Warehouses De Pauw SA (ARG) Earnings Call Transcript & Summary

Good morning, everybody. [Foreign Language]. Good morning, Europe. I think, and I'm sure it's a fantastic day, a fantastic day for Argan, a fantastic day for WDP, but also a fantastic day for the European growth real estate sector. And of course, also a fantastic day for both families behind me. Yes, it is like Jean-Claude just mentioned, today, we realized something unique with the right partners at the right moment with the same fundamentals. And that is really important. But before that, let's go back once to the beginning of this year, when we launched our new long-term project, BLEND&EXTEND 2030 based on a good long-term structural demand for logistics and a disciplined balance sheet, you can blend a lot and you can create value. And until now, we did it only internally. And as from now, we also do it externally. We don't blend buildings only, but we will also blend companies. And it is indeed something totally different, but so important for our future, for our clients, for our shareholders, and for our teams. First of all, for our clients, that they need and they ask for more Europe. Europe today is more than ever very important. We have seen it this morning again with [ Mr. Sun ]. So we need to build a Europe and our clients are asking for European partnerships in an environment with much more complex solutions and where we need to add to our warehouses, energy solutions, automated solutions. So within a European environment within this deglobalizing world. And for them, it's important to have real European partners. For our shareholders, for them also, it is really important, that we can create today the safe liquid play in the middle. Therefore, liquidity will enhance and will create value for the shareholders in order to be able to adapt and to get a right cost of capital. And for our teams, of course, too, and especially today, we welcome [indiscernible]. And yes, we will blend, we will integrate Argan within the WDP network. And so we will also give to our people a more dynamic European environment to create value together with our clients. And this all fits perfectly in 1 of the slides, we mentioned and we used in January, building a platform of tomorrow. And that is what we really do now. In January, we said we can build a platform of EUR 10 billion plus ourselves within our own capacities. And today, we can say that we can build really the platform of the future, but a EUR 20 billion platform, where there are much more possibilities to grow further and to create value. And all of this is based on our DNA. Because today, like I said, we are branding companies, and that's something else. And in order to blend companies, you need the same DNA. And that is what we have and what we shared already so long. Yes, we are effective and efficient. Yes, we are both [ createtist ]. And yes, like today, we are sometimes a little bit contrarian, but also with respect of everybody and all the cultures in our group. And that is the DNA we shared. And based on that, together with client-centricity, a clear focus on our clients supported in the long term by our founding families there, that is how we created both the last 25-year value and how we will continue to create value. And then, of course, this project, this friendly merger by this, we really built a European leading platform. I think the industrial logic is absolutely clear, a pure logistics and industrial REIT who can help these clients everywhere in Western Europe. And yes, we build now scale and leadership. Scale is important for our clients and leadership is important to our shareholders and that we are a big leader. We become a top 3 European logistics REIT and a top 10 EPRA company. So this gives us possibilities for further growth, further growth beyond our existing markets. Now we become market leaders in the Benelux, in France, and a leading position in Romania. And as from there, we can grow further and embark further with Germany, Italy, and Spain. And so we can, within our existing 8 countries, we can grow together in a long-term course up to EUR 20 billion. And in order to do that in an efficient way, we need a right cost of capital, and we had already a perfect rating, which gives us a top 5 balance sheet in Europe with our A3 rating from Moody's and together with our EMTN program so we can attract depth in a very efficient way. And now, okay, we had already a EUR 5 billion market cap, but now we go to a top liquid company, like I said, the safe liquids play in the middle, and we grow, as from today, to EUR 7 billion market cap, which gives us extra liquidity, which also should enhance the cost of equity. And when we can optimize our cost of debt and our cost of equity, we can optimize our cost of capital, which is crucial to be profitable. Because, like the last 25 years and the next 25 years, we want to grow, but not grow for growth only, profitable growth, so that we can continue to create value. And yes, with this model, we will create value. We will create value directly in the short term with a 10% total accounting return that we realized as from '28 and in the long term, we will be able to grow in our existing countries and in the countries around us. But that, Mick will explain in detail after this. [Presentation]

Good morning also from my side. Let me walk you through this transaction. What we announced today is a recommended all-share cross-border merger of Argan and WDP. The exchange ratio is 3 WDP shares for 1 Argan share. Argan will also propose an exceptional dividend distribution of EUR 11 per share to its shareholders ahead of completion, which is factored into the exchange ratio. On the basis of that exchange ratio and the exceptional distribution, the implied value for Argan shareholders is EUR 79 per Argan share, which implies a premium of 21% based on Argan's closing share price of yesterday and a premium of 28% based on the 1-month VWAP of Argan shares. In other words, a very attractive consideration to become part of a unique group with strong ambitions. I want to be clear that this is a friendly transaction. It has the unanimous support of both boards Additionally, it has a support and the voting commitments of approximately 52% of Argan shareholders and around 19% of WDP shareholders including, of course, both founding families, with De Pauw family on our side and Le Lan family via Kerlan on Argan side as well as Predica Argan's second largest shareholder. The key transaction documents such as terms of the merger, the merger agreement and supporting documentation have already been signed, and the completion is subject only to shareholder approvals on both AGMs, customary regulatory approvals and the opinion of a tax ruling in France. On timing, assuming all goes ahead as expected, completion is foreseen early '27 during the course of Q1. Important to stress also is that the group will retain its REIT and sales overall and the fixed stages in France. And in terms of governance, a representative of Kerlan, Argan's founding family office is expected to join the WDP board, subject to shareholder approval at the AGM. And together, we are very much looking forward to building out this fantastic platform. Now, what's in it for you as a shareholder? We believe that this is really a compelling opportunity for an industrial project for both Argan and WDP shareholders. First of all, for Argan shareholders we share the same DNA, but now we can do it at the European scale, and we can build from a local champion inside the top 3 EU logistics REIT like Uwents explains. We are ready together to unlock 1 million square meters of GLA embedded land reserves in France, immediately benefiting from a significant uplift with 3 matches towards an E3 rating, a tenfold increase in liquidity. And next to the previously mentioned premium of 21%, an immediate 6% dividend step-up in annual dividends going forward. And all this also for the Argan shareholder with full exposure to our Blend 2030 growth ambitions. On the other side, for the WDP shareholders, a genuinely integrated EUR 13 billion-plus EU platform, accelerated capital deployment in France, a clear pathway for further growth with an increased self-financing capacity of EUR 700 million per year, and we'll come back on that. Liquidity to further increase on a combined market cap of EUR 7 billion, and a transaction that delivers an immediate short-term 10% total accounting return. And also reinforcing our Blend 2030 targets. In other words, a true win-win and in the context of the combined group, growth will always be paired with focus continues and relentless focus on EPS accretion and strong total returns coupled with strict capital discipline. Now, on the next slide, next to merging the companies and the platforms, some works on the portfolio. As you can also largely see in the other slides, we believe we are combining 2 highly complementary and top quality portfolios with irreplaceable supply chain infrastructure that took decades to build out. Furthermore, we believe that through Argan's best-in-class operating model and plan base in combination with the funding strength of WDP and our European network, we can further unlock growth opportunities through activating the landbank, more cross-selling opportunities in a true European platform and also creating a link to the south to Italy and Spain. and this allows both sets of shareholders to benefit from strong future prospects of the combination. And also important, of course, as many questions -- as we receive some questions on that. what's our starting point in terms of net initial yields, there we expect as from completion of the merger in early '27 and net initial yield of exactly 6% based on the deal enterprise value. Now on the next slide and digging a bit deeper into the numbers here. First, in terms of EPRA EPS accretion. Here, we expect a 3% rise as from the full year of operations, so in '28, and that is based on the merger terms EUR 10 million of cost synergies, largely financial savings by applying our A3 rating and also EUR 250 million disposals across the group to maintain leverage in check. And also for the record, this fully includes the debt reset of both companies based on the debt maturity profile at current swap curve. Second item on EPRA NTA accretion, this increases by 7% based on a 30 June pro forma accounts. So the combination of short-term EPS and NPA accretion will immediately yield an accounting return of plus 10%. On leverage, the combination is expected to be broadly leveraged neutral with only plus 1% LTV and plus 0.3% in debt to EBITDA, and this is by consolidating both groups, factoring in the exceptional dividend, distribution by Argan of EUR 280 million and penciling in EUR 250 million disposals across the group of noncore assets. Also note, right after the merger, we will also further strengthen our equity through the stock dividend of WDP, which will then be offered in May next year to both shareholder groups as the '26 dividends will be distributed for both shareholder groups through WDP. And that also creates a bridge to the last number on the slide, Argan shareholders will receive an immediate uplift in their annual dividend of plus 6%. That is after first receiving the exceptional dividend distribution and I would like to stress that this is really a win-win since Argan shareholders are not selling, but swapping their shares, hence also benefiting from this EPS and NAV accretion. Hence, we believe with these numbers reflected a true win-win and a strong foundation for future value creation. Then on the next slide, in terms of our medium-term outlook. Well, this combination of Argan and WDP brings consistency and continuity as we already have a detailed and clear medium-term horizon through the BLEND&EXTEND 2030 plan, we can integrate this industrial projects into our group targets. And what we can say is that this deal reinforces the minimum EUR 2 per share target by 2030. And now with incremental opportunities to deliver through strong French platform, larger development opportunity set, and more capital markets relevance and obviously, a higher scale and firepower with now EUR 700 million per year of self-financing capacity, which is composed of roughly EUR 400 million of relatively automatic equity strengthening each year through retained earnings, scrip dividends, and our regular contributions in kind, supplemented with moderate debt, and we can confirm as well that we will continue to do so by applying our prudent financial policies, which stay in place.

So back to operations, back to the companies. We started and we are indeed WDP, let's say, focused Benelux company with an add-on in Romania. And above that, we have a European ambition and we want to grow further with our basics, our foundation is the Benelux and Romania. And then we have really that ambition to become a real European champion based on our EUR 9 billion portfolio. And if then now we can add Argan, well, then we can add the WDP of France with a EUR 4 billion-plus real estate portfolio and also a very nice pipeline. And if we can combine those then become -- and we become really a European champion in the core of Western Europe, which 47% Benelux, 40% France, and 13% Romania. And this basis those fundamental, based on that, we can create a real European champion. And it is like in the 50s, Europe also started from the European coal and steel community, which was founded merely by the Benelux and France and [ could done ] enlarge further. And so there, we have a fantastic basic to grow further, and we have a direct pipeline of EUR 1 billion, which is in execution and had reach EUR 700 million of annualized [ REITS ], and we have fantastic development landbank available of more than 3 million square meters that we can build on the landbank. The landbank of Argan and also the 1 we build it up again in Western Europe since the beginning of the year. So a very good basic and is written pipeline and added with a landbank for future growth. And yes, why France? And some of you will ask why France. Well, France, because you can never be European without having France. And France is a big country, so you need to be everywhere on the logistics access like La Dorsale and Arc Atlantique. But there is so much more. If you see at the European transport network lines and the European transport corridors, then you see them everywhere in Europe, but most of them pass and across France. And France is really the link between North and South, between the Benelux and Spain and France, but also between the U.K. and Germany. So it's really a crucial part within logistics in Europe, and people are not and our clients are not thinking nationally anymore. They are thinking from a European scale. And then we need to be able to help them everywhere. And indeed, Argan is active on all the important access on the logistics corridors in France. And of course, don't forget that in Europe, we have no big cities. We have only 2 of them London and Paris. Well, Paris is, of course, in the middle of France and is also part of the logistics corridor. So France is really needed when you want to create European solutions for your clients. And France has always invested a lot in its infrastructure. These days, a lot of people use again, the French highways, okay? You have to pay for them, but they are good and the infrastructure is well-built out. France has always taken care of this infrastructure. And even now, up to 2030, there is a EUR-15 billion-plan and in build reindustrialization and supply chain plan that is built out in France. So also in the near future, France will build out this infrastructure, this logistic infrastructure. And so logistically, for logistics real estate and logistics solutions for our clients, France is needed and you can't build Europe without France. And based on that, like I said, we can build out now Germany, Italy, and Spain. And don't forget, that a lot of our Romanian clients are French. So also, Romania will be able to grow further, thanks to France because a lot of French companies are active in Romania. And like I said, instead of, let's say, 2 concentrated companies, we become a very well-spread and a very well-combined company started today and with EUR 13 billion of real estate. And yes, not only on the geographies, we -- let's say, we grow and we diversify but also the European growth of real estate world, we grow. And now we become really a European champion by, let's say, becoming the third big European logistics growth real estate company with a growth potential and already a EUR 1 billion pipeline in execution. And yes, it's not only the geography we spread, but also on the different sectors where we are active, we stay very well-spread and also with our clients, the client base, of course, growth up to more than 500 clients. And yes, there are a little bit more French clients now, but we very welcome them because a lot of them were already clients of us in Romania. And we spread further. And yes, we diversify, but were also strong and make our shareholder bases stronger with the 2 founding families, the family De Pauw, the family Le Lan, supported by Predica, Credit Agricole Assurances, and don't forget that we have a really nice, big overlap in our institutional shareholdership, almost 30% of you, the investors, is indeed already shareholder of both of us. So that is a very good basis for further growth of our shareholder basis. We can continue, of course, to tell a lot about this fantastic deal where we worked very hard on, but we will stop telling ourselves, and we will go now to Q&A.

So again, every session, a little bit more people. So now we give the floor to Alexander who will coordinate the questions. And beside me, we have our friends of Argan, Eric Donnet and Francis, who we know already for many years. And so they will answer the questions about Argan and Mick and I, we will answer the questions about WDP and about the merger. Alexander, the floor is yours.

Thank you, and welcome Eric and Francis. [Operator Instructions] We already have a first question in coming from Pierre-Emmanuel from Jefferies.

Actually, I have quite decent amount of questions. I will limit myself to 2 to leave the floor to other analyst. Just coming back on the NAV accretion, so the plus 7%. I see that Argan's portfolio is currently valued at roughly 5% and it's basically in line with the prime market yield today, and there is no clear reduction on the portfolio except for the assets led to Carrefour today. So can you explain how you assess the valuation of Argan's portfolio in this context of current market in France and in a more subdued market, let's put it that way? And would this deal would have been relatively accretive if you were, let's say, more marking to the market Argan's advanced portfolio valuation?

Obviously, you also need to always to need to listen to what the market is telling you in terms of cost of capital. We're not talking about real estate only. We are talking about real estate companies. And there, it is not based on any judgment on future evolution about valuations. Have we just built something where the mechanics work for both shareholder groups and at current -- at these conditions within the merger, it creates substantial value for both shareholder groups and this EPS and NAV accretive and the starting yield is 6% net initial yield in '27 and in combination with having a strong, very well-experienced team in place with a lot of development activities. We can activate through the funding strength of WDP as well and the cross-selling opportunity layer, we can add as well in a larger European group. And perhaps, Eric, you wanted to...

Yes. The explanation is really top of the transaction that just, you mentioned, Mick, clearly has the reason why there is a premium on the stock market price and fairly not a premium on the EPRA NTA value, where discount could appear that reflects the implied deflation that suspension make of 6% of the deal.

And I guess the impact on the LTV based on the 6% will not be the same. So it has to be taken into account in this deal in the end. Well, my second question is on the Argan deal, just to understand the setup of the deal and the rationale behind this special dividend, why this structure has been preferred on our higher exchange ratio? Do you have, for the Le Lan family, do they have a look at period after the closing of this deal and what would be the duration, the conditions look? And is the merger agreement fully legal-binding today? Are there circumstances under which Argan could engage with third-party.

I think first of all, on the lockup in general, we can say and we can speak on both families that indeed, there are -- both founding families for more than 25 years active in that company, let it grow, they supported it all the time than indeed asking for a 3- or 6-month lockup has no value. They are there, they were therefore to support over the last 25 years, they will support us, of course, taking into account their patrimonial values, but they will, let's say, continue to support us. And then I would say, they brief logistics and it's everything they know.

And also, I would also add that the merger agreement is only subject to both EGM approvals for which we have from the reference shareholders on both sides, fully binding voting commitments, and then next to obtaining some customary regulatory approvals, and the confirmatory tax ruling.

On the distribution side, you mentioned the distribution of EUR 11, which will take place, so before the merger and received by Argan, and that should be done through capital return. We did that in order to optimize the balance sheet of the 2 companies. So clearly, such part of the calculation and calibration of the balance sheet and as well [ stock mutual ] that optimize the interest of Argan own shareholders, and we did that as well to make sure that we expected a win-win situation that just Mick mentioned, and this win-win situation that we see is optimizing the EPRA and the earnings pressure a substantial benefit in the future for both shareholders, WDP and Argan, obviously

Now I think it's very important that, let's say, nobody is selling something. We are indeed now exchanging shares, exchanging shares based on, let's say, price earnings and so that we can create a new fundament, a new basis, and then grow further together and indeed based on the fundamental and the exchanges we can share the upgrades and we can share the upside together. And I think we all know and we say a lot of times sharing is caring, and that is what we will do in the future, sharing the upside.

The next question is coming from Frederic from Kepler.

Congratulation, first on [ both team ]. Then I have a few questions, if I may. Maybe the first one, can you guide us through the history of discussion? So since when have you already started to formally engage?

About the execution, Frederic?

Yes. can you -- you can walk Frederic through the history of the transaction?

The history? History is more than 10 years drinking coffee together, learning to know to get each other, to understand each other, to really view and see that we have really the same DNA that we are speaking the same operational language that is, let's say, the real history of the deal. And then, yes, at a certain moment, you feel that there is a top goal and come a little bit more concrete. And then at a certain moment, people ask the other to tango. And yes, you need 2 to tango. And if somebody asks you to tango, you need to do it. And it's never the good moment and it's always a good moment. And then we started detailed negotiations between the 2 teams and that realized yesterday evening in a fantastic, unique deal.

Understood. I understand that Argan is more opportunity. Maybe a question on other financing because you mentioned that EUR 10 million synergy would come only from a financing point of view. But in parallel, we know that Argan debt is mostly composed of well, secure funding, so mortgage-related type of funding, which accordingly is cheaper. So I'm not such sure to understand how you would be able to get lower funding on that basis? Can you explain?

Yes, I will start and perhaps Francis can also supplement. So the EUR 10 million synergies are composed of 1/3 operational synergies, the typical synergies you can gain in terms of listing corporate overheads, et cetera, and 1/3 is coming from some -- from optimization of the funding costs through -- mainly through the credit spreads and also some hedging optimization and do not underestimate that obviously, we have because of our larger balance sheet and more diversification, we have a credit rating that is higher we calculated that, and we believe that we can capture that in the short term. And it's not only about the mortgage that Argan has also some other debt in place as well. Perhaps you can also -- Francis?

this Mickael is right. We can benefit from WDP cost of debt. In our business plan, we have some refinancing of debt to make in 1 or 2 years. And for these refinancement. we could benefit from the notation of WDP, which is 2 or 3 notch above our notations.

And to conflate as well, that you mentioned it Mick, for Argan's shareholders. Clearly, what's at stake is clearly the access to European platform and access to capital as well as a better cost Mick mentioned it, we are having a credit rating with SAP of BBB minus as far as Argan is concerned, and the credit rating of WDP at this moment is obviously better and we will, with the combined group, benefit from this greater and better credit rating.

I understand, technically the mid- to long-term benefit, of course, but I'm just telling to see short-term how the marginal cost of debt could be even lower than the future funding. But okay, any way it is [ okay ]. The next question will be on...

If I may. Indeed, there will be substantial refinancing in '26 and '27, impacting the Argan EPRA earnings per share, and that's included in the EUR 6 per share assumption of EPRA EPS for Argan for next year, which is in line with the consensus. And we can then compensate part of that impact by our credit rating in the short-term. That's how you should see it.

On the LTV side, the 1% impact that you mentioned, does it take into account the exceptional dividends and the pro forma disposal? And on the disposal like, which do you assume that this result to be done?

Yes, absolutely. Yes, this is factored in. So the pro forma balance sheet impact, which is limited to plus 1% LTV and 0.3% net debt to EBITDA factors in the exceptional dividend distributed by Argan prior to closing and also by the end of next year, disposals of around EUR 250 million at the group level in June with current valuations, yes.

And then very last question, more purview. I understand your present in France and being very vocal about the great part. But I'm just wanting to know what do you think about getting bigger exposure to our country where actually there could be more standstill or sluggish activity ahead of the upcoming national election?

Yes, there are always, let's say, macroeconomical and political short-term turbulence as possible, but that's everywhere. And I think we have also had the turbulences in Belgium, in the Netherlands, and so therefore -- and now we are a much more well-spread company. There is less focus in 1 region. If tomorrow something happens in the Netherlands, and you can say the same. Now we are a well-spread company. And yes, we have, let's say, more or less temporarily -- like in Germany last year, temporarily political turbulences uncertainties, but we are there for the long-term. We are there. We buy and we buy because it is important for logistics, for the logistics infrastructure. We don't believe from, let's say -- and yes, of course, we like it, but we don't like from the short-term only because economy is going up a little bit in France or going down a little bit. And yes, I think, in general, even in the Benelux, we can say that you see a lot of good activities that, let's say, the logistic world is open again, we can do, again, a lot of very nice acquisitions, developments, redevelopments and so on -- but, yes, on the other hand, we still miss 2 in Belgium, the -- let's say, the stock buildup when an economy goes up, the macroeconomic stock buildup that we miss. And yes, we make that, let's say, today, in our portfolio, and that can happen in France, too. But I would say did better homework because they have a 100% occupancy rate and we, a little bit less. And so therefore, we look longer, we look to those logistics and industrial fundamentals. And I would say it's the same when we entered the Netherlands in 2010, then everybody said, "WDP, what are you doing now going to the Netherlands and nobody believes anymore in the Polder model. And we were the first to enter that country. Well, today, it's 1 of the most nicest parts in our portfolio and everybody is happy with the Dutch exposure. And so indeed, even if in the short-term, there are some uncertainties. That's everywhere. Last year, it was Germany, now with France next year, the Netherlands, who knows. So -- and everybody and our clients, they look through those uncertainties volatility is a new normal and people have to live with it and our clients have accepted it and live with it.

If I may add, yes, clearly, it's a merger between 2 companies, which are already very robust. Clearly, Argan is not fragile at all. That's the leading company in each sector in France and, really, in the combined group, obviously, being the capacity to address an enlarged market to unlock landbank's capacity. And you see the quality of the portfolio and the applicable assets owned by Argan at this stage, bring to the combined group strength in France. Obviously, with 68 million inhabitants, GDP of EUR 3 trillion, that's clearly a large economic capacity. So the strength of France, not just short term but long term for the combined group will obviously bring benefits to the entire shareholders.

And then the next question is coming from Charles from UBS.

Just 2 questions from my side. First, on looking at Argan's portfolio, I think there's no vacancy due to the type of assets and build-to-suit and average residual lease term is around 4.9 years. So would you expect the vacancy to increase towards the market average, which I think in France as of end of June per CBRE is roughly 7% over time? Or do you think that the portfolio is generally positioned in a way that should justify very low vacancy?

Actually our portfolio targets vacancy rate will not increase at all. And we are -- we have already been very tough around the occupancy rate, so in the last decade obviously, Argan has benefited from this 100% occupancy rate and that will continue. We do not intent at all to diminish that. And we have a strong client base, again the quality of the portfolio of 110 assets owned by Argan in France are rock solid. We have strong retail consumer goods clients that's our client base in single-tenants capacity and good location. And again we stress the presence we have in France through the [indiscernible] they are famous Blue Banana in France coming from Lille to Paris, [ Alsace-Moselle ], on the Arc Atlantic from [indiscernible] that's clearly the value of this land banks and the location and on the combined perception of the group, we clearly estimated the occupancy rate at the rate of 98.7% globally. So to assure you that will be obviously begin to have strong cash flows from these combined groups.

And for example, the last -- or the only building, which became free the beginning of this year, which was liberated by Carrefour was rented and re-rented directly at the higher price. So they are doing perfect job within the group.

Just as a remainder the world's occupancy rate for Argan going the last 20 years was 97%. So it's not only words, but it's facts too.

Very interesting. My second question is on the land bank, which Joost you mentioned as a key driver during your presentation. And going through the disclosure, there's not as much detail on the location of the land bank. Is it mostly around the Île-de-France France region? Is it spread across the market? Is it mostly around the existing asset in terms of extension of proven sites or new green build area?

Let's say I will answer on our land bank here because let's say, we did not only worked on the merger in the first 6 months of '26. We also worked internally very hard and WDP is also on its own now, let's say, creating a new Western European land bank. And there, we will really create a new land bank from the north of Holland and from Zwolle, over Breda, Antwerp, Paris, Lyon, sorry, Paris and Toulouse. So that will be our new land bank. And above that, there is indeed a big land bank, which is not only, let's say, the location is important, but also, for example, 2 of them are really near and besides a part of us in Bollène, we bought 2 years ago, a big park. Well, Argan has a land -- has land besides, so we can enlarge our WDP's existing park. So it's more than just a land bank, but it's also on adjacent locations to ours. The rest of...

On the land bank portfolio, so we mentioned as far Argan is concerned, 750,000 square meters of land banks half of it in fact, in possible extension on existing plots of land combined with existing assets rented by our clients. So extensions for half of it and new, obviously, developments on the other side. But I can remind you as well that Argan has got a strict discipline as well in the developments, in-house developments. And obviously, we want to reach the correct valuation on those portfolios. And we want to secure obviously, leases before committed to those developments. So we have to combine unlocking land banks through access of capital, but obviously keeping an eye on the occupancy rates and no doubt that the combination of the 2 groups, we will keep and follow the same discipline, no change in the risk profile of the 2 companies.

The next question is coming from Vivien from Petercam.

Yes. Congratulations to both Argan and WDP. Two questions on my side. The first one is coming back on the EUR 250 million of disposals. So I understand you expect to sell at current valuation and -- but you're not mentioning the assumed yield. But maybe you can provide more detail on the timing and the geography considered for these disposals.

We have made an analysis of which type of assets we will sell. So we know that we have not started the process, of course, and it considers non-core assets a bit scattered across the entire group in line with current valuations in general as is published and it considers non-core assets. And also do note that also on a stand-alone basis, as you have seen this year with the portfolio going towards EUR 10 billion that now also more active portfolio rotation a bit of arbitrage, let's say, 1%, 2% of the portfolio per year, we will also implement as a value driver as we have already executed upon this year. And also the EUR 250 million, you should see that against the EUR 13 billion platform upon closing.

And the idea is to realize it, let's say, by the end of next.

Correct.

Okay. And then maybe a bit of a different question with regard to allocation to Romania, considering the increasing size of the portfolio, do you still see limits to the allocation you want to do under the blend and extend plan? Or do you believe that with the dilution of Romania within the combined portfolio, there is room to do more since you have done quite a lot in Romania over the last 12, 18 months. So do you see room to allocate more capital to this country?

No, because it will now be diluted in the entire group. And there is Romania is predominantly developers and investor market dominated by WDP and our colleagues of CTP. And in Romania, we anticipate a sort of natural demand flow coming from the existing tenant base so that we can further activate the land into pre-let developments and that Romania will then take its fair share of the ongoing new investments.

But we will not do less in Romania in the sense that we will stop Romania. Now, we will continue like we did it in the last 15 years. And let's hope that we can help fast some French clients more in Romania and that we can continue to develop. So we will develop it further like every other country. We will treat all our children in the same way.

We have next question incoming from Suraj from Green Street. And can I ask Joost to hand over pointer please.

I got a couple of questions. First one is just -- so basically, the strategic rationale for acquiring Argan obviously rest heavily on France. France has been exhibiting signs of a relatively weaker European industrial market from an operating fundamentals point of view. So take-up is down around 25% in the first half of this year versus the 5-year prior average. So how do you think about this as part of your underwriting? I know you touched on it from a political point of view, but some more details would be helpful, especially sort of where you think market rent growth will be versus your existing markets, Benelux, Romania, et cetera.

Well, I think indeed we really believe in France. Yes, in France, you have, for example, a little bit a higher empty -- and higher vacancy rate in new projects because that's specifically due to France and the long duration of projects, therefore, it takes you 2 years to get your building permit and your operational permit. And so you can always not ask and no tenant in advance because nobody wants to, let's say, to wait for 2 years. And that's for more, I would say, general players, but even with those limitations of a long duration of permits, which made some investors start projects at risk they can also stop. But on the contrary, Argan proved that even within such an environment of permitting, which takes 2 years that they can pre-let it and they can do, let's say, projects tailor-made for their clients. So that's also because of the local deep knowledge. And therefore, yes, that's a general picture. But besides that, then it is the way you handle it and the way -- and they are really -- let's say, they have that French knowledge. They know how to do it, and they know how to handle it with their clients.

Maybe to add-on on Joost. Joost just mentioned the fact that obviously, there is -- and there were as well political elections in France. Remember that in last March, we enjoyed the municipalities of the city elections and the greater regions, obviously. And combined with the land scarcity and obviously, all this ecological pressure, obviously, that made the wrong path or the wrong momentum for the market efficiency and new developments. Most probably after the presidential election taking place in April, May next year, we clearly will benefit from a growing market again, but we had this path -- this momentum, obviously, to go through. That's part of our building obviously, challenges in the coming months. We will come over it, that's part of the development program that we have clearly integrated.

But our clients are not thinking politically. They are really thinking about the business, about the growth, about the Europeanization, about, let's say, the de-globalization, the continentalization. There are they thinking of and they can live with volatility. And it's not because there is an election that nobody does something or -- and for us too, we don't go to France or another country because of an election. It's not because there was an election in Germany last year that we would not invest. We invest for 10, 20, 30 years and more. So then we have to look much further than just short-term disturbances. And so no, then it is really about the long-term potential of a region. That's the reason why we invest in a certain region. And we believe really in the reindustrialization and let's say, the unification of Europe. Europe needs a European answer on financial markets, on the internal market. Europe will have to defend itself. And we believe that and we believe that we can help our clients in, let's say, becoming more Europe. And we prove today that we can look beyond our own borders and that we can create European solutions.

Okay. Understood. Just a quick second question, if I may. It's just on the synergies. I just want to understand a bit more detail. I know you touched on it. So the EUR 10 million synergies, you're saying around 1/3 is operational and the other 2/3 is around the funding cost, which you discussed earlier. But just to understand correctly, so that's around sort of EUR 3 million over the EUR 15 million, I think Argan has in its G&A. Is that the correct understanding? I would have expected it to be a bit higher?