One United Properties SA (ONE) Earnings Call Transcript & Summary

Good morning, and welcome to One United Properties conference call for presenting the preliminary 2025 results. My name is Zuzanna Kurek, and I'm Investor Relations Manager at One United Properties, and I am joined in this call by Victor Capitanu, Executive Board member and Co-Founder of One United Properties; and Cosmin Samoila, CFO at One United Properties. Before we begin, I would like to mention that this call is being recorded and that the recording will be uploaded on our website later today. As stated in the call invite by joining the video conference you automatically and implicitly consented to being recorded. If you do not consent to being recorded, please leave the call. In terms of organizational aspects, let me present to you the setup of the call. Firstly, we will share the financial and operational highlights from 2025, which will be presented by our co-founder, Victor Capitanu; CFO, Cosmin Samoila; as well as myself. During the presentation, feel free to type any of the questions you might have in the chat window, and we'll answer them during the Q&A. After the presentation is over, we will start the Q&A session. [Operator Instructions] I will be moderating the session, and therefore, for the sake of those who will be watching the replay of this teleconference, I will be reading all the questions out loud before addressing them. Your questions today will be answered by Victor Capitanu, Cosmin Samoila or myself. Please note that today's presentation is focusing only on the preliminary 2025 results, and therefore, we will not be answering any questions related to our 2026 budget or annual targets. Consequently, we kindly ask you to refrain from putting such questions forward during the call. We can, however, address general questions related to trends or structural changes to the market, including legislative changes and their impact on our business. Just as a note, One United Properties will publish the 2026 budget via current report later this month around March 27, ahead of our General Meeting of Shareholders scheduled for April 29. I would like to mention that we might be making, nonetheless, forward-looking statements today during this call regarding future performance of One United Properties, and that the actual results may differ materially. We encourage you to review the disclaimer that we have included in the presentation, which you can see now on the screen. This disclaimer applies equally to all the statements made in today's call. Thank you all for your patience. And I would like to now kick off this call and invite Victor Capitanu to share with you the key highlights of One United Properties performance in 2025. Victor?

Good morning, and welcome to our results call for 2025. As you can see, we had turnover in 2025 similar to 2024. But we managed this year to be -- to improve the discipline and to improve a bit on the costs, and we managed to increase our profitability from the sales of apartments from residential property by 10% to RON 363 million. Also, we managed to improve the overall profitability of the company by 19%, the operational profitability to RON 572 million. And gross profit before tax, we managed to increase by 18% to RON 509 million, which is a bit over EUR 100 million, which, by the way, is the first year in which we managed to increase our profit in the last 3 years. The last 2 years the profit has been slightly declining, and this is the first year in the last 3 years that we finally managed to start increasing our yearly profitability. I wanted to break down here the -- our segments a bit more, just to understand the scale that we are delivering this year. So basically, if you look to the residential segment, I broke down whatever we have under construction to see that most of it is delivered this year. So this year, we delivered residential units with more than EUR 1 billion gross development value. This is around 2,800 units, more or less as much as we delivered in the last 13 years combined. And of course, estimated margin for this yearly delivery is EUR 358 million, around 35% margin. Some of it we recognized already, but a good part of it will be recognized this year and next year. We have also some delivery under construction, some residential units under construction that will be delivered post 2026, but also this year, we'll start a number of -- we estimate around 5 new construction sites. In 2024 and 2025, we only started one new construction site. So this year, we want to ramp up starting new construction sites. So although the number of units under construction will decrease by the end of this year, many others will come and will be under construction by the end of 2026. As you see, we have quite a good pipeline on the planning phase, EUR 2.3 billion in gross development value and more than 10,000 units. And just to have a dimension, we put also the estimated gross margin that we plan to make on this pipeline, more than EUR 800 million. So a part of it, we will start this year. So on the residential, as you see, the position is very, very strong. Also on the investment property, we cannot complain about it. This year, we delivered 3 new rental -- 3 new income-generating properties. We have Infineon Technologies. It's the headquarter of Infineon, the German chip manufacturer. We have One Gallery, which is the former Ford factory, the first in Central Eastern Europe, which is also being delivered this year. And we have also the Mondrian Hotel. So we expect by the end of this year to reach 200,000 square meters in gross leasable area for investment property segment and with a value in the range of EUR 700 million. Also, our pipeline is strong. We have a few other properties that we plan to start building and deliver over the next years. We will do this based on how fast we can sign lease agreements. So we don't intend to build investment properties speculatively. We will grow this segment as we find the tenants and long-term leases to secure our investments. So as you know, we don't -- we are not really found of building speculatively. So we will take it -- as the demand will hold, we will develop this pipeline. Also, we are now present in a few other locations in Bucharest. As you know, we had an effort since we listed our company to expand our operations outside Bucharest in Romania but also outside Romania. This effort took some time, but it seems this year, it finally pays off. And we managed to secure locations in -- besides Bucharest Ilfov that we are -- it's, let's say, our main market, we managed to secure more locations in Sibiu and Constanta and we will start developing them. And we also estimate that we will secure locations in Iasi and Poiana Brasov during 2026. And we are looking very actively to the main cities of the country. But how we plan to expand, we are looking for very good locations. We are looking very reliable landowner partner. And we are not looking to invest equity in these locations. The target is to find good land, good partner and to leverage our brand and our track record in order to create value in those locations. So our plan is to invest minimal equity, but to -- nevertheless, to expand in some major cities around the country. In parallel, because we speak about expansion, it's good to know that we are very actively looking to develop also outside the country. And we've been saying this for 5 years. Hopefully, maybe this year, we manage to start also an operation outside Romania. Thank you very much, and I will ask my colleague, Cosmin, to walk you in detail through the financial results.

Thank you, Victor. Good morning, everyone, and thank you for participating to our call. Related to the financials, turnover mostly similar as last year. And in the turnover, we have included revenues from apartment sales of RON 1.73 million. Rental and tenant service revenues, RON 164.6 million. Gains from fair value adjustment, RON 166 million and also other operating income. As a result, gross profit reached RON 509.3 million, 18% increase compared to previous year. And the net profit reached RON 425.8 million, a 14% increase compared to 2024 and also, very important, 8% over the budgeted net profit. Related to the residential segment. The revenues from residential decreased with 6% to RON 1.73 billion. And this is a reflection of the sales mix that we have properties in advanced stage of construction, but also some properties in the first part of the construction stages. Also, due to this, many developments nearing completion, the net income from residential property increased with 10% to RON 363.5 million. And the fact that the construction in most of the properties is advancing resulted in the fact that the residential net margin segment improved to 33.9% in 2025 compared to 28.9% that was recorded in 2024. And this value reflects our minimum target in terms of margin, 35%. Related to the commercial segment. The rental income increased with 9%, reaching RON 164.6 million. This moderate increase, it's a reflection of the fact that the portfolio is stabilized. Lease rate, it's close to maximum, 97%; and 90% of the tenants have already moved in. Net rental income had a 5% increase to RON 107.6 million. Related to expenses. The administrative expenses have decreased this year, 13%, to RON 64.4 million. This decline is due to what we announced beginning of last year and during the year that we had the cost optimization program across the whole group. Other operating expenses also decreased 14% to RON 15.6 million. But out of this, we have some sponsorships also that are deducted from the profit tax. And the result from operating activity totaled RON 552.9 million, reflecting a 19% increase compared to the previous year. This increase is supported by the increase in net income from residential property, increase in net rental income and also the increase in gains from fair value adjustments. Related to the cash position, we ended the year with RON 655 million, 52% increase in the cash position compared to the previous year. This is a historical highest cash position of the company. And also the loan-to-value was 36%, a slight increase compared to previous periods. But this reflects the use of debt to fund the expansion of the development in the residential sector and also the assets in the income-generating portfolio. Nevertheless, this LTV is still in the low range compared to other listed European real estate developers. And of course, this will ensure for the future also efficient capital allocation and financial flexibility for our future developments. Net debt was RON 895.3 million, only 14% from total assets. Total assets reached RON 6.6 billion at the end of December. Related to the cash inflows. As of 31 December, we have cash inflows from contracts already signed with residential clients totaling RON 353 million to cash in by 2028, EUR 179 million in 2026, EUR 120.6 million in 2027 and EUR 54.2 million in 2028. And only in 2025, we collected EUR 152.4 million. As mentioned, these amounts are all for units that are already presold and we have presale agreement signed with clients covering all these amounts. And also, you see the evolution in the last years starting 2021. Thank you, and I pass to my colleagues, Zuzanna, to continue with the business updates.

Thank you very much, Cosmin. I have just 3 slides on the detailed evolution of our sales team performance. So as we have seen also throughout 2025, the residential sales and presales and the total surface sold and presold has decreased. However, that was part of the intentional strategy of the company to focus on selling the units in developments that are -- that were under construction in the course of 2025, and that strategy has delivered and it delivered an 18% increase in price per square meter sold. In terms of top developments, we had, for the third year in a row, One Lake District remained our best-selling development followed by One High District and the third best seller of 2025 is One Academy Club with a very impressive performance. Within Q4, the sales were launched end of November. Within Q4, our colleagues sold 80 units out of a total of 160 units at the development. The fourth development continued to be One Lake Club, also similar to One Lake District and One High District, one of our best sellers in the course of last 2 years. Here, we have a more detailed outline on our sales portfolio. What I would like to underline are 3 numbers. We had 999 units available for sale at developments under construction as of December 31. So that means 74% of our developments under construction were already presold. Across developments that were delivered in the course of 2025, we have 3 developments, and there were -- there are remaining 85 units available. At those developments, we're talking about One Lake Club Phase 2, One North Lofts and One Mamaia Nord Phase 2. In terms of developments that were already finalized, meaning finalized until the beginning of 2025. We only had 43 units and the total amount of EUR 45.8 million still available for sale. So that shows you our sales strategy in terms of focusing on presales during the construction with very few limited high-value units remaining for clients once the development is finalized. In terms of commercial, we see a portfolio that is pre-leased at the level -- leased and pre-leased at the level of 97% for standing assets with 90% of tenants moved in as of the end of 2025. The headline rent was EUR 29.1 million in 2025. That was a 4% increase year-on-year. What is important is that our colleagues from the office development continued a very robust lease activity. And in the course of the year, they leased almost 14,000 square meters of office and retail spaces across the commercial portfolio and signed multiple lease extensions for the total area of 23,000 square meters. Now this concludes the first part of our call. We will now open the floor for questions.

[Operator Instructions] To give you some more time, we will first address the questions that were sent to us via e-mail ahead of the teleconference. We actually have 2 questions. [Operator Instructions] So the first question is, how are sales going in January compared to last year? And how do you perceive 2026 will be in terms of apartment sales compared to 2025?

Okay. Thank you. So basically, there was a very important change in the law for real estate development in Romania. This was abruptly introduced in December. We call it the Nordic Law because this was introduced in the aftermath of the insolvency of this developer called Nordic. But actually, it's a law that plans to improve, let's say, the safety of the transactions for both the developers and the clients in the sector. But this law instead of being introduced with, let's say, 3 months or 6 months or 12 months' notice, was introduced abruptly overnight. So this will impact the whole residential market. And we estimate that it will take a few months to readjust the sector to the new conditions. And this affects -- first of all, it affects the cash flow because you cannot make new sales and take down payments until you are aligned with a new procedure, but it also affects sales. So what we see, we see a disproportionate impact for smaller developers, but it will affect on the short term, the whole industry. So this is the answer.

Thank you, Victor. And now I see -- we actually have a repeat also in the chat of a question related to Q4. So the question is related to the abrupt decline in residential revenue, so minus 70% year-on-year and minus 71% quarter-on-quarter and the cost of sales in Q4. And the question is related to what drove that because I'm reading also from the chat. Could you explain the main drivers behind this drop in Q4?

Yes. For Q4, the sales were good, but we did an analyze which was a bit overdue from our part on the number of contracts that were not paying on time or they were too much slowly paying. And we decided that it's more profitable for the company to cancel quite a number of contracts. So we make, let's say, bulk cancellation of the nonperforming contracts in Q4. So this, I think, had the effect on the performance in Q4. If Cosmin, you would like to add something on this from the -- how we registered in the accounting maybe or...

Yes. Indeed, this was the main driver that brought a lower profitability in Q4. The fact that from the analysis, we had some less performing contracts, and we decided to release these units for better sales in order to improve further profitability rather than waiting clients to slowly pay these units, so this was the effect.

I think this impacted also these total contracts that we need to receive, Cosmin, no?

Yes, of course, it impacted also the future cash flow from this. But nevertheless, the inflow was somehow compensated by new sales. So the amount remained the same. But on the revenue recognition, then it was a backdrop due to these cancellations.

The next question is, based on the information in the preliminary report, it appears that you have either already submitted or are prepared to submit the public offer documentation to ASF. Could you please provide an update on the current status? And I see this is also a repeat for the following question. If -- there is a question related to the documentation and if it was already submitted to the Financial Supervisory Authority.

Yes, this is -- the public tender offer is coordinated by the Chairman of the Board and by the Board. And basically, all communications related to the public tender offer is done by the Chairman of the Board, so we will not make any comments on that at this stage.

The next question is about what we discussed about the cancellations. With the cancellation of contracts, did One keep the already paid installments from clients? And if so, which amount was kept by One?

This, I don't know if we kept anything. Cosmin, do you this data?

It was based on the contractual range. Some we kept on, some it was disbursed...

From case to case.

To case to case, yes.

Thank you. The next question: During the Q3 earnings call, you were highly optimistic about 2026. Given recent macroeconomic developments, how do you view the broader market climate and the outlook for 2026 now? Do you maintain the same level of optimism and One's projected performance for the upcoming year?

Look, thank you for the question. As we announced already, we plan to launch 5 new developments this year. One is in Sibiu and 4 are in Bucharest. So I think this shows that we are quite optimistic with the market despite of the existing challenges. We launched in the last quarter of last year, One Academy Club. And we've seen that the demand for our product is extremely robust because we've sold half of the entire development in the quarter. So basically, we know that if we launch new developments, we can sell much more. We just wanted to focus to make sure that we finish all the developments that we have because we have a huge peak coming to delivery this year. So that's why we didn't launch new developments and new sales. We just wanted to make sure that we have everything under control. But we are quite positive with this year, and we are starting all these new developments. I've seen also, which I think is quite positive news, that after half year of, let's say, harsh measures taken at the government level, the government managed to get a budgetary [ accident ] for January, a surplus, which I think is quite a good achievement. And we hope that this can lay a good foundation also for the -- at the macro level for the economy for 2026. But coming back to the apartments, apartments are in a structural deficit. The city of Bucharest grows quite fast. It grows like -- it grew like 10% per year over the last 10 years. And now also immigration reversed. So we expect the growth to be even faster. But even if it grow only 10% per year next 10 years, this means 300,000 people over the next 10 years. So only the new people coming are 30,000 people per year just with the current growth without the effect of the reverse of immigration. So the city of Bucharest alone is very, very strong and the demand is quite significant. So we are quite positive of the demand of residential.

Thank you, Victor. The next question, could you give us a brief update on the potential sale of One Tower?

Yes. On the potential sale of One Tower, the sale is not imminent. So we didn't -- we are not -- we didn't manage to be as advanced as to have a transaction coming immediately. We still want to sell the property. We still have at least one interested buyer at the price that we target. In the meantime, it's not so bad for the company because the property is generating almost [ 600,000 ] of net rent per month, so around [ 7 million ] per year. So -- and even the IRR for this is double digit. So even if we delay the sale of this property 6 months or 1 year, we don't believe this is bad for the company. In an ideal world in which money would be readily available and the market would be more efficient, to be honest, personally, I wouldn't sell One Tower. But for the market of Romania, we decided it is good to do it and to recycle the equity. So we are still working on that.

Thank you. I see we just got a new question. Could you provide a brief overview of residential projects that will drive the major impact in 2026? I mean, what is the current physical completion status of your main construction sites? And in terms of margin, what do you expect in 2026? Maybe I will go to the...

I don't know, this -- we need to take one by one or...

Yes. Maybe let's overview of the residential projects that will drive a major impact in 2026. And I put back the slide with the residential developments under construction together with the estimated delivery date.

I think this -- we have -- the data is public. I think we can send it all somehow because I...

Yes. I think for the second question, the current physical completion status of your main construction site, I think that can be assumed looking at the estimated delivery. As you know, we update it quarter-on-quarter. So you can see on the slide that we have One Floreasca Towers and Herastrau Vista and One Athenee with estimated delivery in Q1 of this year. So that is either ongoing or it's going to happen in March. Then it follows with the second quarter, we have One High District scheduled for Q2. And then we continue -- as well as, excuse me, One Lake Club Phase 1. As Victor said, it's a very busy year for us this year, a lot of deliveries. And for Q3, we have One Lake District Phase 1. And yes, so these are the key developments, I would say, schedule.

And the question was also about the physical completion. Physical completion is very near to final. I mean all of them are standing and look almost finalized. So we are working on just final works on most of them because otherwise, we cannot deliver it this year. So the actual completion, the physical completion is almost realized for most of them.

In terms of the margin question, as I mentioned at the beginning, we kindly ask you to wait for the budget that we will provide at the end of this month that we'll provide a general guidance in terms of the revenues per segment as well as overall profits that we'll target for this year. What I can really state is, as we always do, we -- with any development, we target a minimum gross margin of 35%. And I hope -- yes, this answered your questions. And I see we don't have any more questions in the chat. Therefore, we can conclude this teleconference. I would like to mention 3 important dates. 27th of March, we will release the annual report of One United Properties. These are -- this would be the audited 2025 numbers. On 29th of April, we will be hosting the Annual General Meeting of Shareholders, and we look forward to seeing you face-to-face or online via eVote solution. On 14th of May, we will be publishing the results for the first quarter of 2026, and we will host a teleconference on 15th of May. Therefore, we hope to see you all there. We wish you a great day ahead, and thank you all for joining us.

Thank you very much. Have a great day, everybody.