Gecina (GFC) Earnings Call Transcript & Summary

Hello, and welcome to the Gecina 2026 Half Year Earnings Presentation. [Operator Instructions] Today, we have Bennett Ortega, CEO; and Nikola Detroit, Deputy CEO in charge of Finance as our presenters. I will now hand you over to your host, Benet Ortega, to begin today's conference. Thank you.

Good morning, everyone. Thank you for joining us today to review our performance for H1 2026. Three themes will guide today's discussion. In the first half of 2026, we continue to deliver growth in both revenues and earnings. This growth comes with stronger long-term fundamentals to a higher quality portfolio and LC leverage, and we are actively working to build tomorrow's self-funded sustainable growth for the next year. . I'll come back to this point at. Let's start with H1 2026 achievements. Leasing activity was sustained this semester. We signed 48,000 square meters in 6 months, sustaining a rental uplift of 13% while keeping our occupancy high around 94%. Looking ahead, our pipeline of surfaces on the Tomset now reaches 50,000 square meters including discussions with major tech players. We expect this discussion to close before the end of the year. On the multifamily side, we signed 650 leases with a strong increase in occupancy, up 170 basis points year-on-year. This shows the ramp-up of the strategy we've been deploying for 2 years now, furnished and serviced apartments as well as co-living solutions alongside our traditional family units. A good example of the way we capture strong rental uplift is the proactive rollout of our fully managed offices. We offer a plug-and-play product, 1 point of contact, 1 invoice and flexibility, and the market is ready to pay for that. It now represents more than 16,000 square meters across 16 buildings in Central Paris, where this offering is most relevant. Based on market trends for traditional leases, we achieved rents 30% to 40% above market value after deducting our costs, including CapEx. Basically, we achieved rents similar to redeveloped assets without entirely vacating the building for 18 or 24 months. This is particularly relevant for typical small-sized traditional Parisian office assets. We have already targeted 40 assets, and we expect to double this portfolio by the end of 2028. We are also working hard on customer satisfaction to retain our tenants for longer. This enhanced our visibility on occupancy, higher for longer and strengthened portfolio resilience overall. Thanks to proactive renewals and renegotiations, our tenant rotation rate was 10 points higher this year than the 3-year average. This reflects a broader market trend one that was probably reinforced recently and that helps explain the apparent subdue take-up since tenacitation doesn't fully show up in market data in France. This translates into our capacity to grow revenue. Our rental income grew by 2% on a like-for-like basis, outperforming indexation by 100 basis points in a context where inflation has been slowing down until recently, which is no surprise. It's even been up 7.6% on our housing portfolio, thanks to a solid catch-up in occupancy and growing rents per square meter. On a current basis, the contribution from our different growth drivers, organic growth, immediate accretive acquisition we made last year in Paris, as well as recent pipeline deliveries offset the disposal of mature residential assets as well as asset repositionings and potential conversions. Going from the top line to the bottom line, we continue to optimize our property costs to generate a solid increase in the rental margin, up 160 basis points year-on-year. Zooming out to the broader cost base, H1 confirms a significant decrease in our EPRA cost ratio from 21% in 2021 to 14% now. Same focus on financial costs, which remain well contained, thanks to our strong hedging policy and disciplined financing strategy. All in all, earnings continue to grow and we confirm our guidance for 2026, recurring net income expected to be between EUR 6.7 and EUR 6.75 per share. We delivered this growth while improving our fundamentals from portfolio quality to talent-based robustness of our financing platform. We have obviously worked on improving the quality of our portfolio. In the context where more than 4% of office stock was converted in housing or hotels in Paris, most adapter locations, we have been firmly anchoring our portfolio in the prime side of the market and where prime rents continue to grow in real terms after incentives and above inflation. This is a long-term effort and it requires consistency over time. Thanks to proactive disposals even in subdued investment markets, acquisitions and redevelopment Paris and share of our rents has already grown by 7 points since 2021. Those 7 points will become 20 points by 2031 or else equal, representing a doubling of our price office rents in 10 years. At the same time, we have made our portfolio more prime 65% our office portfolio has been restructured over the past 10 years, and we have identified 40 assets to further deploy our place, a fully managed office offering to be more appealing against our competition. On this journey, we have also reinforced the quality of our tenant base, and we take pride in hosting more blue chip names you see on this slide, French or global leaders alike in our portfolio. The last one being Mondelez Group in Bolon last month. Valued our holding firm, broadly stable like-for-like central location values, in particular, are up 0.3% in an investment market where Paris concentrates 75% of collection volumes in line with what we observed in 2024 and 2025. This is a surprise the investment market generally tracks the leasing market and tenant's favor centrality and quality. One important news behind the figures, we have also renewed our independent appraisals and all assets have been assessed by a new appraiser this semester. One of the key fundamentals we pay great attention to, as you know, is our financing structure. Summarizing H1 in Nathan, our credit ability was confirmed again with both rating agencies, reiterating our best-in-class credit profile for the eighth consecutive year. The bond we issued EUR 500 million over 5 years at a very competitive spread of 68 bps is a further proof of our competitive advantage against our peers on the bond market. In this context, we continuously maintain visibility with stable leverage. All future growth already funded for this year. I'll come back to this, strong liquidity with new credit lines and bonds and efficiency of our financing platform with strong hedging and contain cost of debt at 1.6%. Fibre then, as our model funds its own future revenue and value growth. In 6 months, we closed EUR 250 million of disposals of mature assets at a rent loss rate of 3.1% to fund the CapEx of the redevelopment pipeline launch end of 2024. Another EUR 80 million was secured in July at a rental loss in average of 2.4%. This year's blending need for development is EUR 265 million. The return on CapEx invested in Paris and eye redevelopment is 10.6%. This is how we approach capital allocation tools on an agnostic basis always with the aim to combine improving portfolio quality to drive future long-term rental growth. Keeping leverage at the safe medium, long-term level in support of our rating and selecting the most cash flow accretive investment for shareholders and adjusting at any time for the best option. Signature in Paris CBD is a good expression of this approach. It's a destination asset for corporate headquarters and already a leasing and value creation success just 12 months after our position. Our leasing progress is 15% above our initial underwriting. EUR 150 million of value has been already created in 12 months, and through this transaction, we have reinforced the portfolio quality with more prime by central value. The CBD share of our portfolio grew by 4%. We funded the acquisition and refurbishments without impacting leverage by selling a mature student housing portfolio yielding below 4% and value creation is already there with an updated yield on cost of 7% on actual rents. Let me now turn to how we are building tomorrow's value creation. When we look at the market, it's important to stress that Paris stands out as one of the few global cities offering such a diversity of talent base. It's the leading financial hub continue and a corporate industrial powerhouse hosting 88% of CAC 4 headquarters. Additionally, in a centralized country like France is also home to most national and global public institutions. And it's less known, but Paris is also becoming Continental Europe's leading up for AI and tech. Several reasons to explain this, the depth of the talent pool in Paris, scientists, engineers, data specialists, the existing ecosystem of hundreds of startups and AI leaders and capital velocity with strong public and private investment now reaching EUR 109 billion after 2 France. And it already shows up in the figures, the real estate figures, tech companies take up has doubled between 2023 and 2025, concentrated in prime submarkets with major transactions from Datadog, Mitral I or ShopVision. Same story on Gecina reform, tech, FinTech and Astec rents have doubled across our office portfolio between 2021 and today and Tech now represents 17% of our total office rents. Zooming out a bit. In the last weeks, we have interviewed together with IFP 500 French CEOs regarding AI and 2/3 say they are already an AI strategy deployed or working on one. Interestingly, 9 in 10 of those business leaders surveys, think that artificial intelligence will impact the office, not to replace it, but to make it more strategic and collaborative and among 72% of leaders who expect their real estate strategy to evolve in the coming years. The main move expected is flight in quality favoring central offices, best connected to building transport, flexible and collaborative workspaces and a monetized and service office buildings to attract and retain the best talent. The destination assets we are designing are aligned with these trends. They are also modular by design to adapt to evolving it. This thinking on the product is key in my view to meet the market with the right offering and deliver the expected annual rent of EUR 80 million to EUR 90 million once delivered and fully let. The first time are encouraging. Signature now is 60% secured, we have advanced discussion on 3 quarters arches, a healthy pipeline of visits and discussions across all projects, including a first fully managed office in quarter project. In May, we also launched works on shape, the new name of the T1 Tower in La deface. We'll bring the cause of hospitality, modern services and create design to transform the experience of this tower. This 18-month refurbishment will reposition the tower on the strong side of the market, where you have seen that vacancy has been down recently. And we already have interest though it's still early for prospect to come. Looking forward, and we have already confirmed guidance for 2026, the next cycle of growth is progressively taking shape. 2027 will be likely a transition year with much depending on the pace of releasing of the Paris Enel pipeline. From 2028, in a normalized inflation environment, rent contribution from the redeveloped assets with sustained rental and earning growth, together with the progressive releasing of shape. As you can see, we are working hard on the short term to deliver growth today while also preparing tomorrow's value creation always with the same discipline on capital allocation to extract more value. Thank you all for listening, and we are now happy to answer your questions.

[Operator Instructions] The next question comes from Florent Larochubert from Auto BHF.

I would have 2 questions. The first one on the asset value. So I understand that you have a new Ross -- and so could you maybe give us some maybe more colors about the comments on the valuations for your Central IS. And also maybe a comment on what has happened in the defense side, I think that is a one-off effect maybe on Q1? And maybe after that, I can ask you my second question.

Yes. Listen, the trends in Paris Central locations are the same regarding rents. We had a positive cash flow effect on operation assets and appraisal are based on the current situation, explained a bit the hit on the prime portfolio. So that's why growth has been a bit more limited than the previous semester with no major changes regarding appraisals. On La distance, there is a small impact on defense on the T1 and towers, and that explains most of it.

Okay. And so maybe my second question will be on the leasing side. So I think this is the first time that you report the square meters signed on temp sheets. So I understand that when you sign a temp sheet, so the rents are quite secured let's say, at 99% or something like that. How can we compare this volume of 50,000 square meters under temp sheet compared to previous period. Is it above same or below, that's what you are able to sign in the past?

I would say that the situation in France is a bit in a wait-and-see mode. So that's why we gave a bit of that indication. So conversation can longer than before. So that's why we have more volumes in term sheet before going to signature than what we had before. And as it was a sizable amount against what we signed during H1, we thought it was interesting to guide you a bit on what were the current discussions with tenants.

The next question comes from Ebrahim Homni from CIC. .

If I may. The first one is about the rental margin. Is there room for further improvement in H2? And my second question is about your dividend distribution policy. What payout ratio to expect in 2026, given the current Improvement, please? .

Can you just repeat the question, please, which just got interacted in the risk.

It was about the rental margin in H2. Is there a room for further improvement? And my second question is about your dividend distribution policy. What level of dividend could we expect in 2026, given the.

Yes, regarding rental margin, we worked a lot on that during the first half, like we did on the previous years. I think we should be a bit in line in H2 against what we did in H1. Really, it's a series of super small amounts, very detailed work by the teams on both resi and resi teams and office teams, which is paying off now. So it should be rather similar in H2. Regarding dividend policy, I think we gave some view that the dividend that we paid today based on the current distribution rate is rather fine and that we can sustain that dividend for the medium term and progressively increases alongside with leasing. So that's what the message we conveyed in February during our annual earnings call is still in line with what we have in mind now.

The next question comes from Benjamin Legrand from Kepler churro.

Just 2 questions from my side. First question would be on the guidance and what you expect over the second part of the year, considering where you are at the moment, I mean, I see it as a bit shy. So I was just wondering what you expect and then the second question would be in La default regarding Idemia, if you have any news coming from them if they could be staying or not in the tower.

We are in mind to have a different semesters between H1 and H2. It's a lot of small elements, but we are still in line with what we are planning to deliver for year-end. So that's why, in fact, we have kept the guidance like it was. Leasing is producing according to plan. So that's why we are capable to confirm the guidance even during this complex situation. Regarding La Defense, obviously, I will not be able to comment precisely on one tenant discussion. But regarding tower, which is for or you want the bidding, which is next to T1 tower, where ENGIE has a Suplac, which is called edema. And we are progressing well on being capable to keep occupancy on that building. But sorry, we are still working on it and negotiating. So I will not be able to comment precisely on the specific demand.

The next question comes from Jonathan Kownator from GS.

So how do you see the investment market, obviously, your valuation was down slightly by you've changed? Do you have appetite? And do you have -- do you think there's liquidity for additional disposals in the market today? And at the same time, can you please also highlight opportunities of reinvestments and how you compare today investment opportunities? Do you see any in the market versus potential share buybacks?

Thank you, Jonathan. I think we all saw the stat regarding investment market in private region, which are. So liquidity is pretty limited still some in Paris in our city, but still pretty shy. So there's the investment market following iron and the rise in interest rates have been declining in terms of volumes. That's probably why present have thought that it was slightly compression of our yield and therefore, no major moves to be expected in my view on the Parinvestment market...

Just sorry very quickly. Caviar instance was highlighting that insurance companies have been collected capital then trying to invest in some areas. I mean they were highlighting foreign investments. But what are you seeing from that type of investors currently.

But no massive move. I agree with you, they have collected a series of amounts of money, especially in Assurant, so the life insurance business. But so far, we have not seen them really active on our market. It might change. But so far, I see the market pretty net. What is meant there is probably family office. You saw that there was some remote regarding Ponte trying to buy capital, it might be executed in the next days, but we are not in the deal. Outside of family and pension fund money and not much to say.

Okay. What are you seeing in terms of reinvestment opportunities in the market? And is that something that you would consider currently?

The -- obviously, the -- our -- and I think it's in line with the question regarding share buyback. Our hurdle for capital -- cost of capital is pretty high. So we are obviously very careful and demanding on the returns regarding acquisitions. So -- and as the market has been frozen, in the next month, I don't see so many opportunities in the market for our positions. But again, my change, the situation is pretty volatile so.

And generally speaking, I mean, can you help us understand -- I mean, obviously, I understand my liquidity currently is low in the market. But what's your appetite to continue disposals, obviously, you've been doing some disposals in H1 that are funding your pipeline. What is your appetite in principle to test the market if you find some is liquidity in that.