Trade Estates REIC (TRESTATES) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Costantino, your Chorus Call operator. Welcome, and thank you for joining the Trade States Real Estate Investment Company conference call and webcast to present and discuss the first half 2020 financial results. We have with us today Mr. Dimitrios Papoulis, Chief Executive Officer; Mr. Demetris Panayi, Chief Financial Officer; and Mr. Yiannis Messinis, Finance Manager. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Papoulis. Mr. Papoulis, you may now proceed. Thank you.

Good afternoon, everyone, and thank you for joining us for Trade states First half 2026 Results Presentation. We are pleased with our performance during the first half of the year which once again demonstrates the resilience and quality of our portfolio across both retail parks and logistics serving the evolving needs of the omnichannel retail ecosystem. Alongside solid underlying trading, we continue to execute our growth strategy with important progress across our development pipeline and the execution of our regional footprint and expansion throughout our investment in Sofia, Bulgaria. We entered the second half of the year with confidence, focused on delivering our development program maintaining strong operating performance and pursuing disciplined value-accretive growth. With that, let me take you through the key highlights of our first half results. We have solid operational performance supported by portfolio growth, active asset management, increased traffic and resilient tenant trading dynamics. Our gross asset value has increased to EUR 625.3 million, and our net asset value reached EUR 347.6 million, reflecting both investment activity and continued portfolio appreciation. Our investment plan execution remains on track with Chilca 49% completed and keep developments progressing towards value creation and earnings growth. We have robust financial position that is underpinned by a steady net LTV, efficient cash management, low average cost of debt and high levels of interest rate hedging. Our gross rental income at EUR 21.3 million, an increase of 7.2% over H1 2025. Our net asset value, as stated before, at EUR 347.6 million or an increase of 2.2% over year-end 2025. Our EBITDA at EUR 30.2 million or an increase of 60.4% over H1 2025. Our adjusted EBITDA at EUR 15.6 million or a decrease of 2.7% over H1 2025. Our funds from operation at EUR 10 million or an increase of 0.7% over H1 2025. Our gross asset value at EUR 625.3 million or an increase of 4% over year-end 2025 and our LTV at 45.8% and our net LTV at 43.8%. In terms of our year-to-date highlights. As regards to the Hellinikon retail park, we have obtained the revised building permit for the Hellenic development and the project is now entering into construction phase. The Novita Logistics Center, we have acquired an adjusted land plot, increasing the permitting the permitted buildability and enabling full future expansion of lettable space. As regards to the apropos logistics center of Intercare, we have acquired adjusted land plots and landed and handed over the property to the tenant confirming the successful completion and commercial activation of the investment. As regards the acquisition of Softail. We have agreed to acquire 50% interest in the premier retail destination of Bulgaria, marking a strategic milestone in the company's regional growth strategy. Our retail parks visits have reached 11.2 million visits, an increase of 6.8% over H1 2025, and our tenant sales grew to EUR 261.4 million in H1 2026, an increase of 7.5% over H1 2025. As far as the important financial and corporate management activities, during H1 2026, the company distributed both the interim and the final dividend in respect of the full year 2025 totaling to EUR 15.8 million or 0.13% per share. We have strengthened our interest rate risk management strategy by entering hides with able interest rate swap in April 2026 and covering an additional EUR 50 million loan exposure. During August 2026, the FTSE Russell announced the inclusion of trade states in is developed markets Microcap Index as part of Greece's reclassification for emerging and developed markets. The inclusion is effective as of 21st of September 2026. Finally, we have received the Gold Award of the Greek Compliance Award 2026, and independent competition of our company's strong governance framework, compliance culture and commitment to transparency. With that, I pass the floor to Mr. Demetris Panayi, our CFO, to walk us through our financial performance and position.

Thank Mr. Papoulis. Moving on to our financial performance. Gross rental income increased by 7.2% compared to the first 6 months of 2025, reaching EUR 21.3 million. This reflects the continued strength of our portfolio and leasing platform. The main driver of growth was a like-for-like increase in rental income of approximately EUR 1.1 million. This amount represents a change in gross rental income generated by assets that were in operation throughout both reporting periods. Rental income growth was further supported by the full period contribution from [Topairaklion] as were as iomanagement of rental income from the logistics center in as properties. Adjusted EBITDA for the first half of 2026 amounted to EUR 15.6 million, reflecting the impact of approximately EUR 1.2 million of nonrecurring expenses. Excluding the nonrecurring items, underlying operating performance remained positive with adjusted EBITDA increasing by approximately 4.4% compared to the first half of 2025. Funds from operations reached EUR 10 million, remaining broadly stable versus the first half of 2025 and with a modest increase of 0.7%, despite higher tax charges and administration costs associated with business growth. Looking at our full year 2026 guidance, we are reaffirming the outlook communicated last June. Now turning briefly to the progress against our full year targets. First half performance is broadly in line with our expectations and provides good visibility for the remainder of the year. With gross rental income reported just below 50% of our full year guidance of EUR 43 million, we expect performance to accelerate in the second half. This will be supported by a full 6-month contribution from the Aspropyrgos Logistics Center. Adjusted EBITDA also remains on track relative to our full year target of EUR 52.5 million. It is worth noting again that the profitability of the first half of 2026 was affected by approximately EUR 1.2 million of nonrecurring expenses. Funds from operations reached EUR 10 million in the first half, representing approximately 45.5% of our full year target of EUR 22 million. While this is slightly below the midyear mark, it is consistent with the phasing of earnings during the year and reflects the fact that growth drivers are weighted towards the second half. Continuing with our balance sheet. Net asset value grew to EUR 347.6 million at the end of June, representing an increase of 2.2% compared with the year-end 2025. This growth was primarily driven by the group's profitability bringing the period with net profit reaching EUR 22.3 million. Importantly, this increase was achieved despite the distribution of a EUR 15.8 million dividend payment relating to the 2025 financial year. Based on this dividend distribution and our recent share price levels, Trade Estates continues to offer the highest dividend yield in the sector currently standing at approximately 6.8%. In terms of portfolio value, gross asset value increased by 4% compared with the year-end 2025, reaching EUR 625.3 million. The increase was primarily driven by the fair value gains of EUR 14.8 million, together with CapEx and advances relating to projects under development. The positive valuation outcome was driven mainly by the strong performance of our income-producing assets, reflecting rental growth and higher operating cash flows across the portfolio. Regarding our balance sheet and capital structure, cash and cash equivalents stood at EUR 12.2 million at the end of June 2026 compared with EUR 24.9 million at the end of 2025. The reduction primarily reflects the payment of EUR 15.8 million in dividends relating to the 2025 financial year. Total debt amounted to EUR 286.3 million, representing only a modest increase of EUR 1.3 million compared with the year-end 2025. As of June 30, 2026, our loan portfolio had a maturity of 7.1 years, while our hedging agreements have maturities between 2 to 7 years. We continue to benefit from a highly defensive debt profile with a weighted average cost of debt around 3.19%, while 96% of our total borrowings carry either a fixed interest rate or a tech against interest rate movements. As of June 30, 2026, we have 2 RRF facilities in place totaling EUR 31 million while a third facility of EUR 29.7 million was successfully secured in May and will be drawn during the second half of 2026. Across facilities, approximately 62.5% of the total noncoal amount, benefits from a fixed interest rate with the balance carrying a floating rate linked to the 3-month year-over. You should note here that all loans, excluding fixed interest rate loans, current spread of 1.25%. By the end of 2026, more than 89% of our debt is expected to be fixed rate or Fed with an average cost of approximately 3.12%. This provides a good visibility over our future financing costs. It is also worth noting that we carry -- we continue to carry the AA credit rating, which is the highest in the sector. Beginning with the 2025 reporting period, we started adopting EPRA performance measures in line with the latest APRA best practice recommendations. During this reporting period, we expanded our APRA reporting framework by introducing 4 additional metrics. First, we introduced the EPRA cost ratio, which measures operating expenses and overhead costs as a percentage of gross rental income and also includes nonrecurring expenses. As of June 2026, the ELA cost ratio stood at approximately 29%. However, excluding nonrecurring costs registered in the first half of 2026, a the ratio would have been approximately at 24%. Second, we now report EPA capital expenditure, which provides a breakdown of capital invested in acquisitions, development projects existing properties and capitalized interest. In total, capital costs reported in the first half of the year amounted to EUR 2 million to EUR 4.3 million. On the portfolio side, we added 2 metrics. The first is the EPRA net initial yield together with a top-up net initial yield which provide investors with additional information on the net income yield generated by our property portfolio. As of June 30, 2026, this ratio stood at 7.3%. Secondly, the EPRA vacancy rate, which measures the estimated rental value or EIV of vacant space as a percentage of the EV of the total income-generating portfolio. This ratio at the end of the reporting period is at 3.3%, roughly the same as it was at the end of 2025. Digital definitions and calculations for all aircraft performance measures can be found in our interim financial statement and in the appendix of this presentation, both of which are available on our company's website. Lastly, looking at our shareholder base, there were no material changes to our shareholder structure during this period. Under the share buyback program, the company acquired 47,734 owned shares during the first half of 2026. And this brought the company's treasury share porting to 26,394 shares after June 30, 2026. The floor back to you, Mr. Popoulis.

Thank you very much, Demetris, and for the detailed insights presentation. So continuing with our portfolio analysis and updates. Our annualized gross rental income stands at EUR 46.4 million, our gross rental yield at 7.7%. Our gross leasable area is at 414, 000 square meters over 16 properties. Our weighted average unexpired lease term and 9.5 years, our EPRA vacancy rate at 3.26% and the remaining buildable area at 59,000 square meters. As stated before, our gross consumer sales have increased by 7.5% at EUR 261.4 million. Our number of visits at EUR 11.6 million or an increase of 6.8%. In terms of the gross asset value breakdown, our gross asset value at EUR 625 million is broken down to 79% contribution from retail parts 17% from logistics and 4% in development projects. As far as income-producing assets, there is a breakdown between 82% coming from retail parks and 18% so income coming from logistics centers. As far as our balanced geographical presence, it's carried out through Greece, Bulgaria and Cyprus and with the recent acquisition of 50% of software in all we see a further expansion and a stronger footprint in Bulgaria. As far as the tenant mix, we expanded diversification of our tenant big and the brand Tika now represents approximately 32% of our total income. As far as the sustainability initiatives, we have added a certain installation of photovoltaic panels in the top part race that is about to commence its operation in September year 2020. Also, we further expand our EV super fast charger program throughout our portfolio of retail parks in Greece. As far as our investment pipeline status. We have announced back in year 2020 and year-end 2023, the EUR 250 million investment plan that runs through from year 2024 to year 2028. We have already concluded 49% of the investment plan as stated before or investments of EUR 123.6 million. The remaining of our investment plan is spread through year 2026, EUR 21.6 million, year 2027 EUR 34.7 million and full year 2028, EUR 69.7 million. As far as the 6 projects of the investment plan, atop Parks Iraqi and the AspropLogistics center of Intercare, are already completed and income producing, while the Hellenica Retail Park has entered into the construction phase. Top parks ration is at the finalization of design phase, while the Alacena logistics center is still in maturity stage. As previously stated, the remaining of our investment plan will take us to a gross asset value of EUR 740 million to EUR 760 million of gross asset value by year-end 2028, with the addition of the EUR 126 million over -- between year 2021 and year 8. or an increase from the current EUR 625 million of gross asset value of 18% to 22% over the next 2.5 years. We would like to make special reference to the new acquisition agreed of Soaring Mall, the acquisition of 50% stake of the leading retail destination of Bulgaria. This is a high-performing retail asset with strong footfall, leading international tenants and embedded rental growth potential. It has a proven destination appeal, complemented by the adjusted Inca store owned already by Trade Estates. This provides access to Trade Estates to stable cash flow that is underpinned by strong tenant mix of over 180 tenants and the market-leading position. This is a strategic transaction that broaden statstate's regional footprint, supporting its long-term growth strategy, earnings visibility and shareholder value creation. The transaction closing is expected to happen in the last quarter of year 2026. In the key property figures, this is a GLA of 69,000 square meters, a gross asset value of EUR 161.2 million with net operating income for year 2025 of EUR 12.5 million, a net incoming yield of 7.8%. And annual footfall of 7.3 million visitors, tenant sales of EUR 140 million occupancy rate of 98% and a weighted average and expired lease term of 4.1 years. Further down, we want to -- and closing with the presentation, we want to make special reference to the analyst coverage and to the Eurobank Equities coverage note issued in July 30, year 2026, that is proposed in trade state that is preferred to Greek real estate investment company stock with a buy rating and the target price of EUR 2.37. Also, we make special reference to the initiation of coverage from Edison Company of trade states, and the CEO interview that are all three present and available in our tradeestates.com website. Thank you very much. And we are open for questions.

[Operator Instructions] The first question comes from the line of Martyn King with Edison.

Could I ask you to talk a little bit more about the opportunity -- the wider opportunities in the Bulgarian market, operating conditions are like the structure of the market a little bit. And whether or not this is initially a very attractive asset that came away or whether it signals a more active expansion in Bulgaria.

Thank you, Martyn. We followed Bulgaria very closely, and we know the market quite well. The acquisition of 50% of Softcaring mall provides us with size and along with our existing asset of care, we go with the firepower of more than EUR 130 million in the specific market, which is a considerable size to further pursue income-producing assets. To your question, we consider Bulgaria to be a growth market. As you all know, it has recently entered the Eurozone. It's a market with positive economic growth, very low unemployment rate and a very fast-growing middle class. So that is very, very much consumption driven. So the answer is yes. We -- with a solid firepower gross asset value we review the market for further opportunities once I've got the line.