VGP NV (VGP) Earnings Call Transcript & Summary

Welcome to the VGP's conference call. Today's call is being recorded and will be hosted by Mr. Jan Van Geet, CEO; Mr. Piet Van Geet, CFO; Mr. Martijn Vlutters, Business Development; and Ms. Nelleke van Rijswoud, IR Manager. Mr. Jan Geet, please go ahead.

Okay. Good morning, everybody. Sorry for the delay. Welcome to the webcast on the review of VGP's results over the first half of '22. Sorry to have kept you waiting. There was a technical issue on the line. It's, here, maybe a first. I'm first going to go through the presentation, which you can maybe also follow on line with the highlights of the first half of 2022. Our net profit for the period amounted to EUR 153.1 million. That's on the back of strong business growth across the portfolio. We have signed and renewed rental income of EUR 35.4 million at the 30th of June. Meanwhile, that's gone up to EUR 41.6 million. The total signed rental income of EUR 281.1 million, that's including 100% of the joint ventures and went up with roughly 10% at the 30th of June. Meanwhile, that's increased to 12.4%. And the 2 last months has seen a nice increase of signed lease agreements. We currently have 1,346,000 square meters under construction, which represent 40 projects and EUR 88.1 million in additional annual rent once it's going to be fully built and let. And that's currently 93.4% pre-let already. It was 87.4% at the at the 30th of June. Our land bank extends to 11.3 million square meters, that's only 3.3% increase year-to-date, but we also deployed a little bit. And we can construct on that more than 5 million square meter of future lettable area. We can virtually double our business on our land bank, which we have today. We delivered and it spread an absolute record, 334,000 square meters of lettable area in the first half, which represented 17 projects. That's EUR 17 million of annualized committed leases, and they were virtually completely 99.3% let. And we also acquired our first brownfield in France in Rouen, which is a really nice location at a major city of Normandy in the first half, of which we are very positive. And we are starting up our operations in Sweden and Denmark in the second half of this year. The closings with the joint ventures, which we did in the first half, and it's a bit special because we did 1 closing on the first of July, just after we reported our numbers, 5 minutes past midnight. They delivered strong gains in comparison to our numbers, which we had in our books on the 1st of December. We did EUR 469 million of gross asset value transfers, sold to the joint ventures. Out of which we recycle EUR 350 million of gross proceeds to date. We are going to complete VGP Park Munich. We handed over already part of the premises to BMW, and we're handing over, as we speak, to Krauss Maffei. And that should deliver an extra minimum cash proceeds of EUR 73 million in the second half year. And so far, it's completely funded by money from the 2 capital partners. So we are going to deleverage and then there will be another both -- some coming in next year once we have re-leveraged VGP Park Munich. And then we have agreed tentatively with Allianz on the first closing of our new joint venture, which is going to happen on the 15th of November this year, with a relatively large seed portfolio, which is going to be transferred to the new Europe point venture. Our billing remains very low at 33.5%. That is taking into account the EUR 82 million, which we gave insight on the first of July, so our cash balance was EUR 730 million on the 1st of July in the morning. We have a total equity of EUR 2.197 billion. And as you all know, we issued the bonds on the 10th of January this year, EUR 500 million, which -- on a 5-year tenure, which is at 1.6% cost and EUR 500 million in an 8-year tranche. It's under 2.25% cost, which, in retrospective now, has been a very good move, I think, and relatively cheap money in today's market. On the financial performance, we have an ongoing strong performance. We have -- in 1 years' time, our total portfolio value grew with more than EUR 2 billion in value. We have a continued strong growth in the committed annualized rental income, which is the main indicator of how our business grows. And you can see it's gone up by 48% in 1 years' time from EUR 225 million to EUR 281 million, and it's currently EUR 287 million. Our operating profit and the higher net rental income is mitigated by a decrease in net valuation gains on our standing assets, but it's mainly spending up. If you look at our profit, then the only difference between last year and this year is the valuation gains on our standing assets in the Randgold portfolio is EUR 53 million, less than last year when we had a big yield compression this year. The compressions are a lot modest so far. And our earnings per share, they have decreased a little bit, but still up to the EUR 7.01 per share. It's a little bit affected by the share issuance, which we did last year in the fourth quarter. If you would compare it on a like-for-like basis, we will deliver EUR 7.44 per share. And in ESG, which is more and more important in today's challenging energy market, we have -- I will go quickly through the achievements and highlights of the first half. On our green building certification, all of our buildings, which we started after 2020 have received Green Building Certifications. And this represents, just to give you an idea how fast we grow, already 61.2% of our total portfolio as of June 2022. On the VGP renewable energy side, that's totally our best-performing investment today thanks to the rise in the energy price. We have 120.9 megawatt peak now installed under construction and another 53.7 megawatt peak in the pipeline. And if we look at the actual news today, so not annualized, then the income on our solar panels, which represent roughly -- we have already EUR 48 million invested in the site. We have 60 -- more than 60 -- almost EUR 70 million of commitments in total, including the EUR 48 million, and we will need over EUR 40 million to go and deploy the 53.7 megawatt peak. So the investment will go over EUR 100 million in the near future. And we have -- if we look at what is yielding today, so non-annualized until now, we have on our income generating assets already a yield of more than 14% in this year. So it is really going very, very well, thanks to the high energy price. We are on track to achieve carbon neutrality by 2025. That's our commitment and a 50% growth reduction on the Scope 1 and 2. All of our VGP offices profit now from a green energy PPA contract as of the 1st of January 2022. So all the energy which we use inside of our offices in green and we have committed ourselves to a 55% reduction in new Scope 3 emissions by 2030. And all of our new buildings as of March 2022 will be realized without the gas source heating systems wherever it's possible. So -- and that's the bulk of our new investments on all -- going on other alternatives than gas heating. On the operational performance over the first half. So we signed our net rental income increased by -- our rental income -- our contracted rental income increased by 9.7%. As I said, actually 12.4%, of which EUR 22.4 million new leases were signed in the first half year. So there is another EUR 6.1 million added to that over the last 2 months. Our lease portfolio is very well diversified. We have in total 417 current contracts, which drives committed annualized leases to 281 at the 30th of June from 287 in comparison at full year 2021, and it amounted to EUR 256 million. And our occupancy rate is 99% for the completed portfolio at the moment. If we go to the portfolio growth, then you see that our compounded annual growth rate stands from '18 until the first half of 2022 at 41.56%. We have an expected capital expenditure, which is predominantly based on pre-let construction, we grown a little bit more cautious, and we are really very well let today. As I said, 93% -- more than 93% of our building under construction is pre-let. It's a lot bigger than last year. Our CapEx. We expect a CapEx of around EUR 1 billion in this year. And but we have a significant cash balance expected to be recycled from joint venture closing in the remainder of 2022, which have now been agreed with Allianz. And you can see in the 2 lines under the graph that it works very well. The capital expenditure over the last 2018 has been EUR 2.6 billion, and we recycled, out of our joint venture, closing EUR 1.55 billion so far. We have a very diversified investment portfolio. If you break it down by country, of course, you can see Germany is the biggest one. It's also the biggest economy, where we are active in. But all of the other countries are doing very well and growing very fast. And if you look at the investment portfolio by states, then you can see that it's shifting more and more to what's completed today. We have EUR 4.3 billion of completed assets, and we have EUR 1.5 billion of assets under construction on our balance sheet, and the development plans represents 11% of the total asset -- value asset -- asset value with EUR 0.7 billion. Our ultimate goal is to have portfolios of at least EUR 500 million of gross asset value in each of the countries where we are active in and in the bigger economies, of course, is to grow bigger, so over EUR 1 billion. We already have that in Germany and virtually, we'll have it soon in Czech Republic, Spain and the Netherlands, and we're trying to grow the other countries also as fast as we can. We are really fully let on a long-term basis. These numbers which we show are virtually always oscillating around the same because our lease agreement, which we signed, are always very long term, 10- and 15-year leases, most of them. And actually, you see that in our own portfolio in the first half, we are at 97.5% of occupancy rate. And that is mainly because we have moved 2 of our existing tenants into a lot bigger buildings. They have expanded and we are re-leasing, as we speak, the place -- the space which they are going to make vacant in the second half year. And that will -- but we already have a lot of tenancy and there's a lot of strong demand in the market, and we are very certain that it will be re-leased before the year-end. The completed -- the combined occupancy of the portfolio stood at 99% and the weighted average lease term is 8.3 years and the weighted average lease, before the first break stands at 8 years. So that's a bit where we are today. If you look at the diversification of our tenant base, then it's -- as we grow very fast, also it's becoming more and more diverse. And our top 10 clients' accounts only for 34.3% anymore which is divided over a lot of leases. It's not just everyone in the top have more than 1 lease. Krauss Maffei is 3 different leases. It was, 2 years ago, if you remember, 21% of our total lease portfolio. It's come down to below 10% now, and it will go down further as we move along. Amazon, it is not only 1 lease as is often mentioned in the Belgian press. It is 6 different lease agreements which we have with Amazon. We have 3 different lease agreements with Zalando. We have 6 different lease agreements with Rhenus Logistics in different countries. So it's a spread. And if you look at the tenant portfolio breakdown by industry segment, you see that logistics takes up 38.6%, which is mainly end users and then e-commerce stayed stable at 25.2% and light industrial, 32.3%. For us, this mix is very important, because going forward in Europe, if you want to go more and more into brownfields, which are politically always a bit tough and most of the time, they have employed a lot of people before, we need to be able to convince the local governments that we are a partner which doesn't only bring just big warehouses with low employment, but that we can also bring on really challenging projects, which have a lot of technical parameters and that is where we are focusing on the technical competence inside of VGP. Out of the 385 people that work for us now, more than half of them are engineers and are very specialized in building ourselves buildings, which are a little bit more challenging, which assure long-term leases with very nice tenants inside. That's what we are focusing on going forward. In the first half of 2022, we delivered 17 buildings, which represented 334,000 square meters as we already said, EUR 17 million rental income through 24 different talent contracts, and it was virtually 100% let. The largest share of new development delivered from our -- from tenants active in logistics. We aim to start up in the second half year roughly the same amount or a little bit more 270,000 square meters now which is already complete. This is more than 90% pre-let, and we will certainly start up some other buildings also in the second half year going forward. Our target in the pre-let when we start up is at least 80% pre-let, 6 months after the start of the construction, which we are well above today. So we have a big [ presence ] in-site. And we can see a couple of examples that we have delivered in Leipzig in Germany, in Magdeburg, where we are just now have signed a very big new lease agreement with a state-owned company. And in Nijmegen, where we also signed a new lease agreement with a very large e-commerce player in May, which takes a whole building of 60,000 square meter for a 10-year lease. Okay. In delivery of new developments in the second half. We expect to deliver more than -- we expect to deliver actually more than 750,000 square meters. We said here several hundred thousands, so we'll never know, maybe it can shift a little bit because of fit-out reaches which we have in the second half, which would be an absolute record. So -- also our recurrent income generated -- income generating assets are going up very fast next year. This year, we will activate more than EUR 80 million of rental income, which will actually start paying from this year and next year on. So our return to income really goes up very fast, that's on the total of EUR 5 billion. We delivered EUR 1 billion this year, but 25% of our total portfolio, which we delivered in 1 years' time. Once this -- the 700,000 is actually, as I already said, is 93-and-a-bit percent pre-let of the total, which is under construction. The 700,000, which are going to deliver is almost all completely pre-let. It represents EUR 51.5 million of rent. And the industrial tenants make up the biggest part of the pre-let inside of this portfolio, which we are delivering this year with [ Laatzen ] and Munich and the main components of it. Our pre-let portfolio under construction expanded significantly. So as I already said, we have 40 buildings under construction, which represent 1,246,000 at the 30th of June. In total, this equates to EUR 88.1 million of new lease contracts. It is now 93.7% pre-let. And Western Europe for the EPRA one from the view, it's maybe interesting to see that we are shifting a little bit more to Western Europe. Of course, the economies are bigger. Eastern Europe states are as important for us as Western Europe. We are looking at Europe as 1 market but Western Europe represents meanwhile 70.5% of the portfolio under construction. And in the second half of the year, we foresee, as I already said, to start up at least 270,000 of new development. We have to start up at least 270,000 new developments which -- because we are actually already more than 90% pre-let, so we need to start them off going forward. If you then look at the developments on the geographic breakdown, you see that Germany is still the biggest market by 61%. But going forward, Spain, Czech Republic, Romania and Hungary are growing all very fast. And also the other countries are going to start up quite some big developments in the second half of the year. On the picture on the right side, you see VGP Park Giessen Am Alten Flughafen, which is a brownfield, which we bought 1.5 years ago, which is fully let now, 1 part to Zalando and the other part is UPS and Rhenus. Zalando is a 15-year lease and the Rhenus and UPS are a 10-year lease agreement. It's a lot further in construction as is visible on the picture, and we will deliver it in the course of next year. On the land bank, we are focusing only on what we consider to be proper locations. And if you look, the land bank owned in December 2021 amounted to 7 million square meters, we deployed 0.5 million or more square meters meanwhile, it's already more than 0.5 million square meters in 2022. We acquired 1.5 million square meters in the first half year. And we committed to another 3 million -- 3.2 million square meters, which is things which we want to buy in the next 12 to 24 months. So we have another 601,000 square meters with LOIs. So we are doing our due diligence, which is not committed yet. And if you look at the geographic breakdown, you see there is a more equal spread there where we have a lot of land in the future, we bought a lot of land in the Netherlands, in Spain, in Austria. And I will go through some of the highlights later on. We have a couple of examples in our presentation prepared. Thanks to the energy crisis in Europe, we have also seen, over the past months, that some of the traditional industrial projects in Germany are really thinking about reorganizing themselves with this high energy cost. And there have been -- we have seen a number of brownfield projects in different countries come to the market now which we consider to be really top locations and very attractive opportunities where we can get high returns on and which will be our main focus in the future going forward, where we really want to focus on. That's also why we are investing so much in technological competence because these are things which we'll need to be developed in close cooperation with the local communities. We believe that there is a lot of value inside of these new opportunities. I come to the financial performance of VGP. I'll first go to the income statement. So our operating profit was amounted to EUR 190.5 million compared to the first half of 2021 when we had EUR 239.9 million. The higher net rental income is mitigated by decrease in net valuation gain and the joint venture contribution. The joint venture contribution profited last year from a very big yield compression. And this year, the yields have been fairly stable. But if you look at what we have started up, then we can say that our margins on the projects under construction are stable. And I think that's the most important thing to look at. That is thanks also to the fact that we have been able to charge through a lot higher rental. The rental prices in Europe have really grown a lot in the first half of 2022. On a look-through basis, our net rental income is up by 48% year-on-year. That's an increase from EUR 31.9 million to EUR 47.3 million over the first half year whereas the total net rental income at the JVs at 100% increased to 29% to EUR 82.9 million. The net valuation gains on the bond property portfolio of EUR 155.9 million increased an extra EUR 47 million of realized gains on the disposals to the joint ventures, versus EUR 12 million in the first half of 2021. So if you know that we did EUR 464 million, you can see that we booked an extra 10% profit against the 1st of December numbers. Yes. Then we have EUR 108 million of unrealized gains, including EUR 40 million on held for sale, net of EUR 6 million of broker and rent fees. And that is resulting from a EUR 78 million profit on first time valuations and positive revaluations effects is EUR 36 million. The standing property portfolio is valued on a weighted average yield of 4.57% versus 4.64% as of the 31st of December 2021 which is mainly due to another mix of the geographies where we are active in. The sale of profit from the joint ventures and associates lower -- is lower by EUR 53 million, but as I said, that's a [ new ] lower revaluation profit, because last year, the yield compression contributed very positive in the first half of 2021, and that hit to a lesser extent at the moment. And the change, as I already said in the report, that yield is due to the portfolio mix change. And if you look at the administration and other expenses, our administration expenses are in line with the comparable period last year. And we spent EUR 3 million. We were very much hit after the war started because in Eastern Europe, a lot of people on our projects and sites are -- most of which from the Ukraine. They went back to fight and we decided to spend EUR 3 million as a contribution in saving of the Ukrainian refugees, which has been spent to the United Nations to have them set up their first tents to accommodate them. If you look at the operating EBITDA by segment, which we report every time, then you can see that on the rental income, our EBITDA went from EUR 33.4 million to EUR 47 million. And that is really taken clear, just the rental income without any revaluation gains, and we have administered our administration expense, which we needed to incur to be able to do that to each of the segments. On the development side, we have our EBITDA went up to EUR 147.1 million and that is actually -- if you look through at our developments, which we have on our balance sheet, which are ultimately going all into the joint ventures, so -- which we are going to sell at market value in the joint ventures. And then on the property and asset management side, thanks to the fact that our portfolios in the joint venture are growing so fast. Also, our management fee income is growing a lot and the EBITDA, which we made out of EUR 6.7 million, totaling for the 2 together, EUR 203 million of EBITDA, which we can say comes out of the operations. On the asset side of the balance sheet, the investment properties and our own portfolio, including the disposal group held for sale totaled EUR 2.688 million -- EUR 2.688 billion, which consists of the completed portfolio which has grown tremendously. If you compare to last half year, it was EUR 195 million. Now it's more than EUR 1 billion, EUR 1.078 billion. The same goes for the under construction. Last year, EUR 709 million, now under construction is more than EUR 1 billion, EUR 1.042 billion, and the development plans went up from EUR 359 million last year to EUR 569 million this year. The investment in joint ventures and associates increased to EUR 965 million, reflecting the joint venture #1, which is now fully invested. And there, we have an equity share of EUR 646 million in site. The first joint venture it is -- it covers the geographies of Germany, the Czech Republic, Slovakia, and Hungary. The second joint venture, we have EUR 163 million of equity in site. That is the joint venture which were made for the other countries, Spain, Romania, Italy, the Netherlands, Austria and Portugal. And the third joint venture is a special one. That's the development joint venture, which we did together with them. It's unique. And there, we have EUR 131 million of investment in site. And then we have another -- some other development joint ventures, which is including the biggest 1 in Moerdijk, in the Netherlands. In Moerdijk, we have -- we are partnering with the Harbor of Moerdijk, which is the second largest port in the Netherlands and where we can develop, over time, more than 470,000 square, almost 480,000 square meters. We think that we can start construction there next year. It's a really nice development. And then if we look at other noncurrent receivables, they increased to EUR 332.3 million from EUR 264.9 million, which mainly reflects shareholder loans. So to the VGP Park in Munich, where we are co-funding together with Allianz, our development, our park in Moerdijk, where we have bought, meanwhile, all of the land plots, and we are investing in infrastructure and preparation of the foundation, EUR 71 million. And then we have some other joint ventures. We have 1 in Spain. We have another 1 in Germany, where we invested, in-site, the EUR 92 million in terms of -- to other joint venture, EUR 92 million. And then we have an increase of the cash position compared to last year to EUR 648.5 million at the 30th of June, which changed to EUR 730 million at the 1st of July. And besides that, we have secured another revolving credit facility, making our several multiyear unsecured revolving credit facilities. They are undrawn and they are available and the run for the 5-year period and they increase to EUR 300 million of available credit facilities in -- now available in the second half of 2022. If we go to the equity and liabilities, so the shareholder equity is now at EUR 2.179 billion. And the main variation for a dividend payout of EUR 149.6 million and then the profit contribution of EUR 153.5 million. The total liabilities went up to EUR 2.691 billion in from 1.707 billion. Decrease of the -- there is an increase of the noncurrent financial debt of 842 -- EUR 843.2 million. As you know, we issued a bond of EUR 1 billion in a dual tranche of 5 and 8 years. And we reclassified the bonds which is due in April 23, to current financial. And that's about of EUR 150 million in the second half. We have another bond of EUR 275 million, which is also going to be reclassified to current financial debt to be repaid next year. So there is a small amount in the short time, which we issued EUR 4.5 million, which needs to be repaid. The consolidated gearing ratio, if we take into account the money which came in on the first of July, amounts to 33.5%. And that if you look at the proportional consolidated loan-to-value, that stood at 54.6%. If you look at our covenants, then we -- I think a tsunami really needs to happen and a very big one like we've never seen before, before we get anywhere near to our covenant. The gearing ratio stands at 35.2% and our covenant is 65% on the bonds. The debt service cover ratio stands at 17.5x and the covenant is 1.2x bigger than or equal to 1.2, and the interest coverage ratio stands at 22.6x in the first half and our covenant is equal -- bigger or equal to 1.2 So we have a total debt of EUR 2.362 billion. We have EUR 730 million cash as of the 1st of July, EUR 300 million unutilized credit facilities, 100% of unencumbered assets. The only encumbered assets, which we had was in the Baltic states, and we repaid our loan there. We have a 5-year average debt maturity, and our average cost of debt is 2.29%. And if we repay next year our bonds, which we intend to do, then our cost of debt actually goes down because going forward, our bonds, in time, become cheaper and cheaper when you look at it. So I think that's a nice -- you can see the maturity profile of the financial debt. Next year is a bigger year to repay debt. But then the year after until 2027, we have a lot of time to grow. I'm going to give you a bit of project update. So the VGP has carefully, but well-chosen going forward with acquisitions of land plots for -- to ensure its future growth. And the first acquisition we did is in France, a new country that we entered, where we are very positive on. We see very positive signals in the market. We bought a large land plot in Rouen. Rouen is a big city. It's the capital of Normandy with 550,000 inhabitants and a lot of big cities around it. So it's a very big economical center in France. The land side, which we bought is 321,000 square meters, and we can potentially build more than 150,000 square meters. We already -- with just a lot of interest for the location, there is -- a part of it, there is a building permit issues, which we want to modify and we think that next year, we will start development here. We hope to be able to develop it relatively quickly. Our team in France is also proving to be really very good. We're very proud of them. The second thing which I wanted to show you is our unique development. The completion will be done completely in the second half of 2022. You can see that it's in a very well advanced stage. In total, it will be 340,000 square meters of gross lettable area. There is 1 building which has not started yet, which is a potential expansion and it's fully let 100%. And it will be -- latest hand-over date is the 15th of November, and we are more than in time, we can hand it over quickly. Then we have one of the nicest developments, which we are doing is really in Giessen Am Alten Flughafen, in Germany. It's an old American air base, which -- it's a brownfield which has been completely redeveloped. It's more than 30 hectares of development plans, and we completely leased it out in a couple of months of time. It's 212,000 square meters of gross lettable area and the construction started, and we are well within our budget. So we believe that this is a very big profit contributor in our numbers. If you look at Spain, we bought -- and you see the tendency is that we're going more and more into brownfield. And we bought a very big [ CPR ] which went bankrupt in Bilbao. And meanwhile got all the permits to start the demolishing of the old [ pokes ]. It's really a very -- it was a very, very brownfield. We had in our calculations that we were going to have to pay EUR 5 million for the decontamination and the demolishment. Thanks to the rise in the steel price in the first -- in the last quarter of last year actually the first quarter of this year, actually, we are paying us EUR 3.5 million for demolishing and then for decontaminating it. So it is a lot better in our balance sheet than we have foreseen. And meanwhile, there is -- it's -- what you see now is not any more relevant today. It's almost a new greenfield. Most of the old buildings has been demolished and taken away. And we also have a lot of interest in the dry docks because there is a shipyard around it. And we are in very far and pumped negotiations with a big industrial group to make floating pontoons with the unit inside of our -- I think, really, the new energy industry is very interested in the location, which has a very good access to the sea and more than 1.3 kilometer of [ case ] directly at the water front. So that's only a little selection of what we are working on. We're growing further on. We see a lot of opportunities in the market. And we need to make sure that we remain with a strong balance sheet, and that we have enough capital available to react to new opportunities going forward. And to summarize it, I think that, all in all, being prudent nevertheless, we did a very strong financial operating results over the first half of 2022. We had a robust growth. As I said, it's more than 40 million of new or renewed lease agreements signed. We also used the momentum to -- when we were placing solar panels on the roofs and we were negotiating with our tenants to prolong our lease agreements with existing tenants. So that's, hence, also part of the EUR 35 million is renewed and very long-term renewal lease agreements existing ones. We have -- we've seen a significant rental growth in most of the countries. You will have seen that our profit contribution from the new assets under construction remains at a very nice margin. And that's thanks to the fact that we have been able to push through significant higher rents in most of the countries, which we are active in and especially in Germany. And yes, we have been more prudent towards rent acquisitions in the first half of 2022. And we see that there is a lot of opportunities coming onto the market, and we think it is wise to be prudent and to wait for these opportunities because it's going to ease a little bit from the big scarcity that there was, and we're going to be able to source them a lot better than before, I expect. There is a bit volatility on the energy market, which has given a significant boost to our renewable energy revenue potential. As I said, non-annualized, we are now at 14% -- more than 14% in here already generated in this year on our investments on the income-generating assets on the solar panels. If you extrapolate that, of course, the meter is in front of us, but if you extrapolate that to the whole year, we're going to generate more than 20% yield on these investments in this year which is thanks to the good weather, I would say, that's 1 advantage. But of course, also because of this very high energy prices, which I don't expect to come down very soon. And so it's also been an accelerator for our tenants' transition towards renewable energy consumption across regions. It's also these high energy prices is also -- it confirms the trend and there is nothing wrong, I think, with the industrial and logistics sector. Going forward, people will have to move to more energy-efficient buildings and energy-efficient solutions. And it supports the strong fundamentals of our industry. We have done significant cash recycling through completed and anticipated joint venture closings. On the 15th of November, we are in due diligence now. There is a seed portfolio closing that's anticipated for our new joint venture, which I wanted to remind you, the idea is that we are going to grow it in a period of 5 years' time to EUR 2.8 billion of gross asset value. So it's roughly 50% bigger than the first joint venture, which we started up. And we have already a lot of that prepared on our balance sheet to be able to transfer it towards that joint venture in the next 12 -- 6 to 12 months. And then we -- our strong capital position is important. As I said, there are highly attractive brownfield opportunities which start to increasingly arise, and we want to play a big role in acquiring them across the continent, and that's a bit, I think, recapitulation of how we see the market and what we have performed so far and what we're going to do in the second half of this year. I -- there is an appendix to our presentation where you can see, but meanwhile we have 104 active parks in our -- there is -- we also bought land in Zagreb where we have a lot of demand for it. We're negotiating with a very large player in Belgrade. For -- to -- we'd put our first big building on the market this year. We expanded a lot in Spain. As you can see, also in regional cities where we have, everywhere, a lot of demand. To be honest, the demand side, and you see it in our numbers in what we have leased out, is really still very strong going forward. I would stop here with our presentation and we could go to a couple of questions if there are any. Thank you very much for listening to us so far.

Operator, I think we can open the line for the research analysts to post questions on the queue.

[Operator Instructions] We'll take our first question from Frederic Renard from Kepler.

I have 4 different questions. The first one is on Munich. I read in the annual report on the half year report, sorry, that it did continue to be measured at the pre-agreed purchase price that you had with Allianz. I was just -- just refresh me, how much was the deal yielding? I think it was more than 4%. And how much do you think it will be revaluated in [ H2 ]?

Thank you for the question. So on the -- on Munich, we have agreed in 2020 that it's 2 different deals. One is for the BMW side, and one is for the Krauss Maffei. BMW was a 3.7% yield and Krauss Maffei, 4.1% yield. So in average, it's 4% yield. Today, in today's market, the 30th of June, if we would reevaluate it, we'd certainly have a better value inside of our books. But as it is the agreed price, which we agreed upon, we have taken this yield to be conservative and to say that we are going to get that price in November from -- that's when -- so we will reevaluate it at the year-end for the first time. And what the yields will do in the meantime is -- I don't have a crystal ball. So I -- that, I cannot answer. I can only say that of German assets are comparable. And then it's Munich. Munich is really very special in the German market because it's the top location, I think. They are considerably lower than 4% today in our book to comparable assets, which we have in Germany. So it is fair to assume that there would be an extra profit in our books if we would revalue it.

And maybe an indication of rental level versus what you [ pre-assigned ] in the past? Is it up maybe 15% also?

The rental level, you mean?

Yes, the year of Munich, probably it's going up...

The ERV, it's a bit difficult to compare, of course, because these are really industrial projects. BMW is having it fixed. So it's -- motions have been in the field centrum, where they do now the development of batteries or battery competence inside of the building. So it's relatively industrialized. And Krauss Maffei is also -- they are machine-making. They have completely full books at the moment. But if you look at the rental crisis in Munich, I still report -- and in the first half year, they went over EUR 9 per square meter. We are at, I think, on average, EUR 7 to EUR 7.50 per square meters is where we are in our end. So the ERV is substantially -- would be, in today's market, substantially higher, but that is also because of the scarcity in the Munich market and the extreme development, which has been there over the last 24 months.

Understood. The second question is on the expected seed portfolio. Could you give a certain range in valuation that you expect, modifying your assets?

I -- we think that -- it's difficult to say, but we tentatively agreed and the valuations are in line with what we expected. So they are around where we see them today. That is -- we have agreed roughly, but within our books today.

And another question is on the new construction. I think you said during the call that you would expect to start 270,000 square meters. So in total, year-on-year should be just below 500,000 square meters. Is the 270,000 that you mentioned, this is already certified, but do you expect to do more? Or not?

Well, the 270,000 is what we have to start up because we already leased out. There is not 1 single building in between that, which is not at least partly pre-let and most of them are completely pre-let. That's the minimum we need to do. Now to be honest, we have seen an incredible surmount in inflation in the first half year, which is now easy. It's -- we see that the prices are coming down again in our construction. And that's why we have been so prudent and not start off too many speculative building. That's also why our pre-let number is so high, over 93%. This being said, we see a lot of demand in the market. You can also see that what we have leased out over EUR 40 million, including the renewals, but I think almost EUR 30 million in new lease agreements, and we are ready to start up a couple of other buildings also in the second half year. But I don't want to give a guidance on it. I want to be -- I want to remain prudent and not just start speculatively developing like crazy. We don't know what market is going to do. So we're going to go step by step. And we are ready. We have most of our building permits now of the buildings, which we once -- we have them available. And in the second half year, we can start up. We could start up a lot more. But I'm not going to say we're going to do that. I want to keep my pre-let levels very high, so to be prudent in the market. And I still think that is the best way forward, not to have too much exposure on vacancies.

Okay. And the last question, if I may, on the solar energy. Do I understand then from what you said that you would expect more than EUR 10 million income going forward? If I take the...

Going forward, yes, yes. We want to -- we have now -- we have around -- it's more than 100 -- help me Martijn, how much do we have now under construction and activities already?

In total, we -- 120.9, there is -- 30.5 megawatt peak is operational -- sorry, 45 is operational and 75 is in the pipeline.

And we want to double that. We want to more than double that. Our original plan was to double it by 2025. But if you look now, all of our tenants are asking for it. So dependent on the capabilities which we can get in the market, we're investing heavily in-site. We already hired a lot of people to build it out. And indeed, it's very high yielding. So we are going to try to accelerate it as much as we can on our buildings. And there is potential on our roofs. It's -- among us, it is very big. But we need to go really step-by-step and to make sure that everything is done really state-of-the-art, and that we don't have any problems afterwards, and we also want to make sure that we don't take any risks on nonpaid energy bills. So we want to do it combined with our good tenants and make sure that we have good agreements with them going forward and that we -- if they would not be there, that we can also deliver to the grid, and that's dependent on where we are in which legislation in which country, so we are studying it very well. And but it has to be said in the beginning, we only did the Netherlands and Germany. Now we have a first project also in the Czech Republic, in Italy, in Romania. So it's really -- it's accelerating as we speak. And yes, it's the highest yielding asset class at the moment where we are active. And we also -- we always said that we see it as an attractive investment opportunity in today's market, and we have a commitment of over EUR 100 million already just to invest in-site, so -- which is going to grow.

We could easily start another 155-megawatt peak today, build -- I mean, but as Jan said, we also want to make sure that we don't just have a good business model today on today's energy prices, but that there is a longer-term security on it as well. So we're working with the tenants to agree those self-consumption or use a subsidy regime if it's available.

We'll take our next question from Pieter Runneboom, Kempen.

Could you maybe give some color on the appetite from Allianz to continue these joint venture structures? Maybe also shed some light on how the discussions were going for the portfolio for joint venture, specifically on valuations?

You're asking me to speak in the name of somebody else. We have 4 joint venture closing this year. So we already closed the Aurora portfolio, which was EUR 364 million, we did the last closing in Randgold, which was EUR 91 million. We are closing Munich, which is 100% sure in the course of November, and we have agreed, and there is a due diligence running from both sides. On the seed portfolio on the first one, which is -- yes, it's a combination of 2 different portfolios. And it's a total, it should be around EUR 1 billion in size, which is ongoing. So that, in a sense, speaks for itself that there is a lot of appetite still, I think, to continue with VGP. The relationship is very good. We also have a lot of offers on the table for financing from banks. There was a lot of uncertainty at a certain moment in time, expressed by some of our -- the people in some of our -- that we would not be able to attract financing anymore, but we have very attractive financing proposals for all the countries where we are active in, in we are going to transfer, which make our returns look as we expected. So I would say there is -- everything is going to plan for us at the moment.

Okay. And on my second question, so could you maybe [ tell ] a little bit on how the discussions were going on the seed portfolio, the EUR 1 billion? Of course, the biggest closing in the current market environment, could you imagine that it didn't go as smoothly as it went in the past? Or was that not the case?

We always have discussions about price and anything, but there is nothing unusual about today's discussions. It goes alongside what we have been -- we have planned this fourth joint venture and signed it in March after the war started in March, after the war started with a planned and a key portfolio closing in November. So everything is going to plan. I cannot tell you that this is differently. Allianz has access to -- and it has to be said that these are probably some of our best assets which we ever generated or created. And we see still a lot of appetite to do it. So we've agreed this. We have it in writing that they want to go ahead with it. We are doing the duration. So there's nothing else I can tell you about it.

Perfect. That's good news. I've got another question on the EPRA NTA. I actually see a lot of positives. So you did a close premium compression, indexation, you started some new developments. What did offset this that made the EPRA NTA growth coming flat?