LAMDA Development S.A. (LAMDA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Constantino, your Chorus Call operator. Welcome, and thank you for joining the LAMDA Development conference call and live webcast to present and discuss the first quarter 2025 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Apostolos Zafolias, Chief Strategy and IR. Mr. Zafolias, you may now proceed.

Thank you. Good evening, and thank you for joining us to discuss our first quarter results. The first quarter of 2025 was dominated by record-breaking results for our Malls as well as the Marinas. We also achieved significant commercial and construction progress at Ellinikon, which we will outline below. At a group level, we reported consolidated EBITDA of EUR 17.4 million. Our malls and marinas both registered new records. Retail EBITDA for the malls was EUR 23 million for the first quarter with our operating malls delivering the strongest first quarter in history across almost every performance metric following 3 years of solid growth. The solid performance of the malls business reflect LAMDA Development's leading position in the market based on the retailers' preference of our malls and our unique offering. Our goal is to create destinations and build experiences that make each moment special. It is achieved by the combination of a premium retail selection with experiences tailored for the whole family. Beyond a rich variety of food and beverage options, we also have integrated an aquarium, museum and children's entertainment spaces. The preference of our offering is reflected in the malls KPIs with another record of tenant sales at EUR 175 million for the first quarter, along with a 2% increase in footfall to 5.6 million visitors for the quarter. And we continue to grow. Utilizing our expertise to date, we're developing 2 more landmark destinations within the Ellinikon. The Ellinikon Mall, which will be the largest retail and entertainment experience in Greece at 100,000 GLA and the Riviera Galleria, the new lifestyle destination in the southern suburbs, which is part of the Agios Kosmas Marina. There, we see very strong demand already. We have agreed a hedge of terms of tenants for over 77% of the GLA at the Riviera Galleria, which will be the first development to be completed and 63% of the Ellinikon Mall's gross leasable area. We know that both are at higher levels as compared to our existing malls and demand for the remaining GLA exceeds available GLA for lease. Our marinas also registered a new record in both revenues and EBITDA. The latter having increased by 3% to EUR 4.7 million. Our Mega Yacht Marinas continue to operate at 100% occupancy, capitalizing on the strengthening tourism fundamentals in Greece. We note that renovations have already started in the Agios Kosmas Marina, that's part of the Ellinikon. The Marina is being redesigned to accommodate larger yachts while also significantly upgrading both the infrastructure and the service offering. In parallel, on the back of strong market fundamentals, in 2024, we announced the development of a new Mega Yacht Marina in Corfu, and an anticipated EUR 140 million investment to further strengthen our position in the space. Now we'll move on to the Ellinikon. The project is now well into its execution phase with demand for residential developments exceeding or continuing to exceed expectations. For the quarter, we realized a gross profit of EUR 8.4 million, which when you compare it to last year's figures was impacted by the timing of land plot sales, namely EUR 22 million of gross profit was recognized in Q1 of 2024 versus none really for this year. We do, however, anticipate to record approximately EUR 30 million of gross profit from land plot sales in the second quarter of 2025. Cash proceeds from property sales to date continue to rise and are now close to EUR 1.2 billion, and over half of those proceeds were collected in 2024. After selling out 100% of the Coastal Front developments, commercial success is ongoing for Little Athens where we have put out to market 560 units. And out of these, 84% has been sold or reserved. While the available units for sale in Little Athens have been limited in Q2 due to necessary redesigns of certain projects that were affected by a change in Greek building regulations, we expect absorption rates to rebound to previous levels towards the end of the year of the third quarter rather as these projects, these new projects are being gradually launched into the market. Construction is progressing on both the residential and infrastructure fronts despite the very challenging conditions in the construction market due to the high demand for both public and private sector projects as well as a very tight broader labor market. More specifically, while the Riviera Tower and some of the infrastructure projects are still our biggest challenges, construction across our Little Athens residential development is progressing according to schedule. And specifically, the developments undertaken by our internal construction business unit, we name it CBU are progressing ahead of schedule. During 2024, we also completed land plot sales to third parties, including 80,000 square meters sold for residential development. And as per usual, I highlight that the -- we're going to assume price of EUR 2,250 per square meter for the 1 million remaining available GFA for residential developments. That represents about EUR 1.5 billion or over EUR 8 per share of additional value that is not reflected on our balance sheet given that those residential plots are on the balance sheet at cost. Lastly, I mentioned that during 2024, Ellinikon's cash balance increased by EUR 161 million, while no bank loans were utilized for yet another year. Furthermore, our cash balance at the end of this quarter was over EUR 650 million, highlighting the strength of our balance sheet. I will now pass the call to Chara Goritsas, Group CFO, who will walk you through the important highlights of the financial results.

Thank you, Apostolos. And on my end, let me also thank everyone for attending today's results presentation. My presentation will begin with a discussion of the key highlights of the group's 3 main business segments, followed by the most important features at consolidated group level. So starting with the LAMDA Malls, the 4 operating malls broke new records for yet another period. The key highlights of their 2025 performance are in a record -- a new record of retail EBITDA before valuations at EUR 22.7 million, driven by increase in both net base rents and other revenues, mainly parking income. All key leading performance indicators, namely tenant sales, average spending per visitor and footfall increased. To highlight our exceptional leasing efforts, the mall's average occupancy rates remained unchanged to almost 100% while the occupancy rate of our new asset, the designer outlet has increased by some 4 percentage points, reaching almost 100% and in line with the other 3 operating malls. Moreover, during the first 3 months of 2025, we signed new contracts and renew existing ones with tenants in all our 4 operating malls, which are expected to generate an annualized base rent income uplift of 10% going forward. For those reasons, we continue to believe that in the context of an undersupplied market and the undisrupted strong financial performance of our operating malls, those assets are very conservatively valued relative to our peers in Spain and Italy. For a detailed analysis on the LAMDA Malls Group financial results, please refer to Slide 15 to 19 as well as on Slide 34 to 38 in the appendix of our results presentation. Moving now to our Marinas, their performance confirms for yet another period, very steady growth trajectory, breaking new records in the first 3 months of 2025 both in total revenues, delivering 10% increase and in EBITDA, generating a 3% growth versus same quarter 2024. Both Flisvos and Agios Kosmas continue to register maximum occupancy in the permanent berths, reflect our customers' strong preference for those 2 Mega Yacht Marinas while their strategic position on the Affinion Riviera enables them to benefit from Yacht's transit a fast-growing segment of the market. For the details on Marina's financial performance, please refer to Slide 20 on the results presentation. Turning now to the landmark Ellinikon project. The most important achievements to date are the following. As a result of our commercial success that also Apostolos mentioned, the cumulative total cash proceeds from property sales since the beginning of the project and until mid-May 2025 have reached almost EUR 1.2 billion, with cash collections just in Q1 2025, reaching almost EUR 100 million. Details on this, the Ellinikon cash collections can be found on Slide 23 of the results presentation. Moreover, and to highlight the strength of Ellinikon commercial success, let me point out that total cash balance of Ellinikon amounted to EUR 290 million on March 31, 2025. For yet another period, no bank loans have been utilized despite the committed credit lines of EUR 250 million. Thus, this cash reserve enables us to continue self-funding the progress of our works. Looking into the financial limits of the construction progress in the Ellinikon, the total CapEx for building and infrastructure works jumped 76% year-on-year to EUR 81 million in Q1 2025, bringing the cumulative total CapEx from projects starts and until end March 2025 to EUR 644 million. Retail related to the Ellinikon infrastructure works and building CapEx can be found on Slide 24 of the results presentation. Turning now to the Ellinikon income statement performance highlights. Let me point out that last year's Q1 results included EUR 56 million worth of revenue from property sales related to Cove Villas and the Mixed-Use Tower. While in current year, Q1 results, no revenues have been recognized from property sales. Nevertheless, we anticipate to recognize in Q2 2025, some EUR 38 million of revenue and almost EUR 30 million of EBITDA related to third-parties land plot sales. Focus on the Ellinikon residential-related revenues, Q1 2025 show a 116% increase versus Q1 2024 to EUR 66 million. This increase clearly reflects the investor development significant contribution. Work highlighting as well, the growing revenue contribution from the Little Athens residential, which registered a 40% increase versus Q4 2024. Finally, and in the context of the all-important issue of the timing impact between actual cash collections and P&L revenue recognition, the deferred revenue, which is practically cash collections, not yet recognized as P&L revenue based on construction milestones reached EUR 291 million at the end of March 2025 and it is booked in our balance sheet other payables. This will benefit the P&L gradually in the coming months. Details on the Ellinikon P&L can be found on Slide 25 on the results presentation. And now moving to the group level let me highlight the following. Group consolidated EBITDA before valuations in Q1 2025 reached EUR 12.5 million, adversely impacted by the aforesaid absence due to phasing of revenue from property sales in the Ellinikon. Due to this reason, group consolidated net result in the first quarter registered an EUR 11 million loss versus a marginally profitable first quarter last year. Details related to the EBITDA and net profitability breakdown can be found on Slides 8 to 10 of the results presentation. Group total cash amounted to EUR 652 million versus EUR 679 million at the end of 2024, with a EUR 27 million reduction driven by the anticipated CapEx spend as already commented. Finally, net asset value remained above the EUR 1.4 billion mark or equivalent to EUR 8.22 per share. Zooming in the breakdown of the net asset value seen on Slide 13 of the results presentation, LAMDA Malls NAV is approaching the EUR 1.1 billion mark accounting for more than 70% of group's NAV. The Ellinikon project NAV on the other side is almost EUR 350 million, accounting for about 1/4 of the group NAV. I will once again point out our strong belief that the Ellinikon project NAV according to IFRS rules currently reflects only the land acquisition cost and the relevant infrastructure investment for the residential projects. Thus clearly understates the substantial hidden value from the commercialization of both the Coastal Front and the Little Athens residential projects as well as the true market value of our land plots. A tangible example of this hidden value is the fact that specific land plots were sold recently at over 3x the book value. Concluding, I would mention that our strong belief that the current group's market share price clearly underestimates the significant growth and value potential for both the Ellinikon and LAMDA Malls. And with that, I want to thank you for joining our today's call, and we can open the floor to questions.

[Operator Instructions] The first question comes from the line of Natalia Svyrou Svyriadi with Eurobank Equities.

I was wondering if you could give us an update a bit on the timetable of the projects and how they are being formed given the delays you said in the building -- in some of the buildings from the building permit changes. And if you could tell us, which projects the internal construction unit you have, the CBU has undertaken and probably I assume that you are looking for your units to take more construction -- undertake more construction there. So what are your thoughts around this? And then I have a question on the gross margins of the residential projects that you have already booked. You said that coastal projects are 100% given out, so maybe you could give us a range on the gross margins there?

Okay. Natalia, I think I caught all of that. Your first question was in regards to time lines, I believe. To answer that question, basically, the residential developments are going to start being completed at the end of 2026 into 2027, and they're going to basically start being delivering '27 and '28. That's going to be a rolling basis from now onwards as we have more projects that are launching over time. Similarly, slightly different question, I think you asked about the projects that were -- whose launch was delayed. So those were 3 projects, I believe, that were planned to launch in May and June, respectively, of this year. Unfortunately, with the changes in the NOC building regulation, we basically had to go back to the drawing board and redesign those. So we do expect a 3- to 4-month delay in the launches. And also, that goes to partially explain the velocity, I suppose, of growth rate of residential sales, the absorption sale of residential units. Could you remind me the other -- there were 2 more questions, I think.

Yes. The one is which projects have you undertaken with the internal construction unit for the CBU from these projects that we are discussing? And are you seeking to do this for the rest of the residential projects also?

So there are 4 of the projects that are undertaken with the CBU, Promenade Heights is one of them. I believe that there are 3 more in Little Athens. We haven't displayed on Page 40, specifically in the presentation.

Okay. Great. That's very helpful. Do you have better margins from these -- from the ones that you construct by yourself? Is it safe to assume something like that or no, because prices are higher?

No. I think what I'll say -- well, I think you bring up 2 very good points. First of all, prices have been higher versus our initial estimates. So before our sort of more recent update on the investor presentation, we had announced 7,600 per square meter per GFA for Little Athens, our most -- our latest update, which was in May, that number increased to a little bit over 8,500 per square meter. And I think the other thing that's very important to note out is that the profitability and the gross margins of the remaining -- of all of the Little Athens units for that matter are significantly higher than those of the Coastal Front. And just indicatively, we had showed a slide in the investor presentation, basically, they range from 36% to 44% after accounting for obviously commissions and then cost of goods sold, but before Land & Infra. Hope that answered it?

Okay. Yes, that's very great. That's before Land & Infra you said. That's very clear. If I may, one more, just -- I don't know if you can say -- you said there are no bank loans have been utilized up until now for the residential project. Do you believe that this will change, not for the malls, I know that for the malls that you are in discussions and probably as you're starting to construct, we will see more loans for the malls there. But what is happening from the rest of the projects? Do you believe that the cash proceeds are quite good enough?

Yes. Natalia, let me take that question. We mentioned also our strong cash position, EUR 650 million as we speak. And if we see a little bit also the trajectory of what we have in 2025 ahead of us, I cannot write in stone what I'm going to say, but we feel comfortable, Natalia, that we will not raise any funding also in 2025, which will be a great result. So the aim is to continue also for this year after now that 1 quarter has passed, not touching the approved credit line.

Okay. Great. That's very, very nice to know. Obviously, you can see that the cash proceeds are building up. And with the deferred revenues, I think it's pretty clear.

The next question comes from the line of Murphy Andy with Edison Investment Research.

Andy Murphy at Edison. Just a couple of questions. Just going on to the malls, are you suggesting with the base rent footfalls, tenant sales pushing up comfortably that the offset was just that tax timing issue. In other words, if the tax timing had been the same as last year, i.e. the charges in Q2, we would have seen a more normalized growth in the EBITDA. That's the first question. And just the second -- just a follow-up on the previous question of the sales trends at Little Athens. You said in the past 5% to 10% achieved sales per meter, I think as a figure you quoted, 8,500 probably implies around 12%. So are you basically saying that demand is strong and prices -- sales prices there are continuing to edge up?

Thanks, Andy. So to address the first one. Yes, in regards to the malls EBITDA, there was basically EUR 2.9 million of fees and it's ENFIA, it's basically property taxes that last year were paid in Q4 versus this year being paid in Q1. So -- sorry, Q2 last year versus Q1 this year. So yes, it's really just a timing thing. You're going to get the benefit of that next quarter. And if you were to, I guess, adjust for it in this quarter, you would have a much -- a stronger performance. I haven't done the number, but I would guess around 4% year-over-year growth. And then as far as Little Athens, I think you were asking about the prices. So yes, we had about EUR 1,000 increase versus our last estimate that we have seen through May. And I think that the sort of silver lining of the fact that we had to redesign some of the Little Athens projects to be launched, basically means that we have a little bit more time to optimize the pricing of the remaining units as we get more inventory on the sell onwards. So we do expect -- we are seeing strong pricing. And at least for the short term, we could have a further spike.

[Operator Instructions] The next question comes from the line of [ Sorokin Sergei with Pace Invest ].

I'd like to ask on the previous same event, you told that you have ongoing tender for the residential land plots. I want to check what's the progress on this one? And the second question is what's your plan regarding the mixed-use area, most all -- both questions are regarding Ellinikon projects.

Thank you for your question. In terms of the residential land plots, we had announced that we were going to do something in the first half of 2025 and these are ongoing. In regards to the mixed-use area, I'm not quite sure if -- what the question is, but it's basically an ongoing strategic discussion on how that's going to be developed. I don't think I have anything more specific to report on that.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. The conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good evening.