Icade (ICAD) Earnings Call Transcript & Summary

Good morning everyone. I am Nicolas Joly. I'm here with Victoire Aubry, our CFO. It's a real pleasure for me to be here today. We have several subjects on the agenda. We will start by giving you an update on the disposal of Icade Sante, we will then follow with our half year performance and financial results before I give you my first perspective after the first 100 days and we will conclude with our outlook for the year. But let's start our presentation with Slide 5. When I joined as new CEO of Icade, I had 3 priorities. First one was to deliver Icade Sante's Stage 1 disposal. The second is to perform a complete deep dive on our portfolio and assess the situation. And the third will be to leverage that assessment to design the future trajectory of the group. So let me now lead you through the key takeaways of the period that I'd like to share with you. Unsurprisingly, we want to discuss first the latest updates on the sale of Icade Sante. The key new piece of information is that as planned, Stage 1 is completed as of July 5, date by which we sold 63% of our stake in Icade Sante for an amount of EUR 1.4 billion. Stages 2 and 3 are on track with the initial schedule and we expect an additional EUR 1.6 billion cash-in before end 2025. Second takeaway is our strengthened balance sheet and credit profile post closing. This is a key asset for Icade going forward especially in the current context. Next on the list, as I just mentioned, when I joined as CEO, I had a strong conviction about the necessity for me to review thoroughly our portfolio through onsite visits and interaction with the teams. Coming in with the external perception of Icade's portfolio, I needed to see by myself and make my own opinion to better design our future trajectory refocused on our Investment and Development arms. The teams and I are currently working on this to set the ground for our strategic plan for the coming years. As you may know, Icade is also strongly engaged in driving a sectorial change towards more sustainability thanks to our clear and impactful CSR policy with, again this year and for the second year in a row, more than 98% of approval on Say on Climate and Biodiversity resolution. The group was also ranked second out of 27 in 2023 amongst Europe climate leaders in the property sector by Financial Times. On top of that, we disclosed resilient operational and financial H1 2023 indicators. We've been able to generate EUR 111 million net current cash flow on a pro forma basis, EPRA NAV NTA at EUR 79.3 per share and LTV post closing below 30%. Certainly one of the best performers in the market. We will obviously provide you more details on our H1 result further in the presentation, but for now let's focus on Icade Sante. As I just mentioned, the disposal of Icade Sante has obviously been a key focus for us over the last 6 months. On July 5, we sold 63% of our share in Icade Sante and cashed in EUR 1.4 billion. This valuation is in line with EPRA NTA as of 2022 year-end. Now that Stage 1 is behind us, we can announce the resulting circa EUR 400 million special dividend that will be distributed over the next 2 years. As we will develop it in more details later, this deal significantly strengthened our balance sheet with net financial letdown below EUR 3 billion and a hedging ratio, which provides strong visibility on the cost of debt evolution for the coming years. Finally, this operation mechanically streamlines our business model, which is now focused on 2 key pillars; Commercial Investment and Property Development. Moving on to Slide 8 to give you more details on what to expect in Stages 2 and 3. First, between now and end of 2025, we will sell our remaining stake in Icade Sante to Primonial for an additional EUR 900 million. In parallel, during Stage 3 we will sell a set of IHE assets, the international SPV, for an additional cash-in of circa EUR 650 million. The disposal processes are currently being organized by geographies and within distinct timing to maximize competitive tension. First disposal are expected first half 2024 having in mind that Primonial is incentivized to execute them swiftly. To be noted that Icade will receive dividends from its residual stake in the Healthcare division until the end of the asset sale process. Circa EUR 0.80 per share in 2024 on the basis of the ownership on the 5th of July. We will of course continue to keep you updated as Stages 2 and 3 continue to advance. And let's now move on to our half year performance. Let's dive into the performance by business line and start with the Commercial Investment activity. As far as the market is concerned, the Commercial Investment division has evolved in sluggish leasing and investment environment in H1 2023. In leasing, total take-up in Paris region decreased by 22% versus H1 2022 with the percentage of total take-up outside of Paris CBD at circa 70% supported by attractive incentives and scarcity in CBD with historically low office vacancy. This trend is expected to continue with the natural market attraction from prime offices outside of CBD. The total investment volume in France is down 42% compared to H1 2022. And overall, investors are more selective and yields are adapting to the new financial environment restoring medium-term attractiveness of the sector. So now the question is how did we perform in this environment? Well, the reality is that we have a solid first half leasing activity with circa 100,000 square meters signatures and renewals with a 6.4 years WALB while securing annual rental revenue of EUR 27 million. We have also benefited from a positive impact of indexation thanks to 100% indexed leases with plus 4.7 % fully passed in H1 2023 and an estimated plus 5% fully passed in full year '23. All in all it demonstrates our capacity to attract and maintain our tenants in the long term. Overall, the 3 assets you see on this slide put into light the diversity of our portfolio with offices in Nanterre, but also within business parks. The activities going from offices to data centers and our willingness to tackle the environmental issues by signing climate commitment leases like we did with Systeme. It also highlights the quality of prime tenants. Moving on now to the recent disposal. The general output is that despite adverse market conditions, we have successfully continued the disposal of assets for a total amount of circa EUR 180 million. Overall our strategy has been to consider a disposal for mature assets with high occupancy rate where we could benefit from an attractive yield. The main assets concerned by the disposal are Eko Active and Grand Central in Marseille as well as Nautilus in Bordeaux. These 3 assets alone account for over 75% of the total EUR 180 million values of these disposals. Additionally, the disposal of our remaining residential assets, which represented circa EUR 40 million, contributed to the rationalization of our portfolio. It's worth noting that our focus on CSR reflected in the certification granted in our Marseille assets has been a key differentiator enabling us to sell them at good conditions and below the average yield of 4.7%. In the context of the successful disposal of Icade Sante, we will of course continue to remain opportunistic, but do not foresee any further disposal for the year. Let's now take a more forward -looking point of view and discuss the current pipeline with our Commercial Investment activity. We reviewed the pipeline and made a conscious decision to limit commitments in this uncertain environment and while we are preparing the strategic plan. The strategy is in line with our willingness to invest in secure, sustainable and diversified projects; but remains relatively limited with committed amounts reaching circa EUR 676 million for circa EUR 319 million of remaining CapEx. In H1 we launched 2 new projects, including Helsinki-Iena in Orly-Rungis business park of circa 10,600 square meters both either signed or under exclusivity agreement. For the next half, we have 2 new projects to be completed which are already fully prelet demonstrating our ability to reposition our existing office portfolio when necessary. It's worth noting that 100% of our projects are targeting HQE or BREEAM with excellent levels. Let's now move on to the operational performance of the Development business line. Today's market is under pressure with a 32% step-back in commercial launches mainly due to rising and persistently high interest rates. This impacts credit access for first-time buyers and constrains institutional investors to adopt a more selective approach. It translated into a minus 40% decrease in orders. The situation is amplified by less favorable incentive tax schemes notably with more constraining P&L. However, the sector still benefits from solid long-term underlying fundamental under strong demographic trends, historically low unemployment rates and maybe more importantly, a structural need for new development with a demand/supply gap assessed at 60,000 units per year. And now let's move to Slide 17. So in this slowing environment, Icade Promotion was proactive focusing on 3 following levers. An increased focus on bloc sales with a 19% increase in volume and a plus 4% in value. Overall, this allowed us to show strong resilience in orders intake. Greater selectivity, which translated in an increase in minimum order rate from 30% to 40% before starting works enabling us to adapt the volume to a tighter market resulting in a slowdown in our construction works by almost 1/3. And finally, a pragmatic review of committed projects resulting in opportunistic transactions such as the Taitbout transaction. Maybe just a little bit of context on this project. Icade bought an asset to transform it, but opportunistically sold it to a third party with a real estate development contract. This decision was taken in a context where we monitor closely our working capital. This topic will be further discussed by Victoire in the financial section. To conclude this operational section, we wanted to present a more forward-looking vision and explain how we are adapting our medium-term growth trajectory in this challenged environment. As of June 30, 2023 our backlog reached a solid EUR 1.8 billion, slightly down 3.7% versus our backlog as of December 2022. While this level of backlog helps to secure the stability of sales expected for 2023, it also reflects the implementation of the group's adjustment policy to new market environment, which is based on a greater selectivity in the launch of new projects with priority given to maintaining profitability and a sustainable balance sheet. We are now a bit more prudent when it comes to '24-'25 growth considering the slight slowdown in our June 2023 backlog. On the back of those operational results, Victoire will now give you more details on our financial performance. Victoire, floor is yours.

Thank you, Nicolas. Good morning, everyone. Now let's move on the presentation of our financial results for this first half 2023. The purpose of this slide is to introduce you to our pro forma net current cash flow figures meaning by that, excluding the contribution of Healthcare. We therefore need to make some comments on an accounting point of view. Indeed the sale has been announced in March 2023, but has only been effective since 5th July 2023 meaning that for H1 '23 results; first, all numbers are reported under the IFRS 5 accounting standard and second, the Healthcare activities have been reclassified as profit and loss from discontinued operations and are still included in EPRA Earnings. Consequently in our IFRS accounts and EPRA earnings, we have in fact 6 months of Healthcare division. To go straight to my point, focus on the net current cash flow KPI. I'm on Slide 21. Based on the net current cash flow at EUR 2.72 per share, EUR 206 million end of June 2023 on a reported basis as you can see on this slide, it includes EUR 86 million directly coming from the Healthcare first half net current cash flow and also EUR 9 million from intra-group revenues, which brings the total impact coming from the Healthcare business end June 2023 to EUR 95 million. Just to comment on the intra-group revenues. It should be noted that we are currently working on recovering this EUR 9 million impact on our group's net current cash flow through reduction cost plan in the coming months all over the group. Back to the net current cash flow pro forma basis, excluding one more time all revenues linked to Healthcare division, it represents end of June an amount of EUR 111 million, EUR 1.47 per share. And of course the next pages will be focused on pro forma figures. Please also note that going forward as of today, we will report on consolidated basis versus group share when it comes to P&L figures. Let's jump right now to the Slide 22. Overall, the financial performance of Icade pro forma for this first half of 2023 has been slightly up compared to H1 2022. With a slight decrease in Commercial Investment division in the context of significant disposal volume in '22 and '23 excluding the impact of the disposal, the net current cash flow will be up by plus 4%. The net current cash flow coming from the Development division remain slightly up on a year-on-year basis. A good performance in a current context. We'll see that more in detail in few minutes. Notice a positive impact of change in provisions making the difference. So a stable group net current cash flow end of June with the contribution of Commercial Investments at 88% and the remaining 12% from Property Development. Let's focus for now in more detail on the Commercial Investment business, I'm on Slide 23. As far as the gross rental income is concerned, it was slightly down by 2.1% versus H1 2022 and stood at EUR 181 million, out of which minus EUR 9 million coming from the full year impact of 2022 and 2023 disposal as mentioned in the previous slide. On a like-for-like basis, performance is positive plus 2.2% carried by indexation on rent plus 4.7% as Nicolas said just before partially offset by the reversion effect mainly related to the renewal of the significant contract with Veolia 45,000 square meter. I already commented on this impact during Q1 2023 announcement. We also had a slight decrease in the net to gross rental income ratio, higher vacancy cost also influenced the downside. On the cost side, we stabilized our operational expenses. As I said before, further improvement come all over the group. In addition, I would like to highlight that the financial expenses have not been impacted by the rise in interest rates thanks mainly to our efficient hedging strategy. We also generated financial interest income with EUR 450 million at plus 2.5%. This is certainly one of the good surprises we have seen since the beginning of the year and this will have an even greater impact over the full year with interest to be received on cash from the sale of Stage 1 of Icade Sante, additional EUR 1.45 billion remunerated around 3.5%. As a conclusion for the Commercial Investment division, our net current cash flow stood at nearly EUR 100 million, slightly below our H1 2022 performance mechanically reflecting the decrease in rental income and slight contraction of our gross margin fully in line with our budget forecast. Moving on now on the Property Development activity. Figures are overall very resilient given the current market environment with economic revenues around EUR 583 million and a net current cash flow of EUR 13.6 million, up plus nearly 5% from the last year. First, as mentioned in the operating comments, individual sales have slowed down but were partially offset by bloc sales. It's fair to say that this evolution has mechanical impact on margins. Bloc sale margins are circa minus 5% lower on average. Also one of our focus during this semester was to carry out the inventory of ongoing operation to monitor margin and working capital. In this context, we made an opportunistic move on Taitbout operation as previously mentioned by Nicolas. This disposal mechanically impacted our revenue by plus EUR 40 million and the net current cash flow by plus EUR 4 million and it was also supportive on the margin end of June. Going forward, we are more cautious both on margins and net current cash flow evolutions as well as on working capital level expecting longer cycles of holding period. All teams are already focused on monitoring those new challenges to maintain profitability of the division. Let's now focus on our portfolio valuation. I'm on Page 25. We all know the tightening economic environment is putting pressure on real estate asset valuations. Indeed in the context of continuing selective investment policy with slowing down in asset rotations for both acquisitions and disposals, the like-for-like adjusted values are in line with the new interest rate environment and the limited number of transactions. It's fair to say that the external appraisals show why disparity between location, namely due to the different characteristics of some markets, between minus 14% and minus 2% like-for-like depending on different sub-territory. This is also where it echoes what Nicolas will describe in the next part. It is key to deeply analyze and assess our portfolio asset by asset to have a clear view of the potential of our businesses to guide growth and value creation in the future for Icade. Overall, as of June 2023, our total portfolio group share is valued at EUR 7.2 billion representing a 6.4% decrease in valuation since December 2022 on a reported basis. Let's jump right now on the NAV slide, Page 26. Few comments on that slide. First, at the end of June, our EPRA NT stood at EUR 79.3 per share with a breakdown by pocket of value as following. First, circa 23% of our NAV, EUR 18.5 per share is cash equity following the completion of Icade Sante Stage 1. Then an additional EUR 15.1 per share corresponds to remaining stake on Healthcare to be sold before end 2025 implying a grand total of EUR 33.6 per share only on Healthcare and cash component. Finally, our Commercial Investment and Property Development businesses are valued at EUR 45.7 per share end of June. Second set of comments on this slide. It's worth mentioning that with a nearly 7% decrease in Commercial Investment valuation in H1 2023 representing minus 12% on a cumulative basis over the last 12 months, the implied blended yield was 6.6% at the end of June. An implicit risk premium of circa 350 bps compared to French 10 years yields. So in summary, in the current environment and supported by a strengthened and liquid balance sheet with an amount of cash of circa EUR 1.9 billion, our stock level is in my view even more difficult to rationalize. I'm now on Slide 27. Overall, Icade is extremely well equipped to face the current financial environment and to effectively limit the increase in its financial expenses. Over 95% of our debt is now hedged until 2026 for an average maturity date in '29 of the hedging instruments. This demonstrates an even stronger hedging position post disposal of Icade Sante and help us to significantly slowdown the impact of rising interest rates to come. As a result, even if our average cost of debt has slightly increased in H1 2023 to reach 1.59% post Healthcare disposal, this increase has been mitigated by the financial income generated through our cash position. Therefore, one more time, rising interest rates has no impact on our financial results as at the end of June. Last comment on this slide. Our ICR remained high at 4.1x multiple end of June, a low point in fact. It's about to come back to toward 5x multiples by the end of the year and after notably thanks to financial interest from Icade Sante proceeds, also the Icade Sante dividend payment in 2024 and the scheduled debt repayment. Let's jump now on Slide 28. On top of that, post Stage 1 the group also benefits from a solid liquidity position with extremely limited refinancing needs ensuring solid management of the new financial environment. With EUR 1.9 billion in cash position plus EUR 1.3 billion in credit facilities, covering principals and interest for the next 5.6 years and no significant maturities until 2026; we are confident to say that Icade has no issue with meeting its financial needs in the short term and will be well protected in the medium term. We will also benefit from interest income on the cash received through asset disposal in the coming months. We are talking about circa EUR 2 billion beneficiating from a rate at around 3.5% as said before. Finally, we already reimbursed mid-July EUR 100 million on a floating rate short-term exposure. To conclude this financial section, let's jump on Slide 29. We discussed our under control yield rate risk and our strong liquidity position, but it's also important to point out that another key asset for Icade is its healthy leverage. As of June 2023 pro forma of Stage 1 completion, our net debt was cut by more than 2 and amounted to EUR 2.9 billion representing a EUR 3.6 billion reduction versus December 2022 balance. One more time, this reinforced and liquid balance sheet after crystallization of capital gain and significant cash to reimburse our debt also provide us with visibility on our cost of debt. But also this translates into a strong deleveraging of the company with a net debt-to-EBITDA ratio at 6.5x and a LTV ratio significantly down to 29.4% as of July 5, 2023. Overall, we are more than comfortable on this solid liquid and well-balanced balance sheet and have now even more headroom to pursue further growth opportunities by taking our time and being opportunistic. Thank you for your attention and I leave the floor to Nicolas.

Thank you, Victoire, for this presentation. Let me now walk you through the state of play that sets the field to understand where we are going in the future. Firstly, our strong balance sheet detailed previously by Victoire is Icade's key asset in the new challenging environment. So we are facing high interest rates leading to greater selectivity and cost saving, office take-up level moving toward a new normal and yield decompression restoring risk premium and medium-term attractiveness. A new normal ahead of us after a decade where value has been driven by cheap money. But what struck me even more on my first days as Icade new CEO was to realize that for the first time in 20 years, the office industry is facing a milestone, a revolution of uses. Hybrid work has changed the way people work and is changing the face of the office industry just as in an analogous way e-commerce changed the way people shop and the face of the traditional retail industry in the past decade. In this context, it was crucial to me to focus on the fundamentals that will drive the market in the future. So I went to our clients and asked them what they expect from us. Centrality, sustainability, services, flexibility were the 4 key words defining the shape of office uses for the future. Those were the key words we used to perform a deep dive review of our portfolio with the team having also in mind the growing requirements that comes with the CSR and the impact it has on tenants' development strategy and economic performances especially in lowering energy consumption. It's based on these observations that we decided to review our approach and move toward a use-based approach because what can better define our portfolio than our client needs. So I wanted to introduce to you our new portfolio segmentation. Our former sectorial segmentation has been reallocated into a use-based segmentation with 4 categories. Offices, which represent 85% of our portfolio; light industrials accounting for 9%; land banks for 2%; and others, including mainly retail and hotels, for 4%. Based on all the information we collected to-date, the offices segment is itself subdivided to account for specificities. We will discuss in more detail this category in the next slide. The light industrial category represents a development axis, which will be studied in detail and which effectively represents a potential for growth. Our current assets are well diversified with the 360,000 square meters all located within 15 kilometers from Paris. The land banks account for a total 500,000 square meters of land reserve. On a side note, we are still working on a final version of the segmentation that we expect to present to you in our full year '23 financial report and our financial documents will keep using the former approach for now. But let's deep dive into offices, the main part of our portfolio. Because the initial aim was to redefine and better understand our portfolio, we push the analysis even further and defined subcategories for the offices section. Circa 75% of the assets fall into the well-positioned asset subdivision. These are fit-for-future, high quality and resilient assets offering good centrality, best-in-class sustainability, services and flexibility. These are assets in which we have a long-term conviction in new office uses with a structural average occupancy rate above 90% and more than 80% aligned with tertiary decree. The category gathering the ones that in our view are not necessarily fitted to new market standards in long-term approach represents 13% of our assets. As for those assets, we will be considering opportunistically and on a case-on-case basis a potential conversion or disposal. And we have 14% of business park offices located in our former business park. In these areas there's a well-established demand, such as for example the Systeme building that we presented earlier, justifying the development strategy of Silic in the past. However, today it's fair to say that these markets are quite oversupplied. That's why we are doing an analysis to assess the right dimensioning of the offer. It will help to determine which assets will be considered as well-positioned offices well suited to the demand and which ones will need to be repositioned. On the Property Development side, Icade Promotion is a well-positioned value-added market leader benefiting from a strong brand that embodies values such as trust and long-term partnership. As such, Icade has a strong expertise in development projects facilitated by our longstanding and solid relationships with local authorities. Icade Promotion also benefits from its diversified offer, be it geographically thanks to our national coverage or operationally thanks to our full services offer, and large and diversified customer base. Finally, we are strongly focused on low carbon on one hand with over 550,000 square meters of timber-based projects completed or under development in 2022 and rewilding on the other hand, which should account for 100% of new build in Property Development division by 2030. To conclude my state of play, I'd like to emphasize on the complementary of Icade businesses line adapted in my view to the challenges of urban transformation. To have older tools in the toolbox will indeed be key tomorrow to develop successfully mixed-use project at a neighborhood level. In that respect, I wanted to share with you a recent example of a site I visited in person just a month ago. Icade has been active in the transformation of the Euromed district in Marseille: on M Factory, a land reserve converted into a fully let 6,000 square meters office and M Life, an acquisition of a lot from Icade Promotion to develop a residential scheme of 129 units. And as the job is never over, Icade Promotion even acquired the former headquarter of our new tenants to redevelop the building. So as you can see, both financial and nonfinancial metrics of these projects are attractive and we aim at increasing the synergetic collaboration of our 2 core businesses to be a leader in the urban transformation. Moving on to our conclusion section. Now that Icade Sante Stage 1 is behind us, we believe it's important to provide you with clarity with respect to our outlook for 2023 for our 2 remaining businesses. The first and most important message is that we confirm our 2023 net current cash flow guidance and with precise dividend outlook. Indeed we are expecting a net current cash flow per share including disposal in the range of EUR 2.95 to EUR 3.05 versus a pro forma EUR 3.04 per share in 2022. As we are not expecting any further disposal in 2023, we are now including the impact of disposal in our guidance, which is therefore aligned with the one announced in February. This confirmed net current cash flow guidance reflect the resilience of our businesses as well as the higher than expected financial income notably thanks to our stronger cash position post Stage 1. This guidance on net current cash flow does not include any positive impact from Healthcare business over the year neither the cash flows generated by Icade Sante in H1 2023 nor the dividends received from this equity stake. In terms of dividend, Icade will offer an attractive special dividend following Healthcare disposal. But taking into account the new challenging environment, the Board will propose to limit the recurring dividend to the minimum legal distribution obligation. Overall, the total 2023 dividend recurring plus special should be at least plus 10% higher than the 2022 dividend. To conclude today's presentation, I'd like to leave you with 5 key takeaways. Icade has a unique profile that has been even further strengthened with the disposal of Icade Sante as highlighted by our LTV below 30%. Our balance sheet is our first asset in this new financial environment. In addition, our H1 results are solid demonstrating once again resilient fundamentals. Regarding our portfolio, we have most premium asset with room for further development and repositioning opportunities on the remaining ones. Our brand is strong. Our business model streamlined with 2 complementary businesses, Investment and Development, following a common CSR leadership. Capitalizing on those trends, we are currently defining our strategic plan to build a new successful trajectory for Icade. Thank you very much for your attention and now let's move to the Q&A session.

[Operator Instructions] We will take the first question from line Stephane Afonso from Invest Securities.

Maybe the best way is to go through them one by one. So the first one on the net current cash flow guidance, I would like to make sure that I correctly understand what you imply by pro forma. Does it mean that there is no contribution at all of the Healthcare portfolio? And if so, does it mean that the recurring dividend would be based on the pro forma guidance or will it take into account also the contribution of the Healthcare portfolio at the end of the year?

Okay. Thanks for this question. Well, there are 2 things. There's the guidance on net current cash flow and as we told you, there is absolutely no contribution on the Healthcare business on the net current cash flow guidance. So neither the cash flow generated by Icade Sante in H1 nor the dividend received from the equity stake. That's for the net current cash flow dividend because the idea was to give you a new base based on Icade's tomorrow's profile. Regarding the dividend, well, we're driven by the minimum legal obligation so of course regarding the recurring part of the dividend, it also includes the one coming from Icade Sante dividend.

Okay. That's clear. And what payout ratio are you targeting for the recurring dividend?

As you saw, well, I know that Icade was used to give a payout ratio guidance on that. But what we think now given the global uncertainty in the environment and the fact that we are preparing the strategic plan is to focus on keeping our strengths and cash into the company. So that's why the Board will propose that the recurring dividend part will be fixed on the minimum basis. That's the reason why. And we also believe that due to the special dividend linked to the Healthcare disposal, it offers for us the possibility to offer the shareholders some visibility in the coming years with satisfactory level of dividends.

Okay. That's clear. And maybe 1 question on asset valuation. So could we have the like-for-like change for the Healthcare portfolio over the next 6 months, please?

Pardon, you are talking about the next 6 months?

No. Just I would like to have an idea of the like-for-like change of the valuation of the Healthcare portfolio over the next 6 months?

Yes, it was slightly up.

Plus 0.4%.

Okay. And maybe 1 last question regarding the Property Development activity. What could we expect in terms of margin at year-end in particular for residential?

As you saw on the global margin regarding the Property Development, the margin on the H1 result was supported by 1 specific operation, Taitbout transaction. And as for the residential, it was 4.6% on H1. All in all to the end of the year on the average, we foresee a slight decrease compared to the 5.7% average margin on H1 till the end of the year.

We will take the next question from line Celine Huynh from Barclays.

I just have 1 question on your special dividend, please. Can you confirm in absolute amount how much you will pay in special dividend in 2024? The reason is that I can't reconcile with the EUR 254 million you're announcing because to me half of 64% of EUR 710 million is EUR 227 million and that's equivalent to EUR 3 per share not EUR 2.54.

Well, the special dividend linked to Stage 1 is exactly EUR 388 million. So as we will distribute half of that in 2024, the exact amount is EUR 194 million reconciling with the EUR 2.54 per share.

We will take the next question from line Florent Laroche-Joubert from ODDO.

So I would have maybe 3 questions. The first one is on the net recurring cash flow. So based on the Slide 21, would it be fair to say that if you have not guided for pro forma net current cash flow, but for total recurring cash flow without doing your pro forma figures, would it be fair to say that this net recurring cash flow would have been around EUR 4.20 per share in 2023? This is my first question. My second question will be on the valuation in offices. So we have today I think a total correction now in 12 months of minus 12%. So how do you reconcile this current valuations with the reality on the investment market in the district in which you operate in offices? And maybe the last question on the offices to be repositioned. So what will be the timeline maybe to dispose them or to reposition them in the current portfolio?

Okay. Maybe regarding the net current cash flow, it would be slightly...

In fact Florent, your question is exactly on a full year basis because when you look at the Slide 21, yes, you have a half year base at EUR 206. And so we don't give guidance including the Healthcare component. So your question is a little bit embarrassing, but it will be just below under EUR 5 per share.

Okay. For the next questions regarding the valuation by the appraisal, that's correct that over the past 12 months value decreased by 12%. We think that it's consistent with the markets we're in that we are well positioned mostly in terms of assets in those submarkets. We also think that the appraisers might have factored in a major part of the adjustment from deriving from the high interest rate environment now. And by the way overall the blended rate of the portfolio is now around 6.6%, which we think is becoming more and more attractive given the current context. And as for your third question regarding the offices to be repositioned. Well, we'll start to see which ones can successfully be repositioned and converted. As I said, we have the expertise in-house. We have the tools in the toolbox with the expertise of the Investment division and the Property Development division. And we've already done that for some of those assets especially [indiscernible] for example, already converted a former office building into a hotel building. So we'll look closely at those assets on an asset-by-asset basis to determine which one need to be converted and also we could consider indeed some disposal about that. Regarding the timing, I'm not quite sure it's the best position to be a [ fourth ] seller in the current environment. So thanks to the Healthcare business disposal and our strong balance sheet, we are in no rush. I mean the first part will be analyzing those assets to see the one that can be converted and after that we'll be opportunistic on the disposal. But there's absolutely no rush because we are not a [ first ] seller.

We will take the next question from line Veronique Meertens from Kempen.

2 questions from my side. Maybe first on the disposal of Sante. Already for the second time, you mentioned that we could actually see already a sale of the remaining part before the end of 2023. So I was curious are there active discussions ongoing there that you know of or what was the specific reason that you mentioned that or what percentage of change of succession which you actually think that it could happen before the end of the year? And then maybe secondly, operationally on the office segment. We've seen a bit of a drop in terms of occupancy levels and also quite some negative reversion in Q1. So I was curious how do you see it going forward? Are there some larger lease maturities coming up where you expect some negative reversion or what are your expectations toward your occupancy level?

Okay. Well, regarding Stages 2 and 3 of the disposal of the Healthcare business. The Icade Sante stake is to be gradually acquired by both the inflows on Primonial REIM funds and new institutional investors. We mentioned that because we're negotiating a window to allow the new institutional investors to take advantage of December 2022 NAV if they enter before year-end. So that's the reason why there's a window open as soon as the end of 2023. But we are globally confident in both timing and valuation on the next step of Stages 2 and 3. As for the reversion and the next leases, as you saw, we have 2.2% like-for-like for the Investment division. Victoire noted the fact that we had a specific renewal with Veolia. Maybe just to put the figures without this renewal, the like-for-like figures would have been plus 3.8%. So this is a very specific deal. So the key part is that we fully pass the indexation because we have a strong tenant basis which is prime tenant 70%, but public state, major companies from [indiscernible]. So all in all, we still have this business model that allows us to pass the most part of the indexation. We do not expect any change I mean in the months to come regarding the discussion we have. We might have some different strategy regarding the sub-buckets we've put in the office portfolio. But for example on our prime offices, as you saw, the last discussion were on track and consistent with the main figures we shared with you.

Okay. Maybe 1 follow-up question. So the remaining stake in Sante, does it have to be sold in one go or can it actually be split apart into several disposals?

It can be several disposals. The idea indeed is this stake to be gradually acquired from both Primonial annual inflows and some specific investors that can bought some smaller stakes of course.