Icade (ICAD) Earnings Call Transcript & Summary

Hello, and welcome to today's Icade conference call. Please note that this conference is being recorded [Operator Instructions] I will now hand over to your host, Olivier Wigniolle, CEO; and Victoire Aubry, CFO, to begin today's call.

Thank you. So good morning, everyone. So I'm Olivier Wigniolle speaking, and I am with Victoire Aubry and also Anne-Sophie Lanaute . We have organized this call just to present the transaction that occurred yesterday because yesterday, we have signed an exclusivity agreement with Primonial in order to sell our stake in Icade Santé. So as you could see, I am on Slide 2 of the presentation. Maybe to start with, and just to remind you some figures about our stake in health care real estate. In terms of value -- in terms of NAV value at the end of last year, it represents a value of EUR 2.6 billion based on the NTA NAV, which -- it's split in 2 parts, EUR 2.3 billion for Icade Santé and EUR 0.3 billion for Icade Healthcare Europe, which is more the international portfolio. And just also to remind you or to add that on top of this EUR 2.6 billion in terms of value, we have a shareholder loan of EUR 0.4 billion that are with Icade Santé and Icade Healthcare Europe. So the exclusivity agreement that we have signed with Primonial is the first step of a transaction that will occur and we will probably come back to that with 3 stages. But just to summarize, the first stage will be -- will occur by the end of July 2023 this year, and it will be the sale of 64% our stake in Icade Santé for an amount of EUR 1.4 billion. First on top of that, repayment of Icade Santé shareholder loan to Icade for EUR 50 million. The second stage will occur by the end of 2025, which she then, Victoire will explain how it will work. But would be the disposal of our remaining stake in Icade Santé. And on top of that, the third stage of the transaction is the disposal of the portfolio of Icade Healthcare Europe, which represents a gross value of roughly EUR 850 million. So maybe before to leave the floor to Victoire just to explain the rationale of the transaction for Icade, we have highlighted 5 different elements: the first one is, as you know, part of our strategic plan, was the completion of a liquidity event for Icade Santé. We were not able to leave the company in September 2021, and we were looking for alternative solution. And the reason for that is, for sure, to try to raise capital for the development of Icade Santé, but also to crystallize and to show the real value of our health care portfolio. And Victoire will come back to that. But I think that this transaction will clearly illustrate that the value of Icade Santé was clearly the value that we integrate in our NAV. The consequence of the transaction, just to remind you that our road map with health care started in 2007. We have opened the capital of Icade Santé in 2012. And I really do think that it was a really successful story for Icade because if you look at the valuation, EUR 2.6 billion, embedded capital gain roughly amount to EUR 1.2 billion. And as you probably -- we will have to book at the end of transaction, we'll have to book this significant amount of capital gain. And as you probably have in mind, the SIIC regime will allow us -- will oblige us to distribute 70% of the capital gain that we will book with the transaction that will represent roughly EUR 110 million of exceptional dividend to be paid within 2 years after the transaction. So another rationale of the transaction for Icade is clearly, I think, to have a stronger balance sheet for sure part of the proceed will be used to reduce our LTV ratio, but mainly -- and I think it's a thing important to highlight that in order to be much more flexible and cash risk to seize opportunities that we do think will be available in the current market. And on top of that, I think we will have a simpler business model, refocus mainly, not to say only, before maybe a new strategic plan that will be presented by the end of the year. But a new business model, more refocus on offices and residential development. These are the highlights of the transaction. And now I'll leave the floor to Victoire for more details. Victoire, the floor is yours.

Thank you, Olivier, and hello, everyone. So back to the structure of the transaction. I will comment more in detail each stage of this transaction. The first one, Stage 1. So to come more in detail. As you can see on the Slide 3. The first stage represents 1.46 -- EUR 1,450 million. It's a combination of the first part, EUR 1.1 billion, which is sold to Primonial. The second part is -- represents EUR 100 million in Icade Santé shares sold to Sogecap, which reinforce its exposure on Icade Santé with this investment. And the last part is -- represent EUR 200 million shares, cancellation for the sole benefit of Icade. All those 3 elements are based on valuation in line with EPRA NTA and 2022 of course, after adjusting the 2022 dividend. On the top of that, as Olivier said, this first part of the transaction will be the opportunity to reinforce the shareholder loan for EUR 50 million. In the meantime, there is a bank financing bridge, representing EUR 550 million which covered EUR 200 million of capital reduction, as I explained just before, the repayment of the shareholder loan for EUR 50 million. And I'm sure you have this in mind, the refinancing of the key round bridge-to-bond on Icade Santé side, representing EUR 300 million. And very also important as a result of this first stage, the subsidiary, Icade Santé and [indiscernible] will be deconsolidated from the Icade Group consolidated financial statements upon completion of Stage 1. Perhaps to complete the description, a few elements regarding the composition of the capital structure of Icade Santé after -- before and after this Stage 1. Before this Stage 1, Icade Santé -- Icade probably represents 58% of Icade Santé; Sogecap, 10%; Credit Agricole Assurance, 17%; Cardif, 9%; CNP, 5%. After this first stage, so before end of July 2023, Icade will have 22% of Icade Santé exposure. Sogecap with a EUR 100 million additional investment will have 14% of exposure; Credit Agricole 18%; Cardif, 10%; CNP 5.6%; and Primonial, 31%. Just to give you a complete situation of the Icade Santé shareholding structure after this first stage. The second part of the transaction, Stage 2 is focused on the remaining stakes. How to sell the remaining stake of Icade in Icade Santé? So it will be organized by the end of 2025, mainly through funds managed by Primonial REIM or investors identified by Primonial REIM and in line with Icade Santé most recently published EPRA NTA on sale date. That's the second of the organization of the second part of the transaction. Stage 3, concentrate focus on the remaining vehicle Icade Healthcare Europe. Primonial has been tasked with selling assets of Icade Healthcare Europe by the end of 2024. So proceeds for the sale will be first used to repay the shareholder loan from Icade, representing an amount of EUR 327 million and the balance will be distributed to all IHE’s shareholders, common shareholders, which are merely the same than the shareholders of Icade Santé vehicle. So that's a description of the transaction split in 3 stage and ending in 2025 -- by 2025. I'm on Page 4, perhaps to give you more flavor regarding the benefits of the transaction. First, on Icade side, clearly, as Olivier said, significant deleveraging and strengthening the BBB+ rating. I will elaborate a little bit more about that just after. More headroom and agility to anchor new strategy and seize opportunity in the bottom -- in the market at the bottom of the cycle. Opportunistic acquisition and optimized use of our land bank to develop projects in line with post-COVID office market undergoing significant changes. Increased agility for large-scale Property Development projects as we explained with afterwork division, for example. And new strategy to be defined, of course, by the end of 2023. On Icade Santé side, health care investment side. Clearly, it's an opportunity to allow new long-term sources of capital to continue to grow in such asset class. Current minority shareholders will be also able to sell or to strengthen their position in the Icade Santé structure. And Icade Santé teams transfer to form a best-in-class team and undisputed leader in the management of the asset class. On Page 5, right now, to give you more detail on the balance sheet and the financial situation. first to highlight that the Finexsi reported on its work and conclusions to Icade's Board of Directors last week, confirming the fairness of the term and conditions of the transaction for Icade and its shareholders. On top of that, clearly, this operation -- this transaction will offer Icade the opportunity to reinforce significantly its balance sheet with incoming cash flow of up to EUR 3 billion until end 2025. Realization of a significant capital gain representing EUR 1.2 billion. Clearly, strengthened credit profile in line with a BBB+ rating. LTV, including duties will represent an amount of [ EUR 35 million ] and perhaps even below [ EUR 35 million ] after the transaction. And of course, it means significantly improved debt ratio as early as 2023. In the meantime, clearly, this transaction is a very good opportunity to crystallizing the valuation of the health care business close we can say, at the EPRA NTA level. And so highlighting that clearly, in our view, highly excessive discounts at which Icade shares are trading, I remind you, around 48% discount to EPRA NAV when we are focusing on our division dedicated on offices, it's around 80% of discount. So clearly an excessive discount in our view. And third, it's also securing and reinforcing the dividend policy with up to EUR 710 million in special dividends, payable in the 2 years following the sales, of course, what the SIIC regime said regarding this type of operation. I leave the floor for Olivier to comment on the last slide and to conclude.

Thank you, Victoire. Just to summarize, as you have understood, is clearly for us, it's a major transaction. that we have closed with one of the leading asset manager in the real estate market. We really do think that, as I said, it's a win-win transaction for both Icade and Icade Santé. I think it will be clearly an interesting position for Icade Santé within the Primonial Group and also for the team of Icade Santé to continue to grow and probably to have a better access to funds to finance the growth of Icade Santé. And for us, for Icade, with up to EUR 3 billion of cash. within the next 2 years, I think it would be clearly a great opportunity for Icade to be in a position to both finance the future growth but also to reduce our LTV ratio. On top of that, as you have understood, our shareholders will benefit from a significant exceptional dividend that are embedded in the valuation of Icade Santé. So the next step is to have the opinion of the Works Council of Icade. That will be -- that should be done before the end of May. Then we will have the signing of the agreement with Primonial and the closing of the transaction should occur before the end of July this year. In terms of guidance and dividend policy for 2023, being our guidance is unchanged. But for sure, the transaction will have a significant impact on our cash flow. That's why we will confirm the exact [indiscernible] cash flow in January 2023, according to the effective date of the transaction. And in terms of dividend policy, the dividend policy of Icade remained unchanged, in line with the pro forma change in the net current cash flow plus the impact of the exceptional dividend that will be also confirmed in July 2023. This is for the presentation of the transaction. And now Victoire and I are more than happy to answer your question, if any.

[Operator Instructions] Today's first question is going to come from Mr. Marc Mozzi coming from Bank of America.

I'm just wondering this impact on the LTV pro forma. If I'm correct, your EPRA LTV is 46%, out of which the leverage of Icade Santé is 35%. And I'm not sure how we get from -- this EPRA LPTV at 46%, minus 35% to deconsolidate, how you can get a lower LTV, should not it be higher? I'm just wondering how you get to this 35% in to value.

Victoire, do you want to answer?

Yes, of course. Marc, I'll answer more focused on what we are speaking about LTV. We are more focused, as you know, on LTV, including duties. We are right now end of 2022 at a level of 39%. As I said just a few minutes before, we should be able to be around 35%, not to say below 35%. On top of that, I also like very much to follow carefully the ratios, the S&P ratio, which is, in my view, very relevant. S&P ratio, its debt-to-debt -- debt plus revalued equity. Right now, S&P ratio, it's a level of 44% for Icade level end of 2022. After the transaction, we will be able to be toward 35%. So just to give you more flavor regarding our leverage structure. And on the top to that, I can also comment another ratio, which is more and more focused today. It's debt to -- debt-net-to-equity. And this ratio should be around 8 multiples, perhaps below 8 multiples after the transaction. So that's the main KPI I can comment right now today regarding the debt structure. And just remember, Marc, that this transaction represents an amount up to EUR 3 billion in the coming years. And it will be quite significant before end of July because before end of July, it's plus EUR 1,450 million cash in Icade's balance sheet.

Yes. But I still do not understand how the LTV can go down. Icade Santé is less leveraged than Icade stand-alone from -- when you take consolidate Icade Santé, which is 35% LTV, 39% on the other side, I am struggling when you're fully consolidated, meaning I would be happy to share how you get to 35% because I've not been able to get to that number. But whatever, moving on, I just wanted to understand as well -- what has been the trigger to sell your stake rather than to inject new equity from Primonial typically because now I understand that you're more focused, you're more office, you're are cleaner, potentially less leveraged. But in the meantime, I have feeling that you're selling the jewel of the crown. And in the end, you have an office portfolio, which potentially have -- not going to have that much rental growth, where we have some in Icade Santé? I'm just understanding what has been the trigger to sell that to stake, which is effectively the reason why most of the investors were looking at Icade so far?

I will answer the question, Victoire. The trigger, I think it's probably several elements, I will highlight 3 of them. The first one is we really do think that there will have some really appealing opportunities available on the market within the next 2 years. I'm saying that even if I won't be in charge of that. But clearly, that's our analysis that you will have some willing sellers in the market in 2024, maybe 2025. And if we want to be in a position to seize these opportunities, we have to be flexible and cash rich in order to be in a position to guide them. That's probably the main figure. The second figure is clearly linked also with the valuation or the level of our share price. If you really take into account that the transaction occur at, let's say, NTA NAV, if you replace cash, well, our stake within Icade Santé by cash, and if you do assume that the share price won't change, it means that you will realize that the discount to -- for the remaining part of the Icade is between 80% to 85%, which is even if you have a pessimistic view on residential schemes or if you have a pessimistic view on [indiscernible] transaction on the [indiscernible] market, we clearly do think that this level of discount [indiscernible] too high or to say unfair. So clearly, the level of our share price has been a second element that triggered the transaction because it was an unsolicited offer that was sent to us by Primonial. And the third element, even if you have some difficulties with figures. But for sure, Victoire and Anne-Sophie will come back to you. But clearly, to have more cash in order also to reduce the LTV ratio for the third element that has convinced the Board to approve the transaction.

Okay. And the final very basic accounting question. The reason why you're generating a capital gain while selling at book values because you're accounting of Icade Santé is at historical cost or the way I should read it?

Yes. Exactly.

The capital gains are based under the SIIC regime on historic value, which is not -- on fair market value. But the SIIC regime is based on historical values.

Okay. Victoire, if we can have a call on this LTV thing. I think it's something where I'm a bit lost. And not the only one.

We'll now move to Mr. Rob Jones of BNP Paribas.

Firstly, congratulations on the transaction announcement. It's good to see. A couple of questions from my side. So just one, the Stage 3 disposals, this is on Slide 3, obviously talk about sale of the Icade Healthcare Europe assets. Do you stay in line with the latest EPRA NTA, but what I don't fully understand is how can you have the confidence to say you're going to sell assets in line with basically current valuation, given that there's no bid at present as far as I understand it? And do you have a view in terms of the timing of those disposals? The second question was around the fact that you've tasked Primonial REIM to sell those assets. I'm just wondering from a kind of search process perspective, why out of all of the potential entities that could be tasked to sell that portfolio globally, why the entity that you elected to do that was also the same entity that's buying your Icade Santé stake? Just some commentary around that. I appreciate that you've done some process around complex, but just in more detail would be helpful. And then the final one from my side was I guess the answer is no, but have you had the opportunity to speak to the rating agencies yet, I guess, namely S&P in terms of feedback from their side on the back of the transaction linked to your BBB+ rating that obviously will strengthen on the back of this as well?

Victoire, do you want to answer the 3 questions?

Okay. Our confidence regarding the Stage 3, you said on Icade Healthcare. I said first, clearly, we will organize the disposal through quite comfortable period, meaning by that until end 2024. Of course, certainly, it will be organized asset-by-asset or a small recruitment of assets and countries-by-countries. There is also in agreement floor value deal with all the partner of all the shareholders of Icade Santé. So clearly, our focus is to sell those assets, which are clearly a good quality of assets, mainly focused in Italy, Portugal, I don't know if you have this in mind, but we have a trophy asset on acute care in Portugal, for example, but there is also, as I said, assets in Italy and in Spain and some also, of course, in Germany. And we are quite confident so far after discussion with Primonial, of course, to be able to sell with appropriate level of price those assets in the coming 2 years. Your second question, I -- if you don't mind, if it is possible to say it again because I didn't catch it? The last one regarding Standard and Poor's. Of course, we had a regular exchange with S&P before the transaction, we have made rating evaluation services. And to be clear, we have exactly -- it's very clear in our mind what should be the -- the new debt KPI regarding the evolution of the business profile and also the credit profile of the company after the transaction. And I can confirm -- reaffirm and it is a Board requirement, we can say that we will maintain an objective to be fully in line with our BBB+ rating, meaning by that, we will manage our debt KPI to stabilize this rating after taking into account all the impact of the transaction on the business and credit profile. And sorry for the second question, if you can read it again, it could be great.

No problem. So the second question, the short variant of second question is you've chosen Primonial as the organization to sell the Icade Healthcare Europe portfolio, but why is Primonial? Why not use BNP Paribas Real Estate or why not use any other organization to do that process? And I guess, linked to that, why did Primonial decides not to buy the IHE portfolio? Is it a geographic thing at an asset type? Or actually, do they not like the assets as much as the assets that they are acquiring?

Victoire, I give you the floor.

Yes, yes. Well, in fact, Primonial is an asset manager. So they will organize the disposal process. Nevertheless, they will external brokers. On top of that, I can say there are probably because Primonial is an asset manager, it's not to fund by itself or a company. So they probably also have been more some investors that would be interested by part of the portfolio. So it will be -- they will be in charge of the disposal process. Nevertheless, they will be in charge of the management of Icade Healthcare Europe. But for the disposal, we don't want to have pressure in terms of timing. That's why I said we are in line to do that, will start right now by the end of 2024. And again, using Primonial as organizer for the process, but also external brokers. They are both pre-identified some interest for part of the portfolio. For sure, it won't be a block sale of the entire portfolio. This is not the best way to increase the valuation, so we will split the portfolio in different parts in order to be able to get the highest valuation possible. And we are confident, back to the question -- we are confident due to the quality of the portfolio and the decision not to keep this international portfolio is clearly the fact that the industrial projects lately for the minority shareholders -- for the existing minority shareholders of Icade Santé and for Primonial is to refocus Icade Santé, mainly not to say only focus to France, and that's why they have decided to dispose the international portfolio. But as Victoire said, several [indiscernible], I said, in Spain, in Italy, in Portugal. So even in a market which is what it is, we are quite confident in our capacity to dispose this part of the portfolio by the end of 2024 at an appealing or interesting level of valuation.

We now move to Stéphane Afonso calling from Invest Securities.

So 3 questions on my side. The first one on your special dividend. So if I'm right, the SIIC tax regime in place to distribute 70% of capital gains on disposals you have EUR 1.2 billion of capital gains on Icade Santé. So if I do the math, the special dividend is around EUR 840 million compared to EUR 710 million that you estimated. So how can we reconcile the 2 figures? My second question on the EUR 3 billion of cash inflows due to disposals. Could you explain us or did you compute this figure? And finally, what could be the Primonial stake in Icade Santé when the deal will be completed?

I can take the first one, if you want; Olivier, the second one, if you want.

And the third one.

Okay. So regarding your question for the estimation of the exceptional dividend. First, just noticed when I explained the split of the Stage 1, if we can go on Page 3, IHE. We have the 2 first parts of the transaction, EUR 1.1 billion and EUR 0.1 billion, which is also under SIIC regime constraints. And so it means that the capital gain has to be distributed. As you say, that's a level of 70% for -- in the next 2 years. For the last part, the EUR 200 million dedicated on share cancellation for the sole benefit of Icade, it's with a neutralization of SIIC regime constraints. So it means that you don't have to take into account the whole amount of EUR 1.4 billion. That's the first question. The second one, how we can split the EUR 3 billion? It is [indiscernible] EUR 3 billion, of course, it represents the total amount of the 3 stages of the transaction. What we can say so far is that, as we said on this EUR 3.7 billion is dedicated to dividend. We made an approximation and estimation of around 25% of this amount dedicated to reimbursement of debt 1 more time to be sure to be fully aligned with our BBB+ rating. And so it means that the sold of this cash amount could be dedicated to reinvestment, as we explained in an opportunistic transaction, which we hope will be occurred in the coming months. And the third one, I'm sorry. I didn't catch it.

What would be the Primonial stake in Icade Santé when the deal would be completed?

It will depend, of course, of the contribution of the external new investor because I'm sure you noticed that we will organize the first stage -- the second stage of the transaction through fund managed by Primonial, but also through new investors interesting to be part of the shareholding structure of Icade Santé. So it's difficult to answer to your question precisely on that topic. As I said in my first -- in the first part of the call, after the Stage 1, Primonial could represents 30% of Icade Santé. At the end of the transaction end of 2025, I don't know exactly. I cannot answer precisely, perhaps between 30% to 40%, depending, as I said, the part of the new shareholders in the Icade Santé vehicle.

We will now to Mr. Florent Laroche-Joubert, who is calling from ODDO BHF.

Yes. So I would have maybe 2 questions. So the first one, so why can we say that today the transaction is secured? Could be the risk that maybe part of the transaction would not be executed? - and my second question would be on [ ESG ]. So can we consider that it will still consolidated in Icade accounts until there are some assets in the portfolio? And maybe a third question, if I may. You speak about future opportunities for growth, but are you already looking for some opportunities? Have you have some discussion at certain level?

So I will answer the first and third question, and if you can answer the second. For the first question, Florent, under the French law, you can't sign an agreement before to have the opinion of the Works Council. But what I can say is that the transaction is secured because we have put on Primonial. And also -- but we will sign the contract after the opinion of the Works Council. But the transaction is secured. We have some condition precedent when we will find the agreement, but there are, let's say, at a normal level for this kind of transaction and no reason to doubt to be able to fulfill the condition precedent. There is 1 condition linked to [indiscernible], 1 question linked to Primonial and 1 question linked to risk of confrontation in Germany, but clearly, very limited level of conditional precedent. So that's for the first question. For the third question, we say, no. For the time being, we are on pause for achieving new opportunities. And the reason for that is just because the new CEO, Nicolas Joly will join probably somewhere around end of May or something like that. and it would be a responsibility to define the new investment strategy. But for sure, Icade will have a new CEO and therefore, a new plan. But the market is positive and whatever -- whether would be the CEO, the opportunities on the market, we would be -- are available. But it is fair to say that for the time being, we are looking at some of them. We are selling some of them, but we are waiting for the new CEO in order to move forward on 1 other opportunity that we do see in the market.

Regarding your last question, Florent, on Icade Healthcare Europe subsidiary, I can clearly say that it will be also deconsolidated. At the same time that -- than Icade Santé opened the completion of the Stage 1, of course, because of the strong and clear willingness of Icade to sell its exposure on Icade Healthcare assets. So it's a war. And so both Icade Santé and Icade Healthcare Europe will be deconsolidated upon the completion of Stage 1.

We'll now take questions from Mr. Bruno Duclos, who is calling from Invest Securities.

I have a few basic questions first. Regarding the Stage 2 and Stage 3, could you give us the split of value of we can share based on the last NAV?

What do you mean the split of we can share, Bruno, [indiscernible] but just to precise the question.

Yes. I mean the value, the proceeds you could get for [indiscernible].

Sorry. Okay. Victoire, could you give you the amount of [indiscernible]?

It's clearly based at the level of NAV NTE, we could expect at the time of the transaction, which means that, to be clear, we don't have a precise view so far to answer to that point. As we said at our full year presentation -- result presentation, we are quite confident to say that on health care asset class level, we don't expect significant evolution in valuation in the coming months, in the coming years. We can also -- to be more precise, that we are confident to say that this asset class remains very attractive, very competitive, especially for asset manager as Primonial, but there is some other type of assets with the same willingness to -- and a strong appetite for such asset profile. So in our view, we are confident to say that the valuation of this asset class should remain stable, which means the valuation you have in front of you end of 2022, representing EUR 2.6 billion for the global exposure of Icade in health care asset class should be not too far from this level. But of course, because the transaction will happen in the coming months, we are not fully certain that it will be exactly this amount.

Yes. So there is EUR 1.2 billion split -- EUR 1.2 billion split between Stage 2 and Stage 3. Am I correct?

Yes. You're correct.

You cannot provide the split between 2 and 3?

We see we have EUR 1.4 billion for Stage 1. We have more or less for Stage 2 you have roughly EUR 340 million, a part in the disposal of the portfolio -- disposal of Icade Healthcare Europe. And the remaining part of Icade Santé is EUR 770 million based, as think, was said, on the current NTA NAV. And on top of that, you had the reimbursement of EUR 380 million of shareholder loan. And on top of that -- and to have the global amount, as Victoire said at the beginning, we will receive EUR 180 million of dividend, the 2022 dividend of Icade Santé, that will be paid at the beginning of April. So if you had all the numbers that I gave you, you reach the EUR 3 billion of cash.

Okay, okay. You mentioned an LTV of 35%. So you see the path for a lower LTV. That's clear. But as you -- what is -- this is an LTV at the end of the full process?

I'm sorry ...

Victoire, a question for you.

At the end of the process, you know depending the volume of opportunistic investment we will have, of course, it's difficult to [indiscernible] your question, but it will be, as I said, around 35%, and not to say below 35%. One more time, the main focus, as we always said, is to manage our balance sheet to, maintain a BBB+ rating. Have to think that we will manage a split of investment, reimbursement of debt and so on to secure this clear focus for us.

Okay. One last question. Could you give us the minimum mandatory distribution of 2022 for Icade, the mandatory distribution related with the current activities and the dividend paid by the subsidiaries?

What do you mean, 2022 -- last year, you said?

Yes, yes.

Okay. It's around EUR 300 million.

Very close to the current level of dividend.

Exactly.

The current level of the dividend is a little bit above the mandatory obligation of distribution.

Next question is coming from Mr. Jaap Kuin, calling from Kempen.

A few questions from my side. So you -- obviously, a few questions on the LTV already, but you've indicated that the LTV will be below 35%, which makes sense to us. But can you discuss what your future leverage target would be indicating you'd be around 8x net debt EBITDA and LTV? Could you maybe already paint a picture of how you look forward to setting your new leverage targets?

Okay. One more time. Our leverage target is based on the focus on BBB+ rating. So it means we will have a dividend -- sorry, we will have a financial policy around LTV, including duties around 35%, as I said before, and we will manage to maintain that level. After saying that, of course, we have also taking care about S&P ratio, which is debt net revalued equity, which has to be also around 35%, towards 35%. And so it is, for us, clearly a focus to manage the balance sheet in the coming months and coming years.

Okay. That's clear. And then on the timing of some of the milestones, I will be interested in some clarification. So on the Stage 2 sale, it says by the end of 2025. So how should we interpret that? Can that Stage 2 be executed any time before 2025? Or is it going to be for sure, Q4 '25? Can you provide some color on that one?

It is exactly what you said. It begins June 2023, hope to. So if it is possible. We will -- it could end before December 2025. If there is a strong interest of external investors. And in addition, attractive collection regarding fund managed by Primonial, it could be -- it could occur before December 2025.

Okay. Great. And on the timing, so let's say, focus on Stage 1 and the special dividends attached to that one, which I think assuming pro rata should be above EUR 5. How do you foresee paying out that special dividend? Will that still happen in 2023?

That a good question. I propose to revert to you when we will announce the closing of the transaction in -- I hope before the end of July, and we will answer to you more precisely on this question regarding the 2023 exceptional dividend.

Ladies and gentlemen, due to the time constraints, that will conclude today's question-answer session. I turn the call back over to the meeting organizers for any additional or closing remarks. Thank you.

So we -- I don't know if you have any further questions. Otherwise, I will thank you to have joined this call. And if you have any additional questions, do not hesitate to send them to Victoire. Anne-Sophie will be more than happy to revert to you. Thank you very much.

Thank you very much.

Goodbye.

Bye-bye.

Thank you very much, ladies and gentlemen. Thanks for your attendance. You may now disconnect.