that will be tendered and that will have an influence on the EPRA earnings for the full year 2025. So for that reason, management decided to keep the guidance on a standalone basis as it was announced at the beginning of the year and at EUR 5.01 per share. So depending on the rollout of this transaction with Cofinimmo, later onwards, we can provide more specific guidance on this.

Okay. And so we made the bridge towards the Cofinimmo transaction. So a quick update on where we are standing in the Cofinimmo transaction. So a lot has happened since May 1, of course. Main milestones up to now, first of all, the fact that we were able to reach an agreement with the Board of Cofinimmo regarding this transaction, which then led to an exchange ratio of 1.185 Aedifica shares for each Cofinimmo share. So a deal that is recommended now. Second main milestone is the EGM of Aedifica on July 11, during which we got approval of our shareholders for the capital increase that we need to be able to execute the exchange offer. And we -- well, we got approval with an overwhelming 99.9% approval rates for which we like to thank our shareholders. Right now, we are in the more at least, if I'm allowed to call it like this, administrative phase. So basically, teams are working now on prospectus approval with the FSMA in Belgium. And we're working our way through the merger approvals that we need to be able to execute the deal. Now as you all know, the Netherlands and Germany already approved. We are in Belgium right now in an ongoing procedure with the Belgian market authority. Today, we are in the pre-notification phase of this procedure, meaning that it is the investigation and prosecution service of the IPS of the BMA, which is conducting its investigation. Now this is a phase which is, first of all, totally confidential. And secondly, it is a phase without any strict deadlines. So basically, what the IPS is doing is they're talking to the market, they're sending out questions to whoever they deem interesting enough to ask questions to, including, of course, Aedifica and Cofinimmo. That phase is ongoing, as I said, confidential without strict deadlines. And that has led then to the press release that we sent out, I think, 10 days ago, flagging to the market that we expect that the indicative time line that we had put forward previously is probably not the one that really in the end will be the final time line. So it's an ongoing process. At this point in time, there's absolutely nothing more that we can tell you about this, expecting that you probably will have a lot of questions, but I'm afraid that there are not a lot of answers that we can give at this point in time. I think that this concludes the presentation that we prepared for you and that we can switch now to the Q&A. Looking at the people here on our side, if I'm not mistaken, you can either raise your hands and ask your question or you can use the chat room. And Delphine, I let you manage the question.

Stephanie Dossmann?

This is a quite good set of results. I must say, I was a bit frustrating not to see any increase in the guidance, but I understand your -- the rationale behind that. Cofinimmo did the same actually. So -- but maybe in terms of financial expenses, you're mentioning that you are currently discussing with banks and negotiating future refinancing. And given the guidance you gave on the synergies on financial costs with Cofinimmo, what kind of financial terms are you discussing currently? Do you see the impact from these synergies already?

So also there, I must say that the current situation, yes, there are a lot of unknown parameters. So I can say when a part of the negotiations that we're doing with the bank, they look more at, I think I still on a standalone basis. And what we have been refinancing, especially at the beginning of the year, there you can think about a credit spread, I would say, close to 110 basis points for the loans with a tenure between 5 to 7 years. But most recently, I did notice in the discussions that we are currently having that they start taking into account the transaction and also the potential impact that it might have on the improvement of the credit rating. So currently, I do see credit spreads that are a little bit lower than the ones that I just discussed. But to be transparent, we have not signed on those conditions yet.

And maybe a second question on the evolution going forward of your asset values. How do you see them evolving, especially on the yield impact? I appreciate it's growing from the rent impact. But on the yield impact, do you see any yield shift going forward?

First of all, I fully understand the question because it's a question that what we have ourselves. I think that right now, there's not really a lot of market evidence that yields are compressing. So you refer to the fact that valuation moves into the right direction or at least moves upwards, but mostly on the back of rent increases and indexation. We do see 1 or 2 markets today. But as I said, this is basically us talking about what we see happening, not necessarily what the appraisers are already doing. We do see some markets where we start to feel some pressure on yields when we talk to developers, when we talk to operators. So it could be that we might see some pressure on yields in the forthcoming quarters. But right now, it's hard to tell. Personally, I'm expecting to see for the next quarter something similar as what we have seen in previous 2 quarters in terms of valuation.

Okay. Very clear. And maybe a last one. It's a bit tricky and maybe too early to say, but regarding the combination with Cofinimmo and the potential disposal of noncore assets. Did you have any approach from buyers, potential buyers or discussions underway? Or what can you share with us on that?

There's not a lot that we can share at this point in time for lots of reasons, but I think I told the market already before that since we announced the offer on the shares of Cofinimmo that indeed parties have been reaching out to us about noncore assets, but we're not engaging in any discussions at this point in time.

Just maybe in other words, do you see more and more interest from investors for Belgium offices currently or not because there has been a shift, I would say, in the mood from investors on the office side in France, for instance. I was wondering if it's better in Belgium currently.

Yes. I hear you, but it's absolutely not up to me to make statements about the Belgian office market at this point in time. What I was flagging is that the fact that the transaction is out in the open created some momentum apparently towards Cofinimmo-Aedifica. That is something I can confirm. People have been reaching out. But jumping to conclusions, I think that other people is much better placed to make that comment. It's definitely not up to me to make that comment right now.

Frederic Renard from Kepler.

So just to come back on the comment, I guess, the mark of interest you received on the Belgian office were more opportunistic than anything rather than a core investor. So it's more like people looking for you to sell it at a big discount, I guess. Well, you probably won't comment on that, but that would be.

You gave the answer. I'm definitely not about to comment on that. But once again, we are not soliciting anything right now in the market. When people reach out to us, it's their own initiative. The only thing I flag is that, yes, people have been reaching out to us. As I said, apparently, the transaction is creating a certain momentum, but there's no other conclusions, I think that you can draw from that at this point in time. And not going to speculate or make comments about who has been reaching out.

Then I will not ask the question I had also on the competition authority because I think you answered already. And then maybe --

Sorry about that [indiscernible]

Maybe a comment on the type of portfolio that you are seeing on the market today in the health care space. I was just wondering the level of yield you would be requiring for this portfolio? Are they in line with your pipeline at the moment, which is around 6.5%? Or would you be ready to take a lower yield because there is maybe some upside somewhere else? Can you comment a bit on that?

Yes, absolutely. The 6.5% you referred to, that's basically what we want to see for our development pipeline, which is a combination of in-house developments and forward deals. Maybe starting with that, we do see, as I mentioned, a lot more activity, certainly in Finland. And with that, we're clearly reaching the targets. But we also do see in countries like U.K., Ireland, Spain, that there is a lot of potential to do forward deals. And forward deals, and I think we keep in mind yield targets that are around 6% to 6.5%, depending on what type of development we're talking about. And we want to see on average an average yield of the total pipeline around 6.5%. Do we see potential in that range? Yes, clearly, in Finland. Yes, clearly, in some other countries, there are countries where yield expectations are probably more between 5.5% and slightly below 6%. But then it will just depend on how -- basically how we assess the impact of the -- what the impact of these projects will be at EPS level. So it means we're diving into more net yield, et cetera. But yes, there are a couple of countries where we do see growing potential both in terms of volume, but also in terms of reaching the targets that we've been setting ourselves. When you're talking about standing assets, existing portfolios, I think that there, the reality is more closer to what I've been telling the market before that we would love to do deals around 6%. I think that there probably is a market now somewhere between 5.5% and 6%, depending on the country, et cetera, et cetera. So that is more a matter of negotiation, trying to find a solution so that we can meet pricing expectations, but also our own expectations.

Understood. And maybe final one, sorry, on the contingent rent. I'm not so sure I got all the explanation for the EUR 4 million impact this year. Is it one-off or not? So Ingrid can you repeat it?

Yes. So formulas that we have in the lease agreements regarding the contingent rent in a couple of cases for some assets, this was actually referring to a period in the past over 3 years. So what you currently see the EUR 4 million that I said that was more to be considered as a one-off. That is a catch-up from those past year, and that's also the reason why I excluded from the like-for-like calculation. But besides that, we also have and that should be also more the case going forward, contingent rent formulas that are more based on the yearly performance of the operator. And there, it will be calculated on a yearly basis. Of course, we do not know exactly what will be the amount and will be there every year because it depends on the operational performance. But there, we estimate that on a yearly basis, we see, I would say, EUR 1.5 million to EUR 2 million of more recurring -- more recurring contingent trends. So this is something that we already had in the numbers in the past, but the impact is growing. So it's related to the operational performance that they are doing well. So that also means that the amounts that are related to the contingent trends are increasing. So this is something that you will see on an ongoing basis that this year, there is a one-off element of approximately EUR 4 million.

[ Melanie Simmons from Valance ]

One from my side. So it's positive to see that Colisee is still paying the rent. However, we understand from one of your peers that they are having arrears leading to some assets from Colisee in Belgium. So can you elaborate if there are any discussions ongoing for your assets? And if you're working on a backup plan in case the situation does change within Aedifica's portfolio?

Okay. Lots of -- first of all, I can confirm that we are collecting rent for all of the assets within the portfolio. So that's one thing. Secondly, I'm not going to comment on whether or not there are discussions ongoing with Colisee, but I think that you probably know that we have a culture of having a constant dialogue with all of our tenants and clients. So yes, of course, we are in contact with them. And then thirdly, remind me the third part of the question. Do we have a backup plan? Sorry. But that's also part of the way that we see the asset management of our portfolio is that we always try to anticipate what might be happening in the portfolio. And this is just not about Colisee, but if you want also about Armonea in Belgium. We do think that we have a good understanding of the quality of the assets in the portfolio. And if we think that within a certain tenant portfolio, there are some weaker assets, we, of course, always work on possible backup plan if need be. So that is exactly the same approach that we're also applying to the Colisee-Armonea portfolio in Belgium.

So to understand, at this point, there's no clear indication that at Q3, the situation could be different?

Now you're asking me to look into the immediate future. I'm not in the driver's seat of Colisee in France. And I think that, that is where they are setting out their strategy. But at this point in time --

Valerie Jacob from Bernstein.

I just have a couple of questions. My first one is, I understand that there is many uncertainties around Cofinimmo. But if I think about Aedifica on a standalone basis, if I think about H2 versus H1, you've already mentioned the EUR 4 million of contingency rent. Is there anything else that we should know? Or can we just assume that it's going to be the same type of earnings?

I think you can assume the same type of earnings. Of course, we had the disposals of Sweden. So Sweden was also contributing to rental income in the first quarter, which will not happen in the second year half. But I would flag those 2 elements, so disposal of Sweden and then the one-off regarding the catch-up in the contingent plans and the exceptional elements that will not be repeated in the second year half. But besides that, there are no important elements that will have an influence on the numbers, no. Speaking on your questions, a little bit on the taxes because the taxes that are coming from the U.K. entities as we are a U.K. REIT currently. So that means that withholding taxes are only booked at the moment of the timing of the payment of the dividend, which will happen in the second year. But there is nothing major besides those 2 elements that we just discussed that will have an influence on the numbers in the second year half.

That's clear. And my second question is about the transaction cost for the merger with Cofinimmo. Can you tell us what you've booked already and what you anticipate to book in H2?

So currently, there are no transaction costs that are booked in the income statement. The reason for that is that most of the transaction costs that we occurred so far are related to the legal workflows. And that also means, as you might be aware, under IFRS, if you have a capital increase, all costs that are related to the capital increase are deducted from the capital with which you increase the equity on the balance sheet. So it's an IFRS requirement. So that means that for the moment, the cost they are not expensed and they will be reduced from the equity at the point in time that we will issue the new shares and actually have the increase of the capital in the balance sheet.

But so far, you haven't booked [indiscernible]

The other transaction costs that are more related to the advisory elements and those will be disclosed in the prospectus, and they will be expensed in the income statement. But we have not accrued them so far because they are mainly related also on a success fee basis.

Lynn Hautekeete from KBC Securities.