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

Okay. Good morning, everybody. I hope everybody hears us loud and clear. Welcome to the annual results presentation for 2022 -- 2023, sorry. It starts well. Starting, first of all, with some practical comments. We will walk you through a presentation as the first part of this conference, and then there will be time available for a Q&A after the presentation. The presentation itself will be based on a selected number of slides from the roadshow slide deck. The full slide deck is available on the website as of now. So I think that we can start without further ado, and I'll let Ingrid start with commenting on the 2023 results. Ingrid, the floor is yours.

So good morning. Probably, you already had the chance to have a look on our press release that was issued this morning, but we will quickly go to the income statement. So we reported EPRA earnings of EUR 219 million, an increase of 21% compared to the previous year. When you take into account the increased number of shares following the capital increase, this leads to an EPRA earnings per share of EUR 5.02 compared to the EUR 4.76 of previous year. So rental income was up 15%. The EBIT margin slightly improved from 84.6% towards 84.9%, an increase of 16% in the operating result. Then there was an increase in the financial charges, taking into account the increased interest rate, but the average cost of debt remained at a very decent level of 1.9%. Then we have the current taxes, where we had some unusual movements this year related to the FBI status in the Netherlands. So we received a refund for the period 2016 to 2021, and this was reflecting an amount of EUR 9 million. On top of that, also for 2023, no current taxes were booked in the Dutch entities. As most of you are aware, this regime is expected to disappear from the first of January 2025. Then we start including the noncash elements. The most important one is the changes in fair value of the investment properties, minus EUR 143 million. On a like-for-like basis, the investment properties lost 1.9%. We saw the most significant decreases in fair value occurring in the German and Swedish portfolio, but also noticed a positive fair value change in the U.K. on the back of the strong rent cover of the U.K. operators. Then there is a decrease in the mark-to-market of the financial derivatives. So the hedging instruments, minus EUR 50 million related to the increase -- the decrease of the long-term interest rates. We booked a goodwill impairment. So it's the goodwill that is outstanding on the shares of Hoivatilat. The goodwill impairment is related to the increased average cost of capital. And there was a deferred tax income of EUR 24 million related to the FBI regime that will lead to a restating of the tax base for the Dutch assets. So that leads to a net result of EUR 24 million or on a per share basis, EUR 0.56. On this slide, you can see the increase in rental income, plus 15% on a year-on-year basis. So the most significant contributions in the increase of the rental income are related to the acquisitions and deliveries, mainly taking place in Finland and in Ireland, and there's also the impact of the indexation. On a like-for-like basis, the indexation represents 5.6% in group currency. So this, you can see more into detail on this slide. So here, you can see the increase in rental income totaled 15% split out by country, but also the like-for-like calculation by country. For each of the countries, the number is presented in the local currencies. And then at the end, we have the group currency, the 5.2% increase in like-for-like rental income, which can be split, like I said before, into 5.6% regarding rent indexations, 0.1% rent renegotiations and minus 0.5% related to the exchange rate differences There are 2 countries, Germany and the U.K., where there are caps in place on the indexation. Then we have the roll forward on the EPRA earnings, the increase of 21%, mainly supported by the increase of rental income of EUR 41 million. Operating costs went up with the increase on the portfolio side, but we were able to slightly improve the EBIT margin. Then we have the [ FBI ] increase impact on the financial charges and then a little bit of an unusual movement in the taxes, plus EUR 13 million compared to the previous year explained by the EUR 9 million one-off refund and also the current taxes that were applicable in 2022 in the Dutch entities that did not occur in 2023, which is representing an amount of more or less EUR 4.5 million. Moving over to the balance sheet. So we are pleased that we can say that the debt-to-asset ratio at the end of the year is below 40%, so 39.7%. This is well within the financial policy that we have set up, where we aim to have a debt-to-asset ratio around 40% with a maximum of 45%. Theoretically speaking, this would mean that we could do additional investments for almost EUR 600 million before reaching 45% or we could absorb negative portfolio valuation of minus 12% before we would have hit the 45% threshold. This is actually something that you can see on the next slide. So this slide is giving an estimate on how the DTA will evolve in the course of 2024. It's a dark blue line. This is without taking any negative portfolio valuations into account, but it does take into account the execution of the committed pipeline. So you can see in that base scenario that we are expecting that by year-end, debt-to-asset ratio will be slightly below 41%. Then we did some sensitivity testings. Assuming that for the coming quarters, first of all, there would be a negative evaluation of minus 0.5%, so in total, the portfolio reduced EUR 120 million. And then we had some scenarios which are a little bit more pessimistic with more negative portfolio valuations. Main message is that we believe that the portfolio is resilient enough that even in a scenario where we would lose more than EUR 350 million of the portfolio value, by the end of 2024, the debt-to-asset ratio can stay well below the threshold of 45%. Above, words on the credit facilities. So we have a total financial debt outstanding at the end of December of EUR 2.2 billion. In the course of 2023, we were able to do a lot of refinancing with banks, in total almost EUR 650 million. So we still have very good access to bank financing. On average, the credit spread that we -- is applicable on those refinances is around 150 basis points and it's with a turn of between 3 to 6 years. So we can still show very strong financial KPIs. We have a BBB credit rating with a stable outlook with S&P, and we are very well within the thresholds that were set out to stay within the BBB space. The interest cover ratio stands at 5.9x, and a net to -- net debt-to-EBITDA ratio decreased towards 8.4x. Average cost of debt at a very decent 1.9%. And in the meantime, out of all our financing, 50% is related to sustainability-linked KPIs. Almost all of the debt within the group is on an unsecured basis. So we have very little uncumbered assets that represent approximately 4% of the total portfolio value. On the credit facilities, there's an average rating debt maturity of 4.4 years. So at the end of December, we have EUR 911 million headroom available on committed credit lines to finance CapEx and liquidity needs. And this is even after deducting the replacement for the short-term commercial fee. So in our business plan, let me take into account the execution of the committed pipeline. There are no financing needs that occur until the end of 2025. As you can see in the graph, in 2024, we have very little debt maturities to be handled, a total of EUR 170 million existing mainly out of undrawn credit facilities. Then the interest rate hedging. At the end of December, 96%, the weighted average held-to-maturity stands at 5.1 years. Also, in 2024 and 2025, we are expecting that the unhedged portion of the debt portfolio will be around 10% to 15%. And then starting from 2027, there is a decrease in hedges that we have in place. These hedges are actually the main contributors of keeping the average cost of debt around 1.9%. And also, in the outlook for 2024, we are expecting that the average cost of debt will be around 2.2%. Our dividend policy. So on global, we distribute approximately 80% of the EPRA earnings of the company. For 2023, the announced dividend is EUR 3.80 per share, which represents a payout ratio of 76%. It also means that there are retained earnings that will stay within the company and reinforce the balance sheet. Currently, there is still a bit holding tax, a reduced withholding tax of 15% that is applicable. Following the Brexit, there is currently a transitional regime that makes that the U.K. assets are still included in the calculation of the 80% threshold of the portfolio in residential European health care real estate. This transitional regime will stay in place until the end of 2025, so we are expecting that until the end of 2025, the reduced withholding tax regime will be in place. And to summarize the outlook that we are giving for 2024, so there is an increase in rental income of 5%. We are expecting for the year '24 rental income of EUR 330 million, and EPRA earnings of EUR 223 million, an increase of 1.5% compared to 2023. Like I just explained, by the end of '24, we are expecting that our DTA will be slightly below 41%, but this is not taking into account any assumptions on portfolio valuation changes. We still have the committed pipeline. In '24, we are expecting that there will be deliveries of almost EUR 300 million out of this pipeline. And in our outlook, we also include an assumption on asset disposals of approximately EUR 100 million to take place. You can see on the slide the assumptions that we have made on the foreign exchange. And then maybe also a couple of words on the tax regime because also in 2024, there will be some one-off elements. First of all, in the Netherlands, so early February, when we received the final tax assessment regarding 2022 in the Dutch entities. And therefore, there will be a refund of EUR 4.2 million in 2024 in the books. And in '24, we are not -- we are expecting that we also will be in FBI, so no current taxes will occur in the Dutch entities. Then since the first of February, the U.K. REIT regime became effective. So that means that in the U.K., we will have 1 month of current taxes that will occur for the month of January and also going forward also on limited activities that are out of scope of the U.K. REIT regime. And then the first distribution from the U.K. with [ holds corp ] will take place in 2025. There will be a net withholding tax on those dividend distributions of 15% but this will occur for the first time in 2025. So in '24, there's no assumption of withholding taxes on the dividend coming from the U.K. entities included in the outlook. This outlook is a bit of a conservative approach in the way that we have very limited assumptions on hypothetical investments. We have the execution of the committed pipeline, and we also assume that in Finland, Hoivatilat will continue the developments like we have seen in the past. This does not mean that we do not think there are possibilities for additional investment. But currently, the probability is a little bit more less to predict. Stefaan will comment a little bit more on that during his presentation, and they are not included in the outlook so far. So this means that we are expecting EPRA EPS of EUR 4.70 per share for the full year 2024 with an increased dividend of EUR 3.90 per share. Handing over to Stefaan for the strategy.

Okay. Thank you, Ingrid. What I will do is walk you through some of the main topics regarding the portfolio. So once again, this is not a full portfolio presentation. You will find that on the website. Maybe quickly starting with something that definitely will not come as a surprise, looking back at the investment activity of Aedifica over 2023. That was, of course, a quite limited activity given the market conditions in '23, but mainly also pointing out here that we focused more on the Finnish market where as a developer, we still see potential also in terms of -- well, both in terms of getting yields which are reflecting the cost of capital and allowing us to show some development margins in these projects. But that was the past. So then looking at the situation in terms of tenants, I think this is probably one of the main topics that we need to address nowadays given the market apparently still has some concerns about operator health. This is a slide that you know, showing our exposure to the operators. Maybe a couple of comments regarding some of the names that you see on the slide. Starting with Clariane, which is the new name of Korian, still our most important tenant in the portfolio, roughly 10%. But this being said, this is exposure towards the Belgian and the Dutch market. We only have one asset outside of these markets with Clariane, which is in Germany. I guess everybody is well aware of the fact that Clariane announced that they are willing to sell the Dutch-Belgian OpCo as far as we can tell, but this is market gossip, they are working on it as we speak. Now if they would be successful in doing this, our exposure to Clariane will drop to [ a teeny 0.3% ], one asset in Germany. Another message in this regard is that we are absolutely happy with our Dutch and Belgian Clariane portfolio. So that in itself, we do not consider it to be a risk at all. Maybe one of the other names that needs some comments is Orpea. You will see that Orpea dropped from, I think, fourth or fifth position in the past towards 3% now. So our exposure was reduced on the back of the restructuring of the Belgian Orpea portfolio. You probably have read that we were able to sell the 5 assets in Brussels. That means that today, our Orpea exposure is roughly 1% in Belgium, 1% in the Netherlands and 1% in Germany. Once again, without anything specific to be mentioned, this portfolio is performing very well. Also something worthwhile mentioning is that on the back of this restructuring of the Brussels Orpea portfolio, our total exposure to the Brussels market across the board across tenants is now down to roughly 1.75%, so well below 2%. And actually, we also expect to see debt percent even declining further in 2024. So our -- we think that we clearly derisked the portfolio in that respect. And then maybe one last comment. Specht Gruppe is now appearing as one of the -- well, somewhat bigger tenants in our portfolio, roughly 3%. This is a result of the active management that we acquired specifically in the German market, aiming and derisking the German portfolio. What we did there is transfer some of the Ambea assets, which were ramping up assets towards Specht Gruppe, which in our view is, first of all, an operator showing a stronger balance sheet, so a better credit risk. But secondly, and even more importantly, also an operator with a -- much better embedded in the local markets, so having better access to staffing and in a much better position to do the ramping of these assets. So that was really a matter of proactively derisking the portfolio. So looking at this slide today, I think we can with some confidence say that we do believe that the portfolio is in quite good shape and actually, compared to the situation last year, derisked. Then we made an effort to show to the market a bit more transparency regarding the operators and the underlying KPI of the operators. You heard me explaining in the past that this requires a lot of effort in Europe. Not every country and not all operators are willing to be quite transparent. But we focus on occupancy, which is probably the indicator which is more easily to show to the market and to get the information from the operator. So what we see on the slide, and this is the first time that we are showing such a slide, is the occupancy of the mature assets in the main countries of the portfolio, mature assets, meaning assets that are under operations for at least 2 years. So we're not taking into account the assets under ramping up or at least for the first 2 years of -- after delivery of these assets. Now what you will see here, and we could go into full detail for each of the countries, but I'm not going to do that right now and to be quite honest, the exact percentage that you see are, in itself, not so important. The main message here is that we clearly see in all of the main countries, mature assets showing occupancy well above 80%. And I think you heard us explaining in the past that 80%, it is some sort of rule of thumb, but it is definitely if you are above 80%, it's more or less the comfort zone where you need to be to show long-term profitability in this sector. And this is actually what we see throughout the portfolio. By the way, Finland is not on the slide because their operators are definitely not transparent, but we can refer to Attendo's reporting regarding their Finnish portfolio and they are one of our main clients in Finland, and they're also talking about 85% occupancy in Finland. Also important here and perhaps the most important message is the trend. What we try to do is for these mature assets, based on the coverage that we have, and you see the percentages, is compare the situation end of September '23 to end of September '22, which is the like-for-like that you see. And also there, you see an increased occupancy over that period. So the trend is clearly positive. Then switching to the next step, and once again, referring to what we have been telling you during these type of conferences in the past, what we try to do is monitor resident occupancy but also what is happening with the revenue per resident, because that should go up for operators in order to compensate for the increase costs that they have been facing since 2022. Now first of all, starting with the one country where we do have almost full transparency and where operators are performing extraordinarily well, and that is the U.K. What we do see here is the evolution of the rent cover for the mature assets in our U.K. portfolio, both on a 12-month period and on a quarterly basis. Now if you look at September '23, you will see an average rent cover for our U.K. portfolio over -- well over 2. So that is actually quite exceptional in today's market, so a very healthy U.K. operator market. But talking then about Continental Europe. I'm not going to repeat everything that we have been seeing in the recent months. Just confirming that we do see positive trends also in terms of revenue per resin, which in most of the countries, is going upwards. The country that was clearly lagging behind was Germany, and this is where today, for the first time, we can also be much more confident in saying that we do clearly see positive trends today also in the German market. And if you're quickly walking through, a couple of things that are worthwhile flagging here. Now first of all, and this is probably coming from almost all of the operators in our German portfolio, they told us that they are in the process or have finalized the process of renegotiating I-costs, so investment costs, which basically are covering the building cost for them. And then we see increases of up to 25%, in some cases, even higher than 25%. Now this is anecdotal information, but it is something that we hear across the German portfolio, clear increases of investment costs. Secondly, we hear from lots of German operators in our portfolio that are also in the process of renegotiating care rates. And they are flagging that they expect to see significant increases also in terms of care rates. This has not been quantified yet. It's -- I must -- for this is once again anecdotal information, but these type of messages we didn't get from care operators until months ago. So we see both in terms of higher costs and care rates that apparently, the German market is starting to react to the reality, truly, in terms of staffing. and staffing issues are quite important in the German market also because the system is so strict. And if you do not comply, you immediately are confronted with admission bans. Now there is a new Personal Assessment Act in place in Germany since the summer of 2023, which could lead to the softening, a certain softening of the previous rigid quota for staffing, meaning that it will be much more tailor-made for each of the individual care homes based on the care needs of the residents in a specific care home and the available staff in a specific care home. Now what the impact of this will be, it remains to be seen, but it is the first start of at least reducing the pressure of this staffing quota in the German market. It is, once again, something that is quite new. And then maybe last but not least is that we hear specifically from the somewhat larger operators in the German market and in our portfolio is that they have been making huge efforts in terms of trying to deal with the administrative backlog of the local social welfare offices, meaning they have been hiring themselves extra staff to work more on the negotiations with these local social welfare offices and to get finally the payment of outstanding claims they had. This has to do with the increase in the end. Trying to summarize this quickly, as it's related to the increased wages for German caretakers, which have led to higher rates that operators have to charge to their residents and the residents that are not able to pay having to switch from self-payer to social welfare-backed payers. Now the social welfare offices, they had a backlog in dealing with these requests. And what we now hear from German operators is that they are working on the backlog and then they see the money coming through. So the cash is coming therewith. So basically, what we see in the German market or at least is what the -- our operators are telling us is that they are starting to see similar increases in their revenue as what we hear in other European markets, and that even as far as staffing is concerned, there might be a first step towards somewhat softening the very rigid system in Germany. So basically, looking at the market with much more confidence than we did in the past. Then going to the other slides, okay, this moving much more quickly. This gives you an idea of who the operators are. No surprise there, 90% are private profit-driven operators, 6% are not-for-profit operators, and 4%, which is actually more than it used to be, are public operators, and this is mainly in our Finnish portfolio where today, we are, I think, close to 20% of the Finnish assets for which we have municipalities as operators. By the way, on one of the previous slides, you probably have noticed that the Finnish municipalities in themselves, already they are 4% of our tenant risk. Then walking through some of the slides, which probably will not come as a surprise, the WAULT of the portfolio remains at a very high 19 years. Occupancy rate remains at 100%. And then I think something which is more of interest today is what happened in terms of portfolio valuation. Now you will see on the left side of the slide that we are now at an average fair value yield of the portfolio standing at 5.8%. But I think at the right side of the slide will be of more interest. Looking at 2023, we have seen a like-for-like decline in the value of roughly 2%. But I'm going to focus also a bit more on the column showing you the change in fair value for the last quarter of the year. There, you will see a minus 0.6%. First message here, that's clearly in line with the simulations that you have seen in one of the slides that Ingrid has shown you when we try to predict what could happen with the debt to asset ratio. So we're clearly in the better case scenarios here, one thing. Secondly, also pointing out that in 3 of the countries today, we already see what might be a sort of bottoming out or a slightly positive value evolution, which is clearly the U.K. What we have seen is now for 3 quarters in a row, but this time also in Finland and in Ireland. Moving then to the committed pipeline. This is probably the third main topic to be flagged to the market. If you look at the pipeline, at the end of the year, it shows EUR 430 million of projects to be delivered in the future. But if we look at what really needs to be spent, that is down to EUR 245 million. So EUR 168 million already was invested in construction sites that are ongoing at the end of the year. This is a portfolio, as you know, that is 100% pre-let. So once these projects will be delivered, that will lead to an extra EUR 23 million of rental income. If you look at the yield today, it stands at 5.6% on costs. Looking, no doubt that if we would want to add new projects, it will not be at these yields and at much higher yields. But what the impact will be on the portfolio is something I will give an indication when talking about our medium-term outlook. Maybe back to the pipeline itself. Also important here is to note that where in the past, we had a lot of exposure to the German market in terms of projects, now this clearly shifted to the Finnish market. So 28% of the to-be-delivered projects are located in Finland. And then to the U.K. market, it's another 19%. Now if I add to that the Irish market, another 10%, and I come to the conclusion that 57% of the projects that are to be delivered in the near future will be delivered in countries where, now referring back to one of the previous slides, valuation to date has -- or at least in the last quarter of 2023 was no longer negative. So that in itself, I think, is important to point out. Then -- and this is the second graph you see on the slide and now switching to the next slide. It's also important to note is that looking forward from -- and this is on the right side of the slide, towards the end of 2024, we expect to deliver another, as Ingrid already mentioned, roughly EUR 300 million. So by the end of this year, the pipeline will be at EUR 120 million, if we do not add new projects, of course. But this also means that the historic forward deals that have been made in the recent past and before the market started to change will actually almost fade out in 2024. Maybe also important to flag is -- and that is what we see on the left side of the slide is that there is also some room for us to actively manage this committed pipeline, meaning that you will see in what we show in the roll forward from 2022 to 2023 that we cancel, throughout the year, EUR 82 million of projects. They were committed, but there was a reason that allowing us or at least an element allowing us to cancel some of these closures that could have been factored. Developers were not respecting deadlines in terms of building permits or were not able to deliver within the agreed budget. So that allowed us to cancel 5 to 6 projects. Those were low-yielding projects. And when I say low-yielding, it's really around 5%, even in some cases, even slightly below 5%. But on the other hand, we did add some projects, mainly in the Finnish market, but we're clearly talking yields on costs above 6%. So there is some room for some active management of this pipeline. Okay, and then -- and this is probably the final slide I'm showing you. Ingrid has given you the outlook for 2024, which is a quantified outlook. What I'm willing to do here is just give you our idea of the way that we are looking at the medium-term future. So basically, what we do expect to see in the next 3 years towards the end of 2026. No surprise that, first of all, we remind you of the strong fundamental tailwinds of this sector. You heard me explain this in the past. Maybe just pointing out that we now start to see more signs in the countries, and certainly countries also like Belgium where professional associations of operators are really starting to flag to the authorities that they need extra capacity in the future to deal with the aging phenomenon. And we're not talking in the next 10 years. We really are talking in the next -- in the second half of the decade. So the pressure is clearly rising in the market. That is one thing. Secondly, when we do look at Aedifica, I think that we are in a good position to start thinking about future growth, meaning that we have the balance sheet allowing us to do so. The portfolio is performing very well right now. We are showing an EPS and a DPS, mainly, which is still only roughly 80% of our EPS, but even more important is that when we look at a base case scenario, and base case scenario, I mean a scenario in which there would be hardly any investment possible for Aedifica, in that scenario, we still expect to see EPS slightly increasing towards 2023. That is a scenario in which we execute the pipeline and have very limited additional investments, mainly in Finland. Even in that scenario, we do expect to see a slight increase of the E as towards 2026. This being said, it's not the scenario that we think is the most likely or the most probable scenario. Why? Once again, referring to the strong fundamentals, the fact that the pressure in this market is rising, but also the fact that we start to see opportunities in the market that could and will be accretive if we see these opportunities. You have seen 2 small examples in the recent past, small deal that we did in Finland end of last year and the fact that we were able to buy 50% of the JV from Clariane in the Netherlands at conditions that we believe to be accretive. So what we are actually doing right now, and this is also explaining the way that we are looking at investment opportunities today, we are trying to seize some of these opportunities to show to the market that this is a market where there is still a lot to be done and to be expected. But we're today not willing to push or stretch the balance sheet or to push the DTA to a level where the market would start anticipating new capital increases. So we do want to avoid that type of overhang. It is basically a way of showing to the market, I think that will be the main message that we move -- explain to the market that operators are performing better right now, that there are still opportunities, and there still is a lot of demand in this market so that we actually are looking with a lot of confidence towards the future and towards the medium-term future. I think that we can conclude here, and we can switch to the Q&A part of the session. Okay. Maybe quickly because I see some people are raising their hands and we'll switch to them immediately.

[Operator Instructions] I'm going to do this in the order that I see appearing on the screen. So maybe starting with Frederic Renard and now looking at Delphine. Frederic, you are on mute, so please?

Yes. Can you hear me?

Yes.

I will have 3 questions. Maybe first, you have transferred some assets in Germany, as you mentioned, from -- and they are leaving to Specht Gruppe. There, I understand that you managed to transfer to the set at the same condition, right?

Yes, if you look at the deal that we did with Specht Gruppe, so is that basically the rent levels, they remain intact. So we did not change the existing contracts. We made some arrangements with Specht Gruppe to help them digest these transfers. But then we're talking limited, well, limited efforts from the company, but the contracts themselves and the rent levels, they remain intact.

Okay, that I understand. Then maybe another question. I see in your press release, and I think it's on page -- let me check, on Page 13. You show the devaluation of the portfolio by countries, and you are mentioning a total amount of EUR 130 million -- EUR 123 million, sorry. Whereas in your presentation and also in the press release, you are mentioning an amount of EUR 144 million as the evaluation. Is it linked to a loss of value linked to your development operation?

Yes, it is.

Yes.

Okay. And then how do you look at -- so you were mentioning some countries are seeing some kind of stabilization in the yield. And maybe my question would be, I still see some countries, for instance, Ireland and Germany where the net [indiscernible] is below 5%. Do you feel comfortable with the level of valuation in the current market?

I'll answer it in terms of what I do expect to see happening and this is, to a certain extent, of course, a crystal ball question. But looking at the countries that we are in today and you actually you see it also in what happened in Q4, I think, but once again, it is my guess that there might be some further yield compression in the German market, so that would not surprise me. But in some of the other markets, if we look at the situation today, and this is also based on what we see the bridge is doing, it's actually, well, below 0.5% or close to 0%. So we do not expect right now a lot of impact in the other countries. But going to have to see it today, see what happens, yes.

So would you buy assets today in Ireland, for instance, at 4.5%?

That's another matter. As I said, what we are trying to do right now is -- first of all, we are very selectively trying to buy some assets where we do see very strong opportunities also in terms of accretion, taking into account the cost of capital of Aedifica today. So we're looking at our cost of capital, and based on that, making decisions. So if the question is then, am I willing to buy today in Ireland at these levels, I don't think I would do that. But this are not the market in Ireland, of course.

All right. And last one for me. You were speaking about medium-term outlook, which is interesting. And I'm not, well, arguing the strong demographics which is playing in favor of the sector. Just looking for Aedifica as a company, in the past, you have been able to enjoy a premium to your NAV, which has allowed you to take on equity in the market to allow you to grow. Today, you are at a discount, which is obviously limiting a bit or it's a bit harder for you in terms of your future growth. So my question would be, how can Aedifica avoid the use of equity in order to continue to grow?

Okay. There's two different -- well, maybe a couple of elements here. First of all, the thing that we are now absolutely trying to do is to restore the confidence of the market in this sector. And by pointing out that there still are fundamental deals, that there still are investment opportunities that even at today's cost of capital can be rewarding. And that on the back of operators, whose performance is clearly improving. So I think it will be, first of all, a matter of restoring confidence of the market and to see the share price reraise. That's one thing. Secondly, if we -- if you would go into a scenario which, once again, we do not consider to be the most likely case today, but if you would go into a scenario where we have to work within a closed envelope, meaning available equity is the only thing that we have, and we will not add any more equity, that it will be much more a matter of capital allocation and of switching between certain markets in the portfolio. We have quite specific ideas in that regard. If you don't mind, not willing to communicate too much about today as we do not consider it to be the most likely case, but then it will be a matter of capital recycling and reinvesting in more rewarding markets. Switching to the next one, Steven Boumans. Steven, you're on mute. Then maybe we'll first switch then to -- just going down the list here. Ben Richford?

Can you hear me now?

Yes.

Okay. So I guess I'm just looking for a bit more clarity on values from here. I think you're saying there's some geographies where you're seeing values bottoming. But we still have a number of portfolios that are looking to be sold in the market, including [ Deutsche, Bona ], Clariane and others. Given that they're taking time to find buyers, could there not be a negative read across to come and a further move up in yields and impact on valuation to come? So that's the first question. And then just secondly, question around the withholding tax post 2025. What will that mean for investors if the U.K. falls out of your European operating asset portfolio, the 80% required for the lower withholding tax rate? And then thirdly, you've said you'll accelerate capital recycling if you can't access equity markets. Should you not be doing that anyway? Should you not be seeking disciplined disposal of the lower returning parts of your portfolio anyhow?

Yes. Maybe first of all, taking the last question, yes, of course. And it's also what we are more and more doing right now. So -- okay. But yes, that is what we are doing. And when I said that we have very specific ideas, they also apply to the situation today anyhow. On that, we totally do agree. But this also means that when we are talking about our asset rotation or disposal program, that we are also focusing a lot right now on solving issues in the portfolio. So we are trying to get rid of buildings that we do not see as long-term holds in the portfolio because they will lead to too much CapEx. So these are things that we actually are already doing today. And then, of course, the more financial approach is at the certain point in time you want perhaps to recycle low-yielding assets to try and invest into higher-yielding assets. But the thing there is that you do not want to sacrifice the quality of your portfolio. So it's a bit more complex exercise. But that is basically what we already are doing today. I'll let Ingrid deal with the withholding tax question. Then talking about value and distressed sales. Yes, once again, to a certain extent, this is a crystal ball question. What I can tell you right now is that the -- well, the 2, albeit be it somewhat smaller acquisitions that we did, they came with these quite important fair value gains. So these were opportunities that we were able to seize. And we did not see our valuers, appraisers react to that as if this now is the market standard and not just an opportunity that Aedifica was able to see. So we do not, for today, see the impact of distressed sales reflecting immediately into fair value gains, and we still see assessors or appraisers that is making a difference between the 2, being the market and being the distressed seller. Of course, I cannot exclude that at a certain point in time, the market would be flooded wind distressed sales, that, that will then become evidence for appraisers to change their view. Yes, that is a scenario that could happen, but we do not see it yet today. And then again, I think this is just one element amongst others. It also will happen -- depend a lot on what will happen with operator performance that we do see, for instance, in the U.K., which in the end is basically facing higher interest rates than the continent. Then in the U.K., the value shown a very strong track record, and I think that is on the back of the very strong performance of the operators. So that is also an element to be taken into account. And then thirdly, we'll see also what the central bankers will do later on in the year. That probably also have an impact on the way appraisers will be looking at the market. So it is one element amongst others. But to date, it's not been decisive. That's the only thing I can tell about this. And maybe switching to the withholding taxes.

So regarding the withholding taxes, there, we believe that most of the institutional investors, that they will not be affected by a change in the regime regarding the withholding taxes. This will mainly have an impact on the retail shareholders, which currently represents 25% of our shareholders. What we can say is that this regime has changed multiple times in the past. It's becoming more and more specific to currently 2 companies, I would say. And it's -- as it is a purely tax regime, in that way, it's difficult to manage a company regarding pure tax impacts that it might have. So we will try to manage it in the best way, also protecting the interest of the retail shareholders, but most likely, the withholding taxes will go up to 30%.

As of '26. Okay. Switching then to Celine.

Stefaan, can you hear me?

Yes.

Yes, Stefaan, I got 3 questions, if you don't mind. The first one is about all the one-offs that are going into your guidance this year. So can you tell us what exactly is one-off and how much it is? I'm talking about taxes, and I'm talking about the Orpea's earned premium. And then secondly, my question will be around the Clariane deal that you have done at the start of the month, the 50% stake in your portfolio of 6 care homes in the Netherlands, EUR 25 million. Can you talk about the cap rate there? And how it compared to the book value of the 50% that you initially owned in that portfolio, i.e., did you buy for cheaper or more expensive than what you had already in your book? And then my third question, I think it's going back slightly on Frederic's point, but what is preventing you today from raising equity through [ NABB ] because you are talking about market reopening could be opportunities, although it's not in your guidance, so that could be the upside there. But is it just a discount to NAV that's preventing you from doing that?

So maybe I will start with the one-offs. So the one-offs that we have in 2024 and the outlook there purely related to taxes. So regarding the Orpea disposals, that took place in 2023. It's already there included in the books. So the indemnity received there is part of the disposal price in the presentation of the accounts. Then for 2024, the tax is the one-off that we have....

Sorry, can I just confirm here, so in your guidance to get back to some kind of more recurring earnings, I should just remove those EUR 4.2 million of one-off taxes?

Yes. So for 2024, if you let me finish my sentence, so first of all, you have the EUR 4.2 million. That is a one-off regarding the refund of 2022 in the Dutch entities. Then in 2024, we will not have any current taxes in the Dutch entities because we are still in FBI. That's a change you will see starting from 2025. That has an impact, I would estimate, around EUR 4 million, EUR 4.5 million. And then in 2024, there's no withholding tax on the U.K. because there is no dividend distribution. So -- and that represents more or less EUR 3 million. So if you ask me the questions, what are the one-offs in 2024, then I would say the EUR 4.2 million refund in the Netherlands regarding 2022, and the fact that there's no withholding tax in the U.K., representing EUR 3 million.

Yes. Maybe then quickly about Clariane and the JV that we had with them in the Netherlands. Okay, what we disclosed is that we were able to do the deal buying back 50% of the shares that we did not control in the JV at a cap -- reflecting a cap rate for the underlying real estate of 6.5%. This is definitely, well, from Aedifica's perspective, a good deal because if you look at the historic value and the book value, we did make a fair value gain on that deal. Now, we never disclose the underlying fair value yields, and we also have to take into account that client is a quite important client of us. So if you don't mind, I'm not going to go into full detail. But this definitely was a good opportunity for Aedifica.

Okay. And in that case, because it seems to be higher than the yield for the Dutch portfolio, did you mark down the 50% you owned?

No. First of all, that's not up to us. That's up to the independent appraiser, and we don't have any indication that, that will be the case today, knowing that these are very brand-new assets, very high-quality assets. So I do not expect and we don't have -- okay, once again, I do not expect and we don't have any indication today that appraisers would use the fact that we were able to buy at a certain rate now to mark down or to review their idea of the valuation. But okay, without going into detail, we had a similar experience in Finland when we bought these 2 small assets operated by the city of Oulu and the city of [indiscernible] end of last year at 6.5%. We entered the books a fair value yield well below 6.5%. And these appraisers, they knew exactly what we paid for the assets. And today, this is -- we're talking about one potential small deal in another country, which is not concluded and done yet, but it's a similar situation. It is an opportunity that comes out of our network, allowing us to perhaps do a very good deal, and we already talked to the appraisers to make sure that what their idea of value will be, and we see a similar thing. So there is -- there are some limited possibilities to seize opportunities in this market without appraisers immediately using that as evidence to change valuation.

Okay, okay. Got it.

Then lastly, we'll see how -- when -- if the market at a certain point in time shifts. But yes, I can already tell you what I see happening in the market today. Yes.

Well, I guess like the pushback here is that if you bought it cheaper, then you should mark-to-market the bid that you earned because you're creating market value effectively. But I mean that's a different event. Can you comment on my third question on raising equity today?

Raising equity today is -- well, first of all, the very simple answer is that we believe that the stock price is too low and that it would be -- that it would come at too high a cost. So that's the reason why I said that what we're trying to do today is show to the market that there are opportunities that we can seize without stretching the balance sheet. So don't create overhang and have the market speculating about a potential capital increase is what we're trying to do today. But if I look at the other side of the spectrum and to explain to you how we look at the market today, now if there would be a major deal possible, and now we're talking more M&A wise which will be so accretive that you even could raise on the back of such a deal capital today, than it is something that we definitely think we can do. But I don't think it would be a good plan today, market being as volatile as it is going -- having to go to the market, having to raise equity just on the base -- on the back of a promise that we will deploy the capital afterwards. So either you work within the existing equity and you show to the market that there is a lot possible, and you try to make sure that the stock price goes up again, or you come with a very big and strong deal which in itself is accretive enough to raise the equity. So that's the way that we're looking at it right now. Maybe, Steven, going to try again if you are in the call. You should be in the call, yes.

In the meantime, you have received questions.

Sorry.

We still have [ Eduardo ]?

Eduardo, then. Eduardo, you're on mute.

Can you hear me?

Yes, we can.

Perfect. I've got 2 questions from me. So the first one, thank you very much for assembling the occupancy data, I think this is very helpful. Do you have a sense of how much of your rent roll is below 1.25x rents covered? So you shared that data for the U.K., but do you have a sense across your pan-European portfolio?

No, I don't have a number. I keep top of mind that I can give you because as we -- basically also if you want to see the flip side of what we've just shown you is that there still are a certain percentage of assets for which we don't have the info. And what we've shown you is occupancy. When we dive deeper into EBITDA margins and rent covers, then it even the percentage of coverage is already somewhat less than what we've seen in terms of occupancy. So I'm afraid I cannot give you an answer, top of mind. What we do see with the major operators is that they're all -- in most of the countries, major operators are above 125. But then again, it is a big answer. I'm very much aware of it. Yes.

My second question is back to the external growth and cost of capital, a conundrum. Sort of in history, health care REITs have been the marginal buyer, right, in the space. We're a very large buyer across Europe. So today, if your implied cap rate is not the right one, who is bidding more aggressively than you are for acquisitions, M&A? Why haven't values move to your implied cap rate considering it's much better to be a buyer today, considering there are many motivated sellers across Europe? So I'm just trying to solve that equation of how come you can't find deals at sort of 6.5% to 7% [ GAAP ] cap rates today?

Okay. Yes, okay. First of all, what we're trying to do is to show to the market that we can find deals, but to a certain extent. Secondly, if you're really talking M&A and you're starting to look at the implied deals of certain parties in the market, you will also find implied yields that are well above cost of capital. That's then the third. So basically, there are already opportunities available. That's one thing. Secondly, who is buying today in the market, well, first of all, there's not a lot happening still right now. We do see -- I'm aware of some deals that might be completed perhaps in the first half of 2024, where we do see mostly some private money stepping into the market and trying to take advantage of some of the distressed sales. But once again, it seems to be very opportunistic. And when we look at the market today, you mentioned yourself, it's more of a buyers' market, not so much of a sellers' market. We do see more opportunistic players in the market, but sometimes with expectations, and I'm not so sure whether they will be -- whether they are realistic. So we come across sometimes parties in the market that really dream of buying high-quality assets at incredibly high yields, but that is not what we see happening in the market today either. So.

And do you see that changing sort of maybe the second part of this year? I mean motivated sellers, they're motivated, right, so it's not that they have a choice.

Yes, motivated probably would mean if you -- then you probably -- if you are a motivated seller today, that means probably you are, to a certain extent, distressed or facing quite important refinancing issues. So at a certain point in time, they will have to make their move. But I think that most of them, as long as they can afford to wait, they probably will try to wait and probably are speculating that the market will improve towards the second half of 2024.

Understood. That's very helpful.

Sorry, advised we don't have any further questions. I'm just walking through the people that raise your hand and then we will go to the written questions. [ Damian Norduchanne ]? [ Damian ], yes, you're unmuted.

Can you hear me?

Yes, we can.

Coming back to the one-offs that Ingrid referred to, correcting the guidance for this year of these one-offs, I come to EUR 455 million, stripping out the EUR 7.2 million of tax-related one-offs. And your intention, which I understand is not a real guidance of going back to EUR 5-ish EPS in 26, that would mean over 2 years, roughly, back of the envelope, 10% growth. I was wondering what were the ingredients to this growth, bearing in mind that I suppose that you will face gradually higher cost of debt. So is that through rental growth? Better -- less cost or a better EBITDA margin? Just curious to see a bit of flavor on how the ingredients would be to go back to a EUR 5 EPS?

First of all, I don't think that...

But I think maybe to answer the question, I think there's 2 different elements to it. If I mentioned at a certain point in time that we do see a slight increase even if we do not add a lot of new investments to the portfolio, now in that scenario, and then I think it is what you want us to answer, it's a matter of -- it's net rent increases. So that we still -- we are still taking into account some inflation. The pipeline will be delivered. So the EUR 23 million I just mentioned will also be added to the portfolio. And yes, we do also see, and we are working on a slight increase of the EBIT margin or an improvement of the EPRA cost ratio, if you want to turn it around. So these are the ingredients that -- if you really take a no-growth scenario as a base case. But as I said, we also think -- and that is what made me say we still do see a slight increase in EPS. But I also said that we hope and think it's not the most likely scenario when thinking about a 3-year cycle. And then, of course, at a certain point in time, we will start adding hopefully much more new accretive investments. And this is why I say we do already see some potential today, but the -- basically, there the question to us is much more a timing issue of when.

So in other words, you would hope to do better than just matching back the '23 EPS of around EUR 5. So it's the...

Yes. The EUR 5 is a number that you mentioned. We didn't mention that because we didn't quantify it and I'm not going to do it.

I'm just looking at the chart on the screen, which is EUR 5.02, so I'm rounding it to 5. So you are mentioning the '23 EPS?

There, I would like to say that this EUR 5.02 is also including one-offs. They represent EUR 0.20. So I think a more fair comparison point would be the EUR 4.80. I think that is the comparison point.

Okay. Then it's okay, clear enough.

I think Amal, yes, sorry, but the last one in this. Amal, I think you're on mute now. Okay. But maybe then we'll try first...

Can you hear me now?

Yes, Amal, we hear you.

Thank you, yes, for the disclosure of operator occupancy. That's, for in my view, first step to restore confidence on the operator -- health care operator financial health, so that's well appreciated. I have a few remaining questions on the investment strategy. So we understand that you are looking effectively at attractive acquisition. Can you provide us more color on the minimum investment yield that you are now requesting for this acquisition. And I would have a second question about the scrip dividend, given the share price. Do you intend to offer this option for the dividend to be paid in May? And perhaps, a last question on the disposal. So I understand that capital recycling and disposal will be part of your strategy going forward. Can you assume that you will have more or less EUR 100 million as a disposal every year in the coming years?

Okay. First of all, the indication of the yields that we're looking for, I think that I referred a couple of times to the 2 small recent deals, the 1 in Finland, the 1 in the Netherlands. And we, in both cases, published a yield at 6.5%. So I think that is a good indication of what we are looking for. Now there are differences between countries because we're also taking into account tax leakage, et cetera, but I think it's really a good indication of what we are looking for. Capital recycling, yes, we gave guidance EUR 100 million for 2024. We have a pretty good idea of what exactly it is that we want to sell. But to be quite honest, we're also keeping an eye on what is happening terms of valuation, what is happening in terms of the DTA of the company. And if we are in the better case scenarios, there will be less pressure on us to really sell a lot. If there would be more pressure, yes, then we are definitely going to make a bigger effort, but also a bigger effort to get to the EUR 100 million, for instance, that -- but it is an indication once again, of what we think is feasible in terms of lower asset rotation. We haven't decided yet whether that will be the number recurring for the forthcoming years. But looking at the asset rotation program and asset rotation, it always -- for us, it is based on the quality of the portfolio. We're now not talking about protecting the balance sheet, but that could be a number that you could see also in the future. Yes. And then there was a third question, and you have to remind me. I think it was...

It was about the scrip dividend.

Scrip dividend.

Yes. For the scrip dividend, we have not taken decisions so far. So it will depend on the evolution that we will see on the share price, also the valuations at the end of Q1 and how we perceive the investment market and the opportunities for us to add new investment store to portfolio. So, so far, no decision has been taken on the scrip dividend.

And then quickly scrolling through because there's some questions in chat box.

I think some of them we have already answered. But you take the first one.

Okay. So Lynn, your question about where do we see the EUR 100 million disposals, what is the underlying strategy for the disposals as it is under our control. Okay. Now first, we see them really spread out across the portfolio. So it's not in one specific country. Secondly, what I just mentioned, that we have a pretty good idea of what we want to do. This is really coming out of our condition measurement program that we have which allows us to identify assets for which we do not see a long-term future in the portfolio. So it's really based on that type of analysis that we're selecting assets in the different countries. Also bearing in mind ESG, of course, and that we will have to, at a certain point in time, make sure that we reach the targets that we have set there. So that is basically what is happening. And I already indicated that EUR 100 million is an indication of what we're willing to do this year, but we're also keeping an eye on the DTA in positive and negative ways. So if there is hardly any fair value loss, there will be much less pressure on us to really go for the EUR 100 million compared to the other situations. So it is basically keeping an eye on different indicators and parameters here. Switching to the next question, [ Deronique], any interesting portfolios in the market that you're looking at, for instance, Domus Vi in Spain? Now if the question becomes too specific, we definitely cannot answer it. Other portfolios in the market, I think Ben also referred to it, yes, there are some portfolios in the market today or at least we expect to see some portfolios in the market. Are we looking at certain things? Yes, we're constantly monitoring the market. But I'm also referring a little bit to what I just said in terms of the way that we're looking at managing the balance sheet and how to think about raising equity is that if we would make such a move, we want really to make sure that we can bring a very accretive deal to the market, a deal that remains accretive even after raising equity. So it is really -- I think I mentioned the word timing before. It is also a matter of timing, to a large extent.

Then next one is on the scrip dividend. So I think we already answered that.

Yes. Steven, yes, we have your questions here in the chat box then. Sorry, Ingrid?

So I think the question is regarding the Clariane JV stake at a yield of 6.5% and how it compares to the upper net initial yield in the Netherlands of 5.1%. Well, first of all, these are very different concepts. So the 6.5% should be compared to the fair value yields that we have in the Netherlands on the Dutch assets. So this is more like a 6%. As explained by Stefaan, we did a good deal. So that's the reason why the fair value yield, you have the difference. Then what was explaining the bridge with the EPRA net initial yield, it's mainly related to the fact that in the Netherlands, you have a lot of transfer taxes and transfer costs that are taken into consideration and deducted in the calculation of the EPRA net initial yields.

Yes. I hope, Steven, that was helpful. Scrolling down. I have one last question from Lynn, but I'm not sure. An indication of the like-for-like growth will come from like-for-like growth...

I think then, Lynn, you should be a little bit more specific on the question, what exactly you're referring to with the like-for-like growth in January. So I suppose it's a valuation, but...

That we don't have, to be quite honest. Maybe. Lynn, because -- well, feel free to reach out to us after the call because -- maybe scrolling down. Yes.

The next question and the watch list that we monitor a little bit more closely. I think there we can...

Which one is that? Yes.

So we had a...

Yes, sorry, yes. I was scrolling through the chat box. [ Veronique ], your question about our watch list, I think it is where we said in '22, there was a small part of the portfolio that we were monitoring more closely. I think that the message here is quite straightforward is that when we look at the watch list today, it actually almost dried up. So it is really a much reduced watch list compared to what we were talking about in the course of 2022. Now I'm touching wood in the hope I didn't jinx it, but there we also definitely see -- we see that also as an indication that apparently, the situation for operators is improving, but that is, of course, anecdotal information.

Then you have the question of Steven Boumans on the expectations for the investment market for 2024.

Sorry, are you currently in any sizable acquisition processes? As much as I would love to answer that question, Steven, I cannot for the obvious means. But for the sake of clarity, as I said, we are clearly looking to smaller, very accretive investments that we can add to the portfolio on the back of the existing equity position of the company and keeping an eye on what happens in terms of valuation. But we are clearly also -- and I confirm what I said in the past, we do have also an eye on somewhat more sizable acquisitions, and we're thinking more in terms of M&A. But if and when this could happen, that always difficult to predict and definitely not for me to talk about because then I will make it impossible just by talking about it. And two, more color on the proposed [ arc ] or will come to the market like Clariane in the Benelux? okay, but Clariane in the Benelux is an OpCo deal. So what Clariane is doing in the Benelux is selling the operations. And as far -- what I heard, but this is market gossip, is that they are much more targeting family offices and private equity rather than an industrial solution, meaning another operator taking over that portfolio. So as far as I can tell, but once again, based on market rumors, is that they are in the market today and talking to interested buyers. But once again, these are market rumors. The Domus Vi portfolio in Spain, yes, there is a portfolio in the market in Spain for which somebody is now sending out NDAs. So I just can confirm that there probably is a portfolio out in the market. There's really nothing more I can tell about it. And then any idea of the quality of the asset's pricing and timing would be appreciated. Yes, but to be quite honest, it's a bit too soon to give an answer to this type of questions, once again referring to the very simple fact that the more I talk about potential deals, the bigger the chance that we will never do them. Going down, we have -- Stephanie Dossmann, you said, what is your assumption on portfolio asset value change for 2024? Okay. I'm willing to give an answer, but this is very -- it is a very personal estimate and just me thinking about the market. Basically, what I expect for 2024 is to see something similar as what we've seen in the last quarters of 2023. And then I'm thinking in the line of fair value depreciation around minus 0.5% on average per quarter. Question is whether that will go on until the end of the year or that it might go on until summer of 2024. It's an open question to me. So that is actually what I expect, okay? I'm aware that there could be other reasons to be either more optimistic or more pessimistic. But if you ask what I do see as a base case assumption, but once again, this is a very personal answer, and I just mentioned it.

We have a question on the following. So it's regarding the like-for-like [ yield ] of the indexation. So on the increase of the rental income for the portfolio as a whole, we assume that like-for-like indexation will be around 3% but you will see variances between the countries. For instance, in Finland, we already had the indexation in January, as most of the contracts in Finland are indexed at the beginning of the year. So there, it was around 3.6% Sweden was much higher. They were about 6%. But for the portfolio as a whole, we are expecting around 3% for the full year 2024.

This question from [ Christopher ] about the scrip dividend given the shares are trading substantially below discount -- a discount to NAV. Do we expect to recommend the scrip dividend for this year? Yes. Maybe, Chris, to put it into perspective, this is a discussion that the Board will have in May when we would pay the dividend. But this being said, bear in mind that the dividend is split into 2 different coupons so that in the end, if we would do a scrip dividend, it would only apply to the coupon which is still attached to the shares, and that's roughly 50% of the dividend. And that in normal times, we see success rates or take up rates of the scrip dividend around 30%. So the impact in itself will not be that big in terms of amount, but also in terms of dilution. So - but once again, it is a decision that the Board will have to make in May and at that point in time, looking at the stock price in May, yes. Did we go through all the questions or did we miss anything?

No, we haven't.

Yes. Okay. So unless anybody has really a final question, which I do not see appearing right now, then I just want to thank you for the time you spent with us, and wish you all a pleasant day and probably will be talking in the near future to each other. Thank you very much. Bye.