Eurocommercial Properties N.V. (ECMPA) Earnings Call Transcript & Summary

Welcome to the Eurocommercial 31st of December 2020 Results Conference Call. I will now turn the call over to Valerie Jacob, Director of Investor Relations and Corporate Development.

Thank you. Good morning, everyone, and welcome to Eurocommercial with the presentation for the 18-month financial reporting period to 31st of December 2020. I'm on the call with our CEO, Evert Jan van Garderen; our CFO, Roberto Fraticelli; and our CIO, Peter Mills. We will start with a short presentation before we open the floor to questions. Mr. van Garderen, please go ahead.

Good morning, everyone, and thank you for joining us this morning. This is the first time the newly composed management board is reporting to the market. And in this call, Peter Mills will talk in more detail about the property portfolio and ESG, followed by Roberto Fraticelli, who will discuss in more detail the financial results. I will start with an overview of the operations of Eurocommercial during this unprecedented year 2020, and we'll finish this presentation later with some remarks on the dividend proposal. 2020 has been a very challenging year for the company. Our colleagues, our tenants, our customers and our shareholders. The COVID-19 pandemic had a major impact on the business of the company, and we are still experiencing difficult circumstances. However, the modest progress made with the vaccination programs in our 4 countries provide sufficient confidence in rapidly improving circumstances in May, June. The diversification over 4 countries and the quality of the EUR 4 billion retail property portfolio in each of these countries have been key to the performance of the company during 2020. Our suburban shopping centers focused on everyday goods and anchored by hypermarkets and supermarkets showed strong resilience when they were open. Remember that 56% of the space in our shopping centers is dedicated to essential and everyday goods. Due to lockdown orders from government, our shopping centers have been closed several times in 3 of the 4 geographies where we own shopping centers. Only Sweden has seen some restrictions, but no closures. On average, our centers have been closed for 2.5 months in 2020. Our 5 trophy flagship centers, Woluwe in Brussels, Passage du Havre in Paris, and our 3 largest centers in Italy also re-bounced as soon as restrictions were reduced or lifted. This leads us to believe that as soon as nonessential shops and restaurants are allowed to be open again for the customers, which we expect to happen sometime in the second quarter of 2021. The rebound will be even more significant as we have seen after the first wave and the second wave. The quality of the properties is reflected by four important indicators. The vacancy rate increased only marginally from 1.4% in June, to 1.6% at December 2020 for the entire portfolio. The rent collection rate for 2020 was 95% for the due and collectible rent. The rental uplift on renewals and relettings during 2020 was 10.5%, a perfectly respectable result compared to the uplift during the last 10 years. The property values only reduced by 3.8% over the past 12 months due to high occupancy and continuing leasing activity, evidencing the sustainability of rents. This was, obviously, helpful for the improvement of the company's loan-to-value ratio at 31st December to 43.8% compared to 45.5% in June. Due to COVID-19, rent collection rates became one of the most important key performance indicators during 2020. Our leasing and rent collection teams have been extremely busy with the execution of our strategy for the lockdown periods, which was to find mutually acceptable solutions for rent payments and rent concessions for the lockdown periods only and to keep the existing leasing agreements unchanged. This strategy has been successful and resulted in a high number of agreements concluded with tenants. Overall, 98% for the first wave, which was also the reason for the respectable rent collection rates achieved. In the table on Page 7 of the presentation, you will find all details both in case rent concessions are taken into account, which results, of course, in higher rates and in case rent concessions are ignored. And for January, February 2021, we achieved an overall rent collection rate of 75%. In our 12 months report, we anticipated a total amount for rent concessions granted of EUR 21.7 million, which is about 10% of the annual rent and which assessments appear to be correct. At that time, we did not know that in some countries, there would be a second wave and even a third wave in 2021. We assessed the rent concessions for the second wave related to calendar year 2020 to be in the order of EUR 2.3 million. So in total, EUR 24 million, which is reflected in the December 31, 2020, books of the company. Please note that rent concessions for the second wave could still change as in a number of cases, negotiations are ongoing. However, for the first half of 2021, further rent concessions will have to be granted due to closed shops. As partial lockdowns are continuing, it is uncertain when all stores are open again and for which periods landlords and tenants may have to agree solutions. In 3 of our 4 countries, the governments have announced to provide government support for 2021. But for now, it is uncertain how much support will be available and when. Therefore, although we're pleased that there will be, most likely, more government support than in 2020, we have to remain cautious. Despite the pandemic, 2020 has been a very active leasing year, although leasing has, of course, always been the core business activity of Eurocommercial is more than ever now of paramount importance that we continue to lease our retail space to attractive tenants under sustainable conditions at affordable rent levels. Introducing new tenants and new concept of existing tenants will ensure that our shopping centers remain attractive for the customers and continue to have their purpose and stay relevant in their catchments. We are proud to be able to report that on -- sorry, on 277 relettings and renewals, more than 245 in 2019, an average rental uplift of 10.5% was achieved. It's important to note that the leasing activity did not slow down during 2020 and that we were able to conclude 95 lease agreements during the fourth quarter of 2020 with an average uplift of 6.5%. Next to this rental uplifts result, we signed 30 leases for new space, we created in our centers in Italy and Sweden. A nice example of our leasing activity was the re-merchandising of shopping center I Gigli in Florence, building works to create new shops and larger shops continued during the pandemic, and the new space opened in phases between October and December 2020, offering a range of new brands to the tenant mix of our largest shopping centers in Italy. On Page 10, you will find the selection of the brands which we introduced in our centers. In Sweden at Valbo, there were new autumn store openings for New Yorker, HEMTEX and H&M, the fifth full concept H&M store, we have delivered over the last 2 years, all including their successful H&M Home, Clas Ohlson was an important addition to Ingelsta Shopping, opening their latest concept last month. Normal, the expanding Danish value retailer, recently opened in Hallarna and also opened their first store in a French shopping center at Passage du Havre in Paris. At Les Atlantes, we opened a Blackstore unit, a new intersport group brand, while at Etrembières, we signed 2 restaurants with the Agape Group in our external food and beverage project, which will open next year. We have attracted several new premium brands to Woluwe Shopping including Maje, K-Way and JOTT. While last Friday, Rituals established its first flagship store in a shopping center in the French-speaking part of Belgium. In Italy, several new international brands opened in our centers, including The North Face, Nike, Adidas and Starbucks, while existing international brands, including Primark, Inditex, H&M and JD Sports increased their presentation. This is the moment to hand over to Peter Mills, who will discuss in more detail our property portfolio and will report on our ESG strategy and performance.

Thank you, Monsieur Jan. The valuations declined by 3.8% over the year and by 0.9% since the properties were last independently valued on the 30th of June 2020. the overall decline in values resulted from higher initial yields or exit yields depending on valuation methodology and more conservative ERVs, with, in some cases, a modest provision for further lockdown rent concessions. In their reporting, the value has identified the low vacancy levels in the portfolio and the solid outlook for income security supported by steady tenant demand and rent affordability. One general positive comment they had for all markets was the defensive characteristics of the portfolio, with its strong foundations anchored on large food stores and its broad spread of essential and everyday retail. In France, the overall average initial yield is 5%, although it is worth noting that excluding the prime mixed-use central Paris asset, Passage du Havre, with its low initial yield of 3.75%, the overall yield on the remaining predominantly suburban and provincial shopping center portfolio is 5.3%. In Italy, the exit yields used by the valuers in their cash flow models increased by over 20 basis points to 5.7%. The lower initial yield of 5.2% illustrated in the table reflects the temporary lower net operating income before the rents from the projects at the regional centers, I Gigli and Fiordaliso come onstream. In Sweden, the value has identified relevant comparable transactions in all segments of the retail market, including shopping centers, with the sale of Farsta Centrum by Atrium Ljungberg transacting during the COVID period at a yield below 5% for a leasehold tenure. With normal market conditions prevailing in the transactional and occupational markets and with shopping centers open and trading well, the Swedish valuers removed the material valuation uncertainty clauses, which they have inserted in their June valuations. The valuation of Woluwe Shopping in Belgium was down by 6% over the year, mainly the result of an increase in yield and a downward adjustment in ERVs. Following the sale of a 50% interest in Passage du Havre to AXA in July 2019, we have sold another approximately EUR 100 million over the last 6 months, in three separate transactions in Sweden and France, where local buyers still have some appetite for selective retail investments. We decided to sell our two retail parks in Sweden: Moraberg, located on the E4 Motorway outside Södertälje; and Bronson situated next to our still owned shopping center, Ingelsta shopping in [ Norrköping ]. While both properties were fully let, trading well during the pandemic, their more specialist discount retail profile does not match up so well with our normal shopping center tenant mix, and this was just 1 of our considerations in reaching our disposal decision. We sold both properties at their valuation in separate transactions to Serena Properties, the manager of a fund between Balder, the listed Swedish property company, and Varma, one of Finland's largest pension funds. Les Trois Dauphins is a mixed-use property located in the historic city center of Grenoble, next to Galeries Lafayette, s let to FNAC, C&A and Groupe Accor. The property was acquired by Credit Agricole companies at a yield of 6.2%, and the completion of this sale took place yesterday. Other properties have now been identified for sale, but have only recently been put in the market with encouraging levels of initial interest. Following a detailed materiality assessment amongst key stakeholders, the company formulated and presented a new ESG vision and strategy last year to ensure that it meets global challenges and the future demands of its customers, tenants and employees. Our ESG and business strategies are now more carefully aligned so that business decisions can be approached with a long-term view, supported by detailed research in order to evaluate both their environmental and social economic impact. Our approach is articulated around the three strategic pillars shown on the slide: Be green, be engaged and be responsible. Be green forms the foundation of our operations and provides the opportunity to make changes that will significantly reduce our imprint and operational costs as we focus on the transition to a low-carbon economy with the target to operate carbon neutral by 2030. To achieve this ambition, we aim to improve the environmental quality of our shopping centers by implementing standards and technologies to improve energy and water efficiency and waste recycling. This includes reducing energy consumption, procuring renewable electricity and where possible, generating energy on-site through, for instance, further solar panel installations, rock heating and groundwater heating and cooling. In 2020, we managed to reduce our energy consumption by 10% and are now recycling approximately half our waste, with a target of sending 0 waste to landfill by 2030. Our current focus is on improving the quality of baseline energy data and introducing our latest green lease documentation in order to exchange ESG ambitions with our tenants to gradually reduce the environmental footprint. We are constantly engaged with our customers and tenants, listening to their feedback and analyzing regular surveys to ensure our centers evolve with the changing retail landscape. Our target shown here are to improve customer and tenant satisfaction scores. And this year, we are extending our engagement with our suppliers to produce sustainable procurement policies and procedures to improve quality and efficiencies. Meanwhile, our shopping centers continue to form an integral part of their local communities, bringing improved social and environmental values through the promotion of local employment, improved local transport infrastructure, education, and the provision of green space and amenities. Our third pillar, be responsible, includes creating a workplace for our employees to thrive and develop professionally, providing them with a broad corporate and property experience and education, supported by carefully targeted training programs. We pride ourselves on our diversity and collegiate culture with our country teams working together and sharing best practices across property and financial disciplines. With the ESG workshop, in particular, being at the forefront in their engagement as we seek to achieve our targets. This themed dining place for 17 restaurants opened at the beginning of last year at Curno, located to the West of Bergamo, our first shopping center acquired in Italy in 1994. And the aim was to design a low environmental impact structure using solar panels, recycled rainwater and a glass dome with our pillars in order to maximize light without increasing heating and cooling consumption. The whole production process is low-emission with the reuse of production waste and packaging and even plastic trays being 100% recycled. The project received a BREEAM construction Very Good certificate and made an immediate impact with our visitor numbers, up 25% in the first month of operation before the arrival of COVID, which has had a negative impact on our F&B in all markets. We introduced the Eurocommercial Retail Academy with an ambition to develop an inspiring educational program to improve knowledge and training in sales and customer service to serve our customer audience that increasingly values personal service. We initially introduced the academy to our 3,600 staff employed in our Swedish shopping centers using external lecturers specializing in sales, service and customer psychology. The response was very positive among participants who each received an officially recognized diploma on completing the program. Eurocommercial also received very positive feedback on the program content from our senior management level contacts at many of the retail companies. Following this success, we are repeating the program across our other markets, with a further 8 shopping centers initially identified to host the Eurocommercial Retail Academy. While COVID has delayed our progress at our Italian center Il Castello, we still managed to organize their program using virtual workshops. We are committed to improve our ESG performance annually and actually achieved our highest GRESB assessment score last year and a green star position in line with industry best practices. We were also awarded the EPRA Gold Award for sustainability reporting for a seventh consecutive year. Meanwhile, further assessments are underway in our BREEAM certification program, with half the portfolio now certified and a target for all our shopping centers to be certified by the end of 2025. And I will now hand over to Roberto Fraticelli for the financial review.

Thank you very much, Peter, and welcome, everybody. This financial year was 18 months long, as you have seen in our press release. We published the values related to the 18-month period, but also the ones related to the 12-month period for the years 2020 and 2019. We hope this helps in the analysis of the results and their comparability with our peers. A quick look at the numbers, adjusted NAV per depositary receipt was 42.84% at the end, while it stood at 43.89% at the end of 2019, so a difference of around EUR 1 per depositary receipt. EPRA NTA per depositary receipt was 42.55% at the end 2020, while it stood at 41.84% at the end of 2019. The two major movements are related to the decrease in the asset values due to lower valuations that Peter just discussed. And it's partial compensation by a significant reduction in the deferred tax liabilities related to the fiscal value step-up of the Italian assets. The loan-to-value ratio calculated on a proportional consolidated basis and on net asset values is 43.8% at the end of 2020 compared to 45.5% in June 2020, and to 44% at the end of 2019. The loan-to-value group covenant ratio with our banks stands at 60%, in line with market practice. For comparison purposes, with some of our peers, the loan-to-value ratio calculated adding back purchases costs and using the IFRS consolidated balance sheet, stands at 41.5% compared to 41.8% at the end of 2019. This slide gives you a quick overview of the most important financial data. The total net borrowings at December 2020 decreased to EUR 1.77 billion, from the EUR 1.92 billion at 30 June 2019. Our loans are spread among 15 different banks in different countries with Dutch, Germans and Italian banks shares at around 30% each, as you can see. The average term of the loan book is almost 5 years, with most repayments foreseen in the years 2025 and 2026. EUR 100 million long-term loans, which are expiring this year are in the process of being renewed, with negotiations, which are expected to be finalized shortly. The overall interest rate, including margins, decreased slightly to 1.9% and 66 -- sorry, 76% of our interest costs are hedged at the 31st of December 2020, mostly by interest rate swaps, but also by a number of fixed interest coupon loans, and the average IRS hedging term is just over 6 years. If we look at the direct results, while the total direct investment results attributable to the owners of the company for the 18-month period was EUR 167.6 million or EUR 3.4 per depositary receipt. For the 12 months until the 31st of December 2020 and the December 31, 2019, those figures are EUR 2.21 and EUR 2.43, respectively. This slide gives a good overview, I think, of our direct results and the impact of the COVID-19 government measures. The variance related to an increase in the net property income, mainly thanks to the extensions realized and the full contribution of the Woluwe shopping centers, partly compensate for the lower property income derived from the sales realized under the disposal program as Peter correctly illustrated before. The most important variance, by large, is related to the COVID-19 release. Please remember that the total amount of concession is EUR 24 million, of which EUR 16 million are included in this financial year, while the remaining EUR 8 million will be amortized over the coming periods according to IFRS 16. We also booked, in this financial year, ex-provisions for bad debt, EUR 3.6 million, and lower turnover rents and temporary income for EUR 2.6 million, as a consequence of the government restrictions in the various countries. This negative variance were partially compensated by significant cost savings realized this year, which we'll discuss in the next slide. So cost savings have been realized wherever possible, as you see, in the direct as well as the indirect property expenses and in the company expenses. You will find much more detailed information on these savings in the press release. But please be aware that some of them are one-offs, like marketing expenses, for example. We count on investing back in our marketing once restrictions are lifted. Some others, like lower income taxes, travel expenses, or, in general, lower interest expenses are expected to be of a more long-term nature. Thank you very much for listening, and I'll hand back to Evert Jan.

Thank you, Roberto, for presenting all the figures. In the press release, we also included the dividend proposal we will table at the general meeting scheduled for Tuesday, the 8th of June 2021 for approval by the shareholders. The last time the company paid a dividend was on 30 November 2019. Due to all uncertainty caused by the COVID-19 pandemic, the shareholders voted in June 2020 in favor of our proposal to extend the financial year of the company from 30 June 2020 to 31st December 2020. Unfortunately, the uncertainties continued in the second half of 2020 due to the second wave of COVID-19 and new lockdowns. Therefore, we decided after the fifth quarter results, in October 2020, not to declare an interim dividend. Uncertainty is still continuing in this first quarter of 2021. And therefore, the management Board and Supervisory board have decided to ask shareholders and holders of depositary receipts for their approval of the dividend proposal included in the press release. This proposal ensures that the company will maintain its status as a fiscal investment institution in the Netherlands, FBI and its fiscal fixed status in France. The dividend proposal will also help the company to preserve its strong balance sheet, a prudent measure, especially when taking into account the ongoing uncertainties related to the COVID-19 virus pandemic, and the restrictive measures put in place by the different European governments, both in the years 2020 and 2021. For the 18 months period ended December 31, 2020, the dividend to be distributed by Eurocommercial in accordance with the FBI rules and the SEC rules is EUR 107 million. Such distribution can be made either in cash or in shares or depositary receipts or a combination thereof. And the Board of management and the Supervisory Board proposed to pay a dividend of EUR 0.50 per depositary receipt in cash and to pay a mandatory scrip dividend of one new depositary receipt per 18 existing depositary receipts. The total cash dividends amount to EUR 24.7 million, and the distribution in scrip dividend at an issue price above EUR 30, a discount of more than 20% to December 2020, IFRS net asset value amounts to at least EUR 82 million. The ex-dividend date will be Thursday, 10th of June 2021, and the dividend payment date will be Friday, the 2nd of July 2021. The company has been well-known for its stable to increasing dividend policy since its inception in 1991. And we believe it is appropriate to determine the future dividend policy once the full effects related to the pandemic can be better assessed, which is hopefully the case in the course of the second half of 2021. I would like to conclude this presentation with a statement that as management board, we are truly thankful to all our teams in the various countries for their hard work and their continuing commitment to our company. I will now hand over to the operator for questions.

[Operator Instructions] And our first question is from Jaap Kuin from Van Lanschot Kempen.

My first question is on the rent collection. To maybe make your numbers more comparable to peers, could you also detail the rent collection as a percentage of rent roll so basically adding back the stuff you did not invoice?

Well, yes, I think -- thank you for your question. We set out in our table both a column where we said what is the collection if you compare it to what has normally been invoiced and the percentage when you deduct, basically, the rent concessions granted, which then obviously leads to a higher collection percentage. So in order to make us comparable to our peers, we thought it was useful to provide you with both columns.

Okay. So the invoice rent is actually the total rental?

Correct. Yes, yes. Roberto, I think that was the aim, at least. Because I know this is completely new for 2020. Certainly, rent collection rates was, of course, a new metric, which we never looked at before, I think, in the industry, but we try to be as transparent as possible.

That's important clarification.

So is also the impact, of course, but that's on the rest.

Yes, of course. Yes, yes, yes. But I mean, as long as we know that the 87% is the kind of the collection rate on the total rent rule, that is very helpful. And then a second question on the Slide #20 on the, let's say, direct result adjusted for the COVID relief and the cost savings. So you add -- you suggest to add back in the adjustment EUR 7.7million in cost savings. But if I look at '21, it appears that quite a bit of that is from indirect expenses. So can you confirm that the full EUR 7.7 million are normally cost also included in the direct result and not kind of the indirect result?

Those are -- what we try to do, and we've been struggling, as you know, Jaap, with providing useful information and trying to be clear with the 18 months, 12 months and proportional consolidation, IFRS and the rest, let's say, the savings is actually -- mostly, as you've seen, part is one-off and part is possibly recurring. But those are -- you see them, the specification in the slide -- sorry, in the press release, where you see them divided in the 3 areas. So we try to, really, to match, let's say, what was indicated in our balance sheet together with the -- sorry, in our results together with what you actually then see. Does that answer your question or...

I guess, for the benefit of the others, maybe we'll pick it up off-line.

Okay. No, fine. Fine, absolutely.

Yes, no problem. Just more for my modeling and to see where our adjusted cash numbers can end up. And then finally, a question on values. Yes, so a kind of 0.9% write-off in the second half. I mean, regardless of what you think about kind of exit rates. And obviously, you've shown your rents are sustainable, to a large degree, over 2020. I mean, it's a minimal write-down, especially compared to your peers. I mean, what should we think about why is your portfolio so much more resilient than anyone else?

Yes. Well, yes, thank you for this question. I'll ask Peter to comment here.

Yes. Thank you, Jaap. Now I tried in the -- I mean, first of all, I tried, in the presentation, to give you the reasons and behind what the valuers were saying, and I talked about, as you say, very low vacancy, the affordable, sustainable rents, strong food anchors. I think -- what I would say is, of course, our net operating income compared to, well, I've gone and compared it to peers. But our net operating income was, of course, positive between the two valuation periods. I mean it's only up a little bit NOI, but it was positive. And in terms of the yields, I mean, clearly, there were some transactions, some of which I referred to in the presentation. Others we have discussed, like in Scandinavia, the Citycon transaction and the big sale of Glatt during the COVID period. But what I tried, in the presentation, to do was to put the yields in some further context. So -- I mean, in terms of Sweden, for instance, the exit yield is 5.2%. The initial deal is 5%. As I look at the peer group, that's absolutely, bang slap in the middle of the peers to whom we are normally compared. The Italian yield of 5.7% exit yield, again, is directly in line with the main peers to whom we are compared. The initial yield is a bit lower. And as I explained, that is because of the project, Fiordaliso and Carosello, which have yet to come on stream. And again, in France, Passage du Havre is a very special property, low-yielding at 3.75%. And therefore, excluding it to look at the balance of the portfolio in France, and showing a net, an initial yield then of 5.3%. Again, that puts us absolutely -- if anything, actually, at the higher end of our peers in terms of yields. The lowest yield is Belgium. And our value is there. What they did is they added a conservative sum to the figure for the very profitable development that we're still yet to carry out. But of course, there's no income. And so that is partly suppressing the initial yield. The value is also in calculating the initial yield of 4.2%, included the value, but no income for heating and cooling supplement income that we get of EUR 1 million a year. So in fact, our passing yield is 4.4%. But when we bought the property, we very much had the project in mind. In fact, we bought 100% of Woluwe in 4 stages, the last 2 from AG. But the project, which is absolutely online, it's been deferred -- on timetable, but deferred 6 months, which we'll get our planning in June next year. But that EUR 75 million extension is -- it's very high yielding. We already own the land. And as we always hope, it would take our initial purchase yield, which is in the low 4s, pushing up towards 5%. And I think our cash on yield of 5% for that property represents, actually, a quite good value for what is considered still the best shopping center in Brussels. So I hope that helps.

No, no. That provides a lot of color. Maybe just returning back to France. I mean, obviously, there are -- I think common knowledge I would say that there's quite a bit of assets on the market. I mean, do you actually think you could sell your assets for EUR 5.3 million?

I mean we haven't tried it. I know others have. We sold Grenoble yesterday at valuation. That's a different sort of asset. One of the reasons we sold it, it's a city center property that we couldn't extend. I mean all I would say is as a direct read across, in terms of yield at 5.3%. As I say, that is on the high side compared to our peers. I mean, the investment market generally is quite shallow. It has a bit more depth as you'd expected in France and Sweden. And it's not going to then, for those 2 -- that's the market we've transacted in and perhaps have some focus on going forward. But the market -- for the big assets, as I said, with the exception of Glatt. And clearly, we have it in mind, still, for Woluwe, its due course, when the timing is right for a joint venture partner. I mean, the larger European insurance companies and the German open-ended funds are -- have been a bit more hesitant on retail investments. So the answer to your question is, we don't actually intend to sell -- to attempt to sell those French suburban centers, which, as I said, we still think have very good defensive qualities, as shown by the very swift and successful rebound after each lockdown.

Yes. And then I guess, maybe just to come back also on the French yield. So can you maybe square the numbers for me? If I look at the top-up net initial yield in France is 4.1%, and that's completely due to the mix with Passage du Havre. And then how do you get from the 4.1% to the 5%?

The initial yield in the press release for -- overall for the French valuations is 4.9%.

Right. But the...

I beg your pardon. I beg your pardon. I beg your pardon. It's 5%, and what I tried to do was to provide some context to that 5% by taking out Passage, which is a very separate and special and prime asset, as I said, with a very low yield. And look, therefore, the remainder of the French portfolio to try and provide you with some context for which to compare, perhaps, to some of our peers. And that is why I -- excluding Passage, we end up with an initial yield of 5.3%, but we reported 5%, including Passage overall.

Yes. I'm referring to Page 18 of the press release that actually says France, net initial yield 4.0%.

We'll have to look at that, yes. But that's not -- we'll have to come back to you on that one.

That's the EPRA net yield table you would refer to, whereas we were talking about our table on Page 8, Jaap. But of course, the EPRA net yields and our table yields, I mean, that's also a matter of definition, which we provide on Page 8. But no problem to reconcile this together with you and give you the background, how we arrived at these figures.

Yes. No, exactly. I think that's -- that will be helpful to better understand the bridge between the reported net initial and the prior numbers.

Our next question for today is from Niko Levikari from ABN AMRO-ODDO.

Let's say, my first question is regarding the, let's say, as a small clarification about the dividend. Did I hear correctly, Jan, that you've set the discount for the scrip dividend to be, let's say, you'll be issuing the shares at around EUR 30. Is that...

Well, what I said is that we have an obligation to distribute EUR 107 million. So that means that we have to also determine the issue price. And if you look at the cash component of just over EUR 24 million, that would mean that we would need, at least to price it, when we, in the end, have the proposal table at the AGM of above EUR 30 to get to that amount. So of course, you could say it's a bit theoretical, but whatever price you ask everybody, as a shareholder, knows you get 1 new share for 18 existing, so the pricing is maybe irrelevant. But of course, the pricing is relevant for the distribution of the amount we need to do to comply with the rules for FBI and SEC regime. But I just made the point that if people say, okay, I look at today's number of shares, you're going to distribute, and I look at the stock price, then how do you arrive at EUR 107 million? So that was a bit of guidance I gave in my speech.

Sure. Okay. And maybe, let's say, what was the reason that you felt that it was a more appropriate choice to go ahead with providing, let's say, 3 quarters in a scrip dividend. Instead of just issuing it all as a cash dividend?

Well, I think, Niko, it's -- well, let's say, the message we wanted to give. And of course, it's still up to the shareholders to decide in June at the AGM that, on the one hand, yes, we are conscious that dividends have not been paid for a while, but we are still in a very uncertain period. Loan-to-value does matter. I'm very pleased that we could at least report that we're going into the right direction at the moment. But it's also uncertain that we set to just have a cash outflow in June of EUR 107 million under these circumstances, we thought, was not prudent. On the other hand, we want to maintain our REIT stages, both in the Netherlands and France. So this is then the sort of compromise. The cash component is there as well. Of course, we're also conscious that when you pay out dividends in the Netherlands, we have to withhold 15% dividend withholding tax, so there is cash needed. So that obviously also makes it more relevant to offer some cash as well. But this was, in the end, we thought, a reasonable proposal, given all the circumstances, which are uncertain, I'm afraid. As you know, in 3 of the 4 countries we're in, we have lockdowns.

Yes. No, that's understandable. Let's say, maybe a small question regarding the renewals of the debt. How do you see the discussions that you have currently with your banks are financing the assets? And do you see some pressure on the, let's say, on increasing interest expenses? Or if you can elaborate on that.

Yes. Well, I will ask Roberto also to comment. But as sort of first response, as Roberto said, the only loans we have to renew this year, extend this year is for EUR 100 million. They relate to Italian shopping centers, and we're pretty advanced in the discussions there. And I don't see that any effect on pricing in that case. It's, of course, now a matter of completing it. And hopefully, we can report soon that, that transaction has happened, but so far, so good. So I don't foresee any -- from that perspective, any effect on our interest expense. Of course, market interest rates at the long have ticked up a bit. But short term, we're still looking at quite negative interest rates. So we don't have an expectation. I think we're more or less stable with the interest. But Roberto, would you like to add some more comments here?

Some more color. Absolutely. I mean, the relationship with the banks, Niko, as you know, has been very long term, and we always discuss with them everything, the market and all the rest. And it's very interesting. It's very nice to see that they follow us on this. So they look at the situation, and they have a different view, possibly than a generalist would normally have. Now you look -- you hear shopping centers and you go, you're all going to shut down tomorrow. How come you're still alive? In the U.S., everybody's dead, and you're going to die as well. Well, we discuss with them. They look at the numbers. There's really this long-term relationship, and they understand that's how the situation goes. They see on the investments that we do. They look at the way we deal with our patents. The get comfort when they hear about our negotiations with tenants, how they're going and all the rest. So it's very comfortable, let's say, to have this kind of relationship with our banks because that helps. It's us help them helping us because, of course, then they need to go to the credit committee, they need to clarify things. But this long-term relationship is helping a lot, as you imagine.

Are you also looking at doing some further, let's say, green financing with -- across your portfolio?

Yes, yes, yes.

And regarding I said the disposals then. What regions are you now currently mostly looking at? Because obviously, that would be of interest. If you can provide some color on that.

Peter, maybe you would like to say, Peter?

Yes, Niko, thank you. I mean, I want to say during our last results call in August, we mentioned that we had identified approximately EUR 200 million a property to be sold in the next year. So we're halfway through that. I think sold EUR 100 million. The other properties slightly exceed EUR 100 million. But I think at this stage, we shouldn't give any further details into their identification. I mean, they are clearly -- I did mention that the two most liquid markets are Sweden and France. I mean, the other thing -- I'll just I say, just to mention again, is -- are the joint ventures on the large properties. We have two with Passage and Fiordaliso with AXA and Finiper, respectively. And Woluwe is something that, as I mentioned, we will continue to focus on for a potential partner at the right time. So I think we're on target, and I hope we'll have some more news, next reporting on some successful sales of the remainder of the program.

Maybe one other last questions from my side. Regarding the EUR 7.9 million of, let's say, concessions from 2020, that's still due for 2021 and '22. Can you just quickly elaborate, is that all due -- let's say, mostly due in 2021 figures? Or how should I consider splitting that, say, in my...

Roberto?

Am I going to take it? Yes. Say, if you look at the average contract, let's say, which is around 5 years, but usually, I would look at the period of around 3 years. And just to give you a rough idea, if you want to input numbers.

Yes. And then, Niko, I think what is fair to say is that of course, the next period, you amortize the most. So it's not a linear sort of connection. So the next time we report -- we have taken already a lot of amortization on board. But of course, it's linked to all the contracts and when the first break is there on an individual lease. And we actually do these calculations on an individual lease basis in our bookkeeping, Niko.

Sure, no, I understand. But let's say, if I -- from a modeling perspective, I assume, let's say, half of it in 2021, and that's not too badly off. I assume.

More or less, it's not too thorough.

Okay. And last question from my side about the OCRs. You obviously mentioned in the PR that you've seen some pressure for this to increase. Can you -- I mean, obviously, it's been a difficult year for the retailers and probably for the comparable figures. But is there any indication of, let's say, for the overall portfolio where the OCR is at the moment? Is that something you'd like to comment?

Yes. Well, Niko, you have noted that we haven't this time put OCRs in our reporting because the period just behind us, is so unusual that we thought, of course, you can give OCRs, but what do you give? Because there are rent concessions, lock down. So I think what we can say about OCRs at the moment is probably more reflected by what we see in our leasing activity and what we achieved there. And we're still doing deals. We showed the uplifts for the year, but also in the fourth quarter, we did quite some deals with an uplift overall 6.5%. So that indicates that at least the rents that we are achieving are also fit the tenants. And let's say, if we go back to normal, then I think we will still see the OCRs, Eurocommercial has been showing for many years. And I think in the end, the fact that we have those lower OCRs also allows us to do, still, business in the leasing. But we have deliberately not reported now because it's probably more misleading than adding anything for you, as an analyst, to rely on.

[Operator Instructions] The next question is from Pierre Clouard from Kepler Cheuvreux.

From Kepler Cheuvreux. So I guess you answer my first question on disposals, so just to make it clear, but you are not a seller today of your remaining stake in the Passage du Havre as we saw that guys like Alliance were actually interested in buying stakes in French shopping centers, from [ MSM ] for instance, but this is clear for you that the remaining 60% stake in the Passage du Havre is not for sale today?

Well, when we announced our joint venture with AXA on Passage, you have -- we established that joint venture for the long term. It's a long-term arrangement with AXA 50-50. And that has developed nicely. Of course, nobody could, at that time, foresee COVID-19, et cetera, and the impact. And even today, although I think [ Marks' ] is still trading from The Street. The gallery, unfortunately, is closed. No, but there is no trigger or whatsoever for that joint venture. We have established an initial period for the JV anyhow. And we're very happy teaming up with AXA in Passage du Havre.

Okay. Maybe just to come back on the uplift. Is it related to a specific retailer or category? Or is it very equally spread over the renegotiations?

With the uplift, you referred to our table in the press release?

Yes, sure. That's right.

Yes. No, let's say, we -- of course, and that was also the purpose of the slide in my presentation. If you look at uplifts overtime, of course, these vary a lot with the period in which we do deals in the letting, overtime. It's on Slide 6, you can see that these uplifts, sometimes, were much higher than 10.5%, which we reported for the year. And there were also periods, even some years ago, when it was lower. But it's fair to say that this time, we benefited from, particularly, activities in I Gigli, where we had some space which was rented out at a much lower rent per square meter, a bazaar space, basically, which we now have relapsed to premium brands, and we've given a number of those brands in the presentation. So that is where most of that uplift came from. But there were also other successful lettings done in Sweden. And even in Woluwe, with a few nice brands, which we concluded. So it's actually the quality of the portfolio producing these numbers.

Okay. Very good. Interesting. Maybe just to stay on the study. Maybe can you come back on the fiscal status that we actually saw in Italy. So was it expected? And can we believe that this reversal will be at the same level for going forward, and there won't be any potential change in the future there?

Roberto, I think that's about the fiscal step up.

No, I think it's -- is it about the renewals? Of lease renewals or -- sorry.

No, no. The fiscal step up?

The fiscal step up. Yes, it's a one-off. So let's say, it's a very nice legislation which was put in place in Italy, whereby you can actually do the fiscal step up at the 3% rate compared to the standard rate of 24% or 27.9%. So we're using it. And that will -- as you've seen, that's reduced the -- significantly, the deferred tax liabilities. If they will do it again, that could be. I mean, it's not the first time that we have a fiscal step-up in Italy. The rate is very interesting. You might remember there was one once with Berlusconi at similar rates. But, no.

And maybe can you remind us what is the rationale beyond this change of tax?

Yes. Sure. From our point of view, I can tell you, I mean, because, of course, we have fiscal book values of our assets and the participations in the sub holdings. And through this fiscal step up, that were able to raise the value of the -- fiscal value of the assets to the same value as the market value of the asset. So in case of a sale in the future, then the tax that you need to pay on the difference between the market value and the fiscal value is reduced significantly. So that's the rationale for us to enter into this kind of transactions with the Italian government.

So the one-off has been taken into account, and then it will stay that way for long now?

Yes. Unfortunately, I cannot hear you very well. But if I understand your question correctly, let's say, if I have an asset, which is in my books for EUR 50 million, and I sell, like, fiscal books for EUR 50 million, and I sell it for EUR 120 million, then I should be paying taxes on the EUR 70 million. And that will be tax, let's say, the 24% rate, depending on the kind of taxation -- of the kinds of transactions and the rest. But if you do the fiscal step up, then you got the fiscal book value is EUR 120 million, and it's equal to the market value of the property. So there is no tax involved or very little tax involved. There's always some tax involved.

Okay. Good to know. And maybe a final one. It's -- maybe to understand your feeling there. What's your, I guess, happening new in terms of asset valuation in Q1 '21?

Sorry, could you repeat the question? Because it was difficult to hear.

Yes. Sorry, sorry. What's -- what do you think about the evolution of asset valuation in 2021? Do you feel it will be in the same extent that was in 2020? It will be higher or lower maybe? So maybe have more color there on your expectations on the valuation for 2021 would be useful.

Yes. Well, I think, Peter, that's, of course, forward-looking. The next valuation for us will be in June and for many of our peers.

Yes. No, that's right. We'll be instructing them shortly. They'll be carrying out their valuations in May. I mean, the question, I suppose, are there going to be any comparable transactions in our markets to the portfolios we have before then? I don't know. n terms of the fundamentals, though, behind the judgment the values it took in terms of looking at the net income. I mean, yes, there will be a -- there may well be a correction in terms of short-term loss of rent. But I think those should be, hopefully, through by the time we get to the valuations in May for this third lockdown. And we'll see, again, that the rents are still there as before. The leases are still there with very little vacancy. So in terms of the fundamentals of the assets, I don't see a lot of change by June. I suppose the question is, will there be comparable data that will make the values reevaluate in terms of yields, but it's difficult to tell at this early stage.

There are no further questions at this time. I'll hand back to Valerie.

Hello. So we have a few questions for the webcast. So I'm going to read them out. The first one is, you stated that in the first 2 months of 2021, you collected 75% of the rent due. How does this figure compare with the pre-pandemic scenario?

Yes. Thank you for this question. If you compare it to the pre pandemic scenario, then we were still in a position where, actually, all our rents, basically, were billed advance quarterly. so we were used to bill quarterly. And then, of course, you collected, immediately, the rent for the whole quarter. Of course, there were always some arrears, due to maybe an individual tenant who had difficulty, but that was the normal pattern. And I think today, if you look at this figure of 75% due, we -- you must also include that, in many cases, we have agreed or allowed tenants to pay monthly. So that's the first observation. And also in a number of cases, it's not only in advance, but also in arrears. So this 75% for January and February, we think, is still a respectable percentage. Of course, whether this percentage will increase or what it will be for the second quarter remains to be seen, because we're in lockdowns still. And it's also probably affected by the fact that governments have announced that there will be support. And if tenants think maybe there is further support coming up, they might, in some cases, maybe be a bit more slower in paying it or awaiting exactly how that support will look like in order to see whether they should pay, later, the rent or do something else. So overall, I think it's still a good percentage, but it's completely different from what we experienced before COVID-19.

Second question is, do you believe that you will need further rent concession to be recognized for 2021, considering current partial lockdowns?

Yes, we actually already mentioned that also in our presentation that 2021 is the first quarter, again, has seen a number of lockdowns in Italy. It was a partial one which continued more or less. And in France, unfortunately, it started again in February and very recently now Belgium. And that means that we have to sit down with the tenants, of course, to deal with these periods. And depending a bit on what government support there will be, we have not yet seen the specifications, but it seems that there is more support than in 2020. So we just have to sit down and see what we can negotiate, but there will be some further rent concessions. That is no doubt.

Thank you. The next question is, which country do you expect less support from the government? Is it Sweden or another country?

Well, let's say, the only real experience, actually, we have also cash-wise is Sweden. Because in Sweden, there was quite quickly, in the first wave, support from the government. And we then had to collect moneys from the Swedish government or, let's say, more the regionals where we had to submit our claims. And that was quite effective because we actually cashed in already a lot. The support now announced in France, for the second wave, is still in the middle of being processed with forms, et cetera, which you then have to collect from tenants and then later on make -- made the claim. And for the third wave, we don't know. It has been announced, but how it exactly will look like, that is still uncertain even in Sweden. So I think what we can say so far is that, let's say, Belgium, but then we have only one asset there, has not seen a lot of government support, but then it's, for us, the smallest country. So we're then not so much affected.

The next question is what will be the total cash out consequences, sorry, of the dividend proposal?

Yes. I just refer to what I said in my speech earlier today. It's a cash outflow of EUR 24.7 million, if you take the outstanding depositary receipts into account. So EUR 0.50 each depository receipts. That's it, not more.

Next question on the agreements concluded over 2020, 97%. How much do you expect to recover from the remaining 3% of non-concluded agreements?

Yes. I think that 97% is still already quite a respectable and high percentage, the deals we've done and what is missing is basically positions where tenants are maybe in financial difficulty or have maybe a principal point where they don't want to agree. So whether we will -- can expect additional income remains to be seen. That depends a little bit on also, I think, in some cases, a combination with what we do with the third wave. So it's not only looking back, but we also have to look forward. So I don't want to put a number on it or an amount on it. But I think with the 97%, we're quite satisfied what we have achieved.

The next question is about the increase in vacancy. Which retailer sectors are most impacted, sorry, and are those increased due to bankruptcies?

Yes, maybe because it is reference to Italy, Roberto, comment on your side there?

Yes. I mean, you're absolutely right. The point is, of course, food and beverage has been affected as well as entertainment. So if you look at cinemas, for example, they've been very badly hit. What the situation will be? How many will be bankrupt? At the moment, we do not know because the situation is still ongoing. We also, as mentioned before, have to look at the actions by the government. So if they will come with packages and what they will do, but those have been the most impacted sectors at the moment.

And then I see there's also -- sorry.

No. Sorry. Yes, in France, it was fashion, no? And the last question is on the cost cutting, what is the sustainability of the cost cutting? I think he'll want to pass to over you, Roberto, for that.

Yes. I mean, some -- as illustrated also during the presentation, some of the cost-cutting is one-off, is COVID related. And some others, like reduction in taxes -- corporate taxes, for example, due to the fiscal step-up in Italy or also the reduction of interest expenses towards our more long term. But others, let's say, we need to see also the effect of COVID to see to judge on a long -- along the road that we'll have.

Thank you. I think we have another question on the telephone or...

We do, yes. It's a follow-up from Niko Levikari.

Just one quick follow-up on the Italian fiscal step up. You obviously mentioned that there would be the resulting tax payable of about EUR 13.8 million, for example, in 2021. But then again, you also mentioned that you expect these to be recovered in a short period of time through tax savings because of the -- obviously, the higher fiscally deductible depreciation that you have. My question was then, what would be, let's say, the net tax increase on the back of this that I can expect in the 2021 figures, if you could comment on that.

So if we had not done the fiscal step up, I'd say, what would have been the tax increase in 2021?

Yes.

Okay. Well, Niko, you have to look it from -- you can look at it from a more long-term perspective because, of course, we have increasing income and also decreasing amortization and also decreasing costs -- financing costs that we can adapt. So let's say, if you look at over a period of 5 years, then, let's say, the expense that we currently have for this fiscal step up, it will be compensated. That's the way we looked at it. So does that answer your question or...

Okay. No, that's fine. All right.

So whatever you say past the 5 years is actually an interesting game.

Okay. Thank you. I think we have no more questions. So I'm going to hand over to the operator. And of course, I am and we are, the team, available if you have any follow-up questions. Thank you.

Thank you very much, Valerie. Ladies and gentlemen, that does conclude the conference for today. Thank you all for joining. You may now disconnect.