Gecina (GFC) Earnings Call Transcript & Summary

Hello, and welcome to Gecina business at September 30, 2026. [Operator Instructions] Today, we have Beñat Ortega, CEO; and Nicolas Dutreuil, Deputy CEO in charge of Finance as our presenters. I will now hand you over to your host, Beñat Ortega, to begin today's conference. Thank you.

Good morning, everyone. We are pleased to update you on our activity over the first 9 months of 2026. We have all seen our market conditions have evolved this year and we have worked hard to deal positively with the situation on free front future revenues, cost of capital and energy. I would like to use my time to highlight where Gecina sits within this evolving environment. On the revenue side, we have achieved the record Q3 leasing activity in our office portfolio with 92,000 square meters of renewal and lettings, representing now 140,000 square meters since the beginning of the year. It's one of the strongest performances in a decade. It also shows that our portfolio is not following market averages, which remain subdued. We have talked a lot about polarization recently, and it's only getting stronger, it plays on 2 levels where when tenants decide to relocate on the best transportation hubs and on the highest quality buildings. This is the lens to which I would read our figures. I would like to draw 4 points from it. First, the quality of the mix of our leading achievements, more than half of the volume comes from new tenants choosing our platform because they better fit their needs and the rest from existing tenants that agreed to stay longer in our buildings. We work both on attracting new consumers, customers and on securing our tenant base. Second, visibility. This lease secures around EUR 91 million of annual rent with an average maturity of 6 years. Third, La Défense as you saw on Monday, we signed 2 long-term leases on Building B and Adamas, ensuring full occupancy for both buildings. The best assets attract the best tenants in a selective market. This is the dynamic we want to build on for shape, the former T1 tower occupied by ENGIE in the near future. Fourth, we have a further 40,000 square meters in advanced discussions including assets from our development pipeline, where the next phase of growth will come from. Our housing portfolio has even been more successful. We signed 1,050 leases over the period, driven by the new offerings you are now familiar with, furnished service departments with 1,250 units deployed and shared apartments. Let me turn now to our revenues. Like-for-like growth of 1.7% comes from both offices and residential and it is well above indexation. Occupancies high and sustained at 94% with a record 97.4% in Central Paris [ NE ]. Over the years, we have deliberately we focused the portfolio on central areas where [ reversion ] is strongly positive at 11% on renewals and relettings. And in other areas where market trends have not followed indexation, we have accelerated resetting rents to market levels in '26 and '27 in exchange of long-term commitments and better occupancy like we have just done in La Défense. On indexation, the slowdown continues as expected. Before the recent pickup in inflation starts to feed through to the rent at the end of 2027 or in early 2028. Regarding our cost of capital, our cost to operate before the summer, we secured EUR 1.5 billion funding, first, EUR 700 million of bonds at [ presume ] market conditions, a EUR 500 million benchmark in May and EUR 200 million of tax of existing bonds. Second, EUR 0.5 billion of new or extended undrawn credit facilities Together, this refinanced nearly all our 2027 maturities and strengthen our liquidity. Third, more than EUR 330 million disposal at an average net dilutive impact of 2.9%. And we have done this while progressing on our high-yielding accretive developments, which are which we are delivering on time and on budget. In a higher rent environment, this anticipation and discipline [ preplans ] growth from 2028 onwards. Last mention for this call is a word on sustainability. Gecina ranked first in its peer group in [ Grasby ], this result reflects the same intensity in execution that we are applying everywhere else in the business on 3 fronts. First, energy consumption, where we pay close attention to detail, building by building, we work on operations, equipment settings and the daily performance of our assets to produce lasting savings. Second, the energy mix, we are steadily shifting towards greener sources of energy across the portfolio and less carbonized. Third, transformation where it makes sense. We don't just optimize the building, we transform it, so that it meets to more standard in terms of performance and carbon. At a time where energy bills become critical, occupying Gecina building means lower energy consumption and more future-proof buildings for our tenants. For our investors, it means lower obsolescence risk and protection of asset value. And to conclude this first introduction, our 2026 guidance since confirmed with a recurring net income grow share between [ EUR 6.7 and EUR 6.75 ] per share. Thank you, and we are happy now to take your questions.

[Operator Instructions] The next question comes from Florent Laroche-Joubert from ODDO BHF.

[indiscernible] I would have 2 questions, and I can ask one by one. So my first question is to come back to your leasing activity, so it has been strong as we have been able to see it on the press release. And when we look at the occupancy rate for your offices, so it's well oriented on the last 6 months basis, but not yet on a year-to-year basis. So what can we expect maybe for the payer to come with regard to your occupancy rate in offices.

Well, I think I gave a range between 93% and 95% average occupancy for our office portfolio, which is a good target for the company. It might fluctuate from a departure on arrival. Obviously, what we have worked a lot during this quarter and obviously since many months, in fact, also to secure occupancy in advance. So part of the leasing activity there like you saw in La Défense was anticipating the departure of ENGIE from B tower in '27, mid-'27 and to reduce that in '28 to new tenants. We have extended leases renewed some stuff. So it's the way to cope with this average occupancy is also always to anticipate, engage with our clients and at the same time, catch the tenants which are looking for better space but also retain our clients.

Okay. Okay. And then my second question would be more on your investment activity. So I don't know if you can say a word on that. And maybe linked to this question. So how do you anticipate the exercise by [ Aprea ] to value your assets at the end of the year given that we have been able to see some increase of interest rate?

Well, I think the rise in interest rates rather plan the investment market, let's say, which was not super active anyway. So we see a pretty quiet investment market since the beginning of September, and we will have to see how it plays out. I think what comes with the rising interest rates is also more inflation. [ And ] that is not yet in our cash flow. Obviously, as you know, because it takes time before the index applicable to leases capture that inflation and then the full year impact. But I think what comes with interest rates rise is also inflation. So we'll have to see how all that plays out. And that will be for the next months.

And have you already had some discussion with your [ APs ] on this?

Not yet, not yet.

The next question comes from Valerie Jacob from Bernstein.

So I've got a couple of questions. My first question is on your lettings, if you could share what is the impact of all the renewal and reletting you've done since the beginning of the year? What will be the impact on the rental overall for next year? And also, if there is any asset that was added to the pipeline where we were going to lose rent that we should know about? That's my first question.

Well, like I said, I think what we try to cover is obviously keeping the occupancy high, so part of those have been to retain tenants. We might have some departures. Some of them were already known typically in [ Colon ], who will lose [ Oracle ] in [ Colombia ] that has moved to more regional assets early this year. So I think, yes, we will have some departures. We have secured new -- obviously, ENGIE will depart okay, we will lose the rents of ENGIE mid-June next year. So we lose also rents on that one, and we'll capture the rent from the new tenants more in '28 than in '27. So it will be year, like we said during the different calls earlier, a year condition before we can kick our revenues up through the development pipeline and the average occupancy of the portfolio.

Okay. So just want to follow up on ENGIE because I thought the termination fee was amortized over '26, and you said you will receive rent in '27 as well. Is it correct? Or...

Yes, it's a series of different indemnities that we have amortized through the P&L. So let's say that the deal with ENGIE is the fact that we can take back the premises on the tower earlier, so from April '26. But let's say, in accounting and the cash collection is equivalent to the situation prior to the deal with [ ENGIE ]. So we'll collect -- we have collected basically in '26 the amount that they were supposed to pay us for '26, and we will collect in '27 the amount that they were supposed to pay us '27. It's incentive and not rent, but it's the same P&L and cash impact like if the lease would have continued until the end.

Okay. That's clear. And my second question is, so you've done a lot of leasing, but can you give us an update on lettings on your development pipeline? What can we expect? And how your talks are progressing? And what are your expectations?

The -- obviously, the general market is not super hectic these days in Paris. I think the country is in a [ wasted SIMO ] before elections. What I would say is that you have seen in our results, we have leased almost 75,000 square meters of new space to new clients. That's in line with our annual average over the last year, while the market has gone down. So we have probably doubled our market share in terms of lettings against what was happening in the previous years. We are working hard. I think our products, especially on the pipeline are relevant. We have good discussions. Similar to what I said late July, but obviously, between late July and early October, there is September in France. August is rather quiet. So we are progressing well. Like we said, we have some discussions quite well advanced, hopefully, we'll have good news, but it takes time. We are working hard on it and hope to satisfy all our investors as soon as possible.

The next question comes from Thomas Rothaeusler from Deutsche Bank.

I've got two questions. The first one is on the higher interest rate environment in general. Just wondering you could elaborate a bit more on the potential impacts on your business, like on financing costs, property values, disposals, maybe also on your CapEx plan? And the second question actually is on pre-lets. Maybe you could provide some more color on the pre-letting progress and where you stand with regards to leasing negotiations?

On the pre-let, Thomas, I just refer to where we stand to Valerie. I think yes, we have advanced discussions and are progressing correctly. We have good visits could interest for the project. Regarding the interest rate evolution, I think that you see a bit all the potential outcomes of an interest rate increase into, obviously, it impacts our future financing costs. I think one should not take the immediate interest rates to calibrate what's the future of funding cost, we try to anticipate those situations. So typically, when we issued a bond in May, in fact, we were refinancing a year almost the bonds expiring in '27. And we saw a good tension of our -- on our bonds late July, early August, so that we have even that some [ argon ] for EUR 200 million in preparation for the 2028 expiry, so that's not to take the full impact of the current interest rate increase. I think obviously, markets look day-to-day, but our business is a long-term business. And each time we try to anticipate those 11. So on that. Some are not in our control. Typically, you were [ resigning ] to presence. That's independent of results. What we have in our control, we try to anticipate, and that's typically what we have done on our funding activity early this year. And the last element on CapEx, I think we have -- like we referred to in our press release. We have a pipeline which is ongoing. We are close to the end of those projects. We have roughly EUR 400 million to finance short term. we have started this year by selling assets, and we will probably continue. It doesn't mean it's easy, but we'll be probably continue to do so. So that's a bit the view we have on that. Obviously, new CapEx for the future, we'll be very careful based on the current circumstances.

The next question comes from Stéphanie Dossmann from Jefferies.

I have a question regarding your reversionary potential. I mean, you give try different figures than previous period. So I would like to understand how they compare to previous periods. I appreciate the geographical mix and, let's say, product mix matter. But I would like to go to the evolution of rental reversion on a like-for-like basis. So could you please provide us with 1 or 2 figures which could be comparable to previous periods?

Yes, 2 elements. You are referring to the uplift that we generate through our leasing activity. Maybe to comment or to color behind it. The first one is when we look at Paris, for example, we have achieved around EUR 1,000 per square meter rent in average for our CBD portfolio. So it's rather in line with what was there. So we are keeping a quite high pace and high rent activity in the CBD. So that's first element. Second I think the La Défense deal was a success, signing 30,000 square meters of new clients in such markets. was, I think, exceptional. Obviously, market trends in La Défense have not following inflation. I have in mind that the NGLs was 12 years. So it was 12 years of inflation to had to mark down the rent -- but I think it was a play, like I said, quite rational and anticipated by the market to get duration, occupancy and get the rents we can get on those premises. So that plays a rather flattish reversion. But with what you said, which is a geographical mix, which was different from the previous quarters or [ year ].

Yes. But for the 11% rental lease you have achieved in what you call central locations. How does it compare to central location, rental uplift in previous periods? I mean, is it decreasing, how do you feel the market in terms of rental uplift on the same kind of product and location?

Again, the first half and last year, I think we are in the same range of rents. So it depends on the maturity and which lease expires. But I would say it's rather similar. So for the best we are still significantly increasing the rents. I was reviewing the list of releases we have achieved this year, and we can achieve for some deals, small service offices 120%, 140% rental uplift for some locations. So it's really depending on the mix of assets, mix of situation, but we are still delivering excellent results even on the CBD. So in average, I would say it's similar in terms of fleet to previous quarters. And in terms of France, it's a bit similar, but very variable from the lease to another.

Okay. Understood. And my second question is correlated to that. I mean regarding the demand and the structure of leases, you said that the average duration signed on is was years, if I'm correct. So can you explain what are the current lease structure? I mean what is the -- what does the 6 years mean? Is it the firm lease period because usually you sign like 9, 10 years lean duration and with this maybe 6 years from period. So can you elaborate on that, please?

So for the large, I would say, of large-scale deals, we are more in the range of 9 year. You saw that La Défense was more close to 12 years. And we are always when we talk about duration in terms of firm duration. In France, anyway, you can sign leases below 9 years. So most of the bits are between 9 to 12 years in terms of lease duration, but we communicate on firm. So yes, long-term leases for the large deals. And obviously, we are for small services inside the city found better deals to go for more flexible, more service offices where the average duration is more in the range of 3 years. So the mix of that is where you stand at 6 years firm.