CTP N.V. (CTPNV) Earnings Call Transcript & Summary

Good morning, and thank you for joining us. In Q1 2024, we continued our strong operational and financial performance. But before digging into the details, I want to take a step back to reflect on the strong growth we've seen in the 3 years since our IPO in March 2021. We've more than doubled our GLA and we have grown our land bank by 162% to 23.1 million square meters, locking in the potential to double our GLA again. We increased the value of our investment properties by 138% to EUR 13.8 billion. And we've grown our next 12 months contracted revenues by 116% to EUR 742 million. We're proud of the growth we've delivered in the past years, and there's much more to come. Now coming back to the first quarter numbers, our Parkmaker model continues to be successful, helping us grow with our tenants throughout the CTPark network, with 2/3 of our leases signed with existing tenants and our clients are happy as illustrated by the 94% retention rate. Firstly, we signed more leases at higher rents when compared to last year. 336,000 square meters of leases signed in Q1 of 2024, that's 13% more than we signed in the first quarter of 2023. Our average rent per square meter is up 6% compared to the same period last year. We remain the market leader in most of the countries where we operate. We have people on the ground at each CTPark, who give us a good feel for what's happening with our tenants in real time. In Q1, we saw continued strong demand from manufacturing tenants in the CEE region. They accounted for 25% of all leasing in the last 24 months, and we expect this to grow in the coming years due to the ongoing nearshoring trends, as CEE is the business-smart and best cost production location for Europe. We also saw this with our growing number of Asian clients, who now represent nearly 10% of the portfolio, producing in Europe for Europe. Of course, there's continued strong demand from 3PLs and retailers as well. CEE remains undersupplied by A-class space with GLA per capita below the European average in most CEE countries. So there's still plenty of room for us to grow. Running through our business lines, we grew the portfolio to 12 million square meters of GLA and remain on track to reach our 20 million square meter target by the end of the decade. We have a wide diversified and international tenant base with over 1,000 blue chip tenants from a broad range of industries, and our tenants pay on time with a rent collection rate of 99.9%. Looking at the overall market, we see supply of new product is decreasing in the current higher interest rate environment. This brings opportunities for us as our track record shows we are able to grow profitably even when market conditions change. In Q1 of 2024, we delivered 169,000 square meters which were 95% pre-let at completion, and the yield on cost of these completions was a market-leading 10.7%. We now have 2 million square meters of properties under construction. 77% of this is within existing parks and an additional 15% is under construction in new locations, each of which can grow to over 100,000 square meters of GLA. When fully let, these projects are expected to add EUR 146 million each year to our rent roll. This year, we expect to deliver another 1 million to 1.5 million square meters and we expect yield on cost to remain above 10%. And the 2024 deliveries are already 43% pre-let. As usual, we start with a slightly lower pre-let than our peers. This allows us to deliver consistently higher yield on cost. And we expect to achieve an 80% to 90% pre-let ratio on these completions at delivery. We have a land bank of 23.1 million square meters. The majority of this is in existing parks. Indeed, together with new locations, over 90% of our land bank is in a CTPark. So we have lots of future growth locked in, and we're on track to reach our 20 million square meter GLA target by the end of the decade. Moving on to our financial highlights. Our like-for-like rental growth came to 5% in Q1 of 2024, driven by indexation and strong rent reversion. 68% of our portfolio is now indexed to the Consumer Price Index, while the remaining 32% has fixed escalations. We expect the percentage of our contracts linked to CPI to increase further over time. The reversionary potential portfolio stands at 14.5%, and we've proven to be very successful in capturing this potential, as leases come up for renewal. Our gross rental income for the period increased 15.8% year-on-year to EUR 157.5 million. Net rental income went up by 17.5% year-on-year, as we reduced service charge leakage. The NRI to GRI ratio in Q1 of 2024 came to 97.5%. The company-specific adjusted EPRA earnings per share increased 10.7% year-on-year to EUR 0.20, on track to reach our guidance of EUR 0.80 to EUR 0.82 for the calendar year. Now I hand over to Maarten to cover valuations, funding and our outlook.

Moving on to valuations. During Q1 and Q3 reporting, only investment properties in the development are revalued, while there's no revaluation of the standing portfolio. The gross asset value of our portfolio grew to EUR 14 billion, up 2.8% compared to year-end 2023. The Q1 2024 revaluation amounts to EUR 166.7 million, driven by our development and reflecting the leasing and construction progress on those. Of our 23.1 million square meter land bank, 70.5 million square meter is owned and on balance sheet. The remaining 5.5 million square meter is under option. With the 50% build-up ratio, we need 2 square meter of land for 1 square meter of GLA, which means we can build over 11 million square meter of GLA on our current land bank. Taking into account the average construction cost of EUR 500 per square meter and land prices of EUR 50 per square meter with total investment cost for 1 square meter of GLA comes to EUR 600. This, while the standing portfolio is valued around EUR 950 per square meter, allows us to realize the potential development profit of EUR 350 per square meter. We have conservative valuation yields. CTP reversionary yield now stands at 7.2%. And looking ahead, after the 80 basis points increase we experienced in the last 2 years, we expect no further material yield widening. However, we do foresee further positive ERV growth on the back of continued tenant demand due to the positive impact of the secular growth drivers in the CEE region. In most CEE markets, inflation-adjusted real rents remained lower than 15 years ago, illustrating both the affordability for our tenants as well as the rental growth potential. Our EPRA net tangible assets per share increased from EUR 15.92 at year-end 2023 to EUR 16.50 at the 31st of March 2024, representing an increase of 3.7%. We have a robust balance sheet and strong access to multiple pools of capital. In total, we raised EUR 1.1 billion year-to-date. In February, we went back to the bond market after nearly 2 years as pricing normalized. We issued a EUR 750 million, 6-year bond and mid-swap plus 220 basis points, which was more than 5x oversubscribed, despite us upsizing from EUR 500 million. Together with the bond issuance, we launched a tender offer and repurchase short-dated bonds with a total nominal amount of EUR 250 million. Our pro forma cash position stands at EUR 1.4 billion, more than sufficient to meet our cash needs for the next 12 months, including our RCF, which we increased to EUR 550 million. Our pro forma liquidity position amounts to nearly EUR 2 billion. Our average debt maturity stands at 5.2 years, with no material debt maturity until June '25. At the end of the quarter, CTP's average cost of debt came to 2.13%. This will continue to take up going forward, as we bring on new funding to finance our development-led growth. Our high-yielding portfolio and market-leading development yield on cost allows us to grow profitably, even with higher funding costs. 99% of the debt is fixed or hedged until maturity. And thanks to our strong cash flow generating portfolio, we have healthy interest coverage ratio of 3.4x, while our normalized net debt to EBITDA stands at 9.1x. Our LTV ratio was 45.9%, down 10 bps compared to year-end 2023, driven by development completions. This is slightly above our 40% to 45% target range, but we expect the LTV to come down, as the revaluations of the developments become fully booked. We continue to deem this LTV range to be appropriate, given the high yielding nature of our portfolio. We are confident in the outlook for CTP. And despite some slowdown in the macro environment, leasing dynamics in the CEE region remains strong leading to continued rental growth and supporting valuations. Our pipeline is highly profitable and tenant-led. And thanks to our industry-leading yield on cost, we are able to deliver sustainable and profitable growth, also in the current higher interest rate environment. It sets us apart from other players in the sector. We confirm our EPS guidance of EUR 0.80 to EUR 0.82 for 2024, and we target to reach annual rental income of EUR 1 billion by 2027 and are on track to reach 20 million square meters of GLA and annual rental income of EUR 1.2 billion before the end of the decade. Thank you for your attention, and we now welcome your questions.

[Operator Instructions] Our first question comes from Vanessa Guy from JPMorgan.

I have 3 questions. So the first one is on the yield on cost. If you could give some color on how this is developing outside of the CEE region. The second one is more on the like-for-like rental growth? And what are your expectations for the rest of the year? And then the final one is on data centers. So you commented in your last call that you were looking into this. And I would like to know that, if there's been any developments on this front?

Vanessa, thank you for those questions. Yes so in terms of yield on cost outside of CEE, as you see, we targeted 11% in our core markets in Germany. We are probably getting 9%, 9.5% in a couple of that project. So we don't get to the 10%, but we confirm the 10% plus across the whole portfolio. In terms of like-for-like...

Maybe, Richard, I can add one comment to the deal on cost outside of CEE because also we see construction costs coming down in Germany, for example. So we may be not to around 9 numbers because number used to be mentioned, but maybe even a bit up of 9%, even also in Germany because of the fact that there is indeed a construction cost coming down, which helps us little bit in Germany.

Yes. Thank you. Thanks, Remon. And then in terms of the like-for-like for the rest of the year, almost all of the indexation clauses take effect on the 1st of January, which is why we see pretty much our guidance reached probably -- for the full year reached in Q1. We do have a few leases where the indexation is 1st of March or 1st of April. But going forward, any real change in the like-for-like will be driven by our capacity to capture reversionary growth. As you know, we have a reversionary potential of 14.5%. At the end of last year, we continue to see ERVs climbing higher in most of our markets. So we think we're in a good place to deliver on 5% plus. And then finally, on the question on data centers. We are still in research mode there, checking out where and how we think we would possibly be able to fit them into our park network. Now if you look at our tenant mix, we have a very strong percentage of manufacturing. Around half of our tenants are manufacturing. So we're quite used to the idea of needing a lot of energy. So we do see -- we think that we will see a number of opportunities across our network also in one or the other brownfield in Germany.

Our next question comes from Bart Gysens from Morgan Stanley.

Bart Gysens from Morgan Stanley. Look, everything is clearly going very well operationally, but we saw vacancy tick up a bit to 7%. And I don't want to put too much emphasis on one quarter move, right? But could you perhaps provide a little bit of color on, is this a timing thing? Is this a one quarter thing? Is it strategically that you allow your vacancy to go up a little bit more? And perhaps a bit of color on how you could see this develop over the year?

Thanks, Bart. Happy to take that. Yes. Well, we have been in around, what, 93%, 96% of vacancy over, I think, the past 10, 20 years. So yes, it's a bit of a fluctuation. But we will remain on target to be around 95% in some markets a bit higher, others are a bit lower, but average portfolio, 95% occupancy remains the target. We see strong demand. As Richard explained also in the introduction, we've done more deals than we've done same quarter '23, so close signed lease contracts, but also we have issued way more proposals. So there are and there is good demand for Central Europe, in particular at the moment because, obviously, that is very much the portfolio over there and Germany is now about building new stores and getting sites prepared and doing rental growth, which we do successfully. But anyway, yes, so we see demand coming from existing clients a lot for the region of Central Europe for nearshoring from manufacturing, cost-effective location, all kind of different sectors, semiconductor business, but also automotive business, et cetera. At the same time, with consumer spending and the lack of modern space in places like Romania or Hungary or Serbia, we do see good demand and 50-50, as Richard said, manufacturing and the rest logistics and all of that. So not quite positive. And with regards to Germany and again, we also signed a pre-lease with a Taiwanese semiconductor producers, if you like, part of ecosystem, part of the network we have in Taiwan, where we have been active for more than 2 decades, a company called Quanta. And for them, we're going to build a super high-tech facility in Germany in Jülich, close to Aachen. So also new developments have started in Germany, but overall, good and strong demand from the different industries.

And then Bart -- maybe to add on that, Bart. If you look to Q1, Q1 leasing is always slightly lower than other quarters. So typically, you see the take-up in leasing from Q2 onwards. So it's naturally you see sometimes the quarterly volatility. So you shouldn't read too much into that. If we look, for example, into April, and April already, we signed more than 200,000 square meters of new leases. So that continued demand is going on. And like Remon said, we expect that occupancy to remain around 95%.

Our next question comes from Marios Pastou from Bernstein.

Marios from Bernstein. Just 2 remaining questions from my side. You're still targeting a range of the 1 million to 1.5 million square meter development completions. You mentioned quite a few times that demand is very strong. So do you think it'll be maybe towards the upper end of this range for this year. And then secondly, just on your average monthly rents for leases signed over Q1, I see they're up year-on-year, but more broadly in line with the full year '23 average and not the levels you saw in the second half of last year. So any further color here will be appreciated.

Yes, Marios, Maarten here. And maybe to start with the last question. There's more due to the country mix you have. So as you know, of course, the rental levels we are signing in the different countries are at different stages. So in Czech, we have, of course, seen much more rental growth already. In the past years, while other countries like Romania are just at the start of the rental trajectory. So if you look specifically to Q1 and the average rent signed in Q1, that is purely driven by country mix. So we signed a bit less leases in Q1 in Czech Republic than we did on the average for the full of last year. If we take away the country mix and if we look on a country-by-country basis, we continue to see an uptick in rental growth, but Richard already was also referring to EVs, also continuing pickup. So that figure is really, really reflecting the specific deals we signed and the weight of the different countries in there rather than anything else. So overall, in 2024, we expect the figure to be higher than 2023. And then moving on to your first question on the amount of deliveries. Indeed, the guidance is between 1 and 1.5. If tenant demand remains as strong as we see now, we indeed will most likely be on the upper end of that range. We'll give an update again at the half year where we stand. But for now, we are very comfortable with that. And most of the pipeline we have of the 2 million will be delivered this year.

Our next question comes from Steven Boumans from ABM AMRO.

One follow-up on the previous question on the vacancy, which countries do you see the vacancy today? Is there any relationship to the weaker macro in some specific countries?

No...

I think -- sorry, Maarten, too late. Well, the vacancy -- I think if I may take this, you add the vacancy currently for CDP is in Poland. The Polish market, as you remember, we entered last year or year before maybe we did the acquisition. We started to build a speculative basis. And we knew that we need time to work on doing lease deals in order to get rid of vacancy in Poland, and that's where the highest vacancy is. Why is that? Well, we wanted to enter the market, make sure that we do have properties available to offer that was our market strategy at that time, which I'm happy to say and confirm that it worked out quite well for us, and that is the way we have been able to secure a nice position in the Polish market, which is Central Europe's largest country and what we believe very much a location where companies will continue to go to for their nearshoring for in Europe, for Europe, for manufacturing related to automotive, semiconductor industry, but also defense industry related, et cetera, et cetera. So that's why. And I'm not going to get to 95% occupancy in Poland by the end of this year, and it has never been the target. We need a bit more time for that. But the take-up is very good. And Q1, we've been able to sign leases. Q2 will continue to sign. Mostly Q2 is stronger in terms of signing, as Maarten also confirmed. So that's the one market. Other markets, core markets, low vacancy in Czech, no vacancy in Slovakia, nothing in Serbia, maybe a bit below the 95% in Romania. We have been quite enthusiastic, in Bucharest, but also on the West -- along the West border with Hungary. So there, I think, 93% occupancy at the moment. But I think they will close by year-end with 95% in Romania as well. But yes, we remain the kind of company who do speculative or start speculative and always have space for tenants moving quick. And that remains the approach going forward, especially in this market where we see less development from other companies, either developers, I mean, peers because either they are less dynamic, they don't respond quick or they don't have the funding or they have different funding costs, whatever it is, but this gives opportunity for us to benefit from that. I think that's how I see -- how I would answer. Maarten, if you to add anything?

No, that's it.

Okay. Very clear. Then one second and last question. We see more brownfield developments in Western Europe along with densification, so higher GLA to land ratios. Given your comments on strong margins in CEE, can we expect more brownfields in densification in your countries, too, going forward?

Brownfields for us is mostly Germany at the moment. I think that's the only country where we are buying brownfields actively. If I'm not mistaken, we did our Vallourec deal in Mülheim [indiscernible] for an urban business park in Mülheim, close to Aachen and Düsseldorf and Wuppertal. We closed on a project in Aachen. Those are technical universities. We believe in the modernization of the German, how should I phrase, industry with all of the semiconductor initiatives, Intel, but also TSMC with Porsche, there is dozens of billions of euros going into the industry. I'd like to make sure that we are part of that. Buying land in Germany like brownfield with infrastructure, utilities and zoning, I think, is better in many ways than doing a greenfield. So in terms of ESG, but also in terms of permitting and the support from local authorities. So I think for us, the moment, what we look at when we look at Germany, we think this is the right time for us to enter, to continue to build land bank. which we then, over the next 5, 10 years, we will be able to develop our projects. And so brownfield is mostly Germany. I don't think any other markets. Maybe coincidentally, we buy something here and there, but -- and that will be obviously going forward -- in the Czech Republic, we do brownfields as well because of the lack of land currently. There's just very little land available. So you're forced to buy brownfield, which is also good. We've done that. I mean we've done that for -- since 20 years so we continue to do so.

Okay. Clear. And densification, so more GLA per lend. Is that the trend that you see in your key countries?

Yes. I think especially for the more urban locations, you will continue to see densification. We plan to start our first double story building in the Czech Republic later this year, early next year. So we do start to see that, but that's going to be in the urban locations. On your general about Central Europe, brownfield, they're more used now for transformation into residential, as the cities in Central Europe continue to grow. As you may have seen from our Central European paper, the Central European capitals are the fastest growing in Europe. So I think that's a trend that will go on for a couple of years. But then at some stage, yes, there will be more -- there will be brownfield opportunities in Central Europe.

One more thing to add to that. Germany, it's not like -- brownfield is not always us a location where we would build pure logistics. With logistics, I mean a big warehouse and then 7% is office or sanitary areas, 7% of the total lettable. I mean if we look at brownfield locations Wuppertal, Mülheim or Düsseldorf, which we acquired last year in Germany or Aachen, the one I mentioned, they are beautiful locations. They are inner city, urban business park type box. So the kind of property we would develop there is not a big box warehouse. It's much more -- could be lab space, could be space with R&D facilities, could be way higher office and other space and not just warehouse, could be test center, impairment center, clean rooms, could be -- et cetera, et cetera. So then yes, per square meter of land, you will see indeed more potential and higher -- more square meter of lettable area indeed, that is definitely -- that is also because those locations are good enough and better than a typical outside of town logistics side, yes.

Our next question comes from [ Vincent Lee ] from Kempen.

[ Vincent Lee] from Kempen here. First one on the pre-let rate for the pipeline. At 43%, as you mentioned, it is in line with historical rates. If you look back at 2022 and before. But if you compare it to last year, that's a bit lower. Last year was at 49%. So was there anything exceptional in '23? So could you add a bit more color there? And then second one on guidance. So if we take the quarterly run rate and annualize that, then you're already at the lower end of guidance. And then I think we can agree that throughout the year, the run rate will actually improve because you will capture more [indiscernible] also complete more development. So could you add a bit more color there as well? And also, if there is an update, when should we expect that?

Yes. So maybe to start with the last question on guidance. We confirm our guidance EUR 0.80 to EUR 0.82. Indeed, if you look at run rate, we are on track. You will indeed have some more deliveries and indeed reversion contributing to that in the second, third and fourth quarter of the year. On the other hand, we also, as you know, given our development exposure, a relatively high cash balance and see that, of course, reflected in the cost of debt with the new cost of debt coming online. So we did, of course, bond in February with a coupon of 4.75%. If you currently look at marginal cost of debt, in the range of 4.50% to 4.75%. Of course, if we bring on those new loans and bonds, you see that reflected in the financial expenses. So that's why we stick to the guidance we have given. We will confirm or upgrade or change our guidance, and we look at it quarter-by-quarter. At this stage, we are very comfortable with the range of 80% to 82%, but we'll give you an update again at the H1. And then to move to your first question, which was around the pre-let. Indeed, you refer to the figure of last year, which we had in the Q1. As you might remember, that was excluding Poland, where we started, like Remon mentioned before, some more speculative developments. The figure this year includes Poland. So there is a slightly difference in the scope there. So if you look to overall pre-letting, we are very much on track and a similar trend than last year.

Yes. And our target is to deliver the -- our target is to deliver the buildings at 80% to 90% on completion. As you've seen in the last years, our deliveries are normally loaded towards the back end of the year, as the summer is the main construction season. So we're very comfortable with where we are at the moment. Leasing later is better for our yield on cost because rents continue to go high.

Our next question comes from Rob Jones from BNP Paribas.

A couple of quick ones. Firstly, thank you for the detail on the delta between the portfolio value per square meter and the all-in development cost per square meter to give us a real clear computation as to how we can think about the current future potential for the development pipeline. When I think about new land acquisitions, I appreciate you've got a huge amount of land and thus buildable area to be getting almost the next 8 to 10 years. But when I think about new land acquisitions, do you have a view in terms of the expected yield on cost differential between land that you might be buying over the next 12-plus months versus the existing land bank? The second question was just briefly on solar panels because I'm aware that I haven't got this in my model, 15% yield on cost, obviously very high. But remind me what the total planned investment is there. And then the third one and final one is just on the dividend. I think you've given a scrip option this year. And I don't know whether you know yet what the scrip take-up is likely to be, so I can think about share count in the model. And then the very final one, Richard, happy birthday the other day. It looked like a serious amount of cape construction across the group.

Thanks very much, Rob. Yes, maybe I answer the questions the other way around. If we look at the dividend, I think Remon has said that since he has paid off the vendor loan to his [indiscernible], he will be taking almost all of his dividend in scrip. Slight correction, technically, it's a scrip dividend with an option for cash. So for cash. So we would expect more than 75% -- more like 80% plus to be retained within the company. In terms of the solar, the yield on cost, 1 megawatt peak cost you around EUR 750,000 to install. So I think that should be good for you to -- for your model. And then in terms of the new land, so when we calculate yield on cost, we calculate based on the market value of the land. So in reality, if we're buying land today, that's at current market value, which is the same math as if we are mobilizing part of our land bank. So we have the same threshold to buy land, as we do to activate.

But Richard, there's one comment to buying land because the most of the land we buy, we buy land within existing business parks. So we grow parks. And then the benefit is that if you do so, then all your infrastructure costs, utilities, all of what you do, obviously, the larger the park, the better it becomes, right, because then you can divide all those costs among more square meters of land. So if you look at land banking even today before this call, Richard, Maarten and myself, we had to talk about some other land that is land next door to parks which we operate. And then we think we can grow the park and so that makes sense. So if that's where you can buy land, which will help you to continue to do your 10% plus or -- plus yield on cost kind of numbers. Yes, that's always we buy a huge amount of land, right? I also say you guys let's buy less land, let's focus on building on land we already have. But anyway, so we seem to like do that and very careful. And if so, we obviously have like a kind of investment committee within CTP. We look at different opportunities, which we consider. But yes, we would then always look at, okay, can we hit -- first question, can we be north of 10% yield cost in the first place and buying land with an existing business park, growing existing business parks will help.

And if you look at the total land bank, the 23.4 million square meters, 77% of that is in and around the existing parks and another 15% is the land for a new park in the park for us is more than 100,000 square meters. So over 90% of all the land bank is in and around our existing park.

[Operator Instructions] Our next question comes from Suraj Goyal from Green Street.

You mentioned on a few occasions that you expect ERVs to continue to grow, and I just wanted to get a bit of a sense on if you have some additional color on which of your markets you expect to see the highest growth versus the lowest? And how much you think you expect them to grow over the next 1 to 2 years based on some of the structural tailwind you referred to? Would around 5% per annum be reasonable on average?

So if you look to ERV growth and the quantum, we haven't given a specific guidance on the amount, but the figures you mentioned slightly ahead of indexation, can be reasonable as we see continued more demand. So you would expect that the ERV growth outpaces indexation a bit, but that's the theoretical analysis of that. If you look to the specific countries, as I said earlier, it depends a bit on what states they are in. So for example, coming back to Czech Republic, we have seen already a lot of ERV growth there. So for us there, the potential is more to capture that. So the highest reversionary potential we have in Czech next to Germany, but that's with, of course, our specific portfolio in Germany, which is under-rented and where we have the catch-up potential with rents on expiry increasing 30%, 40%. But if we look to the CEE markets, Czech has seen the most rental growth and like I said, opportunity for us to capture. Other markets, we are just at the beginning of that. Romania, we only start to see the rental growth. So there is much more potential there long term. Slovakia also have seen some opportunities for rental growth there. So it depends a bit on where the market is simply in terms of maturity. But on average, we expect to see rents growing in all of our markets. The quantum might be slightly different from market to market.

Our next question comes from Jonathan Kownator from Goldman Sachs.

Just one, please. Obviously, you're describing strong markets. You have a huge land bank available. What would be the conditions for you to be able to accelerate your development pipeline if you think that would make any sort of sense?

Yes. Thanks, Jonathan. Look, I mean, we're constantly looking at the market in all of our -- everywhere across our region. And if you like -- what Remon said earlier, our core business is we build a building next to or ones that we already own in parts that we already own, and we lease those to tenants who we already know. So the real guide for us will be when we feel the tenant demand getting even stronger or firming up again. So that's something that we kind of review on an ongoing basis. We had 2 million square meters under construction at the end of 2023. We delivered 169,000 in Q1. We started the same amount. So we have 2 million square meters still under construction. So for now, we feel very comfortable reloading the pipeline and [indiscernible].

So we think that the 2 million square meters is a good number to have a run rate going forward, right?

Yes. I mean, yes, but there's not all the things that we're going to be able to deliver within the 12-month period.

And that was our last audio question. To the webcast question, our first question comes from Francesca Ferragina from ING. The question is, where do you expect LTV to land by year-end? Also, how do you expect the average cost of debt to involve? Fair to expect the stabilization at this level for the rest of the year?

Yes, Francesca. So if you look to cost of debt, as I said in one of the earlier answers, that will tick up over the year, as we continue to develop and therefore, continue to bring on new debt. Indeed, if you look to our existing debt stack, that's all fixed or had still maturity. And we have no expiries during the year. The first major expiries are only in June '25. So our cost of debt for the existing debt stack doesn't increase and remains, of course, the low level that we have been able to secure by issuing the bonds in 2020, 2021 and beginning of 2022. But the average cost of debt will pick up as we bring on new debt at higher rates. But still, if you look, of course, and then we compare the cost of debt we have to bear with the investment yield, if we have a yield on cost above 10%, borrowing at 4.5% remains a very lucrative business. And you can see that in our P&L and also, of course, the valuation uplift we are able to book. So that's, of course -- the increase in cost of debt goes hand-in-hand with all the development profits we are able to realize. And then on the LTV, where do we expect it to end by year-end? I would expect it to be around 45%. Of course, main impact will be what do valuations do. What we said on that is that we don't expect any material further yield widening. But you also heard we expect further ERV growth. So you can do the math on what that means for valuations. And then the other part, which, of course, feeds into that, how much land do we buy? And do we buy it with cash? Or do we buy it or secure it basically through options? Our preference is to secure through options because that's a less capital-intensive way of securing land. But there might be cases in which we do cash acquisitions, as that simply is what the seller wants. So it will be a bit of balance between the acquisitions we do, the amount of deliveries we are able to complete, but it comes as well back to the previous questions also on dividend. We will be able to retain the vast majority of our earnings, as we expect a large take-up of scrip. So all those things feed into the LTV, and then we expect it to be around 45%. So basically the upper end of our guidance range.

And just to follow up quickly on that. Maarten mentioned the acquisition opportunities. Like in Q4 of 2023, we had a couple of opportunities to buy something. The seller had to close before year-end. We had to pay cash, but we were able to get a very, very attractive deal on that. And as a consequence of that, our yield on cost wasn't the 45% -- the loan value wasn't the 45.4% that it would have been, but was the [ 46% ] at year-end. But what you see is like in a normal quarter, you would expect us to be gradually deleveraging, as we deliver deliveries -- or deliver developments. And as Maarten said, we're expecting values to pick up, which will also contribute to the yield.

Yes. And as you know, we also look closely at our cash flow metrics because LTV is not something we look at in isolation. We look at it together with our net debt to EBITDA stands. And as you might have seen, our normalized net debt to EBITDA now stands at 9.1x, and we are very comfortable with that. We target to keep that below 10x.

We currently have no further questions. So I will hand back over to the management team to conclude.

Yes. We'd just like to thank everyone for their interest, for their questions and wish you all a great day. Thank you very much, everyone.