Stoneweg Europe Stapled Trust (SET) Earnings Call Transcript & Summary

Good morning, and welcome to the Stoneweg Europe Stapled Trust's Full Year 2025 Results Briefing. We will begin with remarks from the CEO of the Manager, Simon Garing, followed by a presentation from the management team. We will then open the floor for Q&A. [Operator Instructions] Now I will hand across to the CEO of the Manager of the Stoneweg Europe Stapled Trust, Simon Garing. Simon, over to you.

Thank you, Kara, and good morning to everyone. Thank you very much for joining us today for the Stoneweg Europe Stapled Trust full year results briefing and outlook. To recap, the portfolio is predominantly Western Europe freehold logistics and light industrial assets underpinned by nearly 800 tenants with a very long WALE of 5 years and is currently valued at EUR 2.2 billion. And we've also, in the last 12 months, added a new growth engine in our investment in our sponsors data center development fund. If I can turn to Slide 4, 2025 was an exceptionally active year and sets SERT up well to continue to deliver outperformance into this next year. Firstly, the portfolio delivered a pleasing like-for-like NPI growth of 5%. This was driven by strong leasing success across 300,000 square meters or 20% of the portfolio, producing a positive rent reversion of 10%. And this underscores the quality of SERT's assets and the improving European fundamentals, which overall supported the NAV of EUR 2.03 per security. Through the year, we completed EUR 140 million of noncore asset sales at an 11% premium to the valuations and recycled EUR 50 million into Stoneweg's 2-gigawatt data center development fund called AiOnX. We also issued 2 long-term bonds for EUR 800 million with no debt now maturing until 2030. These value-added actions were also recognized by Fitch's credit rating upgrade to BBB. And finally, we delivered a full year dividend per security of EUR 0.1339. While this was slightly down on last year, 2024, it was, however, above market expectations, while at the same time, we also reduced net gearing to 38%. And this positions SERT very well to grow through new investments in the coming period. So turning to Slide 5. Our purpose is to deliver you, the investor, stable income yield and long-term value as outlined in this investment case on Page 5. We continue to see healthy rental growth supported by long-term tenant demand and sustainable operating fundamentals across the gateway European cities, and this underpins the current distribution levels. As European investment activity continues to recover and cap rates stabilize and begin to compress, the operating environment is becoming more supportive of capital values and is attracting increasing levels of foreign investment. Complementary to our logistics strategic focus, SERT's investment in the data center development platform provides long-term growth opportunity, and this is already evident in the approximately 40% uplift in value in our initial investment from June to the end of this year. In an exciting overnight development, SWI Group, our sponsor, has announced the acquisition of a majority stake in Polarise, a German company, which is one of European's NVIDIA's preferred partners at a valuation of around EUR 500 million. Together, SWI Group, AiOnX and Polarise are beginning to grow this very integrated European AI infrastructure platform, which spans across the power, the compute and the delivery. SWI Group also successfully listed on the Euronext stock market under the code of SWICH and is up 32% in just the 3 days since listing. We see further strategic opportunities for SERT within our broader sponsor ecosystem. At current security price levels, we believe SERT offers compelling value, and this is reflected in the Board's decision to repurchase EUR 10 million of securities recently, taking advantage of the approximately 20% discount to NAV and the 8% yield. Overall, this buyback added 1.1% to dividends. So going through each of the pillars in a little bit more detail on Slide 6, we continue to increase SERT's weighting to Western Europe and the Nordics, now at 90% with low concentration risk by country, city or tenant. The Netherlands is our largest exposure at 28%, reflecting its role as a strategic European logistics hub and its strong high-tech-led economy. Our focus remains on the gateway cities, including Amsterdam, Paris, Milan, Frankfurt, Hamburg, Munich. We are also pursuing opportunities now in Madrid, Barcelona and the key Swiss cities, where Stoneweg has a deep presence and a strong track record. We continue to reposition SERT towards a 70% weighting in logistics and data centers by next year, while the office portfolio remains an important source of capital for disciplined recycling. Slide 7 shows that SERT's portfolio has grown by almost 70% from the EUR 1.3 billion at 2017 to now over EUR 2.2 billion. We achieved this growth in a disciplined way, protecting the balance sheet throughout. Since 2022, we have completed EUR 400 million of asset sales to keep that net gearing below 40% without issuing dilutive equity or cutting distribution payouts. At the same time, we have continued to shift the portfolio toward higher conviction new economy sectors, mainly logistics and data centers. The chart on Slide 8 shows the impact of the remarkable financing actions that we and our treasury team undertook last year. SERT now has no debt maturities until 2030, with 94% of the debt protected against rising interest rates over the next year or 2 and 42% of the debt able to benefit from rate cuts via caps and collars. We didn't show that on this chart, so as not to overcomplicate matters, but you can at least see that we have that protection there in line with our treasury policy. These actions have partly mitigated the transition from the original 0 rate environment that is now behind us. Our weighted average cost of debt has risen from 3% at the end of '24 to now 3.9% at the end of '25. And we expect now for this to remain broadly stable this year and hence, no longer being a material headwind to earnings or valuations. In the second half, Fitch Ratings upgraded SERT's investment-grade rating to BBB with a stable outlook, and S&P more recently reaffirmed the BBB minus stable outlook, reflecting the improved credit quality. As you can see on this chart on Slide 9, following these rating actions and our capital discipline, SERT's 2031 bonds issued at the beginning of '25 have rallied substantially with the spreads contracting 67 basis points compared to the broader European real estate debt index, which tightened only 24 basis points in the same period. So this outperformance has reduced the implied cost of potential new 5-year debt to approximately 129 basis points over the swap rate. And recall, our first bond was issued back in 2020 at 265 basis points over. So we have come a long way in the capital markets and the strength of the portfolio is now being priced in nicely. So on Slide 11, European investment volumes are recovering. Transaction volumes are recovering with the left-hand chart showing Savill's forecast of 17% growth in 2026 and 13% in '27. We expect to see similar momentum with our portfolio as we continue to pursue selective accretive acquisitions. The right-hand chart shows that now is actually a good time to be looking to buy back into Europe with stable cap rates after the last few years of rising yields and now, in some cases, gradually compressing. And this supports the increase in investor interest and the expected NAV growth of European REITs. Turning to data centers. Clearly, the European data center market offers a distinct growth opportunity as key industries and consumer behavior increasingly shift towards higher data and cloud dependency. The global AI market is set to expand at around 37% per annum until 2030, reaching around USD 1.8 trillion, demand that will require significant new capacity from hyperscalers and investors. Savills estimate that Europe needs to triple the current capacity from 10 gigawatts to 30 gigawatts over the next 3 years in data centers. And to put it in perspective, our data center development fund has 2 gigawatts or roughly 20% of the already established data center market. And as we know, Europe's current capacity is only about 1/3 of that in the U.S., as Europe is more constrained by scarce development land, stricter energy use regulations and slower project approvals driven by often stringent environmental standards. Our sponsor has also committed an additional EUR 1 billion to accelerate the new pipeline that it secured through its new ownership of Polarise in Germany. In this overall environment, early movers with secured land and power, like AiOnX, are positioned to capture outsized returns in a supply tight high-growth market. So to drill down a little bit more on Slide 13, in June 2025, SERT made a strategic EUR 50 million investment into AiOnX, acquiring a stake in the sponsor's pan-European data center development platform. Based on the current valuations at the end of December, this investment has delivered a 41% uplift or roughly EUR 20 million or roughly EUR 0.04 to NAV during FY '25. As I mentioned before, the fund has secured about 1.7 megawatts of capacity across 5 development projects. And this represented an increase of 250 megawatts over the half year, and that helped boost the valuation of the assets. In Dublin, construction of the fund's first 32-megawatt data center is well ahead of schedule. The broader 179-megawatt innovation campus is pre-leased to a major U.S. hyperscaler. Construction financing is in place. And because we're ahead of schedule, rent in the first phase is now expected to commence from the third quarter of 2026. Good progress continues across the remaining sites with '26 expected to be a year of key milestones. Madrid is progressing towards planning approval with strong federal and local government support. Varde in Denmark has secured all required zoning for 800 megawatts. I beg your pardon, it isn't not yet just got the zoning, but we're working towards that. So it's more in advanced stages. Milan, however, has obtained the zoning with 150 megawatts. Cambridge has secured recently additional land for a further 200 megawatts, taking the total project contracted capacity to 530 megawatts with pre-leasing discussions progressing very well. I apologize a bit tongue twisted. These are big numbers. We're talking about a GDV of over EUR 30 billion, of which we own around a 6.7% stake in. And we'll continue to evaluate further DC pipeline from our sponsor and from this fund. And sponsor alignment is a key strength for SERT. As mentioned earlier, SWI Group was recently listed on the Euronext in Amsterdam under the code of SWICH, which reinforces public market governance standards, transparency and long-term accountability. The 30% pop in the share price in the last 3 days also provides a clear valuation marker for our own sponsors' substantial holding in the same platform that we now invest in. And through the global platform, SWI Group also brings institutional-grade sourcing and execution capabilities supported by an extensive international network. And this underpins consistent delivery and long-term value creation for you, our investor. So what does this all mean from an investor's proposition perspective? Well, based on the strategic repositioning over the past 12 months and the improving European fundamentals, we believe SERT is very attractively valued. The securities on the stock exchange here in Singapore currently trade at around a 20% discount to NTA. And this is wider than the discount seen among our European logistic peers and compares with premiums to NTA for the comparable Singapore listed peers. Despite this, SERT delivers one of the strongest cash return profiles in the peer group, and it trades at the highest EBITDA to EV metrics and offers one of the highest dividend yields while operating with similar levels of gearing, reflecting the higher return on equity from our portfolio. So with that, I'll now turn over to Hui Chen, our Head of Finance, to run you through the financial results. Thank you, Hui Chen.

Thank you, Simon. Good morning, everyone. We are pleased to present SERT's second half 2025 results. The consolidated figures presented here include both the REIT and the BT. Further details are available in the financial statements released today. At present, the BT holds only its investment in the data center fund, which remains under development and has not yet contribute distributable income. Accordingly, the EUR 38 million of distributable income for the period was generated entirely by the REIT. The portfolio delivered a strong underlying operating performance. Net property income increased 2.7% year-on-year. This was largely driven by continued strength in the logistics and light industrial sector and higher income from completed REIT developments, notably Nervesa21 and Vittuone. This growth more than offset the expected income impact from divestments. On a like-for-like basis, performance was even stronger with NPI up 5.3%, led by logistics and light industrial growth of 10.8%. As anticipated interest costs increased, mainly reflecting the higher coupon on the EUR 500 million bond issued in January 2025, partially offset by 3-month Euribor and the STR. The average all-in interest rate for the period was 3.9% compared with 3.2% last year. Distribution per security was 3.1% lower, largely due to financing costs and divestments, while underlying portfolio performance remained resilient. Turning now to the full year performance. For FY 2025, net property income increased by 2.5% year-on-year. Growth was driven mainly by completed redevelopments, income growth across logistics/light industrial and other sectors and lower doubtful debt expense. These factors more than offset the impact of divestments. On a like-for-like basis, performance was stronger with NPI up 5%. This was led by 9.2% growth in logistics and light industrial, continued stability in office and growth in the net -- in other sector. As expected, net interest costs, excluding debt establishment costs increased by EUR 8.3 million, reflecting higher borrowings and higher all-in interest rates. This was offset by favorable movements in Euribor and STR. The average all-in interest rate for the year was 3.9% compared with 3.2% in FY 2024. Full year EPS was 5.1% lower, mainly due to higher financing costs and divestments, while underlying property income remained strong. The quarter 4 chart on Slide 19 shows the key movements compared to the previous year. Strong net property income driven by existing portfolio and redevelopment contributions provided a meaningful uplift. This was partially offset by higher interest costs, which reduced EPS by around EUR 0.015 due to higher interest rates and higher borrowings as mentioned earlier. This slide set out the second half distribution timetable. The distribution reinvestment plan remains switched off given the discount between the security price and net asset value, although we note that this discount continue to narrow. The business trust policy is to distribute as much income as applicable. However, as its current investments remain in development phase, no distribution is expected at this stage due to the absence of positive cash flow. The REIT's distribution policy remains a minimum 90% payout of distributable income with both payouts ultimately subject to Board's discretion. Accordingly, the full year DPS of EUR 0.1339 is paid entirely from the REIT. Moving to the balance sheet on Page 20. Now you can see the REIT, the BT and the Stapled Group combined balance sheet as at 31st December 2025. SERT's balance sheet remains strong with total assets of EUR 2.37 billion and a strong cash position of EUR 111 million, driven by the divestment completed in the fourth quarter, as mentioned earlier. A highlight for the balance sheet is the fair value gain of EUR 20.5 million recorded in the business trust as a result of the increase in valuation of the AiOnX data center fund investment. In summary, NAV per security was stable at EUR 2.03 with EPRA NRV improved to EUR 2.18. As my last slide, I'm pleased to report that SERT's credit metrics remain comfortably within its bond and loan facility covenants and within credit rating agencies metrics for maintaining an investment-grade rating. Net gearing improved to 38% and benefited from asset divestments in the fourth quarter, as mentioned earlier. Going forward, we will continue to focus on managing within the long-term policy range of 35% to 40%. Interest coverage ratio on a trading 12-month basis is 3.1x calculated on SERT's EMTM program. This is impacted by higher interest costs, as mentioned in the previous slides, but ICR remains well above our covenants, rating metrics and MS limits. SERT's all interest rate increased to 3.86% as at 31st December 2025 from 3.05% at 31st December 2024. I will now pass the portfolio highlights to Andreas.

Thanks, Hui Chen. The quality of SERT's portfolio is supported by a highly diversified tenant base comprising nearly 800 tenants across nearly 1,000 leases. No single tenant accounts for more than 4% of rent and our top 10 tenants represent just over 21.5%, limiting concentration risk across the portfolio. More than 93% of tenants are large multinationals or government-related entities, providing strong credit quality. The portfolio remains around 7% under-rented with market rent growth evident across logistics and office, supporting future income and valuation upside. Slide 25 highlights 4 of SERT's strongest performing assets and illustrates the key drivers behind recent valuation uplifts. Across these assets, we have added value through active asset management, negotiating strong rent reversions on new leases while taking advantage of rising market rents and some yield compression. In Paris, Parc des Docks delivered a EUR 7.4 million uplift driven by indexation and yield compression. In Netherlands, Veemarkt and Haagse Poort recorded gains of EUR 2.8 million and EUR 5.9 million, respectively, reflecting indexation, ERV growth and higher rents from new leasing. In Italy, Nervesa21 delivered EUR 2.3 million uplift, supported by indexation and exit yield compression. Together, these examples demonstrate our ability to drive valuation growth through disciplined execution and leasing outcome. We are expecting to receive permitting for approximately EUR 200 million developments within the next 12 to 18 months, each with a minimum yield on cost or IRR rather to ensure value accretion. These projects are focused on strengthening income, extending lease terms and future-proofing the portfolio. Key examples include ESG-led repositioning of Bastion in the Netherlands into a multi-tenant office anchored by long leases with Essent and ASML, the ongoing expansion of Thorn Lighting in the U.K. and Ruyterkade redevelopment in Amsterdam, where we now have an irrevocable master plan for a 20,600 square meters office project. Importantly, these initiatives are not just about growth. They also improve the sustainability and quality of SERT's portfolio through energy efficiency, renewable solutions and ESG aligned design, ensuring the portfolio remains well positioned for evolving tenant requirements over the long term. Turning to the portfolio performance. Occupancy at 92.6% is fully in line with June levels. If excluding the fully vacant light industrial park Sully as in France, which is currently on sale, occupancy at year-end 2025 would have been at 93.5%. During 2025, Stoneweg's local teams delivered close to 300,000 square meters of leasing, representing around 20% of the portfolio. The portfolio delivered strong rent reversion of 9.8%, more than double the 4.3% 5-year average. Rent reversion in logistics and light industrial sector also remained at high 9.5% for the full year, well above the previous corresponding period. Occupancy in the Western Europe portfolio remains strong at 93.4%, supported by strong performance in our larger markets. Central Europe eased to 85.4%, largely reflecting the divestment of the Slovakian portfolio, which was 93% occupied prior to sale. While we saw some lease expires in France, including a short-term lease at facility as mentioned, that expired in the fourth quarter, causing a drop in French occupancy, new leasing in Germany, Denmark and Finland helped keep overall occupancy in the portfolio broadly stable and above the 92.4% level recorded in the first half. In 2025, both our logistics and our industrial portfolio delivered similar strong rental reversion of 8.5% and 9.5%, respectively, while maintaining low vacancy levels despite uncertainty of tariffs and other geopolitical headwinds to tenant investment decision-making. As shown on the top chart, rent growth has remained within normal historical ranges and the portfolio continues to be under-rented. Values estimate passing rents are around 4.5% below market, which provides embedded upside over time. During the year, we completed 209,000 square meters of new and renewed leases in this sector. Some occupiers are taking a more cautious approach to expansion, and this has supported higher retention rates. SERT remains on track to reach our 95% occupancy target by the third quarter of 2026. In 2025, our logistics and industrial portfolio -- in the light industrial sector, leasing activity in the fourth quarter was anchored by 2 notable Danish renewals. Fabriksparken, in Fabriksparken, a 4-year lease renewal was signed with a strong 16% rent reversion. And at Stamholmen, a 7.5-year lease renewal achieved an impressive 44% rent reversion. In South Moravia in the Czech Republic, the single tenant property extended its lease for an additional 2 years at passing rent, maintaining income stability. And in our German assets in Kolumbusstrabe, we signed a new 5-year lease for 2,000 square meters, delivering a 7.7% rent reversion. Looking at the Purotie 7 European logistics markets where we operate, fundamentals continue to improve. In the second half of 2025, rolling 6 months take-up remains stable at around 4 million square meters in SERT investment countries. This is materially higher than last year with full year take-up reaching 8.2 million square meters, around 6% above 2024 levels. This points to improving occupier confidence despite ongoing market uncertainty. Market rents continue to grow steadily, broadly in line with inflation. Vacancy across our key markets edged up slightly to 5.1%, but remains within the normal pre-pandemic range. Overall, these conditions remain supportive for rental growth and leasing outcome across certain portfolios. While logistic take-up in Europe has stabilized at around 5 million to 6 million square meters per quarter, structural supply constraints remain firmly in place. Research from CBRE shows that Europe has around 50% less modern logistics space than the U.S. New development remains muted, largely due to land scarcity and dense urban hubs, lengthy planning processes and increasing competition for land from data centers alongside stricter environmental regulations. As a result, the supply gap is expected to persist. CBRE expects vacancy to stabilize in 2026 with rental growth continuing at around 1.8% per annum, which remains supportive for well-located modern logistics assets like those in our portfolio. Leasing momentum in the office portfolio remained positive in 2025 with 92,000 square meters of leasing signed. Activity was heavily weighted to the first half and in particular to the second quarter of '25 when we completed 60,000 square meter of leases. Full year rent reversion was 10.8%, a significant improvement on 2024, reflecting firmer market rents for gateway space and the location quality of the majority of SERT's office assets. The 4.8 years WALE was supported by a number of longer duration leases secured in the second half of the year. The office portfolio remains around 9% under-rented, providing further upside as we continue to capture this embedded value through active leasing and asset enhancement initiatives. As shown on Slide 34, in the fourth quarter, we secured several important office leases, strengthening income visibility. The 2 largest were in Netherlands with a 10-year lease renewal in Koningskade and a 5-year renewal at Bastion. Together, these transactions derisked EUR 2.5 million of income at a modest blended uplift. In France, tenant extended its lease at Paryseine, delivering strong rent reversion. In Italy, we signed a new 8-year lease in area at flat rent levels, which is a good outcome given softer local market conditions in this submarket. We also completed a small number of additional renewals in Italy and the Netherlands with broadly stable rents. Overall, these leases reflect the continued focus on securing long-term income while pragmatically managing market conditions. Looking at the office markets in our 4 SERT office investment countries, take-up in the second half of 2025 improved modestly at around 2.9 million square meters, up slightly on the same period last year. On a full year basis, activity was broadly stable. Overall vacancy in these markets remains steadily at around 8.5%, with office attendance continuing to improve across European markets despite the ongoing impact of hybrid working. What remains clear is [ simply occasion ] between in the office sector. Demand continues to favor high-quality, well-located buildings. Grade A vacancy in SERT's key markets is just 3.9%, significantly lower than secondary space, reinforcing our focus on prime assets and our active repositioning. Looking at the broader European office market, supply of CBD office space across Europe remains constrained. CBRE data shows declining office completions at both CBD and non-CBD locations, while the vacancy gap between prime and secondary office continues to widen. This reflects a clear occupier preference for high-quality, well-located Grade A space, which is consistent with our focus on gateway cities. Demand trends are also improving. Service data shows office attendance across major European cities continue to rise through 2025, approaching pre-pandemic utilization levels, particularly on core mid-weekdays. Notably, Europe is well ahead of the U.S. on this measure. This is further supported by employment fundamentals with Oxford Economics forecasting around 600,000 additional office-based jobs across Europe over the next 5 years. Against this backdrop of tightening supply and improving demand, CBRE expects European prime office rents to grow by around 2.1% in 2026. I will now hand over back to Simon.

Thank you, Andreas. And again, it's lovely to have you here in Singapore to work with us on our strategy over the next few years and update our new directors that have recently been appointed. So thank you. So in conclusion, barring unforeseen circumstances and based on current market conditions and our anticipated transactions timing, the SERT Board expects FY '26 distributions per security to be broadly in line with FY '25. At current security prices, this implies a distribution yield of approximately 8.1%. And I note we are one of the few SREITs to provide this type of guidance, underpinning our confidence in the portfolio. Our strategic focus remains unchanged. We continue to prioritize Western Europe logistics and data centers as our highest conviction sectors and strongest long-term growth drivers. We're evaluating more than EUR 70 million of near-term acquisitions and a potential divestment pipeline of a similar size in FY '26, starting the recycling of the capital into these focus areas. We expect to operate toward the upper end of the 35% to 40% net gearing range while continuing to reduce exposure to the noncore assets with the office portfolio supporting disciplined capital recycling. We will continue to invest in selective value-add and redevelopment initiatives to enhance portfolio quality, earnings resilience and sustainability. Approximately EUR 200 million of projects are expected to receive permitting over the next 12 to 18 months, all subject to minimum return hurdles to ensure value accretion. Our early strategic investment into AiOnX, together with SWI Group, our sponsor's acquisition of a majority stake in a European NVIDIA preferred partner called Polarise and SWI Group's successful listing on the Amsterdam Euronext slot last week creates further strategic opportunities for SERT within the sponsor ecosystem, and we continue to explore pathways to increase our exposure to AiOnX over time. Collectively, these initiatives position SERT to benefit from accelerating AI-driven demand for digital infrastructure and expect it to continue to contribute meaningfully to long-term NAV growth and portfolio resilience. Thank you for your support and attention today, and we're now happy to take your questions. So over to Kara to moderate. Thank you.

[Operator Instructions] Our first question comes from Arthur who asks, in FY '25, there was a 1.5 CPS negative impact on DPS due to higher coupon in Jan '25 bond and higher borrowings, partially offset by lower interest expense on the unhedged debt. Can you please run us through what would be the drivers to consider as to the impact on FY '26 DPS from interest expenses? If there is no debt refinancing due in FY '26, then are the only factors to consider: one, any new debt; and two, the difference between the market rates and the hedged rate or any hedges coming off FY '26? Anything else?

Arthur, thank you very much for the questions. As you can see on Page 8, you're absolutely right. We have no debt maturing until 2030. So again, that's not a typo. So there's no risk on the refinancing side for the next 4 to 5 years. In terms of the second part of your question, we are hedged through caps and collars. And obviously, our bonds are issued on a fixed term basis. So we have a couple of caps maturing one at the end of this year and another one maturing at the end of next year. While we have always done, we've tended to blend and extend, we've tended to trade the premium that we have in some of our derivatives and extend the hedging. So as of today, you're absolutely right, there is no impact on change in rates, and we have no debt maturing.

Our next question comes from Dale.

Congrats on the strong results. Just wanted to follow up on a few questions. I think, firstly, in terms of your plans going forward, I understand that your divestments in the last few years has been -- you have achieved above EUR 400 million already. So how should we look at this further divestments going forward as well as acquisitions?

Yes. So in our prepared remarks, we were suggesting that we're looking to acquire over EUR 70 million this year. We've got good visibility in evaluating a good pipeline. And we're looking to sell roughly the same amount to help fund that. Clearly, moving out of some of the noncore countries, cities and asset classes and moving back into our core focus is set to provide much longer-term growth. And you can really see that in the results that it's quite remarkable that we got almost 9% rent reversion and very strong rent growth across leasing up almost 20% of our logistics portfolio. So we're pretty confident we're on the right track over the next couple of years, and we'll look to continue to recycle. But it certainly is not at the quantum of the last 4 years, which was done deliberately, as you know, back in 2022 with the rise in rates. We really battened down the hatches and made sure that we're very disciplined with our capital, and that included at the end with last year when we sold out of our entire Slovakia portfolio, again, as a derisking strategy and with some excess cash, we bought back just under EUR 10 million of securities, which added to the dividend, added another 1.1% in the result.

So meaning to say that in FY '26, you're going to be -- I mean, you're not going to be a net seller anymore?

Correct. This is a turn. As we said last year, with the stabilization of cap rates, with the hard work of the ECB over the last couple of years to turn things around and now with the more fiscal stimuluses of some of these larger countries, particularly Germany, the outlook is rosy. And so we would like to be as many foreign investors are today, net buyers rather than net sellers.

And just on this slide, right, you're saying that barring any unforeseen circumstances, earnings this year should be flattish. But I just wanted to refer back to that waterfall chart, right? So for this year, there's going to be that absence of income from the Slovakian portfolio. So how should we see in terms of what are the potential upsides to help offset that absence of income from divestments?

Yes. So growth, firstly from acquisitions. So if we're looking to acquire at 6% higher that will more than offset the impact from the sale of Slovakia, which was on a net basis, sub-6% when we look at the tax effect back into Luxembourg. Secondly, you'll get the NPI growth out of the existing 95 assets, which, as you can see on the left-hand side of this waterfall, had a very strong year last year, and we expect growth into '26 as well. And we no longer have to worry about the major impact from the rebasing of our interest rates. That's now behind us. That's the biggest headwind over the last couple of years to our earnings has been the resetting of interest rates from the pre-COVID negative rates to now a more normal environment, which the ECB came out overnight again to reiterate that they see a very good environment at the moment and are very happy with the way things are. This is a very stable operating -- this is a very stable operating environment. And we're seeing the strength in the euro reflect this. We're seeing the strength in the euro stock markets. And indeed, we're seeing the strength in our own sponsor share price up 32% in 3 days since listing. So we're quite excited about the prospects.

Just a final follow-up on this. For the 2 assets in Italy, the Nervesa and Industrial 18, should I -- should we be assuming that full income contribution has been recognized really for at least the second half of last year?

Yes, for Nervesa and mostly for Vittuone. We have one more part of Vittuone. It's a multistage repositioning of an older light industrial property into a more modern property with more cross decks. So it's an AEI project, of which we've got one more phase to go.

Our next question comes from Simon.

Just one question. You mentioned that you're looking to leverage off the sponsor's data center pipeline. I just wondered if you could articulate a little bit more of what you intend to do with that? Is that through the further -- potential further investment in the fund? Or would you look to do something outside of that as well?

Thanks, Simon. Simply both. So our current 6.7% investment in AiOnX, it's in a fund that's got 9 more years to run. Whether or not it takes that long to hit the final stages of redemption, we'll wait and see. There's certainly opportunity to discuss with our investors and with our sponsor to increase our participation in the fund. And then secondly, as you would expect as 1 of only 3 or 4 LPs in the fund, we have certain rights over any asset or part asset that the fund would look to sell. So that's certainly pipeline that you would expect any sponsor that is a developer to offer the opportunity to the REIT if at the right circumstances, the right pricing, it made sense for us. But this is quite an exciting opportunity, again, depending on our cost of capital relative to the expectation of pricing.

Our next question comes from Darryl who asks, can you please share more details regarding investment in AiOnX Data Center Development Fund? Kindly, please be more specific, if possible, for example, IRR plus future capital calls plus ROFR on funds DC properties?

Darryl, that's a really good question. I'd like Noel, please to turn to Page 47. I think, again, we're one of the few REITs to give you the answers to your questions actually in our presentation. So what we've done here is provided an industry rule of thumb that demonstrates the valuation gains on a pre-tax and pre-fee basis. At the moment, valuations of AI-backed data centers are currently valued at around the EUR 18 million to EUR 20 million per megawatt and typically costs around EUR 10 million to EUR 11 million per megawatt. So there's sort of EUR 7 million to EUR 8 million potential per megawatt. And like I said, we're sitting on roughly 2 gigawatts or 2,000 megawatts. Typically, we're looking at 12% to 15% yield on cost. Now a typical office building or logistics property might deliver 6% to 7% yield on cost. So this is where the cash flows are extraordinary as a data center core and shell developer, if you can get access to power and work through the permitting. So the supply of data centers is very restrictive because of those aspects. And with our position now through Polarise that SWI Group is one of NVIDIA'S preferred partners, this again, will help when it comes to allocating the various hyperscalers as they look to roll out their own footprint through Europe. So we have both the real estate now and we have the connections with Polarise and NVIDIA, which is a real game changer for a developer such as our sponsor. So from an IRR perspective, you can do your own math with those numbers, but it's certainly well above the normal returns of a greenfield development. There are very few projects that I've seen in my career that deliver 12% yield on cost and get valued down at 5.5% to 6%. As we have 100% construction financing, therefore, during the period of construction, we're not having to put a lot more equity in. So this fund is pretty well capitalized from an equity perspective. Therefore, the return on equity on a geared basis is remarkably high. And you can see in the right-hand column there, we're talking up to 12x equity multiple. So we've got EUR 50 million in and there's very high expectation of driving substantial gains over the next 7, 8, 9 years as the fund and the properties build out. So they're far better than buying our shares. Our shares is a very attractive price for us to buy back. We could probably deliver 15% IRR based on the current yield at 8% and the 20% discount to NAV, but it's equally, if not more compelling to also invest further into data center developments. So we'll look at both, obviously, and not just one or the other.

Our next question comes from Vijay.

Congrats for a good set of results. My first question is in terms of occupancy. Maybe can you elaborate a bit on the quarter-on-quarter occupancy drop? And firstly, congrats on giving a slide in terms of outlook for 2026. I think that's an industry first. Maybe if you can give an outlook for 2026 occupancy and the forecast, that would also be a good thing.

Well, Andreas, is turning to the page. Thank you for the observation on the guidance. As you can imagine, we're a little bit reluctant to give you 1 or 2 of the inputs into the forecast. So I just want to be specific that we wanted to provide the forecast or the outlook on the basis that we wanted to give the investors certainty when we're trading at an 8.1% yield that this was not going to be another year of DPS decline given all of the initiatives we've undertaken over the last 12, 18 months. So we wanted to show again, as we mentioned last year, that we were very close to the bottom of the cycle. And in fact, that's now what we're -- the Board was confident in saying.

Yes, Vijay, nice to hear you. Yes, if you see in the presentation 28, there's the occupancy development in the respective countries and the biggest drop is in France. And in France, we have one asset called Parc Sully. It's a small nonstrategic asset, which we already have in sale process, currently have 3 buyers looking at it. So we are confident we can get this sold in the next 6 to 9 months. We had a short-term lease in the third quarter, starting in the third quarter, but the lease expired before the end of the fourth quarter. Hence, the drop, it makes a difference of 0.9% occupancy and that pretty much explains the drop in overall portfolio occupancy. We would have hoped to end up close to 94%, which is our aspiration, but that's one asset, spoiler party, so to say. But we're confident we can fix this during this year by selling and then also filling other gaps such as in Slovakia in the developments that you have seen [ lower subset ]. We have now tenants looking at the 2 vacant units. So we hopefully can get back to 100% occupancy in the next half year. Slovakia helped a bit the sale, 93% occupied, so slightly below the logistic/light industrial occupancy rate. So a few small movements in the portfolio, but we believe we can get back to the 94% portfolio occupancy during this year and possibly a bit higher on the logistic/light industrial side.

On your focus on 70 million acquisitions, which you're looking at in the near term, can you give us some color in terms of is this from a sponsor pipeline? And also on AiOnX, what's your medium-term plans? Do you plan to increase stake? Or how should investors look at it?

So when we say sponsor pipeline, we're looking at buying logistics assets through the truffle hunters, our transaction teams. And that's one of the advantages of Stoneweg, as a European sponsor that's more known in the markets than when we were Cromwell. So we're certainly noticing a lot more off-market transactions being brought to us. We are focusing on the key gateway cities around the logistics hubs, particularly in the Netherlands and Germany. Copenhagen is a market we're very confident in. We would like to invest in Prague and broaden our Czech Republic, but predominantly in the near term, Germany, Netherlands and around that central hub of the shipping ports and the airports. I should also point out in my prepared remarks, in the sort of the later stages of this acquisition program, we would like to invest in our sponsors' home market in Switzerland and Barcelona and Madrid. So they are also undergoing a lot of evaluation at the moment, but not in the near term. And the second part of your question was on AiOnX. As I mentioned to Simon, that is an area that we're getting really good feedback from investors based on the track record. And I think as the news digests from overnight with 2 major announcements from our sponsor that can only help both the prospects of our existing assets as well as potentially new assets within AiOnX, that is an area that we would, I think, like to participate further in.

My last question is in terms of the EUR 150 million planned asset enhancements and developments, maybe how do you plan to fund this? And how do you plan to offset the income drop during the construction funding period?

Yes. So the good news is the first project, the EUR 60 million project with Nationale-Nederlanden is the anchor tenant in Haagse Poort, they will be staying in the building as we refurbish around them. So there will be no drop in income in that asset. In the second -- and so that's in final stages at the moment. And so we expect something late this year, early next year. From our second project in the middle of Amsterdam, this is an incredible opportunity for the REIT. We've just recently got an irrevocable approval for the zoning plan to knock the building down and redevelop almost 21,000 square meter prime property in the prime location of Amsterdam. That indeed is likely to be moved into the business trust. Remember, there are some incentives from the Dutch government to encourage new developments like this particular project that perhaps we can't take advantage of with the property sitting inside the REIT. So this will be an example of the property going from the REIT and into the business trust. And that also is very efficient from a dividend perspective because it will come out of the REIT, which will be able to go out and invest for the value of the property that's being sold for into the business trust. So we've got a very nice system of being able to feed projects now out of the REIT and into the BT and not have DPU impacted -- DPU of the REIT impacted.

Our next question comes from Ernest. His first question is around share buybacks. I understand you have set aside EUR 10 million security buyback in FY '25. How much have you used for FY '25?

Ernest, we've used almost the EUR 10 million. I think EUR 9.4 million or EUR 9.6 million. EUR 9.6 million, yes.

And my second question is for this AiOnX data center development fund, I understand your first project for 32 MWDC in Dublin is ahead of schedule with rents from a major U.S. hyperscaler commencing in the third quarter of 2026. Previously, when did you expect this first Dublin project?

Yes, it was probably a 14-month build-out and it will 14- 15-month build-out and it will be 9-10, to be 3 months earlier. Quite quick. Again, this is in conjunction with the hyperscaler who effectively control the site from a development perspective. So for every dollar we're putting in to build the core and shell, they're putting in EUR 5 for the fit-out. So it's in their best interest to move quickly on the construction. But yes, it's 3 months ahead.

Once the rents from the major U.S. hyperscaler commence in the third quarter of 2026, do you see these rents having some positive impact on your distributable income in the second half of 2026?

Yes. So just to be clear, this is a development fund, a private equity development fund. And typically, it would not pay distributions from the rents of the first phase. It would typically Andy's plan in this case, to reinvest that cash flow back into the next phase of the project. So we're not expecting dividends out of this investment from a rent perspective, we would anticipate at some point, that first phase or second phase would get sold. Again, it would be quite typical in a private equity fund that the maturing assets would be moved out of the fund and then potentially that capital recycled back into the next projects. So this means that from a SERT perspective, we have very clear visibility on any capital calls of an existing investor. So this is effectively a self-funding, give or take maybe this EUR 5 million, EUR 10 million that we may have to put in over the next 5 years to maintain our 6.7% stake. But it's a very, very efficient self-funding investment. The cash comes back to investors through the redemption of the assets through the sale of the assets through the redemption of the fund. Or as I mentioned to Simon, potentially, we sit there in discussions at that time and maybe look to buy one of the assets as it's nearing completion.

And the final question from Ernest is, given such positive developments, do you see your portfolio valuation in AiOnX in -- to rise in FY '26?

The Board was prepared to make forward-looking guidance effectively on dividend. But yes, without trying to hide behind corporate speed, yes, we would expect an increase in value. We're very happy with the progress the sponsor is making with the various milestones. Getting zoning is important, getting building permits is important, getting the power we already have and then bringing the tenants in to commence construction. We expect all of these assets to be ready in the next 2 to 3 years for those various milestones to be achieved. So you don't wait to the end of the project before you start to see the increase in the value of the land. This -- you would expect as these milestones are achieved to actually feed through into the valuation that can be done either through firming of discount rates can be done in terms of time issues and can be done in terms of cap rates. So there's a number of DCF tools that the valuers use in assessing the risk return profile of each of these assets. And so we don't have to wait to the end of the project to start crystallizing some of the valuation gains from hitting these planning milestones.

Our next question comes from Brian who asks, given 94% of the debt is currently -- is hedged currently, does it mean weighted average cost of debt will decline when the hedge expires even if the ECB does not cut rates further?

Our caps and collars, which last another 1 to 3 years, typically at or slightly lower than the current 2% level. So again, depending on what we do from a blend and extend, we're pretty confident that in this current environment, 3.8% to 3.9% is roughly what our all-in interest rate will be over the foreseeable future, assuming no change to ECB rates.

Our next question comes from Simon.

Just to follow up on that point about the Amsterdam redevelopment and the movement of the asset from the REIT into the business trust. I just wondered, are there any tax or valuation implications from doing that?

Yes, Simon, good question. This is a very friendly Dutch government. So for example, if we do a development, complete development, not a refurbish, but a complete knockdown and rebuild, they will provide us a stamp duty or real estate transfer tax holiday for a period of time. So on a project worth EUR 170 million to EUR 200 million on completion, that would boost our overall returns by EUR 15 million to EUR 17 million. Now under Singapore REIT rules, of course, we can't develop a new project with the intent to sell it. So you have these 2 conflicting rules within the REIT. One, the Dutch are trying to give investors a bonus. And in the case of the REIT rules here, we're restricted by that. However, by moving the asset into the business trust, where we're not restricted from being able to develop and sell, then yes, you as a unitholder in SERT or you as a debt provider, end up with that extra benefit of that EUR 15 million to EUR 17 million of additional development profit provided by the Dutch government.

Our next question comes from Arthur who asks, is it the case that AiOnX fund is also managed by Stoneweg? Can you please share any details as to the fee terms for the REIT to invest in this fund, in particular, whether there are any mitigation for REIT investors from layered fees paying twice at both the REIT level and the AiOnX fund level?

Thanks, Arthur. So firstly, yes, SWI Group is the GP or the general partner or the development manager or fund manager. They are exceptionally aligned because they are also the largest investor in this fund with over 80% of the equity. And so when you look at their recent debut in Euronext Amsterdam, effectively, their biggest investment is in AiOnX. They have other investments, including a 28% stake in us. So it's a really good look through for you as to what the European market is valuing of that stake in their share price, which is now trading at a material premium to their NAV on the anticipation of the growth in this fund relative to us, which is still at a discount to NAV. In terms of fees, we are just an LP investor into the private equity fund. And so there are fees that we have agreed with the other LPs that are in the fund at market levels. And then from a double dipping, as we said at the time of the investment, Stoneweg have waived their fees on this fund on us as the REIT, so no double dipping.

Our next question comes from Andy who asks, DPU and NAV have been falling since the second half of 2019 and increasing the slide down from the second half of 2022 to 2025. The presentations are colorful and promising, but will it convert to a U-turn in DPU for FY '26 or when? High distribution yield is welcome by unitholders when it is due to DPU increase and not falling share price.

Andy, very good observation, and it's something that we've not hidden behind over the last 3 years. We said we would deliberately sell assets to ensure that with cap rates rising through the world and valuations falling. But yes, we would sell assets and delever. What we did not want to do is what many other property groups around the world had to do, which was raise dilutive equity and/or cut distribution payouts. The second headwind has been moving from negative interest rates to a more moderate interest rate environment. And yes, clearly, that had a major impact. And even on last year, the interest expense went up 25%, 26% on the prior year. However, 2026 is the year that we're advising investors through our guidance that one of the analysts just mentioned, I think we're one of the few REITs to do this is that we are saying that, that period of execution to protect the balance sheet is now behind us. And so the impact that that's had on the dividend is now behind us. And that's why we're confident in our comments that we are saying the DPU will be broadly in line with 2025. And in terms of NAV, again, that's now stabilized. You would have seen the growth versus the June half to the December half. And a real turbocharger on that NAV growth is this investment in AiOnX. This is something that I'm not sure if we go back to the page, I think it was 45 or 47, please do the math and work what does that look like from an NAV perspective if we can deliver the current industry benchmarks of returns. So this is a material driver of NAV. May not be a material driver of DPU growth in the short term, but over the long term, very much value accretion coming out of these projects.

Our next question comes from [ Charmaine ] who notes, I noticed that the data center in Cambridge MW has increased from 330 MW to 500 MW. Will that make it the second largest DC in U.K./Europe?

If not the second, certainly top 5. There's a number of mega projects in Europe. But certainly, this will be a substantial project in the golden triangle of U.K. data centers. The location here is excellent. A lot of the big AI operators are there, albeit in smaller projects. And so this is something that is very exciting for the group.

Charmaine's next question is, can we have some guidance on the rental reversions for the upcoming year? Will 2026 be a pivotal year where we can see recovery in DPU growth for investors considering most of the acquisitions part of the EUR 400 million divestment are done both from the NPI of existing 95 assets plus acquisitions plus are we past the rebasing of IR environment?

The simple answer is yes to most of those questions. It is a pivotal year. This is why we are prepared to say that in writing. It's why we -- I think you mean most of the divestments are over from a strategic perspective. We will continue to sell assets to recycle capital back into existing projects and to improve our weightings towards logistics, absolutely. So -- but that will be more tempered and more matching with our acquisitions.

Charmaine has another question. She wishes to find out more about the yield to cost for data centers in the development stage versus the yield to cost for logistics assets.

Yes. So again, we've provided you with some very strong industry rules of thumb that if we invest in the initial stages of a data center project, we should be looking at 12% plus yield on cost. That's not a geared yield on cost, that's yield on total cost. So with debt in there, it's obviously a higher yield. And from a -- if we were to build ground up on a -- on a logistics asset, which I think was the second part of your question, 7%, 7.25%...

Yes. It depends on location. I mean, convert this back from the prime yields and then add development profit of 20% to 30%, and this gets you into the 6-ish of yield on cost. We currently look at one in Denmark in a very good location and the yield on cost is 6.7% there. Just to give an example.

And one more question from Charmaine. What are good examples of peers for SERT?

If we turn to Page 14, I think it is Noel. We've listed there the peers that a number of investment banks have recommended to us for these charts. So that's there on the smaller font.

Our next question comes from [ Aida ] who asks, how do you see rental reversions trending versus FY 2025 levels in FY 2026 for your office and logistics/light industrial portfolios? How under-rented is your portfolio relative to market rates after a strong FY 2025?

Yes. So we had exceptional high rent reversion in 2025, around 10%, both in office and light industrial. If you look back into the past years, we are always around plus/minus 5% for both sectors, and there were a couple of drivers. One driver is market rent growth, and we continue to see market rent growth in logistics and now it's -- it has trended towards inflation around 2%. In office for the well-located office parts, it's even higher, suggesting supply constraints markets for grade A ESG office space in CBD locations. So that's one driver for our rent reversion because our assets are well located. Second driver is asset enhancement initiatives and especially last year that explains the high 10%. We have seen leases, for instance, in Haagse Poort, where we have already invested and will further invest to bring this asset to [ Paris Proof ], a very high energy-efficient building, and that allows for rent reversions around 30% to 40% also in our asset and to owner that was mentioned in the call, we made an improvement of the quality and turned the light industrial and logistics unit and that also drove rent reversion of above 10%. So that's the second driver. And then, yes, thirdly, also in terms of developments, and if we reposition an asset, then we can come back with a much higher rent. Ruyterkade was mentioned, most likely, the rent -- the prime rent at that point of time for delivery will be somewhere between EUR 550 and EUR 600 and currently, the passing rents are EUR 300. So that drives a lot of value growth.

Thank you, Andreas. Our next question comes from Charmaine. Are you able to also share the percentage of tenants to benefit from the increased Europe defense spending?

Yes. Thanks, Charmaine. For those that haven't been following, and we've had a few presentations from some of the brokers over the last 6 months, this step-up -- material step-up in defense spending, the estimate is that if European governments hit 5% of GDP, then you'll see between 35 million and 40 million square meters of warehouse take-up, depending on which country is that's somewhere between 2 to 5 years of normal tenant demand. So it is a major boost at a time where already vacancy levels are low. And so from our perspective, our calculation is about 5.5% to 6% of our tenants are directly supplying the defense industry. But more than that, supply things like semiconductors. So ASML is one of our key tenants SiPearl, which is Europe's largest semiconductor designer out of France is also a tenant in one of our assets. And then we have the robotic companies, again, who knows where their robots are going, but groups like ABB and in Denmark, we also have a very well-recognized robot manufacturer. So at least 6% and on a second derivative basis, more than that.

Our final question comes from Ernest, who asks, given that SERT units continue to trade at 20% discount to book, coupled with 8.1% dividend yield, will we see similar amounts of funds to be set aside for share buybacks?

So Ernest, I'm going to give you a generic answer, which is we use all of our capital management tools at our disposal. We have demonstrated that we've excess cash from asset sales that if there is a material disconnect in the share price relative to the intrinsic value of our assets, we will look to buy stock back. We know that that's a double-edged sword because if we continue to buy large chunks of stock, then we reduce the free float, and that's one of the concerns we hear from a lot of investors, I wish I could buy more or I wish you traded more volume. So we're certainly mindful of competing in the market with investors at a time where we're trying to be as transparent and provide you with that confidence that from an outlook perspective, we're in really good shape. So we would prefer the market and investors, both existing and new investors take advantage of this current upside potential rather than we do it. But yes, at some point, it's a tool that we would use and have used.

That now brings our Q&A session to a close. The IR team will touch base offline with the rest of the questions that remain unanswered. I will now hand back to Simon for closing remarks.

Thanks, Kara. And again, a special thank you to everyone dialing in and for the support over the last 12 months. We've done a lot of things under the new sponsorship, as we said we would. We've delivered a balance sheet that we think is in very good shape with no debt maturing, and we've obviously seen a lot of questions today about what does that mean? Well, it means that we have stable interest rates now at a REIT level as we've worked through the transition from sub-0 rates to now the more normal rates. We've also shown that we've continued to lease up our portfolio. We've re-leased 20%, which is an extraordinary amount of square meter is about 300,000 square meters. And we did it with delivering 10% rent reversion, which translated into like-for-like 5%. And then we invested in a very exciting opportunity that's very aligned with our sponsor in the data center development fund, and that's providing us with a lot of opportunities at a time where our sponsor is certainly growing its own presence in the AI and data center ecosystem through its announcements over the last couple of days, which we're very optimistic will end up having some benefits to the REIT over the medium term. So again, thank you very much for everyone, and we hopefully catch up with you over the coming days and weeks ahead. Thank you.