Immobiliare Grande Distribuzione SIIQ S.p.A. (IGD) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call operator. Welcome to IGD's business plan presentation spanning 2022-2024. [Operator Instructions] Let me now turn the conference over to Mr. Claudio Albertini, CEO of IGD. Mr. Albertini, you have the floor.

Thank you very much. Good afternoon to all of you. I do apologize for giving you such a short notice and for -- and providing you with the documentation with such a short notice, but despite the fact that the Board meeting started at 9:30, it was only closed at 2:30 p.m. So the Board had to discuss a number of items, not just the business plan. So sorry for the very short notice in sending you the material, but we now have 2 hours -- 2-hour slot for this conference call, so we can give you all the necessary clarifications. Very well. I hope all of you have had the opportunity to look at the presentation or if you have it before you, you can download it from our website together with a press release. Let me start from the title page and we're not used to giving a title to our business plan. It's not the first business plan we are disclosing as IGD at least since I'm the CEO of the company, we've presented a number of them after everything that happened, we decided to attribute to allocate a title countering up a very famous movie series that was Mission Impossible. But our mission instead is possible. So we hope it will be good for us. It will be good omen. And the paper and the presentation I'm going to walk you through consists of five sections. And step-by-step I'll walk you through it. The first one, somehow is a summary of what happened over the last two years. And then the second session, strategy. And then number three, strategic actions and operations. And then number four, key outputs and financial targets and then final remarks. Starting from Page 5. COVID indeed stopped, interrupted our growth plan. Let me remind you that we are still within the 2019-2021 business plan. And the plan was disclosed to the financial community in November 2018. But also here, we would like to show you the performance of some key indicators for the indicators we had in -- over the last five years. So 2015, 2019 will constantly increase our funds from operation getting to the peak of 2019 with a CAGR for the period of 16.5%, up 16.5% and dividends per share followed the same growth path. And it went up 33.3% over the same time span. So a growth path and satisfactory growth path for shareholders. Starting from end of February 2019 and then 2020 and 2021, it's not over yet, even though we are almost at the end of 2021, that's somehow stopped our growth plan. We were affected by a tornado, struck by a tornado somehow if we put together 2020 and 2021, we had 131 days of closure in our shopping centers exception made for the essential services or central activities that were very few and far between pharmacies, tobacconists et cetera, and of course, hypermarkets. So 131 days of closure over a 2-year time span with an economic impact, and operating impact on our FFO accumulated an impact of EUR 27 million. Let me remind you that it's one-off effects that have no drag on onto the following years. And we put in place a number of measures to safeguard our financial structure. We reduced and put off our CapEx. So we cut CapEx by EUR 55 million. And we've partly started to reinvest. But in 2022, '23 and '24, we will resume investing. Now there's very hurtful decision, but necessary and necessarily one. For 2020, we have to cut our dividend payout, taking it to the minimum distributable amount of EUR 0.228. And 2021 over 2020 we've completely zeroed our dividend, even though we were not bound to do that because 2020 was closed with a loss of EUR 78 million and distributable income even according to the SIIQ regulations, rules and regulations. This is what happened on the picture, you see what happened in the five years before the pandemic. But our business model somehow stood its ground, proved to be resilient. And in -- We have an occupancy rate that is slightly higher than 95%. We think it will get to 95.5% by year-end. The collection activity rents collected are in excess of 90% versus 2021, whilst versus 2020. We've almost completed our collections. And then we retained a very sound financial structure despite all the effects I mentioned before, it was loan-to-value, expected loan-to-value. It's rough. It's circa. It's going to be 45% by year-end. And that's the only target -- financial target in the plan that we'll be able to achieve. And the target, as we advanced when we released our press -- when we disclosed the press release of our non-core portfolio,dismissal. So we specified that, that disposal would have enabled us to decrease our loan-to-value to the 45% range. We got, however, some very positive answers when it comes to visitors and footfalls. We have a comparison between now and 2019 to 2021 and 2019. You cannot make a comparison with 2020, but we can make a comparison with 2019 because 2019 was not affected by the pandemic at all. And if we were to ask somebody what a pandemic was, 90% of people would have answered that they didn't have any idea, they didn't have a clue. So starting from mid-May, May 17 is somehow the same data as we had in 2020. restrictions were raised were 17th or 18th of May, last year's the 18th and this year on the 17th of May. If we look at what happened in the last five full month, let's not consider May, but let's start from June, June, July, August, September, October, the last full five months. Look at the chart. And if you exclude July, all months have either slightly positive or very positive trend. August is 15.1%, we are talking about tenant sales per shopping center. So the average of the last five months is up 2.7%, and it's a comparison with 2019. Let me reiterate that. Whilst with footfall, we are still lagging behind. There was an improvement in October. I don't think same applies to November, but we still have to recoup this 10%, 15% of footfalls that spent more, however. So they went less frequently to the shopping center, but the average ticket was higher. So they spent more money versus 2019. So the average ticket versus 2019 is up 25%. And the piece of information is referred to October. And then a very sound recovery of our operating performance. But of course, pools were that our business model is a sound one and that our shopping centers are attractive and appealing. So physical retail, according to us, still has a future and still plays a central role for consumers. Having said that, we have tried to match our business plans panning 2022, 2024 with a back drop that is our -- with our country's GDP. Italy is growing. So cumulated average GDP growth, including 2021, which is up 6.3%, up 6.5%. So on average, putting together 2021 -- sorry, '22, '23 and '24 is up 3.5%. And this average is very similar to the expected growth for private consumption and households, which is up 3.4%. The key factors here for the growth are the ones you find on the right-hand side of the screen, top right. And these are the key elements. Somehow the sizable resources allotted to net generation new for Italy in excess of EUR 222 billion in the PNRR, the national plans for recovery and resilience. And then we have the manufacturing and export where it grew double digit over the last few months. And then when it comes to the next-generation EU front, EUR 25 billion have already been allocated. We've received them over the last few months, but they have to be accompanied by a reform plan on which Prime Minister Draghi and his team are now working. And let us not forget also the strong increase in the building and construction industry, thanks to the grants and bonuses that were made available by the government and that are reconfirmed for the years to come. And we'll see whether they will be reconfirmed in the next budget law. The amount the only unknown is still the amount that will be granted. So the construction industry was a driving force over the last few months and year. So it was not just a technical rebound according to us. After the strong decline in 2020, minus 9% almost, minus 8.9%, so a rebound was to be foreseen. It was a strong rebound but we believe that all of the funds that we will get from Europe and the reforms that will be rolled out somehow the first steps for a strong economic growth based on a number of pillars. And of course, the risks have to be taken into account to have to be factored in, in Italy, but also from the Board between 5 and 6 o'clock, we wait for the observatory on COVID, and we wait for their bulletin to be released, but also the containment measures put in place by the government and the vaccination campaign and also the Green Path initiative and similar measures can contain COVID effect. So we don't expect any other closing effects in 2022 if not very limited one in individual municipalities. Another risk is inflation, of course, the inflation rate. And there's a lot of inflation coming from the increase in the cost of energy not so much driven by the increase in consumption. But for us, it's a risk opportunity. It's risk/opportunity because our contracts, as you know, are inflation-linked or inflation indexed. Let me now move on to Page 10. COVID is somehow accelerating, speeding up some macro trends, global trends, by the way, some of these trends were listed on the screen. We highlighted four, urbanization, first of all, and more and more people are moving to large towns and cities. The idea of proximity is very important, especially now -- nowadays that we were forced to stay at home. So we have to adapt and reconvert urban areas to comply with smart mobility and smart working needs. Our greater attention to quality of life, well-being, wellness, physical activities, personal care. There are more health and public and private health resources and clinics. A lot of the PNRR resources will be devoted to the new health program or health plan throughout Italy and then shopping and services that have to be closed at hand. And we have shopping centers that are very close and very much embedded into the urban fabric and then healthy and fresh food, for instance. And then digitalization. Digitalization is the buzzword right now. And here too, the PNRR will allocate resources to the digitalization plan for Italy as a country. connections will have to be faster and faster bandwidth, et cetera. And the service offering will have to be customized, will have to be bespoken. And of course, there will have to be more integration between online and offline. And then not -- this is not just a payoff. It's not a slogan. And it's not just Friday for future. Green Revolution is something real. We're all affected by it. We've seen what happened in the Midwest in the U.S. not very long ago, lots of tornado hitting the country. And Present Biden said, this is very much affected by climate change and energy transition. So emissions and waste reduction, electric vehicles, green and sustainable finance. And then there's a specific -- if you manage to look through our business plan, you will see that there's a specific section devoted to our CSR policies. Page 11 now. And we, of course, we've embedded our trends into our operations. We have four main operating initiatives, commercial strategy, asset management, financial planning and sustainability. And for each and every one of these themes, we have tried to define objective and medium-term strategies. And all that, of course, leveraging what we believe is an efficient and effective business model. This is a rendering snapshot taken a bird-eye view somehow for our Imola shopping center, it's a dominant shopping center. It's not in absolute terms, Imola is a big city. But in no specific catchment area, it's a dominant shopping center. It's an urban shopping center very close to the city center to downtown 1, 1.5 kilometers from the city center, strong presence for the food anchor. We have hyper shop there, not just products but also services. We have dental clinics, we have outpatient clinics. It's very similar to Centro Borgo in Bologna, but many other centers are being adapted to these new needs. And then about operations, strategic actions and operations again, four different strategies, commercial and marketing strategy. It's a plan we have come up with based on the specific features of every shopping centers. We own 27 shopping centers in 11 regions from Northern to Central and Southern Region Campania, Sicily. And so each and every shopping center has its own distinctive features, its own catchment area. And therefore, we have its own merchant elements, layout, different digital marketing. There's no one size fits all, no common recipe. So merchandising mix, what Will it be like? How will it change going forward in the next few years? How will the shopping center layout will change based on the new product categories that will be introduced and also from the demand we get from our visitors? What will we do from a digital marketing viewpoint with our CRM? We've been working with it for a couple of years now. It should be up and running from 2022 until the -- well, within the entire business plan time horizon. And then events in 2019, we have organized 27 event -- 700 events, sorry. 700 events in our 27 shopping centers, two per month in every shopping center, and that came to a halt because of COVID, but we are starting again. I don't think we'll go back to 700 events per year. However, we will have many digital events. And we're going to give you some ideas in the coming pages. Let's have a look at the merchandising mix. Well, on Page 15 of the presentation. We think our models are scalable and replicable. And we talk about health and well-being. We are not starting from scratch. Over the last few years, we've introduced 21 dental clinics starting from 2013, 1 for every shopping center almost. And recently, we've opened a new medical center, an outpatient clinic, if you wish. And then 1 will soon be -- at Dyadea will soon be open. As soon as we get the NHS, National Health Service authorization in Borgo Casilino as well -- Centro Casilino as well. But in 2022 more will be opened. Fitness centers, two more fitness centers will be open, one in Livorno, in the Porta a Mare project and then one in Grosseto in an external area from the shopping centers so medical center, fitness centers, NHS or health care facilities and services to citizens and households and then health care facility close by, so to say, proximity ones. And we allocate -- well, we know that a lot of funds were allocated within the PNRR facilities for health purposes. So there will be resources to go from. Another product class or category that we want to bet on is the household goods. Over the last two years, we opened 5,500 square meters of shops in the industry, in the household goods industry. Three are Happy Casa, it's a very successful format, but also Mondo Convenienza, which I think is the Italian IKEA. If you wished growing a lot. And we opened a medium-sized service in Ravenna, and they are doing remarkable or meaningful revenues there. We will show you some pictures. And that in 2022, we signed an agreement with Portobello. It's a new brand. They are growing fast, always in the household goods world or universe. We'll open 3,200 square meters of Portobello to then expand its franchise in the shopping centers as well. We are scouting for new formats with new and emerging brands to extend the offer. Food courts, restaurants, those are where the industry that -- they were the industry that was most hit over the last couple of years and even more so in shopping centers because shopping centers were mainly working during lunch time because people working around the area would go and have launch at the shopping center because there were offices around the shopping center. And now many people are still doing smart work and working from home. And therefore, the restaurants in the shopping centers were strongly affected. But still, they are proving to be buoyant, to be lively, new formats being launched. The Hawaiian restaurants, the Poke restaurants. We opened eight of them in 2021 with the Poke brand. Five will be opened in 2022. There's a lot of bouyants. it's a very lively industry. And in 2022, there'll be new openings. And in 2022 and going forward, we will focus on ethnic, bio-organic food, healthy food, high-quality restaurants, not the traditional restaurant similar to a canteen where you have your tray, you pick things and then you go to the till to the cashier desk, large, if you were in an auto grill on the bus way, it's going to be a much more innovative type of -- then other product types and our categories we're going to bet on a lot is the tech offering. There will be 15 new shops that have been opened in the last two years. I'll give you an example here. It's Med Store, which is an Apple reseller. And the other example is Mi store at Tiburtino Shopping Center. This is a Chinese tech company with a wide product range. We are planning to grow. We already have some good agreements with Unieuro who is going to open a new store in 2022 in Porto d'Ascoli. We are currently renovating the space. We will be counting on the market to be top of the notch in terms of tech offer. Sport, sport has grown massively over the last two years. Almost everyone in the world has created a small gym at home everyone started running at a park. So this is another product area which is very dynamic. We have opened lots of stores. Here, you have a few examples. The new opening is being planned in Imola as soon as possible. Actually, we wanted to open by year-end, but we have to slow down a little bit our construction works at the Leonardo Shopping Center. So sport is another area where we're going to invest. And finally, the so-called family stores. These are stores with our strong focus on families, home, children with good value for money. And here, we have two examples. Pepco, Pepco is a Polish brand or chain. We got to know Pepco in Romania, and we have a few stores with them in Romania. They asked us to expand in Italy and we accepted. We've opened eight Pepco stores over the last two years for a total of almost 5,000 square meters. In 2022, we will open some 700 square additional square meters and a lot more probably in the future. Layout are adapting to the new product mix and also to the new types of demand we are seeing on the market. shopping centers will have to have a nice outdoor spaces that can be used for interesting activities. This example is in Roma Casilino, we are creating a rooftop at the Centro Casilino, where we will have restaurants, cafes outdoor restaurants and cafes. So the idea is to allow people to leave outdoor. We'll also have specific areas devoted to smart working or smart studying where additional services are also available, restaurants, cafes and other proximity services. So this is an example of what we are doing outdoor. This is Ravenna Centro ESP, one of our major shopping mall, more than 100 stores, a big hypermarket and a lot of outdoor untapped space. So we decided to adopt these outdoor spaces to the new needs. We will create some paddle courts we will also create a photovoltaic shelters connecting the paddle court to the main stores. We will also have food trucks devoted to -- with riders. And also, we will have food kiosks and area for winding down in the outdoor. Page 19. I've mentioned our omnichannel approach, meaning stronger integration between the physical and the digital channel. We are creating or developing a number of app together with our marketing services, we're investing a lot on this. So new apps, online reservation systems. This will boost our client loyalty. This is done through the CRM. We will also develop the Click&Collect and delivery services, and we will expand these apps also to marketing activities via promotion campaigns. And of course, all of this will be connected to our social outlets. The digital plan will involve food courts, smart areas -- smart working areas but also other activities. Page 20. Here, you have some additional details concerning our digital plan which started back in 2020. So in 2020 and '21 were to speak preparatory times that we got all geared up to speed on -- press down on the accelerator on this digital expansion. We are working on our digital offer. Everything will be possible, thanks to a very strong cooperation with the visitors through customer engagement, but also with our tenants via tenant engagements. We can give you the figures about the contact over the last few months to 100,000 in six months, up 30% since the launch of Area Plus. Events, we think events are crucial, already said so a few minutes ago. We are adapting this format to the new situation. These are two examples of events that were organized recently. The physical events will be matched with digital events. Now let's talk about asset -- our asset management strategy, Page 22. What's the target? Well, the target is to invest over the next three years. Of course, we have always been investing. We've just put off a investments in 2020 and '21. However, in the future, we must continue investing in our shopping malls to make them attractive to -- and also to lengthen the life cycle, four main areas. We have a number of restyling, remodeling and fit-out projects. Secondly, we have a number of development projects. There is one in particular I'm thinking about, i.e., the Livorno project. In 2022, we will open Officine Storiche. The third area is energy efficiency investments. Of course, this is something we used to do also in the past, but we will accelerate this. And finally, we have identified an asset rotation strategy. We have identified some non-core assets, which we're considering disposing off. The investments are a total of EUR 82 million. Part of this investments have already been forecasted for 2020 and 2021. They have just been put off. That's just been postponed or might -- so we now have to catch up on there after two years. And then there are some asset maintenance CapEx and including some anti-seismic CapEx and compliance CapEx. People who are interested in investing in these assets, including banks or including buyers or investors, of course, want our assets to be compliant with existing regulations. So this looks like a lot of money, but it's just 1.5% of the total portfolio. Then we have ESG investments, EUR 12 million as a total not that much, but this is what we actually need. These are energy efficiency investments, photovoltaic, LED lighting investments, cogeneration systems in our stores with the aim of improving our energy efficiency. Then we have EUR 24 million in restyling remodeling and fitout. We will give you -- we will talk about four major restyling projects in the coming years live. And finally, we have the Porta a Mare development project, which will be finalized by the first half of 2022. This is for -- accounts for EUR 13 million. Some EUR 10 million will be devoted to the commercial area and slightly less than EUR 3 million will be used for the residential area. And there are some positive signs coming from the residential area. PortoGrande, that's the first project I'd like to focus on. PortoGrande, the hypermarket at PortoGrande has already been scaled down. This was something that we had already envisaged in our previous business plan. The restyling will be completed in 2023, the first half of 2023. New medium-sized surfaces will be open. We already have three surfaces that are totally rent out that will start providing income starting from next year. 21,800 square meters of surface. So very considerable restyling effort photovoltaics and LED lighting. EUR 4.6 million that will mainly be finalized by 2022 or 2023. This is La Favorita in Mantova. We have already started construction works and this project will be finalized in the second half of 2022. An important restyling of the facade, of the parking lot, food court remodeling. This is a shopping mall, which is part of a very central area in Mantova. This is a commercial park with the Palasport where sport activities, concerts, exhibitions take place. So we are very close to this area. Again, we're doing some restyling activities, but at the same time, will take this opportunity to install photovoltaic and LED lighting systems, EUR 4.3 million in total. We also have two major investments in Sicily that were already part of the previous business plan. It's a remodeling project. We are scaling down or reducing the hypermarket to create a new medium-sized plazas or squares and areas. So the reduction of the hypermarket will start at the next year. There is lots of interest, particularly for Katane, which is in a crucial strategic position. We want to finish the remodeling by the second half of 2022. So -- and again, it all starts with the hypermarket scaling down. And finally, this is probably the most important development projects. Porta a Mare Livorno. This is a mixed-use project. Many of you are quite familiar with this project. This is on Page 28, we have a rendering of how we are planning to developed the entire area, lots of resources have been devoted to this project. The first part will be accomplished during the first half of 2022 with Officine Storiche. We've also opened a retail area, Piazza Mazzini, we have also sold actually, 72 apartments or residential units. Another one will be sold in the next -- in the coming months. And then Palazzo Rade -- Palazzo Orlando, which has already been sold. Now on Page 29, we have a few more details about Officine Storiche, 20,000 square meters of supermarket of galleries, stores. So 20 stores plus a fitness center -- sorry, 30 shops and a fitness center and also 10 restaurants. This is an exquisite mall, which is the result of [ Ovenache techtonic ] refurbishment and renovation. And then you have the harbor. The harbor, this is the old shipyard. As I said, there are 42 flats to be sold. 20 preliminary agreements have already been signed as of today. They will be finalized next June. And we also think that we will easily manage to sell the remaining 22 apartments between 2022 and 2023. So the total investment is EUR 12.8 million, both for the residential and commercial area. On Page 30, we give you an example of energy efficiency. This is not a rendering. It's just a drawing, but there are some major figures to be mentioned. We will increase the green surface in four shopping centers to make them better livable outside outdoors as well. And we will have photovoltaic systems in seven shopping centers either on the rooftop or creating shelters or rooftops on the parking lot and then we will have LED lighting systems in nine shopping centers. We will eliminate induction boilers and we will have high-efficiency hot/cold system in 13 shopping centers. Just to give you an example, of how we are going to improve energy efficiency. We will have artificial intelligence devices in 25 shopping centers to optimize energy consumption. We discussed it with the Board, investing in ESG is no longer an option, it's a must. If we want our shopping centers to be compliant with the needs of visitors, the consumers, investors, et cetera. Energy efficiency targets. Here you see reducing greenhouse gas emission baseline 2018 and until 2025, down 21.5%. And we would like to have at least one asset that is carbon positive by 2030. And we want to have 100% use of energy from renewable sources, and that is already the case. And a very short focus on Romania. It's Page 32 in the presentation. And these are the main features of our Romanian portfolio, extended network, 13 medium-sized Romanian cities, strategic locations in the main squares of these -- or in the city center of the Romanian cities. They are adaptable and flexible assets. We have direct management and Romania is a cash cow or cash producer, if you wish. And Romania is embedded into the IGD's broader plan. FFO generated should be EUR 19.4 million of which EUR 5 million will be devoted to the CapEx plan and EUR 13.5 million will be dividends paid out by our Romanian subsidiary to the IGD to the parent company. Everything is self-financed, 100% self-financed and Romania will keep on having no financial leverage. I talked about asset rotation. Let's move on to Page 33. Within the business plan time horizon, we aim to do something. We have not yet given you an impact on the main financial indicators, we are thinking of potential disposal of EUR 180 million to EUR 200 million over the business plan time span. We have the potential targets, first and foremost Romania and now it's EUR 130 million book value. And I say that during one-to-one, we want to dispose of Romania but not sell off Romania at any rate. It has to be very -- it has to be a value very close to book value. We still have a lot of stand-alone hypermarkets. Some of them were sold to ICG end of November. We have another three stand-alone hypermarkets around EUR 40 million, and that is the next sale. Then we have three plots of land in Porta a Mare, they still have to be developed. And we think we're going to enhance or leverage these three items, so there could be a [ EUR 5 ] million to EUR 7 million cash absorption in the three Porta a Mare plots of land, you could build a hotel and services, you name it. And we'd rather enhance their value, develop and then dispose of them. Altogether, they should be EUR 180 million to EUR 200 million, provided we can actually dispose of those assets. They are not factored in with either a positive or negative impact on our plan. We could reinvest the proceeds in the Italian market. In the retail business with possible economies of scale or we can cut our financial leverage. Our gearing the ICG disposal has been completely devoted to cut our financial leverage. That's why we expect a loan-to-value of 45% at year-end rather than to cut our financial leverage despite the disposals and without resulting to disposal. And we could, why not use the generated cash flow from the potential disposals we could use the possible proceeds to invest in industry or businesses that are different from retail. This is something the Board will look into. It's still outstanding. First, we have to complete the disposals and then we will make a decision as to when and how to reinvest the entered cash flow. And let's now move on to the financial strategy. We want to obtain of course the best economic conditions, whatever the market backdrop and minimize our exposure to financial risk. We will keep on working and operating with an interest rate risk coverage or hedging -- And you know that there might be a hike in rates, and therefore, even more so we need to cut that risk, reduce that risk, minimize that risk and improve at credit worth and that it's still very high, both at banking level and in the fixed income market. So, strategy is to retain a rigorous financial discipline and consistent with the investment-grade profile. Over the last few weeks, we have confirmed -- confirmation by Fitch, investment-grade rating with an improved outlook from negative to stable. S&P itself over the last few days improved our outlook despite us being one notch below investment grade from negative to stable. So that makes us optimistic after the refinancing activities will be running in the first half of 2022. And then we will refinance our maturities, our debt. In the following page, you will see our debt maturity profile, but we're going to refinance our maturities well ahead of time with an early refinancing, even though we know that has a cost, but we think that is a conservative strategy. And we have a sound track record -- long-standing track record in DCM, debt capital market. And we want to be flexible because we may want to go to the DCM market, also we do not rule out other forms of debt refinancing, be it in the market or using or resorting to the banking system. But we want to broaden our investor base, even though it's quite wide already. But the message we want to convey is that we are trying to use new sustainable finance instruments that are growing in importance in financial markets. And I have to read the note on the bottom of the page, the 2022-'24 business plan will be completely self-financed and will not require any capital transactions. On Page 35, you will see in a nutshell our maturity -- debt maturity profile, it's below EUR 1 billion with a net debt landing at EUR 990 million with a loan-to-value, which will be approximately we stress approximately because we wait for the fair value valuation at year-end, so 45% cash on hand, EUR 160 million, EUR 115 million cash in from the disposal plus additional cash we had available that will enable us. In the dotted part, you see, we will have a full coverage of our in 2022, expiring 2022. And then to start in the first half of 2022, hopefully, already in the second quarter to refinance the outstanding debt, it's about EUR 270 million in 2023, relying on our strong ratings, both from Fitch and S&P, one notch under IG with a stable outlook. More details. We are working to refinance our debt going forward. And the ambition we have is to try and create -- lay the foundation to issue a sustainability-linked bond because we know there's a lot of demand for that kind of note. And we are setting up -- with the help of a primary adviser, we're starting up the relevant framework for that issuance. We are well ahead in our work because we've been focusing on CSR activities for 10 years now. And we are talking about a sustainability link bond, not a green bond. We have EUR 12 million, EUR 13 million worth of green investments, but that's not the target. What we want to do is issue a EUR 400 million bond tied in with broader sustainability targets, which is what you find in the next part. We already have a 10-year track record in sustainability. We started a pathway 10 years ago, and we will be so as we moved a long time. And we have come up with this new acronym becoming great, Page 37 in the presentation. So it's 5 -- it's an acronym, stressing there are five elements, units in our strategy, green, responsible, ethical, attractive and together, it's a very, very synthetic. It's not that we can come up with a sustainability report right now, but we've been learning a lot of roadshows where our investors ask for -- ask us to elaborate on sustainability policy and our sustainability plan, which very much embedded and integrated with the business plan because on finance, for instance, we are working on this necessary framework for us to be able to issue a sustainability linked bond. We have four targets from here to 2024. It's material targets of material for IGD, and they are consistent with the UN Sustainable Development Goals, SDGs. And it's 17 goals. Here you see 10, of course, because these are the 10 goals that we think may have an impact on our business, not 17, but 10. And we have identified 41 targets from here to 2024, and we've identified our ambitions towards 2030, which is the time horizon for the SDG principles to be fully rolled out. We have the targets on a page-by-page basis from here to 2024. So you see green, Page 39, most measurable part, of course, is the green targets. It's the green part because there are indicators that can be measured hands on. So 100% green energy purchase, double the use of energy produced from renewable sources. Reduce our energy consumption by 15%, have other assets, nine more assets getting a BREEAM certification. This is a must. If you want to go to the market, you need to have with the disposal, you have to have your BREEAM certification. It's easier if you have a BREEAM certification. If you're looking for investors, it's easier if you have BREEAM certification for the given assets you want to dispose off or -- and then eight of them were already -- of our assets was certified. There were 17. And then use of artificial intelligence technology to reduce energy consumption in four biodiversity projects and four shopping centers and then mobility, 100% of the Italian portfolio. We're charging stations for electric vehicles. And then 2030, on the right-hand side to our 2030 objectives, zero carbon emissions. I don't want to go on for too long because I want to leave room for your questions as well. On green transitions, you find the main targets within the business plan time span. It's similar to what I've said before. So I'm going to go more quickly on the other targets, responsibility, responsible. These are the objectives in-house. And so Innovation Award, sustainability, health and safety, you name it. Ethical targets, we'd like to confirm our legality rating. We have three stars. It's the maximum. So we want to reconfirm that rating and not -- we don't want for it to get worse. We want to apply -- to have a corporate cybersecurity in place, strategy in place. And we want to assess our providers along their supply chain with a view to sustainability. And then we have objectives by 2030. And attractive. This is the part that's more connected with our investment targets and objectives. We want to be appealing and we're attractive, we will be so if we manage to roll out the four key projects, PortoGrande, Mantova, Catania and Palermo. And more and more, and that goes hand in hand with the commercial strategy. We have to adapt our shopping centers to the need of local communities. They have to be spaces to be lived in, that's a payoff -- corporate payoff spaces to be lived in. And then last but not least, together. Together, we've always said that our shopping centers are dominant but are very much integrated with the catchment area with the area where they are located. But we want to do more towards our stakeholders with our sustainability framework. We want to engage our stakeholders more and more. So sustainability framework will be defined. And our CSR office is working with our finance department. Let's now have a look at some financial figures. Let's start with the net rental income. We are expecting a CAGR, meaning an average annual growth in a -- on a like-for-like basis of 5%, 6% in Italy and 8%, 9% in Romania. Total is 5%, 6%. Romania accounts for 5%, 6% of the total revenue. So that's our CAGR for the net rental income. In the bottom part of the slide, you have the net income for 2020, which is dramatically affected by COVID effects. And then also, you have part of 2021, but you also have a restate of the net rental income, where we stripped off EUR 11 million. This EUR 11 million is the proceedings of the disposals almost EUR 7 million plus EUR 4 million, which is the valuation of our master lease contracts, which is no longer a master lease, but it is actually a commercial services contracts. If you compare the 2021 restated EUR 107, EUR 108 and the like-for-like growth in Italy and Romania, plus the positive effect of new [Audio Gap] 2024 with a 17% to 20% growth versus the 2021 restated. So EUR 126 million, EUR 128 million roughly. This, and this takes me to the next slide, and I'm almost finished with my presentation. This takes us to FFOs, which in 2024 will be roughly between EUR 74 million and EUR 76 million. I think we will be over EUR 70 million already 2022, and this figure will be consolidated in 2023, ending up at EUR 74 million, EUR 76 million in 2024. The cumulative FFO will be 2020, 2025 -- sorry, [ EUR 220 million ], [ EUR 225 million ] in the business plan. If we also look at the expected for 2021. You might remember that our guidance which was given during the approval of the half year report, meaning in August, the guidance was increased, the guidance for the entire year. The guidance had been given in February at 3%, 4%, now it's at 7%, 8%. Well, we are confirming this guidance that we will be in the upper part of the range. So actually, we are expecting even to beat the guidance. We wanted to be prudent when we announced the review of the guidance. Everyone was shocked by what happened last year after November, we decided to be more cautious. We don't think there will be COVID-related effects, and no, we're not expecting any closure. So I think that the guidance will be confirmed. And again, we will be in the upper range of the guidance. And maybe we will also be able to beat the guidance. But let's start from the EUR 63 million, EUR 64 million 2021. We are expecting a sensible growth, a major growth over 30%. Because of all of this, we are also expecting our loan-to-value, which end of 2020. was dramatically close to the 50% threshold. We were only slightly below the 50% is low, and this was the result of two write down in 2019 and 2020, we had over EUR 200 million write down EUR 80 million in '19 and EUR 120 million in 2020. And this despite the net financial position, had not increased. Actually, it had gone down. But nevertheless, our loan-to-value really skyrocketed. So as of June 30, third year evaluations were the same, remained unchanged. But because of the disposal and because of the cash generation. By year-end, we are expecting our loan-to-value to go down to 45% this loan to value will actually go down by 2024 by the end of our business plan. It will starts going down in 2022, more markedly in '23. And this is despite the EUR 80 million worth of investments and regardless of the fact that the company is going back to being a dividend paying company, and this is on Page 48. You might have noticed that we have shrinked the dividend per share guidance. The first guidance was talking about I mean this was at the time of the disposal, which was one of the main criteria or one of the main factor for the guidance. Now the guidance is EUR 0.25, EUR 0.30. We'll try and do our best to be on the upper part of this range. because of the disposal, we have now EUR 16 million cash in hand. So we have EUR 16 million of reserves that we're freezed up because of the disposal, and we are forced to pay out this EUR 16 million in two years. We might decide to pay out the -- this amount of money in either during the first year or during the second year or partially the first year and partially the second year. So it's up to us to decide how to pay out this EUR 16 million of reserves. Nevertheless, we want to be back -- to go back to being a dividend-paying company in 2024 as described on Page 48. So we want to be back at EUR 0.50 per share. This takes me to the end of my presentation. I have some final remarks to wrap up. Our main -- the main objective of the 2022-2024 business plan is proactive management of our assets to launch them into the future and prepare our assets for new market challenges. We think that our assets are strong. They proved to be strong and resilient during the pandemic. We confirm that a local physical proximity retail is a resilient business, and there are opportunities to grow. So the new scenario is a scenario where the physical and the digital businesses are interconnected, and we are going to strengthen our spaces to new product mix into tenant mix, those tenants that will be able to catch the new trends. We also want to confirm IGD as a dividend-paying company. IGD, since we went public in 2005, we always paid out dividends, the only exception was 2021 over 2020. But now we are back to being a dividend-paying company, and we expect our dividend per share to grow over time. And this is happening with a loan-to-value, which is going down in a range between 40% and 43%. Possible future scenarios. This is actually my very last slide. IGD wants to position itself as an aggregator of new assets potentially from even different industry or sectors. The final target is to grow. We know that size is one of the most important critical factors that we have. We are small compared to other European international peers. But we want to grow, leveraging on our know-how and also on greater economies of scale. And this with the final aim of creating value. This, of course, with market conditions allowing almost 60% discount on the NAV is -- on our NAV is an interesting figure. Now I'll stop here, and of course, I am available for questions or comments.

[Operator Instructions] First question by Simonetta Chiriotti by Mediobanca -- from Mediobanca.

Good afternoon, and thank you very much for your presentation. I have a number of questions. The first one has to do with your strategy and your product mix and tenant mix strategy, following the results that you are posting. You said the tenant sales picked up despite a reduction in footfalls. How does this reflect on the -- on your revenues? On the tenants, there are more exposed to footfalls for example, restaurants or cafes, the food and beverage area or industries. So this [ 2.7 ] growth, does this growth include also these types of tenants, restaurants and cafes? And how are things going for these type of tenants? Second question has to do with the underlying base scenario concerning revaluation. You are talking about a loan-to-value, your loan-to-value going down. And I guess that you made a few hypotheses in terms of your asset value. And also as far as the CapEx are concerned, I guess this is reflected on the asset value.

Okay. I'll start answering. Well, I think this question was made by our Board members this morning. The product mix, I mentioned, house, [ universe ], electronics. Well, all of them have different contracts and different rentals, lower fees compared to our average, which is EUR 250 per square meter. Some tenants may pay less. As far as the drop in footfalls, well, first of all, we are expecting this gap to be recouped. We are working on the vacancy at the end of '21. Our occupancy rate was 95.5%. So we are expecting to grow. So there is a lot of leasing activity, and we will grow by 100 basis points in 2022, some additional 50 basis points in '23. So early '23 end of '24, the occupancy level will be back to the pre-pandemic one, meaning the vacancy was just 3% occupancy of 97%, which is quite physiologic. So some product mix can impact on the total figures, but not so much in terms of revenues. And anyway, this will be compensated for by inflation, the inflation growth, which we are expecting to grow in even a very prudential way, and we have -- did so in our 2022 budget. So as far as the drop in footfall, yes, it is true. There is still some work to be done there. Probably the business, which is suffering the most is restaurants and cafes. Indeed, we are opening up, and we have new contracts with many brands in the restaurants and cafes business. This is a business we still strongly believe in despite the strong drop, a double-digit drop in the business. So 2.7% is just an average. This is the June, October growth, and this compared to 2019. And indeed, restaurants and cafes are still lagging behind. We have to work on footfalls, on events. The rebound has been very strong. I was not expecting such a strong rebound myself. I have nothing else to add. In terms of asset valuation, well, the figures I shared with you start from stable valuations it's based on stable valuation. We are investing to improve our assets quality. We know we are aware of the interest rate risks. But this will have no impact on us at least this year. which means that in the short run, we are not expecting any major impact. But maybe Massimo, who is an expert in the area of evaluation should answer your question. Yes, bear with me, So, Roberto Zoia.

I will try and answer. I think that the main benefit we're going to have as far as forward inflation for '22, '23 and '24 as far as the forward-looking inflation, there will be very little impact on our valuations. For 2022, two main factors will be important. And these two factors are cost of debt, cost of money, which has an impact on the discount rate and the market trends. The transaction we performed during the second work quota was one of the very few retail transaction that has taken place. Now as far as CapEx, particularly for maintenance investments, well, these investments are not discounted for in the asset value. So when it comes to the loan-to-value forecast for the business plan, well, part of the CapEx are made using our own cash and part of them are not reflected in the after devaluation. So we decided that all maintenance CapEx are not discounted for by the independent appraisers.

[Operator Instructions] Next question is a follow-up by Simonetta Chiriotti with Mediobanca.

I take advantage then of this opportunity to ask for some more hints on your investment strategy in non-retail businesses. What do you have in mind? It's hard for me to conjure up. I don't know why you're going to invest in offices? Maybe there's something else something more special that you want to invest in rather than retail because retail, no one doesn't have a geographical connotation whilst other subsegments do. So what would be your ambitions in that respect if you manage to go ahead with it?

So before thinking about it. Well, I made a list of possible reinvestment options after the potential disposals. So first, we have to actually implement the disposals. And the Board of Directors gave us guidance as to having a very broad spectrum ahead of us when we think of investing, maybe investing in retail, but diversifying in other areas that are now growing. And we have, for instance, high street or the neighborhood stores, even though, of course, the fees are lower than ours and the funding rates -- with the funding rates that might end up being a very dangerous strategy because the range between cost of funding and actual yield could be very narrow. The differential, the spread could be very narrow. But if we want to stick to neighboring sectors or industries, that could be mixed-used assets. A French peer, for instance, has a number of projects on mixed-use assets, but the return on investment, the ROI, the ROI is medium to long term. And initially, it's hard to fulfill that. And the -- of course, the priority -- the first option would be stick to our industry, and that would be the preferred option probably because there are a number of investment opportunities in the market on good assets somehow, assets not to be disposed, so to say. There are more sellers than buyers. So it's the buyers who make the price in that case. They are still at a very, very early stage. All of these projects, we will have to implement the disposal first. It won't be easy, we want to sell and not to somehow sell off or sell at whatever price. And there are some -- for instance, there are investors, British investors, their fair experience in ICG. With ICG, we managed to complete the deal at book value. So we would like to mirror that very positive experience on the assets. We are thinking of disposing off the three stand-alone hypermarkets in Romania. So altogether, it's EUR 40 million for these three hypermarkets in Livorno. And then there are the three plots of land to be developed in Livorno. Once we get all the permits, it won't be difficult to find buyers and developers. There we're talking about EUR 20 million. So it won't be a big project. If we diversify, it's going to be very marginal compared to our total assets. So EUR 20 million is 1% of our total assets, which is about EUR 2.2 billion. So we will see. Let's wait and see. We are focused on this business plan. At the same time, we are focusing on disposals. Should disposal happen, we will see the best way to invest the proceeds if we'll be allowed to reinvest them or maybe one part will be used to further reduce the leverage because the bad leverage is getting higher and higher. We were told, you have to be at least 45%. Our Head of Finance who's constantly in touch with rating agencies telling me now you've got to go down to 40%. So they've set the bar higher, and it's now 40% LTV. In our business plan, we have a range between EUR 40 million and EUR 43 million, and that will have an impact on cost of funding, on the corporate rating. So it's not an abstract in the cater. It has a direct impact on our ability to raise funding over the next few years and do so at a competitive -- with competitive conditions at a competitive price. This year, we'll have the all-time low cost of funding, which is around 2.2%. It won't be the case in 2023. It will be [indiscernible] maybe not so much, but it will be higher than that.

Next question by Dario Michi, BNP Paribas Exane.

Good afternoon, and thank you for your presentation. I have a few questions. First one, what's the impact ...

Sorry, could you pick up because we can hardly hear you.

Well, I'm sorry, I had a few problems with my microphone and with my line. Can you hear me now? I'll try and speak up.

Much better now. Go ahead.

So I'm referring to Slide 46, where you show some of the elements that contributing to the annual average growth of the net rental income. What's the impact of inflation? And what's the expected impact on occupancy? Because if we extend the time horizon to '29, the net rental income is slightly higher, and this is a highly challenging target also if I compare it with the figures expressed by your competitors. Is also Officine Storiche contribution, included and what's the view you have on this project? Out of this EUR 60 million reserves that can be distributed over two years, is a part of it also included in the EUR 0.25 or EUR 0.30? And for last question, 2024, you mentioned EUR 0.5 per share with your FFO target. The payout ratio is 70%. Can you give us some reference for 2022 and 2023?

Dario, this is Raffaele Nardi, and good afternoon, everyone. I'll try and answer at least the first part of your question. Net rental income, what's in there? As you can see on Page 46 on the top box, most of this growth is due to Italy. And part of this recovery is the recoup of COVID direct impact. As then we said at the beginning of our presentation, in '20 and '21, different ways, either temp discounts, provisional discounts or reserves, provisions. We had a lot -- several millions of the COVID direct impacts. Starting from 2022, we think that those impacts will no longer be there. Of course, we wanted to be cautious in terms of discounts or temporary discounts that we might decide to grant to some tenants and some provisions, but nothing will compare to what happened in the two previous years. So that's the first brick of this recovery rule. As far as inflation is concerned, we looked at different research studies, different research groups. And based on the latest data, we think we have been quite prudent -- cautious. For 2022, we are considering a 1.5% inflation rate for Italy as well as in the coming years. Interest rates, of course, were almost down to zero in past years. And as you can also see in the last bullet point on Page 46, we've also considered some increase due to upside and temporary revenues and also some variable revenues, i.e., variables, new revenues coming from better sales from our tenants. The net rental income also includes Officine Storiche. This is in the third box, third green box, the last one, opening and remodeling. That's the effect of all of the investments we made in new projects and in the remodeling of our assets, i.e., remodeling of hypermarket and also Officine. Officine will be opened mid of next year.

As one missing answer on dividends, we assumed and made an estimate that goes above and beyond the mandatory distribution of 70% according to the SIIQ rules and regulations. The assumption also includes the EUR 16 million we mentioned before. We'll see when to distribute them, whether we'll distribute them in full or in part in 2022 for 2021 or maybe part on 2023 for 2022 because those are two years. And they have to be distributed within two years. So the assumptions are accretive in nature. '22 over '21 and '23 over '22. So the EUR 16 million worth of dividends will be distributed then. In the past too, we never just looked at the 70% distributable dividend. In 2019, we've already resolved upon EUR 0.50. But then it was cut to the minimum, EUR 0.228, that's the minimum distributable dividend for the SIIQ rules and regulations. It's Page 5 in the presentation, if you want to go back. With -- but then COVID happened, we have envisaged 50%, we normally round up instead of rounding down, but we have to change because of COVID.

[Operator Instructions] Mr. Albertini so far, there are no more questions in the queue.

Very well. Unless there are any other questions, we would like to say goodbye to all of you from IGD's headquarter for myself and the colleagues who are here with me. And we wish you happy holidays, Merry Christmas, and we'll meet you again next year. Have a nice evening. Goodbye.

This is the Chorus Call operator. The conference call has come to an end, and you may disconnect your phones. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]