Icade (ICAD) Earnings Call Transcript & Summary

Hello, everyone. I'm happy to be here with you at Icade's full year results presentation. Although, I will have preferred a more candida setting. The setting affords me an opportunity to highlight on the agility and responsiveness of Icade employees in 2020, which was a difficult and surprising year unlike any other as you were able to see for yourself during this short video looking back at the adverse events. I would like to thank them for their hard work. Thanks to the commitment of each employee, Icade was able to resist and move forward together despite obstacles. We achieved this while showing solidarity at all times with our stakeholders, some of whom were impacted by the crisis. So Board of Directors at Icade fully support Icade's management and are confident of its ability to preserve the company's interest, the safety of its employees and the continued success of this business. Despite the inevitable impact of the crisis, results for 2020 were solid and Icade's business lines and balance sheet remains strong. So business mix, adaptable risk profile and management of our Office Property Investment, and Icade Property Investment and Property Development business lines are all assets that will continue to make a difference in the current environment. Our business model is not only strong and available, but also offers various opportunities for growth. 2020 was also a year in which Icade ramped up it's low carbon policy. Olivier and Victoire announced the policy to the press on February 2. It's a key issue for us and an important development opportunity. Our outlook is positive. We have managed to adapt our strategy without disruption and in line with Icade's purpose. This purpose helps us stays the course, and we are already prepared to meet the new post-crisis changes. It's, of course, key to our resilience and coherence. It drives our growth by making us stronger and more competitive. I thank you for your attention, and I will turn it over to Olivier, who will now present our results.

Thank you very much, Frederic, and good morning, everyone. I hope you are all fine and safe wherever you are in Paris or London or Amsterdam. So I am with Victoire Aubry, our CFO. And after the presentation, we will have a Q&A session with the management team. So do not hesitate to send us a question by e-mail or by telephone. So let's start with the impact of the COVID-19 crisis for Icade in 2020. So as you could see, final figures are very close to previous figures that we have disclosed in October and November last year. So for sure, 2020 was a very specific year, let's say like this. And Icade has been impacted. But as you could see, the impact is quite limited. So we have split the impact of the crisis in 2 parts. The first part is the impact of the COVID-19 crisis on the net current cash flow, which represent a total amount of EUR 27 million. And the other impact on the net results represent an additional EUR 52 million. So when you combine the 2 figures, it's the total amount of EUR 79 million. So on the recurring cash flow for the Office Investment portfolio, the impact is quite immediate. It's close to EUR 6 million and this is a mix of the several elements. We have provided some support to our smaller tenants with rent free period, with counterparts that are longer leases, and we have postponed some break option. We have also some acquisition or completion that were a bit delayed due to the 2 lockdowns that we had in France last year. Regarding the Healthcare division, the impact is mostly due to delayed investment or completion and an acquisition. But as you can see, the impact is really, really limited because it's less than EUR 2 million. So for Icade Promotion, our development subsidiary, Icade Promotion has been the most affected business by the crisis. But keep in mind that the accounting standard to book revenues for development is the percentage of completion POC for specialists. And as you know, we have experienced 2 lockdowns last year in France. And our construction sites were closed during roughly 2.5 months. Which means that we are minus 20% in terms of our revenue. However, it is not a loss. Those projects and those schemes are just delayed, and revenues will be recognized over time. So even if we have a EUR 19 million less in terms of the cash flow due to the crisis in 2020 for development, 90% of that will be recovered in 2021 and onwards. We have also other impact, which are noncurrent items in our net profit. It's mainly current period without any counterparts for small business, and we have already given the figure for this. We have also, in this amount, the so-called inefficiency costs, which are costs related to construction project, extra charge and extra costs related to the site shutdowns and also to the restart of the construction side. And also to the implementation of the health protection measure. All this amount represent EUR 52 million, which do not affect the current cash flow. But which has an impact on the net profit of the group. For sure, Icade has the financial capacity to absorb those financial impact, and we have no financial issue, no cash issue at all with this level of amount. But for sure, it's not a good news, but it's the crisis. And Victoire will come back to that in a few minutes. And with respect to cash flow generation, most of this EUR 27 million will be pushed back. Let's move to the -- now let's go back to our KPIs and metrics and let's start with the Property Investment portfolio. So in terms of gross rental income, it's an increase of 6.7%. Total amount of rents represent EUR 678.4 million, and it's a like-for-like growth of 2%. In terms of adjusted earnings, from Property Investment, it stands at EUR 4.74 per share, which is a limited decline of minus 2.1%. But it's in the context of the oil crisis, but also in a context of very significant disposal in 2019. Just to remember you that in 2019, we have disposed for more than EUR 1.1 billion. Regarding the portfolio, value-add portfolio valuation, it's up by 2.2% at EUR 11.8 billion, and it's a decline like-for-like of minus 2%. Final figure for the investment portfolio, the financial occupancy rate for the Office portfolio stands at 92.5%, and it is quite stable. In our view, this KPI illustrates the resiliency of our Office and Healthcare investment portfolio. For Property Development, in terms of revenue, as I mentioned, the situation is different because of the 2.5 months lockdown and shut down that we had to face in 2020. So the decline of revenue is only, if I may say, minus 14.7%. But if we had no shutdown in 2020, our revenue for Property Development would have significantly increased, plus 8%. Due to the extraordinary situation in 2020, the cash flow for the division is still positive, but very low at EUR 2.5 million. On the other hand, and I think we have to look forward. If we look at forward KPI, they are well oriented with the backlog, which grew by plus 14.4% and which stands now at EUR 1.4 billion. This is a very positive situation, thanks to the volume of sales contracts that have been signed in 2020, and I will also come back to that. On the liability side of the business, cost of debt keeps slightly decreasing at 1.48%, and the average debt maturity remained close to 6 years. And our loan-to-value ratio stands at 40.1% at the end of December 2020. At the group level, if you look at the 2 group KPIs, our EPRA net tangible asset per share stand at EUR 93.2 per share, so slightly down by minus 3.1%, and our net current cash flow per share stand at EUR 4.84 per share, which is a bit above the guidance that we have given at the end of October. So let's move now to the key highlights of last year. We have selected some of them. First, we think we have a very solid return income in 2020. As I said, at plus 6.7%, which represents an increase of plus EUR 42.5 million. And for Office and business park, it's an increase of plus 4.8%, like-for-like growth of plus 2.5% for offices. And for Healthcare, it's a growth of plus 13.9%. I would like also to highlight and to underline the performance of the asset management team in 2020 with 3 new completion. And the renewal or new lettings for more than 160,000 square meters. On Healthcare, the Healthcare acquisition team has been also very active in 2020 with a volume of more than EUR 440 million invested last year. And for Property Development, as I said, we did perform very well last year in terms of new orders and sales, especially if you compare that to the market, in terms of sales, it's plus 15% compared to last year. And for new orders, is plus 8% in value, where the market is probably close to minus 20%. And in terms of liability, just to remind you, the social bond that we have issue in September, EUR 600 million tenure and a coupon of 1.375%, which is very attractive. So despite of the crisis, Icade has been very active in our mind in 2020. So let's move now more into the detail of the performance of each business unit, and let's start with the Office Investment division. So since the beginning of the crisis, several elements appear to be a real plus for Icade. I would like to mention first our very high-quality tenant base and our capacity to attract and to retain new and existing tenants. To illustrate that, 88% of our rental income comes from solid, not to say, very solid tenants. And less than 12% of our rents derived from tenants belonging to sectors that are the most impacted by the crisis, such as airlines or the plane industry, hotels or trips. So in our view, it's quite limited. Secondly, our occupancy rate over the year stands at 92.5%, no significant move. And our rental income is up by 2.5% compared to 2019 in terms of like-for-like growth. And our default rate is very, very low, very limited and to 2%. On top of that, and as I already mentioned, our asset management team has been very efficient in terms of rent collection, nearing 98% over the year. So all those elements are very good news for the future. And finally, our rental income for offices for 2020 was more than robust because it's a global increase of plus 4.8%. On that slide, I would like to spend a bit of time to explain how we did provide some support to our tenant last year. And if we have very good figures in terms of renewal and rent collection, it's also because we have a very comprehensive and fruitful relationship with our tenants, with our clients. First of all, we were very reactive to implement sanitary measure in 100% of our properties. And in very few days in order to address the new health challenges and to facilitate the back to work return of our tenants in the building. Today, the occupancy rate of our portfolio stands probably around 30% to 40% in terms of a number of employees in the office building. We have also helped our tenants in terms of treasury. And we have accepted, in some cases, monthly payment, sometimes even deferred payment, if necessary. And as far as very small businesses were concerned, we have also agreed to cancel the Q2 2020 rent. And for a landlord, a good tenant is a tenant that is able to pay a rent but to pay a rent on a long-term perspective. In some cases, we thought it was fair to ask our tenant a counterpart to our support and thus, we were able to get now a longer weighted average lease break. On average it's plus 2.9 years for the leases that we have renewed in 2020. And as a global result of our discussion and negotiation, we have successfully coped with more than 80% of 2021 break option. On Slide 14, you have the key metrics of our Office portfolio. Portfolio value stands at EUR 8.5 billion at the end of last year, which is quite stable compared to the end of last year. And we have a weighted average, an expired lease term at 4.1 years. We have also an attractive average net yield at 5.7%, we have a stable financial occupancy rate at 92.5%. And if you look at the average price per square meter in the Greater Paris area, it stands at EUR 7,300 per square meter, EUR 3,600 per square meter outside of Paris region and EUR 2,350 for the business park. This figure are quite similar with the figure that we had at the end of last year, reflecting the solidity and the stability of our portfolio even in a crisis period. So let's go now, and let's move to the Healthcare investment. So on our Healthcare portfolio, the impact of the COVID-19 crisis has been very, very limited. Occupancy rate is still at 100% and rent collection rate is above 99%. Furthermore, we had a significant growth of our revenues in 2020, nearly plus 14% in terms of rental income. And in that respect, I would like to emphasize that in terms of recurring cash flow, Healthcare represented now, represented in 2020, 37% of the global group net current cash flow. I think it's really a valuable metric during the current crisis period. And our portfolio is by far one of the most appealing Healthcare real estate portfolio in France. In Europe, not to say the most appealing portfolio. On slide -- on Slide 17, as you know, to grow in Healthcare real estate and to become the European leader, this asset class is one of our strategic goals. And we have been very active in 2020 despite the crisis, despite travel bans. And despite the fact that it was most of the time, impossible to visit nursing home facilities in 2020. We have closed -- we have been able to close nearly EUR 440 million of new acquisition in France, but also in Italy. And in Germany, which are the key target country for the business line. Actually, around 70% of our investments were made outside of France in 2020. And you have a couple of examples of our last year transaction. We keep on investing in Germany. We have signed a portfolio of 8 nursing home for a total amount of EUR 123 million. And it was the first transaction of a broader and long-term partnership with ORPEA, the world leader in terms of long-term care. We have also proceed our development in Italy, thanks to our partnership with Gheron. And we have acquired in Italy, 7 assets, EUR 431 million with 18 years firm lease. So we do confirm our strategic growth target, which is a significant volume of EUR 2.5 billion of acquisition by the end of 2022. As of today, 60% of this volume is already achieved. On Slide 18, you have the key metrics for Icade Santé for our Healthcare portfolio. So it's a growing portfolio, amounting now at -- amounting to EUR 5.7 billion and a very attractive initial yield standing at 5.3%. Again, the occupancy rate is 100%, while the WAULT is at 7.4 years. And we have the conviction that this portfolio has a very strong potential in terms of value creation on top of the current NAV valuation. This is also a good news for the future. For our last business unit, Icade Promotion, our development subsidiary. In fact, you have 2 ways to look at the figures. As I said, there is a mechanical impact of the COVID-19 crisis on our development revenues because of the 2.5 months shutdown. So we are minus 14.7% compared to last year. Even though the impact is obvious, it remain limited. And moreover, and I said, we would have had a 9% growth for residential if construction site were open all year around. And those were revenues that we are not able to book in 2020. Again, they are not lost. They are postponed and will be recognized in 2021 and onward. And more important, if you look at forward KPIs, our development business is well oriented. Thanks again to dynamic sales results in 2020, especially for the residential activity. And let me emphasize again on the fact that both notary sales and new order, Icade Promotion is significantly up, plus 8% in terms of new orders in value. And plus 15% in terms of sales in a market, which was quite difficult in 2020. Again, if you compare those figures to market figures, they are much, much better. And those promising figures are the result of different elements. First one, Icade Promotion is really a step ahead in terms of digital marketing tools and also the appetite for residential assets remain very strong. Icade Promotion has been able last year to close a lot of block sale with institutional investors in order to balance the decline of unit sale. And the part of block sale represented 59% of our 2020 development revenues. Final figures. The backlog is very well oriented. Plus 14% compared to the end of last year and plus 21%, if you look only at the residential backlog. Here again, it's very good news for the future and for 2021. So I'm now handing over to Victoire for the detailed financial results. Victoire, the floor is yours.

Thank you, Olivier, and hello, everyone. By way of introduction, and in echo with Olivier's words, I would like to say that financial repurchase of the crisis are contained. We may see by getting into details of the income statement of our different divisions. On Page 23, let us have a specific focus on the result of our Property Investment portfolio. The Office division and Healthcare one. So EPRA earnings for our Property Investment divisions, which is EUR 4.74 per share are reflecting, once again, their global resilience on the wall. On a year-on-year basis, our net rental income goes up by 5.5% at EUR 655 million. The net to gross rental income ratio nears 97% at 96.6% precisely and shows that despite that is very specific here, our investment divisions produced solid net revenues. So EPRA cost ratio is also important. It is below 12% excluding the vacancies, quite low level in absolute terms and stable on a year-on-year basis. It reflects effort putting in respective cost especially structural costs, which permits us to absorb the decrease of internal fees due to the slowdown of the investor month volumes. EPRA earnings stand at EUR 351 million, down by EUR 8 million due exclusively to the COVID-19 crisis. And let me remind you that EUR 8 million only represents a 2% impact on consolidated EPRA earnings. With the neutralization of the COVID-19 impact and 2019 disposal, EPRA earnings are up plus 5%. Finally, and I will be -- I will be coming back on that point shortly. Let's note the growing share of Healthcare investment. The division had provided for 39% in 2020, up 6 points. Let's jump to the Page 24. On this side, I want to draw your attention on the structure of the whole portfolio because actually, Office and Healthcare are not similar and not subject to the same rules in terms of risk's, exposure, among others, and particularly in a time of crisis. As far as our office activity is concerned, it remains sound and healthy, and the main figures illustrate the resilient performance of the business line. First, a dynamic leasing activity and asset management, underlined by gross rental income at plus 2.3% on a like-for-like basis. I remind you that 2019 saw a record volume in terms of disposal above EUR 1 billion, representing EUR 18 million of rental income on a full year basis. Despite that, gross rental income grew by 2.5%, and net rental income remains on the rise, weekly, indeed, but still they are on the rise. Main impact is a slight decrease of occupancy rate. Costs are under control, minus 12%, equivalent minimum EUR 11 million. Slight drop in the adjusted EPRA earnings at EUR 214 million, mainly due to the non-recurrence of a substantial income in the amount of EUR 15 million in 2019 and also a very limited COVID impact, EUR 6 million. After neutralizing nonrecurring income and COVID-19 impact, the EPRA earning of the Office Investment division would have absorbed the effect of the significant disposal done in 2019. Now in terms of Healthcare investments. As I said previously, and other activity, another story. All the indicators are well positioned. The crisis has no impact on healthcare results. On one hand, the increase is absolute compared to 2019, plus 12% for the net rental income and a significant rise on the adjusted EPRA earnings, plus 14% to EUR 137 million. On the other hand, the incidence of the health crisis is minor, valued at EUR 2 million. The asset class remains uncyclical and driven by long-term contracts as well. To recap, our investment activities have remained dynamic and we managed to limit the drop of the EPRA earnings at EUR 351 million by the end of the year, stimulated by a positive performance of our Healthcare Investment division. And in the meantime, a quite resilient Office Investment business. Our diversified business model is clearly an asset to resist against the ups and down of the economy. We can now just switch to the result of our Property Development activity or third business line. Page 25. Here, we have a limited equity exposure, 6% at the end of 2020 and less than 10% of the net current cash flow of the group. Having seen that, the circumstances are different, as Olivier has pointed out, and this because our construction sites had to shut down for 2.5 months. This brutal shutdown is noticeable in our results. Indeed, 2.5 months of shutdown on a 12-month's financial year is substantial. Economic revenues decreased by 15%, minus 11% in focus in residential. Residential operating margin stands at 4%, a low point. Net from cash flow remains slightly positive by EUR 2.5 million. Having said that, I really want to underline the good trends. Firstly, the activity benefited this year from our full digital marketing and sale processes in order to limit the impact of the lockdown. Secondly, Icade has been able to close much more block sales versus individual sales. In this particular context, the market profile of investors evolved during the year with institutional investor back to the residential market. As a result and in addition to a strong sales momentum, the impact of the crisis is quite limited, minus 11% for the residential revenues, one more time. On top of that, I would like to emphasize that excluding the impact of site shutdown, the residential revenue would have risen by plus 9%. At the end of the day, even if the impact of the crisis is more sensible for the Property Development revenue, let me also remind you that 90% will be recovered this year and beyond. The market fundamental on the residential side remained strong, especially the demand should remain dynamic perhaps even more after the crisis. We are confident on our ability to recover a good momentum in this business line by improving both volumes and margins in 2021, benefiting also from a promising market. So now in practice, what are the key point regarding owned group net current cash flow? I'm on Page 26. It stands at EUR 4.84 per share, slightly above the guidance update in October. This limited drop, minus 7.9% is mostly due to: first, 2019 disposal, knowing that we had a record volume beyond EUR 1 billion, as I said before; second, slower revenue recognition as we say previously on Icade Promotion. Excluding the impact of the effect of 2019 disposal, net current cash flow is up EUR 14 million, plus 3.6%. Clearly, a solid leasing activity has supported this result, and we have also the positive effect of deliveries completed over the last 18 months. Last but not least, the growing contribution of healthcare, up plus 7-point at 37%, and thus, a more defensive risk profile by the end of 2020. So yes, our results are resilient, and I would like to come back on our adaptability. Icade is made up of different activities with bias risk model and an ability to adapt to equity allocation according to shifting dynamics and cycles. I know that I keep repeating the same thing, but it's important. It is a real advantage. Slowdown in investment on a speculative basis in the Office division, slowdown in equity allocation in the Development business line, and in the meantime, pursued growth in Healthcare division. We have adapted our risk profiles with positive impact on the P&L but also on the NAV as well, I will discuss just now. Let's jump on Page 28. On the coming slide, I would like to share a few comments regarding valuations. I'm assuming the fact that it is a particular focal point at this moment. Concerning the Office Investment activity, you can see the figures. It's almost a flat year, minus 0.3% on a reported basis, minus 3.1% on a like-for-like basis, driven by external expertises, revising downwards some assumption as indexation or more cautious marketing period. I would like to take this opportunity to remind you that the valuation are conducted by external experts and also on top of that, the main asset of the portfolio are subject to 2 appraisals. We then keep the other range of the 2. It clearly reinforced the robustness of our valuations. Now concerning the Healthcare division, the value of the portfolio has a progression of plus 9.2% on a reported basis and plus 1.1% on a like-for-like basis. This is consistent with a very limited impact of the crisis on our Healthcare activity, as Olivier said, and a strong indicator to illustrate the global positive outlook of this asset. Let's go right now on Page 29. This slide is a good summary of what I presented to you before, the evolution of NAV, all apologize, but I have to refer to some technical details first. As you are aware, some changes have been made last year in EPRA metrics. Since the 1st of January 2020, we don't talk anymore about triple net or simple net NAV. We instead refer to NDV net disposal value and NTA net tangible assets or NRV net reinstatement NAV. Regarding Icade, I suggest that we focus on the net tangible asset NAV. It has the advantage of not being impacted by the effect of our debt fair value which is a total external impact, we don't have any catch on. So the main message is about the NTE NAV. First, this indicator is fairly resilient. The valuation of the company after the specific care we faced remains strong, plus 1.1% gross per year the dividend payout. The 2020 total shareholder return remain positive after the year of the crisis we have been through. After dividend distribution, it stands in December 2020 at EUR 6.9 billion, a limited decline of 3.1% over the year. And only a small 1.8 over the 6 months. Notice that the net disposal value NAV specified at the bottom of the slide, at EUR 86.1 per share, midly decreased at 5.5%. It includes a fair value effect of the date of EUR 1.3 per share. Thus, considering stock price level so far at EUR 60 per share, approximately, the discount to NAV is at around 31%. It implies a strong implicit discounts on Offices that is clearly not reflected in the valuation so far and might appear definitively as not fair or excessive. Last but not least, we confirm at the Investor Day, the liquidity event will occur by 2022. Whatever from this event will take? It will help with fair value of healthcare. And materializing of, for sure, a premium for this portfolio, contributing 32% of the NAV as at December. Definitely, I can confirm what I said on the occasion of Investor Day. The work carried out by the external expertise as of December 2020 does not confirm Icade's current listing levels, particularly with regard to Offices. We may still be uncertain. But even the appreciation of the valuation of the asset factored in the share price still excessive even today. Anyway, the trend of our NAV at the end of December illustrate the robustness of our business model. Turning to the question of liability. Page 31. It goes without saying that our financial structure is very, very resistant. How we can improve its liability management during such a critical period? Let me insist on 3 key points: first of all, a very healthy balance sheet. We decided to reinforce our revolving credit facilities with new lines for a total amount now of more than EUR 2 billion, which is quite comfortable. We align also all of our covenants at 60%, just a simple formality from us. As a reminder, only 16% of our debt is concerned by these LTV covenants. The soundness on attractivity of our balance sheet is also recognized by our main counter parts. First, our rating agency [ S&P] confirm our solid BBB+ credit rating with stable outlook. Our banking partner are also confident as they allowed to reinforce our credit revolving facility lines with attractive maturity over 5 years and last but not least, we are very proud of Icade's focused on sustainable finance. Great success of the social bond Icade Santé last September, and our first solidarity revolving credit facilities, real innovation in a sustainable finance market, including EUR 3000 dedicated to the research on COVID-19 vaccines by Institut Pasteur. I will finish on this liability part with 4 metrics that show how sound our financial structure is. I'm on Page 32. Continued focus on debt maturity around 6 years, very attractive cost of debt that continue to decline under 1.5. Debt ratio far below covenant as ICR and LTV ratio. Of course, you noticed that our LTV ratio has increased by 200 basis points over the year. To be precise, 210 basis points. The impact of valuation change rate for 100 bps and the slowdown of our disposal volume almost zero in 2020 compared to annual average amount of EUR 500 million also rate for 100 bps. Also, our LTV ratio at 40% is solid and far from our covenants. It reflects, in a sense, in the incidence of the COVID-19. I would like to confirm, as announced last November at our Capital Markets Day, we reiterate our objective of lowering it to 36, 37 by 2023. I hope the LTV ratio will be the showing sign of decline as early as 2021. The announcement of a financier of 2 sales commitments accounting more than EUR 320 million already is a good start regarding our ability to achieve our ambition as soon as possible. To conclude, regarding our dividend policy in Page 34, I confirm once again what we already announced. The Board has reiterated its proposal to pay a stable dividend versus 2019 at EUR 4.01 per share. The yield is attractive, 6.4% on the basis of the share price as at December at EUR 63 per share, with a notable novelty this year. We are renewing the interim dividend as of the beginning of March ex-dividend date on March 3 payment on the fees and are offering a scrip dividend option for the payment of the final dividend. Payment method will be determined by the Board on March 12. And all this is subject to validation of the general meeting on April 23, of course. 2 important messages as well. With this proposal, I want to highlight our will to strengthen our equity and lower our leverage. But in a reasonable way, without excess, Icade's managed structure is, once again, solid. The proposed dividend level, stable versus 2019, with a payout ratio below 85% at 83%. This is the second important message. It reflects the fact that we manage carefully our balance sheet. In the meantime, we offer a level of return that remain attractive. I will let you make your own judgment. This distribution policy seems to us to be adapted to the current circumstances. Thank you for your attention, and I will give the floor back to you, Olivier.

So thank you very much, Victoire. So what are the outlook for 2021? The future is more important than the past. So as you know, the COVID-19 crisis is not yet over. We have to take that into consideration and to adapt our priorities and strategy to the new environment. So in the next slide, as you will see, I will repeat what we did present, what we did say during our Investor Day at the end of December -- of November, sorry. For the Office Investment portfolio, our main objective is to remain resilient and reactive. So we have adapted our pipeline, and we have a confirmed pipeline around EUR 1.5 billion. And 63% of the coming projects of 2021 are already pre-let. And we have also identified other pipeline opportunities up to EUR 900 million. Regarding disposal, as you remember, 2019 was a record year for Icade on that matter with more than EUR 1.1 billion of disposal. But in 2020, we did not put any asset on the market in order to limit the impact on the current cash flow 2020. So we did say in November that we will go back to a normal level of disposal in 2021. And we have already signed 2 preliminary agreements for more than EUR 320 million. We have a press release on that this morning. And those disposals are part of our mid-term plan to have a lower LTV by the end of 2023. In terms of pricing, those 2 significant transactions, 1 in the north of Paris, 1 in the south of Paris, are really in line with the NAV valuation at the end of 2020. Last but not least, we will also adapt our development pipeline and our land bank by converting part of them into residential schemes. Very briefly on Slide 37, and as said and explained during the Investor Day, we will also adapt our branding core producing Office portfolio by providing new services, more flexibilities and always for an affordable rent per square meters. Tenants demands and requirements are evolving also is our offer. We will also adapt and improve our Office portfolio in terms of a carbon footprint. We have presented our low carbon strategy at the beginning of February. And we have confirmed that our Office portfolio is fully aligned with the 1.5-degree trajectory. I think it's important to highlight that our Office portfolio is also attractive in terms of sustainability and CSR criteria. On top, I would like also to highlight that our Office portfolio with nearly 60% of core and corporate assets will continue to perform even in a more difficult environment. Icade Office portfolio combined a high level of services, very good location, affordable rents and very good CSR specification. Outlook for our Healthcare division. Our investment basis and strategic goal remained the same since 2018. We are very favorable demographic environment. We have an expanding portfolio with a pipeline of EUR 451 million and more than EUR 1 billion of investment opportunities and review in France and abroad. And we have entered in an exclusive negotiation for a portfolio in Spain, which will be a new country for Icade Santé. So we have a very solid portfolio with the strongest signature in terms of tenants and long-term partnerships. And as you know, we have a liquidity event, we will have a liquidity event by the end of 2022. In order to crystallize the real value of our LCR portfolio which represent today 32% of our NAV. But if I may, you should not wait for this event to take into account this potential value creation. When you look at the catcher, the value is already there. For Icade Promotion, the recovery potential of our development subsidiary is, in our view, quite significant. Again, we have a backlog of EUR 1.4 billion. We have an additional potential of revenues of EUR 2.1 billion, deriving from the Residential portfolio that we do control through option or preliminary agreements. We have also a strong midterm revenue potential, close to EUR 7 billion for the 5 coming years with a focus on the growth of our Residential Development business. And Icade is also very ambition in terms of low-carbon construction. Icade wants to be best-in-class regarding that topic. Low carbon is really the future of our industry. Our midterm goal for Icade Promotion is confirmed, revenues at EUR 1.4 billion, with a margin close to 7%. So our priorities for 2021. In 2021, crisis is still there, but we have very clear priorities. As I said, we have good news ahead of us for our 3 business lines. Nevertheless, environment is what it is and visibility remained low due to COVID-19 crisis. Our priorities for 2021 are the following. With respect to the Office Investment division, it will be portfolio retention and value creation deriving from the development pipeline. For Healthcare, further growth and international expansion, and we have to prepare our liquidity even. And for our development subsidiary is to increase significantly the revenues and to achieve a higher margin. Our CSR priority will be the acceleration of our low-carbon strategy and the launch of Urbain des Bois, a dedicated subsidiary to wood construction and residential development. Following the vote at more than 99% of our purpose during the last Annual General meeting. The operational implementation of our purpose in all of our activities will be also one of the other priorities for 2021. So the Slide 41, describe what we will do for the next 3 years at Icade. Nothing new compared to what we have presented at the Investor Day. So it's resumption of rotation within the Office portfolio and liquidity event for Icade Santé to adapt the development pipeline to the current office letting market. And we will use the financial resources coming from the different elements to finance the growth of Icade Santé and to reduce our LTV ratio. For Icade Promotion, we will focus mainly on residential development business. And we will convert part of our land bank into residential schemes. We will adapt our strategy, our business mix and our risk profile to the current environment. Finally, the financial outlook for 2021. 2021 net current cash flow per share is expected up at plus 3%, excluding the impact of 2021 disposal. The guidance is also subject to the health and economic situation, not worsening significantly. And the 2021 dividend will follow the same trend, up by plus 3%. And this level of dividend reflects a payout ratio of 83%. Which is the same level compared to 2020, plus the distribution of a small part of our 2021 capital gain are requested by the [indiscernible] regime. Those figures seems to us quite attractive in the current environment. And just also to remind you that our Annual General meeting will take place the 23rd of April. So thank you for your attention, and we will now be ready with the Executive Committee to answer your question.

[Operator Instructions] And the first question comes from the line of Pierre Clouard from Kepler.

So I have several questions for you. The first one, I just wanted to come back on the future of Icade Santé. I understand that there is a liquidity event that is planned before 2022. But can you be more precise about that? And what form could be this significant event? The second question, can we have an update on your discussions on the EQHO Tower? Do you still believe that your partner in the 2 working sites exercise its extended collection for the remaining part of the tower? And if yes, at what price? The third one is on the 2 disposals that you announced this morning, I understand that this is in line with the 2020 valuation figures. But can you tell us if it's in line or not with the 2019 figures? And on the last one, on the Property Development segment, so I just try to understand if you will be able to post or not at least stable reservation figures in 2021? And can we expect a change in the mix in 2021 in terms of reservations again?

Sure. Thanks for all the question. I would try not to forget one. On the first one, on the liquidity event for Icade Santé, you saw that we don't want to be more precise, but we are working on that. The wording is still the same. We want to prepare that because it's what we do have in our shareholder agreement by the end of 2022. So that's -- and when we would have some new fact about that, we'll come back to the market, but we are working on it. And on top of that, we are still focusing on the growth of the portfolio. As we have said this morning, we have signed an exclusivity agreement with a vendor for a portfolio in Spain. So that's also a good news. Because again, our strategic goal is really to build the pan-European platform and to open a third country. It seems to us something quite interesting. So nothing new about the liquidity even. The second question is about the EQHO Tower. So we had an option with a Korean investor till the end of 2020 that didn't exercise the option. So we are now, let's say, let's like this free to maneuver on the 51% stake of the tower that we have. So we will have to consider what to do with the 51% remaining in the EQHO Tower. We have to take into consideration the fact that valuation at La Défense have decreased by, let's say, depending of asset. But between minus 5% to minus 8% for the future. But for the time being, nothing new on the 51% of EQHO Tower. I think your third question was about the 2 disposals that we have announced this morning. In fact, it's preliminary agreements. So we will wait the signature of the final deal before to give more detailed figure, but compared to valuation at the end of 2019, for sure, it's a decline, but it's a very limited decline. And the reason for that, it's because it's core, its core assets and liquidity for core asset, which means brand-new or recently refurbished building with long-term cash flow, the liquidity in the market is still very strong. And you have no move, I think, more or less on cap rates on the market for core assets. And the fourth question is...

About Development division and the stable figure regarding 2021?

Yes. For the Development division, I think we have, I think, 2 elements to take into consideration for 2021. Our main assumption that we will have no lockdown in 2021. Let's see what will happen in the coming weeks. But as you know, there is an immediate mechanical impact when you have to stop construction site. So we take it into our assumption, the fact that we will have 12 months of activity on our construction side. On top of that, I think the good news for residential, the demand is still there and very strong, both from individual client, but also for -- from institutional clients. So we have no concern about the demand and you may have heard that in France, it's more difficult to get building permit. This is a topic for the next 2 or 3 years, but not for 2021.

The next question comes from the line of Florent Laroche-Joubert from ODDO BHF.

Thank you very much for this very complete presentation. I would have 2 questions, if I may. First, on the Offices. Could you please give us more color on valuation in 2020? And could you please tell us how confident you are to maintain your rents at the current level in 2021? And maybe also, are you confident about the attractivity of your different office in the Greater Paris? So that will be my first question. My second question will be on [indiscernible] So we have seen some of your pace to be very aggressive in terms of investment policies this last month, and it continues. So how do you analyze this dynamic on the investment market? And how could you change your approach in [indiscernible]? And my third question would be on the dividend. Have you an idea of the percentage of your shareholders that could choose the payment of the dividend in 2 shares?

So on your 2 questions, so more, any color or on the office letting market, what we have done, how do we see the future? If you look at the volume of renewed or new large sign, in 2020, it's quite comparable to what we have done in the years before. Main concern was on the letting transaction, new letting transaction because the market has decreased by roughly minus 45% last year. By 2020, was now, let's say, a normal year. So the question for everyone is how the volume of letting transaction will evolve in 2021. Forecast made by real estate brokers. If you can compare -- their forecast is probably minus 25% compared to 2019. Let's see. What we do see on the ground is that, and I think that Emmanuelle could confirm. But we have limited compared to 2019 activity, but compares our back to visit assets. And we have already signed since the beginning of the year, several letting transaction. I know that there is a debate about centrality outside of Paris and so on. We really do think that for the next 2, 3 years, level of cost for corporates will be key. And we really do think that the kind of portfolio, the kind of asset that we do have at Icade, which means very good location, high level of services and building that are brand-new or recently refurbished at very affordable rent seems to be very adapted to requirements of large corporate. And if you look at our portfolio, we don't have any significant move anticipated for 2021. As you know, the level of office demand is clearly linked to the growth of the GDP. So our main concern is when the recovery of the French economy will be there, which means when the crisis will be over. We have done what we did think was necessary to have a stable rent fall in 2021, which means that we have helped some of our tenants. And as we said, with some counter parts. So you have seen that the occupancy rate is stable when you compare the end of 2019 to the end of 2020. Probably a slight decrease in 2021, but we do not expect any major move. So the key question for us is more, as you know, every year, Icade was able to close 1 or 2 very large letting transaction on a new scheme, on a new Office Development scheme. So this is important for us because it's part of the value creation that we are able to deliver. So the main question for us is are there still some corporate on the market-ready to sign a lease for a lease that will start in 2 years or 3 years from now? And the question for that is because probably a large corporate will have other concern maybe to move to another site. So this is a good news for the current rainfall because I think, in our view, it will be more or less very stabilized. But if we want to deliver the growth, we will -- we have to be able to sign pre-let transaction on new development in order to launch new scheme of our pipeline. Because for sure, we will be a little bit more cautious about development scheme that will be launched on a speculative basis. But for the time being, I think -- and there is the debate also about the growth of working from home. But I think the main concern is more the economic crisis. And when the sanitary crisis will be over. And it is true that it's something that we do not control. But everything is, I think, taken into account when we provide the guidance for 2021. The second question was about Healthcare.

Healthcare.

It is true that Healthcare asset, Healthcare real estate is very resilient. So in the current environment, it attracts a lot of liquidity, a lot of new player. We do think that -- and as we say, our strategic target in terms of acquisition, EUR 2.5 billion by the end of '22. We are in a good track to deliver that. We have already achieved 60% of that at the end of 2020. And it is worth written. We have a confirmed investment pipeline of EUR 450 million, and we have -- and the reviewed, does not mean that it's transaction, but it's under review of more than EUR 1 billion of potential investment. It is true that some of our competitors are really aggressive. It is also true that, in our view, the fact that some of our competitors have closed very aggressive transaction, it's still not yet reflected in the current valuation of the portfolio. So that's probably a good news for June 2021 or end of 2021 because people are more and more aggressive on acquisition. Again, what we try to do, the market is what it is. So when you buy in the market, you have to pay the pricing of the market. But what we try to do is again, to focus on what we do call primary transaction, which means real estate assets coming from the balance sheet of operating companies. We are not doing only that, but we try to focus on that because we are able to bring something else on top of just the investment capacity to operating companies. The transaction that we have closed with ORPEA this year is quite interesting because it's the world leader of a nursing home, and they have many opportunities to dispose their assets. And when they made the choice to close a transaction with Icade Santé because okay, we are close to the price of the market, but we are able to bring something different. So we do think that we will be able to close our transaction volume. We try to remain very financially disciplined. It means that there is a level below which we don't want to go. And on the other hand, it will be good news for the valuation of the portfolio. And there was a third part -- the third question was about the scrip dividend. The Board will finalize the proposal to the Annual General Meeting at mid-March. As you know, market is quite volatile during that time. So we want to be as close as possible to the AGM before to fix the final condition. So it will be only for the second part of the dividend. Probably it will not be for the entire second part of the dividend. And after that, the largest -- the larger shareholder, Xavier will confirm or not that they will exercise the option. And for the free float, I really don't know. Based on existing situation, it's usually around 80% of the level of discount that you put on the pricing. But it's usually for the free float around 80% of the market that is choosing the scrip option. So it's -- as you know, and as we have said during the Investor Day at the end of November, if I have to be direct, we don't need to increase our capital. But I think the environment is volatile, the environment is not 100% certain. So that's why we have decided to decrease our loan-to-value ratio by the end of 2023. And to achieve that, it's a mix of more disposal recovery of Development division, the full value of the Healthcare portfolio. And also -- and it's quite, let's say, like this marginal, a little bit more shareholder fund through scrip option, which is also a way, let's say, to thank our existing shareholders.

The next question comes from the line of Christopher Fremantle from Morgan Stanley.

I had 2 questions, please. The first is on the Development business and the Development margin. I think pre COVID, you had guided to an economic margin in the Development business of more than 7% in the medium term. Can you just help us understand when you think it's likely that you go back to that sort of margin? And I think you had guided to 2024 previously, but any update on the margin progression would be helpful, please? That's the first question. And then the second question is just a small accountancy point that I hope you can help me with. If I look at your consolidated balance sheet, I see the level of reserves outside of your share premium account are relatively low. Can you just reassure me that, that is not a problem for the distribution of dividends, please?

For the second question, I think that Victoire will be...

I didn't catch the end of your question? Can you please repeat?

I think the reserve of the balance sheet outside of the shareholder fund and do we have any issue to distribute the dividend. [Foreign Language] Could you answer the question with the microphone?

[Foreign Language] It's okay. So your question, for us, it's -- there is no issue regarding the our ability to distribute a dividend, both in cash or of course if we offer a scrip dividend option is just, as Olivier said, to help another an additional manner to reinforce our equity. And in the meantime, to optimize our LTV ratio, but there isn't any issue regarding our ability to pay cash or dividend, if it is your question.

And maybe more precisely, keep in mind that the capacity to distribute dividend is also -- is not in the IFRS balance sheet that you could see. You have to look at the French gap balance sheet to understand. So we will come back to you or we could revert to you, but it's not within the IFRS balance sheet that you have the clear view of the capacity to distribute the dividend. But believe me, we have no issue to pay the dividend from an accounting standpoint over time.

I can give you more precise...

Over margin, how do you see them?

[Interpreted] Now with regard to the operating margin. In fact, this is, in fact, something in 2020, there is a basic point, which basically was impacted by the stop on construction side. And the reduction in revenue. So we got a road map that will give us an operating margin at 7% with a gradual reconstruction linked to the increase in revenue with quite a few accommodation units that have been done, an offering that has remained stable, while dropping, in fact, by 15% before, we have the means to continue this growth and have a revenue of EUR 1.4 billion that will amortize our charges on the one hand and a premium that has stabilized and an expected increase in revenue.

Emmanuelle said on margin for development business. There is a question of revenue due to lockdown and shutdown in 2020. So assumption is that we will not have that anymore in 2021. Another good news from the market is that it was true that in 2017 and '18 we had a significant increase of construction cost. And due to the evolution of the market, this question is now behind us. And we have seen now that pricing for construction costs are stable and even with a small decline. I think there's another question and if it's by e-mail or phone? It's phone again.