NSI N.V. (NSI) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining, and welcome to our 2026 half year results analyst call. Today, our CFO and Co-CEO, Elke Snijder, will comment on the result presentation published on our website this morning. At the end of the call, you will have the opportunity to ask questions. For now, I would like to hand over to Elke.

Good morning, everyone. So happy to have you all here on the webcast this morning, and it is my pleasure to guide you through the slides. Before we get into the half year results, I want to point, actually, your attention to the picture we included here on the front page as this is the view from Noon, formerly Vitrum, where a couple of weeks ago, we hosted an event for brokers to get a feel for the location and atmosphere despite it being a full-on construction site as Dura Vermeer has commenced there with the construction. All right. Now let's move into the presentation. The highlights of the first half of 2026. As mentioned, we started construction at the Noon site, and we are also progressing the plans with respect to Glass House to the stage that we can say that we are preparing a major repositioning of the asset once KPN leaves the building in Q1 2027. Of course, we also want to update you on leasing, our #1 priority for the year, and we'll have a lot of information on that later on in the presentation. We also announced on June 12 that we decided to discontinue the Well House development, quite painful for the organization and all involved from municipality, architect to construction company. But unfortunately, it has become evident after an extensive feasibility study that the project just was not viable for NSI. The higher construction costs just outpaced the improving rental prospects. Okay. Lastly, we are announcing a 5% share buyback. This is an attractive capital allocation given the current discount to NAV. It delivers immediate shareholder value while preserving capacity for Noon, Glass House and leaves some flexibility beyond that to benefit from commercial opportunities. Not on the sheet, but something I want to address that on May 22, we announced that Bernd Stahli will step down as CEO after 10 years with the company. Bernd and the Supervisory Board concluded that this is the right moment to begin a new chapter of leadership for NSI. An executive search firm has been engaged to lead the search for his successor. During the transition, Bernd will continue to focus on matters that are currently at play, while I will serve as interim Co-CEO next to my CFO duties and focus on the next phase of NSI's development. I am grateful that Bernd will remain with the company during this period, and I highly value his experience, guidance and support. All right. This is an overview slide for you with the KPIs, and it highlights immediately why we will talk about vacancies a lot later in this presentation, showing a near double vacancy rate versus H1 2025. Also noticeable is the negative change in like-for-like net rents on the right top side graph, which is driven by vacancy, and that is mostly the impact of Newtonweg in Leiden and Vivaldi II in Amsterdam. Moving on to portfolio performance. This is a familiar map for you, and it shows you where our 41 assets are. More than half are located in Amsterdam, and you see that we don't have any more assets in Eindhoven and also Hoofddorp, which we exited over the last year. Moving on to the next slide, a bit more on our portfolio optimization. We continued our asset rotation plans in early '26 and sold our one remaining asset in Eindhoven, Hooghuisstraat. And as you can see, we tend to sell our assets above book value. We are now focusing possible disposals on assets that are less fitting for our portfolio and what we want to deliver to tenants. An LOI has been signed for our assets at the Arlandaweg, which is currently a school in the Sloterdijk area. This location has, like several other assets in our portfolio, residential potential, and therefore, an LOI has been signed at an attractive price above book. All right. Now some more deep dives into our vacancy. Just to remind you what happened in our portfolio. The first bump that you can see from '24 to '25 is due to Vivaldi II, which was returned to us in the fall of '25, after which we started renovating the ground floor for less than EUR 1 million in CapEx and prepared the building to be let out, both flexibly and conventionally. The second step-up that you see from '25 to '26 Q1 is due to Newtonweg in Leiden as the single tenant moves to a newer asset in the area. Over the past quarter, so from Q1 to Q2, we have seen improvements. Some further attention is needed for Vivaldi II, however. Pickup there is slower than envisioned as it currently stands in the actuals at 11% occupancy. The pickup has been delayed as there were issues with getting all the materials delivered for the ground floor refurb, but that is now finalized. And you can imagine if the ground floor doesn't look very nice, it's harder to get tenants enthusiastic about the building. Flexspace as of now is doing quite okay in leasing, but that is all small floor plates. And in such a large building, then you need a lot of those smaller tenants to further support the leasing of the conventional space and also possibly some larger floor spaces, 2 additional brokers have been engaged recently, and we see traction from that right away as well. We did have to downgrade our assumption for leasing by the end of the year. We were aiming for 75% plus, but we have to be realistic, and we now guide 40%, hopefully plus. Now let me elaborate on the coming slides on some of the positives that we see happening in our leasing. Okay. Early renewals, as you can see here, we are proactively addressing the assets with single tenants and have early renewals at these 3 assets, all into the next decade. So Veerhaven in Rotterdam and Archimedesweg6 and 30 in Leiden. Also on the next slide, you can see is that we can relet space when we get it back in a quick turnaround. Some of our tenants, due to circumstances, want to resize. And at Trivium in Amsterdam, we had such a case just this year. And within a short time frame of 6 months, we were able to relet the substantial space we got back to a great new tenant. So there you can see, we got it back, re-leased it and are back to 100% occupancy at the building in the next quarter. That's how we generally like it. On to the next slide, of course, I want to tell you a little bit more about Rotterdam Alexander. As in February, we opened this asset after a large refurbishment. And we told you last time that conventional space is leasing up nicely, but also our flexible offices are doing well with nearly 70% let within 4 months. The number on the sheet also underpins why we like flex offices as contracted rent stands at 2.3x the rent of conventional space, which has been in our experience in the HNK locations. So that is good news. Now moving to our projects that obviously are supportive of future leasing prospects. First of all, Noon. At Noon, as mentioned, construction has started, and we have a total cost of about EUR 89 million, including entry value and capitalized interest. Total CapEx that we have remaining is a bit over EUR 50 million, which for the most part is the cost of the construction. And we'd like to keep you updated on this down the line as well. Now of course, a nice visual on the next slide, a render of what the building will look like, and I cannot wait to actually step into it because it's going to look amazing if you ask me. On the following slide, something else that is going to look amazing, Glass House. As announced, KPN is set to leave the building. This was to happen by December 1 this year, but they will now stay for another 2 to 3 months, after which they will vacate the building. Over the past period, the team has worked very hard to come up with the most optimal repositioning. Our conclusion is that we're going to make something special, reposition as the top asset of Sloterdijk with quality services and sustainability matching the location in excellence. Investments will not be dissimilar per square meter to what we did at Rotterdam Alexander. However, without overdoing or making a South Axis product that just does not fit the area. As to the investment, you have to be mindful that a significant part of the money goes into renewal of technical installations and white boxing and the renewal of technical installations would have been necessary after the 20-odd years KPN has occupied the building regardless. The rest of the investment is used to boost the experience for the tenants and make the assets stand out. Think of a covered atrium, connecting bridges and a third entrance. Okay. Now moving to the balance sheet, portfolio valuations. Overall, for the half year, 2.6% negative. Half of this is attributable to the revaluation of Glass House that got another downward adjustment. We mapped it out for you on the right side of the slide, and you can just see it right there. Partially, this downgrade of Glass House was due to the lease expiry with KPN coming closer, but also due to the appraiser having refined its view on the CapEx requirements. The following slide, we also showed you the previous time around to take a closer look at our valuations. And what we illustrate is the development of both market rent, ERV and asset valuations for our like-for-like portfolio using 2020 as the base year. Over a longer period, you would generally expect that if anticipated rental income increases, the corresponding asset values would rise as well. However, the chart shows a disconnect over this time frame. While ERV has increased by over 20% across our like-for-like portfolio, valuations have declined by 19% over the same period. The gap has widened further versus half a year ago. All right, briefly show you the next slide. On this sheet, it shows that GRI growth outpaces inflation for us. And on the bottom right, that new lease rentals are outpacing ERV by circa 15% in H1 '25 (sic) [ H1 '26 ]. You can see that we're actually doing quite well versus ERV every time we sign a new lease generally. But moving on to sustainability as one of our key strategic pillars, remains an area where we are truly committed, and we continue to be committed as a leader in the sector. We assess our progress across multiple indicators, as you know, giving a well-rounded view of our performance. In short, summary is that, we are happy about our progress, but do see that the incremental improvement on CRREM, which is on the left, which we generally take as our main target, ahead us are looking at improvement in kilowatt hour per square meter per year are getting harder. It requires both investing in the technical performance of the buildings, which we are continuously doing, but also supporting the tenants in adopting more energy-conscious behavior. Okay. Bear with me. We're going to step into the financials now. First slide, familiar slide for you. It shows the bridge from GRI to NRI to EPRA earnings. And a few points stand out. Gross rental dropped significantly as the portfolio is smaller with the disposals and vacancy is higher due to Newtonweg and Vivaldi II primarily. Service cost recharge -- not recharge increased. This is logical as when you have higher vacancy, it means that a larger share of these costs cannot be passed on to tenants. You can also see that OpEx is in check. Admin as well, the increase that is shown is driven by the accrual we had to take considering the CEO transition. Okay. Now 2 bridges for you. The first one, looking at EPRA earnings per share. It bridges H1 '25 to H1 '26. From left to right, let's talk about the big chunks. Negative impact of disposals consist of a full year impact of the '25 disposals, namely Beukenhaven and Hoofddorp for October, Kennedyplein in Eindhoven for December and the impact of disposal of Hooghuisstraat in January '26, also in Eindhoven. GRI like-for-like looks a bit ugly, I have to say, but that is the impact of vacancy that's really outpaced indexation. We like to see a plus here because that is then the indexation. But now with the vacancy drop, that's a negative. As said, service cost not recharge increased due to higher vacancy and OpEx a little bit lower and admin a bit higher due to the CEO transition. Next bridge, EPRA NTA per share. There we go, the net tangible asset value per share from H1 '25 to H1 '26. Going again from left to right, you can see the '25 final dividends that we paid out there of EUR 0.83. We paid that out in the first half of '26. I just explained the EUR 0.79 EPRA earnings per share. Impact of the revaluation comes down to EUR 1.34. Sold Eindhoven asset in '26, Hooghuisstraat was sold above book value, hence, the result on sales. And other is the impact of the discontinuation of Well House that overall led to an indirect cost of close to EUR 10 million. Okay. Now 2 more sheets on the balance sheet. Also a familiar view for you. On the left side of the slide, you see the loan maturity profile, very well-staggered schedule, no refinancing needs until '28. We did lots of refinancing last year. And it also highlights that we still have substantial capacity available on our RCF. With the completion of the new private placement with MetLife in January that replaced the Pricoa PP, we have extended our average debt maturity. As you can see from 3.6 to 4.2 now. Lastly, on the financials, the balance sheet KPIs. On the left, you can see that our cost of debt has increased slightly due to the new private placement with MetLife. Obviously, that was priced in a very different base rate environment than the Pricoa private placement that expired in January. LTV shown on the top right, remains comfortably low, well within the bank covenant threshold of 60% and well within our internal guidance range that we like to look at through the cycle. Okay. Last slide for you. And then, of course, we'll open up for questions. I'm going to talk about the outlook. Outlook '26 for the remainder of the year, focus remains on leasing, our top 1 priority. We did have to lower expectations for Vivaldi II this year, but are confident the asset will perform. It just needs some more time. Noon and Glass House are large projects with Noon in execution and Glass House in finalization of the plans. For Glass House, I cannot wait to show you the final renders. The draft renders look amazing. I'm looking forward to showing you what the plans are once they are final and once we are closer to contracting a construction company. We also have somewhat smaller projects in execution to update the HNK experience. At Houthavens, we are close to done with the investment. We did a large refurbishment mainly of the entrance in the central areas, but also new meeting rooms there. It's amazing. It just looks good. And at HNK Utrecht Central Station, we have started with an upgrade of the central areas and should deliver late this year. That is actually a high-performing HNK location for us. And as we want to keep it that way, we continue to invest. We maintain an interim dividend of EUR 0.75 per share. And as noted, we will also execute a share buyback of up to 5% of total outstanding shares before the end of Q1 '27. Due to the slower leasing progress on Vivaldi II, and we noted that on the right-hand side of this slide and the one-off accrual for the CEO transition, we lowered our EPRA EPS guidance to EUR 1.80 to EUR 1.90 per share from the previous EUR 1.90 to EUR 2.05. Okay. So I think that concludes what I wanted to share with you on the slides, and I'm handing it back.

[Operating Instructions] We're going to take first question on audio line, and it comes from the line of Alex Kolsteren from Van Lanschot Kempen.

Can you hear me?

Yes.

A couple of questions. First, on the CEO transition accrual, sort of circa EUR 600,000 in H1. Is that it? Or should I annualize that number to EUR 1 million plus?

So for me, it's easiest to just answer your questions right ahead instead of you asking first all of them and then I have to remember. The accrual that we've taken is in line with the Dutch Corporate Governance Code, the amount that will be passed on to our CEO, but it also includes a small amount already for the search. It is not unfortunately for free to engage an external search headhunter for a CEO of a listed company. And we will see some other costs related to the search coming in, in later quarters, probably all in Q3, but it sort of depends on how the search will progress. So those will be picked up in our actuals, probably all in Q3.

Okay. And is there an option to count as a nonrecurring expense and exclude the EPRA earnings?

Under EPRA, we just generally just like to show you what our true expenses are, but it is most definitely a one-off.

Okay. All right. And then 2 more questions. So on the early renewed leases, job well done in a difficult market. But one asset, I think that still has a near-term lease maturity is Uniceflaan in Utrecht. I believe the KVK is a tenant. Are similar talks going on there to extend that lease? And the other question on Newtonweg. So difficult to lease it up in the current status. If you sell, I assume there has to be a change of zoning for that asset. How is talks with the municipality going there?

Yes. Okay, let me move into that. Uniceflaan, our asset in Utrecht, those talks are ongoing. So no further update there. Newtonweg, actually, I would have loved to be able to tell you that we had a great sale there. We actually had a conditional sales agreement, but the condition was a change in zoning. We test-drived it with the municipality as the buyer was interested in converting it. But unfortunately, we did not have a positive attitude of the municipality towards a change in zoning. So at least we test-drived it and now we know for sure that's not happening in the short term. So there, we have to explore other options. Of course, preferred option for now is to lease it up because then we make money on the asset again. But we always look at Plan B and Plan B is see whether we can monetize it through a sale.

Maybe one last then, speaking of Plan B. So Vivaldi II is a bit slower in terms of leasing. Does it change your view on the CapEx plan that's in place in the building?

No. Well, leasing has taken longer than expected, but there was also -- we understand the refurbishment of the ground floor has taken longer than we had hoped for, very simply put because there was a delay in getting the materials delivered. We live in a little bit in a crazier world sometimes than we like to. Occupancy is a bit disappointing currently at 11%. That's why I think we also had to be more realistic in our forecast and downgraded it to 40% by year-end. We did strengthen the leasing team by appointing additional brokers for conventional space. We are happy even though it's only 11% that we're looking at, but the rental levels remain in line with our expectations. We're not pursuing occupancy at any price. And if leasing is slower, and it is slower now than we'd like it to be, but we're going to give it another couple of months to really see if we can boost the pickup, but the impact would mainly be timing rather than our long-term view of the assets. Does that answer your question?

Yes, perfect.

And the next question comes from the line of Michiel Vereycken from ING.

So 2 questions. First one, you disposed an asset for redevelopment into residential. Could you specify in bit more detail how many assets or what percentage of the portfolio could be suited for redevelopment into residential? I believe it's mainly focused in the Southeast Amsterdam area. Is that correct?

Yes. We have 2 assets here in the Southeast area that we think the longer-term use would be much more logical as residential. And we have one asset furthermore in Amsterdam. That is actually currently already being used as student housing that could be up for a more elaborate conversion to residential as well. And of course, the asset that we sold in -- or at least where we have a letter of intent was also residential potential. And that's also the reason why we were able to sign an LOI well above book because that residential potential is in there. But I think there is the potential in the portfolio that we're looking at.

Okay. Great. Very clear. And then last question, given the pressure that you have on EPS, could you maybe remind us of your dividend policy?

Yes. Because we are an FBI, which is in Dutch Fiscale Beleggingsinstelling, we have to remain an FBI, we have to give out 100% of our fiscal result. As a policy, we hand out 75% of our EPRA earnings. And that's a minimum, just to be clear.