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

Good morning. Thank you for joining this half year of 2026 results, which are positive so far. We have been able to do a lot of leasing, 55% more than we've done in '25 over the first 6 months, which is 1.6 million square meter of deals over the past 2 quarters. So good take-up in different countries in Romania, for example, where we have done deals with Pepco renewal, a new deal with FM Logistics, Bulgaria and Sofia, a new deal for Metro and in Ilawa, Poland, we've seen a significant take-up. I've done a deal with Chinese e-commerce business. So far, first half this year in terms of take-up, very good. And this confirms and demonstrates that there is a high demand for CTP's ready-built factories and warehouses within the CTP business parks. The growth drivers remain in Europe for Europe, companies need to be in Europe to serve and support their clients here. That's why they come over from Asia, other places to be here on the ground. This is one in Europe for Europe. It's also more consumer spending. It's also Central Europe being business smart, cost effective. There's a combination of different factors. Still, 2/3 of all the business we do come from existing clients. We're working hard, of course, to maintain a good excellent relationship with those companies, help them grow. At the same time, also we search for new companies and get new clients from different areas to come to our parks, which often actually works that existing tenants put us in touch with other companies, their suppliers. That's how we also get to new business. Retention rate remains high at almost 90%. Rent collection is as used to be, over 99%. We collect all the rent. We charge almost all of that from our 1,700 blue-chip tenants, very nice companies and good to work for. The integrated business model combines a CTP operator, standing income-producing developer, construction company, in-house construction company and the growth engine, as we call it. So the part of our team is looking for opportunities outside of the established markets, continuously look for opportunity often driven by client demand. We talk to clients, say, okay, "What's your next destination where you like to be? How can we support? How can we help you?" If we go back to what we do, so back to the operator, 93% occupancy, which has been around that number for the past years, 6 years WALT. So the average lease term is 6 years, and the portfolio is now almost 15 million square meter, which is good for EUR 860 million of rental income. And for next year, we are on schedule to hit the EUR 1 billion rental income. And in regards to the developer, in-house construction team, the builders, they've done 250,000 square meters so far of completions. Typically, we start in Q1 with construction in spring time, beginning of Q2 and deliveries will grow more during the second half this year, doing like a 10% growth this year. That's our schedule. And we are on track with that. So far, it looks good at around 10% yield on cost. Anyway, what we built now will produce another EUR 152 million of rental income. We look forward to continued solid leasing activity, yes, in the rest of the year. Land bank, we have a lot of land, mostly within existing business parks that helps us to or allows us to build these additional properties. The land plots have been serviced and normally come with building permits. So it's pretty easy for us to build those properties or to develop or utilize the land. We also have local teams on the ground. We will sit in the parks and look after existing buildings, but at the same time, also within the team are responsible for building more property. Growth engine, talk about it, making good progress in different locations, recently entered Italy. Some years ago, we entered Germany, where we now see the results of us building in Mulheim, preparing the project in Dusseldorf, which is going to be a fantastic project. At the same time, also doing projects in Krefeld and other places in Germany. We do SBUs, small business units, so not just the big boxes, also the smaller units. We've done that for the past more than 25 years, adding larger properties in a business progress for smaller units. In Germany, especially you see strong demand for that, but also other countries. So I can see us grow a lot in the SBU sector in the small, medium-sized companies, but also multinationals who take smaller units here and there, SBUs, 500 square meter, 1,000 square meter, 1,500 square meters, you can mix them up, make them bigger. I think it's very good for the ecosystem in the business parks, also allows start-ups and incubator, all those kind of things. Italy, well underway, so far, building what we had agreed on time, in budget and building a pipeline for the next couple of years, making good progress with the team and also good progress on permitting. So, so far, very good. Happy with the acquisition we've done end of last year. Vietnam, making some progress there. We previously announced that we have demand from clients. We looked at 2 different sites, preparing those now, and we see how we can further grow that market with existing clients coming over there, but also giving us better access to the Asian market, not only for our development in Vietnam, but also to meet and to connect to Chinese companies who are a lot of them in Vietnam, but those Chinese companies also have ambition to move to Europe. And that's a side effect of us being more present in Asia and building our network and building our team, I find it very interesting. I think it's a fantastic opportunity for CTP to connect into that or to grow into that and to become a larger network and to be part of a bigger market, if you like. And that definitely helps CTP to grow and further diversify and also get more Asian clients to become our tenants. Interesting. All kind of businesses, right, pet food, we talked about also battery business, of course, the new automotive, which is, also not bad actually for our region. We've seen a lot of electric vehicle manufacturing, of course, BMW in Debrecen, but also some Asian, Korean, they have been in the region for a while. Chinese are coming now. And yes, we support them with their suppliers coming in to supply, for example, car interiors and seats or dashboards or whatnot. That's what we do. We like to grow. We enjoy grow. That's what we do here. But of course, also focus on not only becoming bigger, but also a better company. We have fantastic people on board now who do process management. We have different -- many different initiatives with different software being implemented, so we can actually do more with the same crew, be more efficient, more effective. And that's the part of becoming a better company, not just a bigger company. Anyway, more on that later. I will hand over now to Maarten on the financials, and thanks again for joining.

Turning to the financial highlights. The portfolio like-for-like rental growth came in at 4.7% in the first half, driven by indexation and continued positive rent reversion capture combined with a record leasing activity of nearly 1.6 million square meter, which was up 55% year-on-year, which demonstrates the ongoing strength of the customer demand across our markets. Gross rental income increased by 12.6% year-on-year to EUR 430 million, and net rental income increased by 12.4% to EUR 405 million, resulting in an NRI margin of approximately 98%. The annualized rental income increased by 13% year-on-year to EUR 858 million. And together with EUR 152 million of potential annual rent from the 2 million square meter we have currently under construction, this provides a clear visibility on our target of EUR 1 billion of annualized rental income in '27. The growing cash flow finances our development-led growth and is the basis for our long-term shareholder returns. Our company-specific adjusted EPRA earnings increased by 11% year-on-year to EUR 241 million. This translates into EUR 0.50 share, an increase of 9% year-on-year. Supported by strong operational performance and leasing momentum, we remain firmly on track to deliver our company-specific adjusted EPRA EPS guidance of EUR 1.01 to EUR 1.03 per share. And now looking at the valuation results. The net valuation result in the first half was negative EUR 83 million. The standing portfolio recorded a negative revaluation of EUR 147 million. This is partially offset by EUR 69 million of positive revaluation from our development pipeline, reflecting construction and leasing progress, while the land bank valuation was broadly stable. Valuation yields also remained stable. The gross portfolio yield was 6.5% and the reversionary yield was 6.9%. And following the strong rental growth achieved over the recent years, we expect ERVs to be broadly stable for the remainder of '26. At the same time, the leasing demand remains supportive. The total portfolio gross asset value now stands at EUR 18.9 billion, up 11% year-on-year. EPRA NTA per share stood at EUR 20.23, up 4.5% year-on-year. Our value creation model continues to work well, which is illustrated by our compounding track record. Since our IPO in '21, GLA has grown by around 18% year-on-year, annualized rental income by 21%, investment property by 24% and EPRA NTA per share by 18% per year. Only a few real estate companies in Europe have delivered this level of sustained growth over such a long period. The supportive demand drivers of our business are even becoming more relevant in the current geopolitical environment, whether that are European companies reshoring or global companies relocating manufacturing to Europe and in particularly to CE markets to effectively manage supply chain risk. And these changes bring opportunity for CTP, and we are ready for those, not only with our 2 million square meter of space currently under construction today, but is well supported by our extensive 33 million square meter land bank where we grow with existing customers. While in Europe, our focus is utilizing our existing land bank and turn them into income-generating assets, we also took our first step into Vietnam, securing an initial land bank of 330,000 square meters across 2 locations. We believe the Vietnamese market offers attractive long-term fundamentals, including strong FDI inflows and continued manufacturing expansion. Many of our clients, whether they are European or Asian, are already active there. As always, our approach is disciplined. We deploy capital selectively and apply the same business model that has underpinned our successful expansion across the European markets, focusing on cash flow generation, while in Vietnam, we target higher risk-adjusted returns. And now I hand over to Richard.

The first half of the year once again demonstrated CTP's exceptional access to global debt capital markets and our disciplined approach to funding the business. We've raised and refinanced almost EUR 1.7 billion of debt, further diversified our funding base and increased the flexibility of our balance sheet. In January, we issued a EUR 500 million green bond with a 4.5-year maturity at a spread of only 92 basis points, our first issuance below 100 basis points since 2021. And in March, we returned to the Asian loan markets with a dual tranche 5-year syndicated facility, raising JPY 22.5 billion and USD 118 million from 15 Asian banks. This further broadened and diversified our pool of lenders. In June, we signed a new EUR 400 million revolving credit facility with a 5-year maturity and a syndicate of 5 key relationship banks. This RCF will be regularly drawn, adding more flexibility to our balance sheet and allowing us to run a lower cash balance. We also remain active in liability management. After tendering EUR 216 million of our February 2030 bonds with an expensive 4.75% coupon in January, we refinanced our syndicated EUR 500 million unsecured term loan facility originally signed in 2024. We decreased the margin to 135 basis points. We extended the original maturity by 2.5 years from 2029 until January 2032. Our debt maturity profile remains conservative. After repaying our EUR 350 million bond in January, the only remaining bond maturity this year is a EUR 275 million maturity in September. Beyond that, maturities remain very manageable through 2027 and 2028 with less than EUR 1.1 billion outstanding in total over those 2 years. Turning to our key credit metrics. Our interest coverage ratio remains stable at 2.5x, comfortably above covenant levels. The leverage ratio stood at 46.8%, slightly above our 40% to 45% target range, reflecting the strategic Italian land bank acquisition that we completed at the end of 2025, together with a modest negative portfolio revaluation in the first half of 2026. Our standing portfolio continues to generate growing recurring cash flow, while our highly profitable development pipeline continues to create value. We expect to continue deleveraging towards our target range over time. Every euro we invest in our pipeline increases our ICR and decreases our net debt to EBITDA, supporting a gradual return of leverage to our target range. This underpins our confidence that we can continue growing rental income at double-digit rates while strengthening the balance sheet. The next stage of growth is built in and financed. Due to our sector-leading yield on cost of around 10%, we do not require additional equity capital to complete our 1.4 million to 1.7 million square meter pipeline in 2026. Liquidity at the end of June stood at EUR 2.1 billion, comprising EUR 400 million of cash and a total of EUR 1.65 billion of available committed revolving credit facilities, more than sufficient to meet our cash needs for the next 12 months. We continue to rebalance our capital structure towards unsecured funding, currently at 71% with a medium-term goal of around 80%. Our average debt maturity is 4.6 years. 99.4% of that debt is either hedged or fixed rate. And our weighted average cost of debt is 3.4%. Following our recent refinancing activities, we do not expect a material increase in our average cost of debt during 2026. We remain confident in the outlook for CTP. Operationally, the first half was marked by record leasing activity, while rental levels remained resilient. We continue to see structural drivers such as nearshoring, supply chain professionalization and in Europe for Europe production, supporting occupier demand across our markets. Our pipeline remains highly profitable and tenant-led with 2 million square meters under construction, EUR 152 million of future rental income embedded in that development pipeline and over EUR 7 billion of development profit potential in our land bank. This provides us with significant embedded growth well beyond the current year. More broadly, we remain firmly on track towards EUR 1 billion of annualized rental income by 2027, supported by development completions and reversionary capture. Thank you for your attention. We now welcome your questions.

[Operator Instructions] Our first question comes from Bart Gysens from Morgan Stanley.

Bart Gysens from Morgan Stanley. I have 2 questions. My first question is on Romania. It looks like quite a chunky write-down there, 5% or so, significant. Can you elaborate what happened? And whether there's any other markets where we could see something similar? That's the first question.

Maarten here. Let me take the first question. So if we look to Romania, what we have seen is, in general, if we look to the volume, we see good demand. But also if you look area, signed quite a bit of leases there in the first half of the year. But we have seen the market becoming more competitive. There have been some more players entering the market, some of the more trade developers, so to say. So people will build and then afterwards sell to fund or others. So that has distorted the market a bit because the market with those new players entering has become a bit more competitive, and that's why you saw some pressure there on the valuations. So that is basically what has taken place in H1. But if you look to the overall leasing that we did in Romania, actually, the first half was good in terms of volume. You see that also on the slide where we show basically the rental levels and the leasing volume we did, which is in the presentation. So if you look, it's more of a local issue and a temporary issue rather than any structural issue. We don't see it also in other countries, and it comes back to the leasing activity that we have done. If you look to the leasing activity, which is up 55% with a total 1.6 million square meters signed, that's a very strong underlying demand. So it's really a local issue reflecting some supply short term in the market. That also if we look to the second half of the year, we expect ERV basically to be stable there.

But can you please give us some actual numbers there? So what was the percentage write-down on that Romanian portfolio? And was that driven by higher yields, lower rents, higher vacancy? Can you just quantify that because I think that's quite important?

So indeed, ERVs came down 4.5%, to be exact. Yields were stable. So it's really driven by the ERV movement. And like I said, if you look to the overall leasing, it was good actually because the overall leasing, we signed 350,000 square meters in the first half in Romania. So it's really pressure on rent short term, driven by a bit more supply push to the market by those local trade developers. No structural issues in terms of the park that we are having because you visited the parks from us in Romania. You know the locations. They are very strong locations. If you look, for example, to Bucharest West, it's the largest park in Europe. And this year, we should pass the 1 million square meter there. We are developing for our key tenants, [ Lilor Mila ], LPP. So very strong underlying dynamics, but just the competition which affected the valuations in the first half.

[Indiscernible].

And what gives you the confidence that -- sure, sorry, yes, go ahead.

This is a matter of adjusting the ERV. This is Remon speaking. So we have seen that the local teams, the leasing teams, we have difficulties to hit the ERV. So we came down with the ERVs. That's what we've done. Yes, it could be a temporary, I think so, situation that if we can hit these ERVs, we can then increase the rents again. But for now, we came down. We don't do a lot of incentives, as you know. We don't do lots of rent-free or anything like that. So yes, and we don't plan to do that. So it's just a matter of -- we have been able to increase ERVs over the past years. And maybe we have been a bit too ambitious here and there, and that's why we corrected that to a realistic level for us or for the leasing team to do deals at. Yes, and Maarten is correct. Of course, it's a bit more competitive. Although yes, maybe it's a temporary thing. But yes, there are other players, not only international, also local fighting for some deals here and there. So yes, there's maybe some more competition, but we don't see a lot of vacancy. So it's more a correction of adjusting the ERV to a bit lower level and not maybe as high as we thought. Let's see our take-up is and what supply is like and then we can maybe increase slowly again the ERVs. I think that's what's happening.

Great. And then my follow-up question or my second question is on the impact on the balance sheet, right? You've been guiding to 40% to 45% LTV. That's ticked up over time, your acquisition in Italy, other ambitions. And now, of course, you have the denominator effect of a lower V and therefore, the LTV goes up to now 47%. By when do you think you'll be back into the target range?

Yes. Thanks for the question. Yes. Look, I think you know that we are able to grow the balance sheet without acquisitions through developments at the 10% plus yield on cost. So everything that we are investing over time, the 2 million square meters that we have under construction, the rest of the developments for delivery this year at 10% plus will help us towards that. We are happy with where we are. At the moment, understanding that the acquisition in Italy at the end of last year pushed us up, we are relaxed about valuations going in through the rest of the year. Like Maarten said, we think about Romania as a separate case. We don't think there's a read across into any of the other markets, different competitive scenario in those. So we will move over time. I don't want to put a specific timeline on that. But over time, we will move slowly down towards the 45%.

Our next question comes from John Vuong from Kempen.

Just following up on Romania. What gives you comfort that this adjustment in ERVs is sufficient and that most downward pressure is behind us? Are the trader developers mostly done with their pipelines? Or yes, how do you see the market there?

It comes back to the rents we are able to achieve, John. So if you look -- and it's also what I said to Bart, if you look to the leasing, we've done 350,000 square meter in the first half of the year compared to 200,000 square meters in the first half of last year. The rental levels, they stay at EUR 4.50 of the new leases signed. So we see those in line with basically the ERVs that we now have. So if we are able to lead at those levels, that gives us, of course, the comfort on the ERVs that we now have in the books.

But, Maarten, maybe more important -- maybe more important to explain, Maarten, is the cash because we are talking here about the perception or the ideas on what is value and what can we rent buildings at today, next week, next year, over next year, duh, duh, duh. But cash doesn't change. So we collect more cash now from the Romanian portfolio than we did 12 months ago, than we did 6 months ago. Do you understand? So the cash, the rental income has grown.

That's clear. And maybe just zooming in on the Czech Republic. I noticed that in your interim statement that you're also written down on the Czech portfolio. Could you provide a bit more color on that?

So if we look to Czech, John, that's a bit -- we have spent some maintenance CapEx in the first half of the year. We keep our properties up to date, as you know. So if you run the CapEx through the P&L, you get the adjustment on your value, and that's why you see the net revaluation result there being slightly negative. So it's the maintenance of the properties that we are able to keep up to date to the current standards. And I think you also visited some of our properties. If you look to the older parks that we are having, it's now 20 years. If you are coming in there, you don't feel like them being 20 years. So they are very well maintained. And that's also why we can continue to drive the rental growth. And that also comes back to what Remon just said before on Romania. If you look to those properties in Czech, well, maybe slightly older, some of the initial parks that we built, they are generating more rental income than ever. And for that, we sometimes need to invest. That's the usual property management that we are doing. That is also the service that we are delivering to our tenants and the quality that we stand for.

Okay. That's clear. And the last one, during your comments on Vietnam, you mentioned that Chinese companies active there are also looking to enter Europe. Do I read this as that they first want to cooperate with you in Vietnam before they decide on whether to partner up with you entering Europe? And just how tangible is your ambition to enter Europe?

Yes, it's both. So -- and Remon can also add on that, but we have been, of course, touring also around in Vietnam. And when we see many companies active there, both our existing clients because we already have quite a bit of Chinese, Taiwanese clients, what we have in Europe, we are also active there, Inventec and Wistron, et cetera. Same with the Chinese clients. What we have in Europe are also active in Vietnam. But there are also, of course, Chinese active in Vietnam that are not yet in Europe. So it's both ways. And the start of CTP Asia through our operations in Vietnam is really also to strengthen our network there. We have seen the growth of Asian clients coming to Europe. I think we have been one of the first ones to act on that. And that's also why you have seen the increase in the Asian tenants in our portfolio. That's also why we, of course, have the team on the ground in China focused on business development. So companies will want to expand into Europe. And we think we can leverage that even more by our operations in Vietnam because especially if you look to the northern part of Vietnam, you see many of those Chinese companies active there. Basically, it's part of the China Plus One strategy. It's more regional production. They are growing outside of China and some of that is in Southeast Asia. Some of that will be in Europe because Europe remains the largest consumer market in the world in terms of population. So for Chinese companies to have that growth and with the new regulation in place, they need to be in Europe and whether that's manufacturing or whether that's more e-commerce. And Remon also mentioned it in the intro, we signed, for example, with a Chinese e-commerce player in Poland. We see more demand of those, especially with the new regulation where the small packages are no longer exempt from import tariffs, they are looking for more space in Europe. But the same with the manufacturing, whether it is EV related, whether it's semiconductor related, the regulation basically drives them to produce in Europe for Europe, together with, of course, the growth ambitions that many of those Chinese companies have and the consumer market that Europe has to offer. And we think that with the operations in Vietnam, we can tap in way more into the network and basically enhance that growth with Asian companies.

To finish maybe and summarize, CTP do 1.5 million square meter of new business this year, 1.5 million, right? That's around 10% of the completed portfolio. 2/3 of that, let's say, 1 million is existing clients and the remaining 1/3, say, 0.5 million square meter we look for new clients. We think that more than 50% of that 500,000 square meter, to be exact, 300,000 square meter is our target for this year to secure that with Asian, mostly Chinese tenants. And so far, first half of this year, we have been able to achieve that. We have done more than 150,000 square meters of new leases with Chinese companies. And that is a mix of all type of companies, honestly, logistic service providers like SF Express, companies involved in manufacturing of machines for the agriculture industry like Zoomlion in Hungary, also the new automotive, so the EV industry, [ Eyambole ] in Serbia, one example, but also a large e-commerce company, which we recently signed for Poland. So we have a very clear identified a number of target groups and the Chinese companies are -- Asian companies, in particular, Chinese companies is one of the target groups which we approach. And we have established a China desk. So we have a team of people, Chinese people in China, but also in Europe who are actively approaching Chinese companies to see if we can help them with their property needs in Europe. And that's not -- also Germany, by the way, it's not just Holland or Poland, it's throughout the portfolio. And with our activity in Vietnam, we're getting even closer to those Asian companies and Chinese companies also because many Chinese companies take space in Vietnam. So this works nicely together, and it helps us to further extend our China desk or our Asia desk when it comes to securing business, not for Europe only, but also going forward for our Vietnam project.

Our next question comes from Vivien Maquet from Degroof Petercam.

Vivien Maquet, Degroof Petercam. Two for me. Maybe first, a follow-up on the increasing competition in Romania. Just wondering if there is any specificity to micro location when you see competition rising more intensively than other locations? And to what extent you see discrepancy in terms of the rent that you can achieve in between your parks? That would be my first question.