Vastned (VASTB) Earnings Call Transcript & Summary

Okay. Good morning, everyone, and thank you for joining on the call today with respect to the annual results of 2025 of Vastned. It will be the results in the first year following the reverse merger, which we have been executed last year. So we will go through the operational results. We will discuss shortly the financial results, our financing position, the impact of the cross-border, what we have done and a bit on the retail real estate market, allowing you to -- and then give an outlook, allowing you to update as well on the models for next year and the years after. So in terms of operational results, I think, first of all, here, we see our property value on the 31st of December 2025. You still see that our biggest country is the Netherlands at 36.7%, equal to last year. So there have been no investments, no divestments happened during the course of the year. What you still see here is that we have a bigger increase in value. So you see that the total portfolio increased with EUR 32 million compared to last year. It's a combination of both investments that took place. Those are sustainability investment, but also the creation of apartments, for example, in the Netherlands. But the biggest part is also coming from value increases in the portfolio. Our locations still spread over the different countries and the occupancy rate remains with 98.6%, still high compared to 98.7%. So it's still a good stable, high occupancy rate over the different countries with 100% in Spain, Belgium, 99.1%, so also quite stable. In France, there was a slight decrease following a bankruptcy of one of the office tenants. And in the Netherlands, we see there an increase because some of the stores that have been empty for a longer time have now been filled up and found the correct tenant. In terms of Rental activities, in total, we closed 126 contracts. The like-for-like rental growth was 3.2%. The biggest rental growth was, of course, coming from Spain, where we see 12.6% coming from the Malaga unit, which has been empty in the course of 2024. So this has been now filled up. It was already filled up at the end of 2024. But of course, if you compare on a full year, you see a slight decrease. I think most important as well is that we still see growth compared to ERV. That was what we saw as well in '24. We still see it in '25 as well. The biggest impact and the biggest increase compared to ERV is in the Netherlands, and that is mainly coming from rent renewals where we have higher rent renewals compared to the ERVs that have been determined by the valuation experts. You still see it a bit decreasing in Belgium, there the market was quite equal to the ERVs. And in Spain, since we did not have a lot of contracts and we only signed contract in Spain, additional rent renewal. So you don't see a big increase coming in from there. What is important is that from the 126 lease contracts signed, of course, a big part is still coming from the residential part, mainly in the Netherlands because we have still more than 200 units in residential apartments. And those have now been concluded all internally without any broker. If we look to the value movements, we also compared to 2023 to give you a bit on the trend. In 2023, we saw a decrease of minus 0.1%, which was still big in France as the investment market in the course of '24 was still flat and no investments took place. You started to see that, that was increasing in Belgium and in Spain. But I think if you compare '23 compared to '25, mainly in Spain, you see an increase from 79.5% to 93.7%. That's mainly due to sharpening of the yields because in the Spanish market, there is limited to no qualitative real estate available, retail real estate. So there is, of course, a big demand. That's also increasing the value of the properties. So it's mainly a yield decompression, which we saw there. In Belgium, you still see that there is a bit EUR 5 million increase. France, the market starts to recover, and there are some transactions that are happening. So there, we see a bit of a prudent yield decompression as well -- yield compression, sorry, as well in the French market. The Netherlands as well, 2.4% increase compared to minus almost 1% the year before. There were no divestments took place, except for some parking lots in Namur. Those parking lots have been divested, EUR 600,000, no big divestments. The average yield, and that's then the gross yield, of course, calculated on the total gross rental income is 5.8% of our portfolio. If you look to the net initial yield at present initial, we are around 5%, 5.1%. And then there are some redevelopments ongoing. The biggest redevelopment is, of course, in Utrecht, where we have been working over the last years on the Oudegracht, where 2 retail units are being refurbished and apartments have been created and on the [indiscernible], where we also have now the retail unit completed, and that has now been filled up with LOAVIES, an online retailer. In terms of financial results, you see that, first of all, the EPRA earnings per share increased from EUR 2.18 to EUR 2.22. We calculated here on the pro forma basis, the 2024 numbers. The reason why the 2024 numbers are -- pro formas are used because, of course, otherwise, Belgium is not relevant. So you cannot use that information. In terms of EPRA earnings, you see that there is an increase of EUR 600,000 between the different years. What happening is, first of all, on the rental income. On rental income, you still see that there is a slight decline. The decline is a combination of 2 opposite effects. First of all, we have had, of course, the divestment of the Rokin Plaza over 2024. It was an impact with -- together with all the other smaller divestments of EUR 2.5 million, which was on the divestments. That has been compensated by, first, the indexation of the rental income; and second, the lease renewal at improved terms. And that's, for example, as I mentioned, in France, there we have had some renewals at higher terms compared to the previous contracts which we had. And of course, there is a part of the effect also coming from new rental properties in Belgium. Last year, we acquired 2024 at the end, we acquired 2 buildings, one in Namur, and that also brings EUR 400,000 in revenue. The total property result is also mixed a bit with the other rental-related income and expenses. That is slightly decreasing why in 2024, we had an exceptional income following a lawsuit that was already ongoing for more than 10 years in Belgium. So that has been settled. The money came in, in '24. So it was really exceptional last year. So all in all, given the divestment, we are proud to say that the total rental income quite -- remained quite flat over the year. If you then look to the property charges, there is an increase of EUR 600,000, but you need to compare this together with the general expenses. And we will come back on it later on the synergies that have been realized. But here, first of all, there is a difference as we reported over the last year as well on the internal management charges that are relocated from general expenses to property charges. So it's according to the BE-REIT schedule where we say that costs linked to people for the asset management, all those costs are reclassified to the property charges. So that's why we consider them together. And what is important is that we see a decrease in the maintenance costs of EUR 800,000, and we see also a bigger decrease in the general expenses. All in all, we have had more than -- we have EUR 1.1 million in the general expenses, and there is still some potential for 2026. Why? Because there were some one-off costs linked to the merger that happened because we needed to structure all the entities, the group, the IT systems. So those are all one-offs, which are, of course, impacting this year general expenses and ensure additional revenue income for next year. Portfolio result, there you see the biggest movement, EUR 46.6 million. Why last year, we had still a decrease in the value. We saw it on the previous slide. And this year, we see an increase in the portfolio value. Financial results, EUR 5.8 million. That is mainly driven, if you compare it was last year, also partially driven by the value movements on swaps. So of course, this year, the movement of the swaps was only EUR 1 million in the P&L. Last year, it was around EUR 5 million. But the net interest costs are EUR 16.3 million, and they decreased with almost EUR 800,000 compared to last year. What is the main driver for this? Main driver is, of course, that we have less credit facilities drawn due to the divestments that took place that have been utilized to decrease the outstanding portion and then decrease the interest, of course. In terms of taxes, the current income tax is EUR 1.4 million, mainly driven in the Netherlands, where we have almost EUR 1.1 million taxes in the Netherlands. There is -- and you see that, that is a bit lower than I think initially forecasted in the models. This is mainly due to the restructuring in the group, which we have been doing, ensuring that all an asset under management fee can be recharged, for example, but also the financing is close to the level of the group and is then recharged to the different subsidiaries, which is there then deductible costs. There is a big deferred tax expense. This is something you will see over the next years as well, the deferred tax expenses coming in. Why? Because of the taxation regime in the Netherlands with the abolishment of the FBI regime, you now come to a situation where you have a fiscal value and you have, of course, an accounting value of your property and that will create some deferred taxes. So this is something that will be recurring as of now over the next years. Of course, this does not contribute to the EPRA result. So that is clear of this deferred tax expense. This brings us to an EPRA NTA as we have an EPRA result of EUR 2.22. If we compare then the EPRA NTA is EUR 38.85. So there is also an increase due to the results, of course, and due to the fact that we have an increase in the value movements of the property. The EPRA LTV came down from more than 42% to 39.1% so that is also one of the topics we set forward that we wanted to go to an EPRA LTV below 40%. We were almost there at the Q3 numbers. We are now there at the Q4 numbers. And the interest cover ratio remains quite okay with 3.3x. If we still look to the key figures per share, you still have the number of shares. Of course, that is remained fixed compared to the pro formas. The number of shares entitled to dividend is also 16.2 million, with a net fair value of the shares of EUR 37.26 and a closing price of EUR 31.1, we come to a discount of still 16.5%. The discount is decreasing a bit. Why? Because you see that the share price was increasing from EUR 27.6 to EUR 31.1 at the end of the year. If we look to the financing position, there have been some movements if you compare it. So first of all, we have signed in 2025 for EUR 395 million of new credit facilities. In the course of February this year, we still received for EUR 55 million additional credit facilities. Why? Because you still see in the chart below the Pricoa for 10%. Pricoa was a EUR 50 million US prime placement that has been repaid in the course of January 2026 and that has now been fully refinanced with the additional portion, EUR 25 million from Belgium Bank and EUR 30 million from French bank. We are happy to announce as well that there is now also a French bank in the portfolio coming in. So that, of course, in our financing structure, the structure of our assets is shown as well. In total, we have EUR 493 million approximately of withdrawn debt. There are still undrawn credit facilities of EUR 92.1 million. Of course, you need to take into account that here is still the EUR 50 million from Pricoa in. So that has been repaid in January. So you come then to EUR 42.1 million, but you have to add the EUR 55 million on top. So that means that we are again at EUR 97 million of credit facilities at this moment. The average term of the credit facilities is 3.6 years. If you compare it to the half year numbers, you will see that there is, of course, an increase in the term. Why? Because we have had some contracts with extension options. There are contracts with 3 plus 1 or 3 plus 1 plus 1 term. Some of the extension options have been used at this moment or have been executed. So that means that we are now at 3.6 years. And if we consider the extension options, which are still on it, we go to a 4-year tenor of all the outstanding credit facilities. Consider that the EUR 50 million in 2035, that are credit facilities with an undetermined period. So there, we just take into account that they take for 10 years, but that's an undetermined period. And if you see the EUR 50 million, which was in '26, that has been repaid at this moment, but now extended. So in the next presentation, we will also include with the EUR 25 million and the EUR 30 million on top so that you get a new view on the terms going forward. If we look to the hedging contracts, we are still hedged. We have EUR 350 million of active swaps. We had on the 31st of December, still the EUR 50 million Pricoa with a fixed interest rate. So if we consider that, we had EUR 400 million, which was almost fixed in interest rates. In the course of January, we closed still for EUR 40 million notional amount additional interest rate swaps with an average tenor of 3.5 years. They are not yet included in this sheet, so they will be included as well. And we are still going to have an active hedging policy. For example, if we see that, for example, the interest rates are coming down, and we see that they are coming down over the last days, then we will take the momentum as well to sign some new interest rate swaps so that we can try to decrease the average interest rate because, of course, we will come to the outlook. The average interest rate is going to increase following the situation of the markets. But today, there was still back to decrease. So we are going to look for it. And of course, we can do some blend and extend if needed, in order to decrease even further the interest rates. If we have, for example, one at 2.5%, 2.6%, we can try to decrease. If we look to the reverse cross-border legal merger, it's quite a mouthful. But if you look to it, we have said we will do it for objective reasons. We determined 5 reasons. First of all, organizational simplification, one listed entity, one management, one simplified governance. That has been put in place. We now have one Board of Directors. We have one executive committee and we have one listed entity, so one ticker. Of course, they are listed still on Euronext Brussels and Euronext Amsterdam, but with the same ticker, of course. We have had an optimized debt financing. So that means that we said we signed EUR 395 million of credit facilities. We have concluded an additional EUR 55 million over the last weeks. We have had an average interest rate of 3.2% in 2025, and we have decreased our LTV. Note that all the financing is completed on the level of Vastned in Belgium and that we distribute it then afterwards to the different subsidiaries, and there is all unsecured. So there is no structure secured financing. We have put operational synergies. As mentioned before, we have achieved EUR 1.1 million in the general expenses, EUR 0.9 million in the property charges, and there are still one-off merger costs for a total amount of EUR 1.1 million. So if you consider that, we came to a EUR 2 million synergy realization this year, but there is still a potential of EUR 1.1 million on top. Note that this is only for the cost structure. We did not take into account any synergies that have been realized with the group restructuring on the fiscal side. So that is not then taken into account in the synergies. We said we will do it for an increased market capitalization. So we have some regional stock coverage from both ABN. We have it from ING. The globe is going to update the report as well. So it's no longer under review. And I think we are also proud to say we entered in 2025 the BEL Mid index in March, and we received in January, the award of the BEL MID Company of the year. So this was also a nice achievement, which we can be proud of after the merger. And then the last topic was the potential for growth. So we are no longer constrained by the suboptimal structure, as we mentioned in the beginning. So we now are going to look for interested investment opportunities. But we only will do it if they increase both shareholder value, meaning both earnings per share and both dividends per share. That means that we are going to look for interesting investment opportunities, which are, of course, higher yielding, but still on a qualitative side. And we will do it in the 4 countries where we are active in. It's not that we are going to expand to other countries because we have now in our 4 countries, we have our structure, we have our people, we know the market. So that's what we are going to look for. We have been very disciplined over the last year. We said in the beginning of the year, we will do it only for looking to the -- we will ensure that we realize the synergies and that we focus on the integration of the company. So after the integration of the company has now been finalized, we will go back, look for additional growth, but on a prudent side. So we are looking for the market where new opportunities will come. If you look to the real estate market, we kept it quite short. But in the end, the retail real estate market, there are only 2 things important. First of all, omnichannel. It was a word that has been used over the last years. We saw it a lot, but we still see that it's now increasing. Pure online retailers are opening those brick-and-mortar stores. And we see with the opening of SOPHIA Mae, it was on the Heiligeweg Amsterdam. It was a success. That also attracted then in the other stores in the street, the vacancy that was there was also now filled up because you had one of the persons who was really attracting additional people. We have now Loavies also a Dutch online brand, which opened in Utrecht. We have Meet me There, NotBranded, Geske. So also some online retailers who are starting to open those stores. So what we saw a bit in the past is that you had local persons, the local stores. Those are now being replaced certainly in the smaller units by some pure online players, some influencers who are starting to open stores and try to give the experience. So experience is really important in the high streets. And that brings us back to location, location, location. Everybody says it, but it still remains the case. If you are on the good spots and you have qualitative real estate on the high streets, then you will have a lot -- the vacancy decreases, and we can show it, of course, with the 98.6% occupancy rate, which is demonstrating that our model pays off. And of course, we still see that there is an increase in the market that we still see that people are -- for example, the city centers like in Antwerp, Schuttershofstraat have been refurbished, it became pedestrianized and then you see that it attracts again to new people. There was a bit reluctance from the retailers to enter that market, to enter that street because they say, yes, but the works will come, we will have a decrease in our turnovers. But now the street has been finalized, pedestrianized. We still see a lot of people. The footfall is increasing and all the vacancy in the street is going away. If we look to the outlook, which we have set forward. So the interest rate for '25 -- sorry, this needed to be '26 is approximately 3.8%. The interest rate for '26. I will send the final version of the slides after. The EPRA result for '26 is also -- will be decreasing to EUR 2.05 to EUR 2.15. The reason of the decrease is, of course, the higher financing costs. We said at this moment, 3.2%. We are now going to 3.8%. This is also explained by the fact that we had the [indiscernible], which was there in '25 for a full year at a lower rate because it was a 10-year tenure that loan had. And then on the other side, we still have for EUR 150 million of swaps, which expired in September 2025. Those have been, of course, changed all at market conditions. But of course, that brings us at a higher interest rate. And that brings us to the EPRA result, but the impact of the interest rate is due to indexation due to the completion of some redevelopment projects, partially mitigated. And of course, we still have a good cost control over the next year. So following this additional cost control, we try to increase, of course, our EPRA result. That brings us to the operational synergies. As mentioned, we have this potential of EUR 1.1 million, which we keep in mind. And then we will also look for asset rotation. We said, okay, there is first external growth, which we are looking for, but that also means that we are going to do some asset rotation. Why asset rotation, you still have some area, the strategy is really to get everything centralized that if you look to the portfolio over the different countries, you see that everything is centralized. But sometimes we have in one of the corners of the country, for example, a stand-alone store. So it might be possible that we sell that stand-alone store, for example, to a local party because they know the market better than we do, and then we can recycle the money to do some investments going forward. But it should be -- we will -- we are not forced to sell, I would say. So we will only sell at the right price, and we will only sell if it's above book value and that, of course, the yields are good. And we will, of course, not sell something at 6% and reinvest it at 4%. We need to ensure that we will not destroy any value so that we keep the value in our books and that we keep the value for our shareholders. That was it with respect to the presentation.

So I will now open the question for questions. So yes, Amol, please go ahead.

A few questions on my side. First on the organic growth, I saw an acceleration in Q4. And if you could provide us the split between indexation impact and the rest? And if there is anything specific that happened in Q4?

Q4, the indexation we have had, of course, the contracts were running. But what we see in Q4 is also some of the redevelopments and of course, some of the vacant stores have been completed. For example, in the Netherlands, we have had some impact for example, have been completed or relet on [indiscernible]. So of course, they started to generate some additional money, and that resulted, of course, in the fact that we had an increase in our rental income in the fourth quarter. The indexation overall is around 1.5%, 2%. It depends on the different countries. And that's, I think, also what we expect for the next years. So we will have our contracts that will be indexed. Note, of course, that over the last years, we had a lot of discussion with tenants and tenants were asking, for example, an index cap. We do not have a lot of contracts with index cap. So that is something I can assure you. And if there is, for example, an index cap, it's, for example, in the limited contracts where we have it, I can count it on my 2 hands, I would say. But then we have, for example, said, okay, at 5%, we index for full and above 5%, we will cap the index in two. But then we still have -- if it's, for example, 7%, we will still index 6% to the tenant.

And what are your expectations for your portfolio given that you have roughly 30% of the portfolio in France and France indexation will be close to 0, I guess, for 2026.

In France, we calculate at this moment, I think it was around 1.3 the indexation for France, which is now calculated by the statistic office in France at the moment in the beginning.

Which index are you using for the French asset...

We are using the bank in France. And they put it in the beginning of the year at 1.3. So that's the indexation we put forward.

But you don't choose the indexes that are calculated by [indiscernible]?

No, we used -- for example, there we use the Bank of France. In Belgium, we use, of course, the CPIs also from the government that have been put forward, but not...

Okay. second question on my side on the synergies, the EUR 1.1 million you said are still possible to extract. Can you give us some, let's say, details on how easy and how straightforward this EUR 1.1 million cost savings will be able to achieve in 2026? Or are they subject to some market evolution or changing?

So they are not really subject to market evolutions. -- are really some one-off costs, like, for example, all the fiscal advisory we needed to have for the restructuring of the group. As you know, we created 8 new companies in the Netherlands, and we shifted all the assets. We had some fiscal advice with respect to transfer pricing. So all those things in the first year, of course, on the fiscal -- on the corporate income taxes, which we had. So considering all those topics, I'm quite confident that they can be realized, knowing as well that, for example, there are also some topics linked to, for example, IT landscape because we were also on 2 different platforms. We had the tenant, we have the dotcom tenant. So we needed to ensure that our IT platforms were communicated to each other. And so all those costs were now one-offs, and we implemented the consolidation tool, et cetera. So all those costs are one-off, which will not be there going forward.

And last question on my side on the dividend guidance, you didn't provide the guidance for 2026. Does it mean that we should just assume the minimum of 80% payout to Belgium REIT status?

But it's something, of course, the Board needs to decide going forward. But I think what we are willing to do is, of course, that the indexation inflation is also foreseen in the dividend because it's not the purpose that we are going to have a fluctuation in the dividend, a low, high, low. No, we try to get the dividend at least stable and compensate for the indexation. But that's something, of course, the Board needs to decide going forward. Perfect. I think, Alex, you were second.

A few questions, mostly on the guidance range. So do you assume any acquisition or disposals in that range?

In this guidance, no acquisitions, no disposals. So we communicated this is flat business as usual, considering the current portfolio.

Okay. That's clear. And for the current tax amount, so it came in a bit lower in '25. What should we expect in '26?