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

Hello, everyone, and thank you for joining today. It's clear that '24 has been a pivotal year for WDP, highlighted by strong financial and operational results and strategic milestones while celebrating 25 years on the Stock Exchange. We made bold moves in the capital side, investing over EUR 1 billion, significantly enhancing our European footprint and more than doubling our investment activities compared to previous years. Through selective capital deployment, we navigated the risk spectrum, replenishing our investment pipeline and solidifying our market presence. At the same time, we've taken organizational changes to position WDP as a truly leading European player with 5 local platforms in 6 countries. A cornerstone of this strategy has been our success in France, where we tripled our portfolio in just 2 years. Under the newly appointed Country Manager, a local French WDP team will unlock new opportunities and extend our presence in this market. Germany also marked a milestone with our first major project of EUR 85 million. Across the portfolio, we generated positive revaluations through development gains, attractive acquisitions and value-add asset management initiatives. All of this was achieved while maintaining our client-centric focus showcased in our portfolio KPIs, supported by the robust market fundamentals. These '24 achievements demonstrate the effectiveness of our execution power and strength of our #BLEND2027 strategy, which blends multiple drivers in multiple markets. Looking ahead, we are well positioned with a unique investment pipeline, a strong balance sheet and funding, all in place to drive us towards over EUR 1.7 EPS targets by '27. Now is the time to execute and to replicate our unmatched track record of profitable growth in each phase of the capital cycle. Welcome, team WDP. Welcome, investors, analysts and bankers. As mentioned in the interim movie, it was again another year of excellence, operationally, and financially. Operationally, we have grown towards a portfolio of EUR 8 billion, and we kept our occupancy rate of 98% and with an annualized rent of EUR 450 million. Financially, we created not only EPS growth, but total return with an EPRA NTA, which has grown up to EUR 21, all supported by a super balance sheet with a loan-to-value of 38% and a net debt to EBITDA of 7.2. And yes, it was a pivotal year for WDP. We really changed from a Benelux company, a Benelux with an add-on in Romania towards a real core Western European platform with a unique fantastic extra in Romania. And going forward and evoluting to a EUR 10 billion-plus company. We secured EUR 1 billion of new investments at an average yield net of 6.4%, and it were not the normal investments in our normal markets, but we really made a breakthrough in France that we can add now as a full fifth platform. Above that, there is still a unique pipeline of EUR 1.1 billion in execution, also very profitable with a net initial yield of 6.6%. And for all this, our funding is in place, thanks to our strong balance sheet, our liquidity and auto financing capacity. So we are in full execution mode towards our EUR 1.7 EPS in '27. Also thanks to our new management structure, which will help us to go and to grow further into more platforms. And indeed, one of the most remarkable things is probably France. We added France as a fifth platform, and so really becoming a local player in France by doubling the portfolio up to EUR 700 million and opening an office in Paris with a well-known new Country Manager in France. If we go down a little bit into detail of the EUR 1 billion newly secured investments of '24. Well, then it is a very nice combination of what WDP stands for, with our very nice developments at the right yields and a combination of core investments to enlarge our 2 new platforms in France and Germany and also core plus and added value investments in our home countries. And yes, of course, we always do our energy investments. Totaling EUR 1 billion unique in our history and an NOI of 6.4%. So what we'll give now the impact of all those investments on our balance sheet, Mick?

Yes. Thank you, Joost. And further to what we've realized in '24, let us look forward from here. What do we still have in execution. So let me walk you through the bridge on the slide. First of all, starting in -- at the growth plan 1 year ago, early '24, we had a very nice pipeline in execution of EUR 640 million, to which we added EUR 1 billion. So that's the realizations, the projects we secured and signed in '24 for EUR 1 billion, as just explained by Joost. We then actually invested, out of those almost EUR 1 billion that accrued in the balance sheet, and we still have EUR 400 million of deals in exclusive negotiations on which we are working right now and executing, which brings the total pipeline at the 31st of December '24 at EUR 1.1 billion, which is the record pipeline we've ever had. And so you can see also in there the EUR 400 million, which we typically don't do to add to what we have in concrete negotiations. So why did we add that? Because for 2 reasons, there was question for more forward-looking data, and we also wanted to anticipate the question, what is still needed to get you to the EPS target of '27 of EUR 1.70? Well, this is it, another EUR 400 million on top of what we have already announced, and we have it in front of us. And the EUR 400 million, by the way, is a balanced mix between projects and acquisitions at expected NOI yields of between 6% and 7%. And let us -- that means that we have now, through this very nice and profitable development pipeline, all the building blocks in place to achieve the growth target by '27. And when we take a look at the next slide. This next slide shows a projection on where rents could land by '27. So growing over EUR 500 million, which implies there is a continued momentum to drive both earnings and total returns. When we then take a look at the status of our 4-year growth plan, #BLEND2027, we can after 1 year, first of all, confirm our target of EUR 1.70. But more importantly, see that we have all the building blocks and the funding in place to achieve that target, and that has never been the situation after 1 year into a 4-year plan. So let me walk you through the details. What is it based on? So first of all, we had the very strong investment activity in '24 with EUR 1 billion growing in the balance sheet and which will then start contributing full as from '25. We have, as showed, the very strong development pipeline of EUR 1.1 billion in execution, composed of a mix of investments. So that is a source of external growth, and that should be supplemented by internal growth roughly at CPI indexation of around 2% plus rent reversions of around 40 bps, 50 bps above that. So in short, those building blocks should bring us to the EUR 1.70. So there is one key assignment Joost, the CEO, brought to our teams early in the year, and that is, let us execute what we have in front of us. On the funding side, we are fully covered from balance sheet capacity as well as from a liquidity perspective. And to translate this into numbers. we are starting off a low LTV of 38% and a net debt to EBITDA of 7.2%. Hence, if we add EUR 1 billion of investments and take into consideration that each year, we had on average EUR 200 million of retained earnings and scrip dividends as a form of auto financing, that should add cumulatively EUR 600 million over the '25-'27 period and keep leverage in check. And so the end result should be a yearly underlying growth rate of 6%, reflecting the true underlying business performance. Now what does it mean for the short term for '25 guidance? Then we guide for an EPRA earnings per share of EUR 1.53, which is exactly in line with the median analyst consensus we compiled. Here, too, of course, we need to take into account those specific elements of the one-off in '24 of EUR 0.03 and the loss as from '25 of EUR 0.05 related to the loss and abolishment of the Dutch REIT regime and to give you a sense of true underlying business performance. And here, you can see, we provided that bridge and the true underlying bridge is from EUR 1.47 through EUR 1.58, which adds EUR 0.11 or 7% growth year-on-year on an underlying basis. The most important building blocks to that guidance are the further execution of the investment pipeline, organic growth for which the components are CPI and reversion combined at 3% and, of course, some impact on the occupancy rates, which we expect to make it true at bottom at 97% by mid-2025 and to gradually cover from there. And this is exactly what we have said during the Q3 call and will also further be highlighted and explained by Joost later on. That's on the investment side. On the funding side, there, it's important to stress that we have good hedging in place. We have no material debt hedge maturities prior to '27. So we are able to keep our cost of debt low at around 2.3%. And then perhaps some technical comments, modeling comments. There will indeed be a step change due to -- on the taxes due to higher tax burden as from '25 related to the cancellation of the Dutch REIT regime. So there, it will go up by around EUR 10 million, EUR 11 million, has an effect of EUR 0.05 per share. And to guide you on the overall effective tax rate, it will go up from 3% in '24 to 5% in '25 and then mildly going higher to 6% and stabilizing at 6% by '27. So that's on the details of this EUR 1.53 on the P&L. And on the balance sheet, we are comfortable with LTV around 40% and a debt to EBITDA staying well below 8x. So I think in summary, despite some technical remarks, that technical items that deserve some explanation, the key message here is that we are well on track to deliver for the EUR 1.70 by '27. And that is, of course, what matters most. So I would like now to hand over back to Joost for some market comments.

Yes. Probably the most important element of today, what do we see at the demand side and in our occupancy rate. In our Q3 report, we anticipated a decline in occupancy of 1%, the famous 100,000 square meter extra, up to 97% due to certain spaces being returned between that moment and June '25. This projection was our 6 to 9 months forward preview based on running contract renewal negotiations at that moment. So as expected, this reduction materialized, but since then, stabilized. No further space is given back. Typically, during an economic downturn, clients tend to remain in place due to the CapEx and the risks associated to relocating, which they prefer to avoid during challenging times. So this behavior is reflected in our retention rate. At the beginning of the year, we usually observe a renewal rate of approximately 50% for the coming year. However, we are pleased to report now that we have already achieved 70% contract prolongations this year. So this indicates that our retention rate has returned to normal levels. Besides, of course, the 100,000 square meters of Q3 that will be given back. Furthermore, we have noticed renewed activity in the rental market, particularly in smaller units for the moment although larger spaces are still lagging behind. We are also engaged in discussions with some clients regarding new developments, primarily in consumer and food sector as the industrial sector continues to face difficulties. But of course, in general, new demands will first be filled up and they will first use empty spaces. All of these factors lead us to conclude that we are really bottoming out and have reached the inflection point in the cyclical nature of our macroeconomic environment. Once again, it proves that the cyclicality in the logistics sector in the last 25 years only results in 2 maximum 3% drop in occupancy, no more than that. Structurally, the demands for warehouses remains robust in a world that increasingly relies on omni-channeling and continentalization. Alexander?

So following the remarks of both Mick and Joost, we will now open the Q&A session in roughly 60 seconds from now. Meanwhile, feel free to already post your questions in the live chat. So we're now open for the Q&A session. For the participants. You can either put your questions in the live chat. But also the analysts have the option to raise their questions live. So we'll first address these ones, and then we'll go on to the ones in the chat. First question is coming from Francesca. You can unmute yourself and ask a question, please, one at a time.

The first one is about investments. We have seen a very strong investment consideration in the latest months of 2024 and also in January. What can we expect from now on? Do we expect this rhythm to continue in 2025? Can you set the tone for the coming months? And based on related discussion, Germany appear to lag a bit behind France. Is still this against the case? What is happening there? Then I have a few other questions, maybe, I will continue later.

Like we mentioned, Francesca, indeed, we will now concentrate on, first, on the pipeline. And the best thing and the most profitable thing we can do now is execute, execute, execute the EUR 1.1 billion pipeline, combination of the already committed investments and the EUR 400 million in negotiation. So this is the first thing we will do. And then first, we will have to concentrate on that execution. So that, let's say, the EUR 1.7 is safe, that we can realize this. And of course, above this basis, then we can look opportunistically further to new acquisitions. But the biggest value to create is just finalizing and executing the EUR 1.1 billion pipeline. And yes, let's say, we have had and we have seen a lot of possibilities in France. There, we went up to EUR 700 million. And Germany was less. But important was that we could do a first big deal with a figure in Zulpich for a very nice specialized pharma logistic hub, and so we could double the portfolio there. So we planted our flag and we are open to invest further. But in Germany, we say to everybody that our cost of capital is, let's say, 5% and that they need to meet that. And as long as Germany, let's say, ignores the cost of capital, then it stays difficult, and we are prepared to do something extra in the start-up phase of a country, but let's say, we don't go below our cost of capital and we want to invest at least earnings per share neutral like we did last year in France and Germany.

That's good. And maybe can you make a comment about development costs because other players are still talking about development cost declining? What are you experiencing lately?

On the development costs, these are, let's say, these have come down, and we see it today stabilizing at a lower level. So they have come down, let's say, from the peak around 15%. We can now achieve those development returns again. So that gives some headroom. But further down, we don't see it or we cannot make a call today that they come further down because on the one hand, labor is going up, too, labor cost. And you have also the norms and the quality and the standards which go up also each year. So that's why it's more balanced today.

Don't you see any differences in market?

Not really. There's no real fundamental, can be a little bit, let's say, the part of the land value is bigger in Western Europe than in Romania. But let's say, in general, the picture is the same.

Okay. And then maybe final question. Regarding the comments on [indiscernible] this morning. Can you make a comment about the MSCI index?

Well, on the MSCI index, we know that there was a concern from the investors that we would have -- we would be excluded from the MSCI Europe index, that -- we received some input from our bankers the last couple of days and they made some calculations and mentioned to us that the risk is considered as being low. But obviously, it's -- you have the data probably, we don't have the data. So I'm just telling you what we got as input.

The next question is coming from Wim Lewi from KBC Securities.

Can you hear me okay?

Yes. Perfectly well.

Perfect. Yes. My question is on the pre-let level in the pipeline. So that came down from around low 70s to 60. And in your statement, you refer to the soil remediation and cluster expansion. Can you give maybe a little bit more info on the dynamics behind that? What has changed, let's say, over the last quarter? And what do you specifically mean with these 2 factors? And also how will that evolve over the year? That's final.

Yes. On the preletting rate on the development pipeline, it came down quarter-on-quarter 72% to 60%. And that's really linked to the project in Romania, where the client canceled the contract and for which we were fully compensated. So that is now a vacant building in the pipeline, which we are executing and that will need to be relet. So that's a technical item. And there are indeed still some other projects in the pipeline which are unlet but which are not massively under construction, all the preparations are being done. For one, we have the solar remediation, which is going on. And for some other projects, these are the final units of the larger project, which was a multi-tenant projects and for which the other sales and units already are finished and out of the development pipeline. And we are confident on letting that, and we have also time to do that.

Okay. And maybe just specifically on that soil remediation. Can you say how that then -- is there like a lengthier process to let if there is a brownfield project? Or that's not what that meant in the statement?

No, no, no. We added it already to the pipeline, and we then need to do the solar remediation. And you have also -- you need to also build afterwards, and that's why it takes a bit more time, but we are commercializing the project, takes a bit longer.

We bought, let's say, it's about 2 sites, 1 in Grimbergen, 1 in Willebroek. And I say we bought the site, but we paid the land value by doing the soil cleaning. And so we paid nothing, but we pay now and during 1.5, 2 years, these are 2 big brownfields. And let's say, now we are preparing those for further development and we pay the value of the land by doing the soil remediation. And let's say, because these are 2 really -- real brownfields, let's say, the final point of the soil remediation is, let's say, putting concrete above and starting development. So you cannot say, there, okay, I just do the soil remediation and I wait. Now the last part of the soil remediation is putting concrete on it and starting the building. And that's for 2 specific cases, 1 in Willebroek and 1 in Grimbergen.

The next question is coming from Vivien Maquet from Banque Degroof Petercam.

A few questions. So the first one, just on the dynamic here in the demand. Can you explain a bit? So we mentioned that there is improvement in some of the subsector. But is it already materializing? Or you see them as more, I would say, keen of having a negotiation going forward towards the site cleaning? That would be the first one.

Now as we mentioned that we see new activity in the leasing than it is indeed in the existing portfolio and more in smaller units. And for example, I give you an example. We have a small unit around 10,000 square meter in Aarschot in Belgium. Well, there, he will become free at the end of Q1. And first, the existing clients said, "Hey, look, I want to stop and I go and consolidate somewhere else." And then because it was a specific location, we have given an exclusivity to somebody until the end of January. And then this week, also, let's say, the existing client came back to say, look, "I have not enough place. So can I stay in the building?" And in the meantime, there was already a third party. So we have 3 concrete interested clients who want, let's say, to rent the space before it becomes free. And it's only a discussion now, who will take it, who will -- and it's not a price discussion. It's only a discussion, do I need it? Can I use it? So with those, I can give some examples about, let's say, new and renewed leasing activity.

Right, thanks. Then next one, more on the investment part. When we look into the undisclosed bucket of EUR 400 million, I see that you are targeting yields of 6%, 7%. Should we assume that this, what you call, tactical acquisition that you did at yield below 6% are less present in this bucket? Or do you still target this, continue outside of Germany where you have reached more tactical acquisitions. So I would expect that to move more into the core plus value-add segments.

That is correct, and that's a reflection of that in the 6% to 7% NOI yield guidance on the EUR 400 million. That's correct. It's a balanced mix between value-add and core plus acquisitions and development projects.

Thanks for the information. And then the last one. I'll leave the room afterwards. Coming back on [indiscernible] and I would say [indiscernible] dropping for [indiscernible] in the lease. And that for you, it's a no-brainer. We have plenty of room. Just want to understand because I think that you move the delivery later to 2026 and then the investment plan changed. Are you are you able, I would say, to change the layout of the project to accommodate less, I would say, build-to-suit aspect? Or can you comment on that one?

Yes, absolutely. And first of all, to give you some color on those amounts. We received the full indemnification of the -- for the discounted lease obligations of EUR 17 million out of a project of EUR 30 million, EUR 11 million was booked into the EPRA earnings and EUR 6 million as a compensation for the investments we need to make, the re-lettings, the specific investments they require to the building. So that is all covered and that's also why the investment changed towards EUR 24 million. And yes, as always, regardless of the fact that we can sometimes do some extra investments for the client in a building for which we have coverage that they need to reimburse that, we always think about the relettability and the reusability of the building, and it's a top-notch building, which can be split in different components, and it can be easily switched from semi-industrial to more plain vanilla warehouse activities. And the timing is deferred into '26 to allow us, of course, to start the reletting and the adaptation of the building, which is a normal leasing process for a brand-new building of 30,000 square meters.

And for example, just some extra loading docks, adaptation of offices. And I would say, as from now, it's only an opportunity.

Any reason what he terminated on the lease? Can you comment on that one?

Yes, general termination of that specific business, not only for our building but on other buildings also from our competitors due to competition for that business coming from Asia.

The next question is coming from [ Steven] from [indiscernible].

I have 2 types of questions. First, a clarification on the leasing market. Could you quantify how you expect occupancy and prelettings to evolve in the coming quarters? And furthermore, how fast can you lease the Romanian site again? And is the 97% occupancy at year-end a bare minimum or really a realistic number in your view? So that's the first one.

Well, I think we give always and we try to give realistic figures. So we think we are, let's say, sure that we will get back that extra 100,000 square meters. So it is realistic. And of course, we will try and we will see depending on how fast and how big we can relet that we can, of course, it's an aim to end higher. But let's say, reasonably, we think we will go to the 97%. And yes, there, we will see what the market gives. But today, we see it more in the smaller part of the business, and we think that together, let's say, with rents coming down, economy, the economy and first of all, consumer-driven economy will reboost during the year. And Romania, yes, it is, let's say, our only real empty building. We have some smaller units from 3,000, 5,000. But let's say, it's our only building so we can fully concentrate on it, and our teams are very positive that they would be able to rent it during the year. But of course, like always, it is the same like with when something and somebody goes bankrupt, you cannot prepare that. You cannot pre-let it or relet it when you are still under construction and let's say, when it has pre-let to somebody else. So you have to wait and we can just start now the letting process. So that will take always a little bit of time. So we think we will need at least 6 to 12 months to relet it since we cannot do any preparatory work in advance.

And if I may, a second one. Could you please comment on your potential developments to be signed for development acquisitions? How will your development pipeline likely look in, let's say, 6 or 12 months in terms of size, geography and yield and cost?

If we would be able to give more info then we should have put it in the secured pipeline. So it is just indeed, we have LOIs, we have heads of terms. But of course, now we want and we have to finalize everything before we can communicate. But the fact that we put here EUR 400 million, let's say, that we are really working on every day, then it's really concrete. But of course, we cannot give more details about it. But there are some very nice developments in that EUR 400 million.

The next question is coming from [indiscernible].

Just a couple. You commented in Q3 about customers adopting the sort of wait-and-see approach. Since then, arguably, we've seen sentiment shift down with increased concerns about tariffs, trade wars, economic growth being downgraded in a few European countries. What are occupiers saying today regarding their expansion plans? And does that concern you or weigh on your ability to potentially pre-lease some of that development pipeline?

Well, indeed, I think, let's say, it has been a difficult 6 months for our clients. But now we feel with our clients that, let's say, it is all stabilizing. Stocks came down, but they are now stabilizing. And yes, there are not the big new tenders or smaller tenders, some extras. But let's say, they see everything stabilizing, stabilizing on a low level. And I think, okay, going forward, there will come some extra stocks again, people will start to invest again. So they are positive. But let's say, it's for the moment, stabilizing and everybody -- and I think this is also important and something we see always that, let's say, one of our challenging times that people stay where they are and they take care of what they have.

And my second question, just on Page 19, the market insight slide. Vacancy rates are coming down in all of your markets by Belgium. I'm just wondering if you can comment on that there? What's driving that?

Yes. Maybe just to give you some color on the demand and the supply side. So on the supply side, what we have seen is that the vacancy rates have edged up year-on-year, basically from the 3%, 4% range up to 4%, 5% range, slightly up. But on the underlying basis, specifically in Belgium is what we have seen is that a large proportion of that increased supply is basically the immediate result of clients that shifted from older buildings to the newer, more efficient buildings. So it's more a [indiscernible] vacancy, which is hidden underlying in their global number or the proportional number of the Belgium vacancy that went up to around 4% to 5%. So that's basically the underlying reason. On the micro level market, when we screen the WDP markets where we are active, we're still comfortable. And then even in general, aside from Belgium, but on Western European market, we see vacancy rates between 3% to 5%. And there is no immediate risk of supply overhangers. There is currently, and that's on a global level, on aggregate, there is roughly 6 million square meters under development in all the WDP markets, which is 4% of the total supply and 70% is currently pre-let. So that actually says that on a stable take-up level, you would assume that vacancy rates in the worst case scenario could edge up another 70 basis points approximately. In Romania, you have vacancy rates even below 5% today. And take-up has done far better than historically. And there, you always have some supply overhang risk, which is significantly higher in the range of 4 to 5 percentage points, but that's nearly all coming from the supply from one of our competitors, which is more concentrated in the Bucharest West region. So that's something that we have been coping with for years.

Okay. That's clear. And the last one. One of the trends, I think, spoken about last year was the loss of interest from generalist investors, particularly in the U.S. towards the European industrial sector. Just wondering, has there been any kind of shift in sentiment since then? And given your confidence in the strong growth outlook for the next 3 years, what do you think these investors need to see to get interested again?

You mean generalist investors from the U.S.?

Yes, generally.

I think, yes, more clarity on what -- how the general macroeconomy will look like and how the geopolitical situation will look like plus a clear path in interest rates.

The next question is coming from [indiscernible].

Just one question from me. Are you actually seeing any impact to leasing within your Romanian portfolio as a result of the ongoing political uncertainty in the country? I know earlier, you mentioned that the 100,000 square meters is the main vacant area at the moment. And you touched on vacancy being below 5%. But do you see this as a potential headwind in the near term?

Not really because, let's say, except the [indiscernible] case, in general, our Romania portfolio is very well leased and it's, I think, the highest even in our countries. There are only some, let's say, smaller units that needs to be leased and where there is concrete negotiations to fill them up. In general, there were some questions, but it's not some impacting the world in Romania and absolutely not for existing. But I could imagine that for some really big investments in a country that they would wait until the new or until the result of the election, which is foreseen for May. But let's say, [indiscernible] has nothing to do with the political environment or it was just because of competition of that business with Asia.

The next question is coming from Paul May from Barclays.

Just a couple of questions from me. A quick one on the leverage. What's your main focus for the leverage ratios? Just thinking, obviously leverage has gone up and on the global context, particularly on net debt to EBITDA, you're considered quite highly leveraged against global peers. Just wonder what your focus is, whether it is net debt to EBITDA or if it's purely focused on LTV, which arguably is on a made-up fee number? I just wonder what your thoughts were there?

Yes. Actually, we've been -- thank you for the question. Paul. We have been steering our capital structure already for many years based on debt-to-EBITDA where our capital structure target is around 8x, and we are very comfortable with the current number and even give some leeway. And obviously, yes, it's a bit higher than our U.S. colleagues, I would say. But on the other hand, it's one of the lowest in the European space. And when we look at it, it's the real cash debt servicing capacity. And if we want, theoretically, we can pay that debt back in 7, 8 years, which is a very comfortable situation. And so we are perfectly fine on that and steering the company on net-debt-to-EBITDA.

Yes. And then in terms of, I suppose, the cyclical issues that you've seen, development prelets lower, like-for-like lower, reversion lower and growth basically being driven by this increased leverage in terms of earnings growth. How do you see that over the #BLEND2027? I think you mentioned leverage, basically being leverage financed on that #BLEND2027. I'm just wondering what your thoughts there as to how that's going to work with regards to your net debt-to-EBITDA.

But I don't think net debt-to-EBITDA will move a lot from here. When we say we -- from this point when the debt-to-EBITDA is 7.2x today, when we say we invest EUR 1 billion over the coming 3 years against EUR 600 million of equity coming in through retained earnings and scrip dividends, the net debt-to-EBITDA is not going to move very far, and it's not really like you mentioned, debt financed or leveraged finance growth. It's balanced funded growth like we always do and we have the means in place. But, indeed, you're probably referring to the fact that we added some leverage in '24, which is right. But do not forget that we deliberately prepared for the reopening of the investment markets in '22 and '23 when we proactively deliberately over equitized when we -- in those years, we invested EUR 1.3 billion against EUR 1.1 billion of equity to anticipate the reopening of the markets and to put us on the very safe side of the metrics side. And then we said last year, now it's also time to activate that strong balance sheet, and we have done that. And we have -- you need to look at it over multiple years. And then we have always applied a very healthy debt equity mix and keep leverage underlying in terms of net debt-to-EBITDA rather stable.

Just follow on.

Yes. Just I would like to add because you see indeed the pre-let ratio of the development pipeline, that came down a little bit. But that's also due to the fact that we started up some second phases of multi-tenant sites like in Breda, like in Kerkrade, like the extension in Vendin-Le-Vieil. So there, let's say, it's kind of a big project of 30,000 square meters where we realized the first phase at the end of last year and which we are fully let. And so nothing of the realized building were not let, they were fully let at the moment of delivery. And now we start second phase. And indeed then, of course, that second phase is not pre-let. We just continue. And if we look to the whole project, we have a pre-letting degree of, let's say, 50%, everything which is built is let. But now, of course, half of the building is in our existing portfolio, and they are let. And now you see only, let's say, the empty part, the part that is start up. So it's -- if you look the broader picture, it's positive and it's not, let's say, really coming down the pre-let ratio, except indeed, in some cases.

Okay. I suppose that's different to prior years when it's just been higher pre-lets on those new things. But just a final one on the reconciling. I guess, valuations are not that we focus on it too much. Your valuation yield is still quite a bit inside where you've been acquiring what you consider core assets, particularly in France and Germany. So I just wondered at what point do acquisitions of core assets at higher yields feed through into your valuations and move your yields higher? Just wondering how that dynamic is working because we've seen that in other markets as well. I just wondered how you see that.

I think those investment yields that what we acquired at around 5.3 are not that far off from the existing EPRA net initial yields, including full occupancy, of course. So that's a minor thing. And the market is, in general, also strong and coming -- have come back. The liquidity to the market and all the investment activity confirms the yields or the valuation yields in our accounts. And we have also never been the market makers of the prime yield. We also try to use our network and use the strength of our balance sheet to do good deals.

I guess in the past, you've always had quite a conservative valuation and it just looks odd that you're acquiring materially -- or not materially, at least higher than where your valuations are. So it's just a slight shift to probably where you were in the past.

But it depends also a bit on the metrics. But when you look at the current valuation, not only in EPRA net initial yields, for example, but on euro per square meter, the portfolio is valued at EUR 950 per square meter, below EUR 1,000 for such a portfolio, core Western Europe, that's a nice figure. And look at also the reversionary yield, which is the net reversionary yield is above 6%. We also need to take that into consideration as well.

Then one more question on the chat currently, coming from Federic.

So maybe a first general question. So there was an article this morning on [indiscernible] suggesting that in the U.K., subletting spaces in logistic is taking up and continues to accelerate actually since 2011. In your portfolio, are you aware of any trends like this? And have you heard something on the ground from your occupiers, which could explain maybe the stickiness you were describing of tenants?

Not really. So I don't say that there is, let's say, never know where any subleasing, but there is not a change in the trend because indeed, we also should know that if that happens because people have to let it known, and we have to give an agreement in general. And our contractors mentioned that people have to propose it to us and that we have to agree if they want to sublet. But there is no really changing in that trend. There can always be something, depending on the moment or the growth, but there is no trend in subleasing.

Okay. A second question would be on the reversion. So if I look at the reversion, it went down from 13% to 11%. Just wondering, is this an effect of the ability to capture the reversion over the year that you did? Or is it due to the fact that the indexation has actually been stronger than ERV growth? So basically, what I mean is that appraisers stabilizing to ERV despite your ability to drive the rent higher purely on indexation grant?

I think it's more a bit a mechanical effect because when you look at the indexation over the year, contractual indexation was around 3% within the reversion and the ERV rise was also around 3%. So that's more or less in line. And then it's the mechanical effect of adding new projects or acquisitions, which more recently signed leases. I think the main message is that even after years of very nice indexation, we still have 11% reversionary potential to capture. And yes, rental growth is slowing, but note that when vacancy rates are below 5%, 6%, and you still have pricing power as a landlord, and there is no discussion on pricing. And the best reflection of further upside potential in the future. is the fact that the replacement cost rents have to have a profitable development scheme at the current land value plus construction cost is still much higher than ERVs for existing buildings. Just in general, aggregated numbers. the portfolio is leased at 50 ERV. For existing buildings, it's 60. And when you want to develop a building and to offer -- and when a client wants a new building, he needs to pay 70.

That's the example in Belgium, but in the Netherlands and the other countries, that is the same, but at other levels. And today, what we see, Frederic, is indeed, if there is, let's say, somebody interested in a building, then the question is, does he really need it now? Is he prepared to decide? But let's say, almost no price discussions.

Okay. That's clear. And maybe just on that. I know that last year, you communicated -- you were communicating on the ERV growth. I think last year was around 11%. Maybe I missed it in the press release, but what would be the ERV growth for this year in your portfolio? .

You mean in '24, it was plus 3%.

All right. And last question on my end. So do I understand well that you have identified all the potential development, potential acquisition for your EUR 1.70 EPS in 2027? We are already in 2025. So that means that you seem to be really well in advance. I'm just also questioning how prudent are you on this guidance for '27, knowing that you will also acquire the 15% stake in Romania that you didn't have?

Yes, on the 15% stake in -- of our Romanian partner, buying out the minority stake, that is included in the guidance, and that's not the big impact. It's EUR 0.02 per share. And on the outperforming, I'll leave it to Joost to comment.

It's fantastic and we are only, let's say, 1 year. We started a new strategic plan 1 year ago. And after 1 year, we can say, look, we have everything. We have all the building block insights and we just have to execute. We don't need to invest further. Now we just have to execute what's inside. I think this is fantastic news for our teams, for you, the investors, so that, let's say, we have it all in our own hands. But of course, if there are unique opportunities. If we can do good deals, we will continue to do it. But it's not -- we can do it, but we are not -- we don't need to do it. So I think this is very good news after 1 year. And then I know, we now say internally and a lot of people are listening. They know that they just have to execute first and that there, the value lies for the coming year.

We still have a few questions outstanding in the live chat. I'm not going to address each and every one of the questions because some of them have already been covered by the analysts. Maybe a first one for Mick. Is there a chance -- or Joost. Is there a chance that the Dutch REIT regime could be reinstated in any form?

Yes, that could be, but not in the short or medium term. Yes, there is some analysis ongoing by the government and the Ministry of Finance and the administration on how it's -- how they should look at it from a policy point of view and attracting investments, but that will be a long project.

We don't calculate on that. We don't count on it.

Maybe Joost. Just to give a few additional comments on the occupancy. How is it possible that from a slowdown in occupancy mentioned during the Q3 press release, we are already at an inflection point or near inflection in demand? KPIs do not suggest it.

Well, let's say, it's like we see and we feel the real world. Yes, there was some questions in last summer about what will happen, what will be the impact of the economic slowdown, who was there? And then indeed, let's say, after summer, we have seen that we got back some space or 100,000 square meters. And then indeed, that was so we could and we could confirm the impact of that. And since then, we got no further -- it's just, let's say, we report what we see in our portfolio. And further on, we did not got any extra giving back further. And it was, let's say, everybody was just staying, prolonging. And so that's just, let's say, the reality that we communicate. And it's also normal in an economic downturn that, let's say, people take care of what they have. They say, look, let's try to keep even, let's say, when they could rent a cheaper building, they have to move in, that is CapEx, that is risks for their KPIs, then people stay. And don't forget that there is still a lot of scarcity. When they give back a building, the chance that they can never re-rent it later is very big. And before 5 years ago, you could say, look, I will give back X percent or a certain sell or whatever, it's better, and I'll take it back within 6 months to 1 year. Well, now that's not possible anymore. When you give back something and it's rented, it can go away. Don't forget the difference with former situations that the scarcity of land in Western Europe.

And then another follow-up question. Are we having -- are we giving any incentives to retain tenants to start?

No. Let's say, when we are -- absolutely not. On the contrary and we keep on discussing about rental growth, of course, when we can do it legally, when we are at the end of the contract, then we keep on discussing. Look, your rent today is too low. We have to higher the rent. So we still can, today, in this environment, discuss about the rental growth instead of incentives.

And then another question just on the occupancy. Do we see any other risk of further terminations in the short term?

Well, no. Otherwise, we would have mentioned it. Today, we feel that -- and our teams really see that people are retaining and that they are staying in the portfolio. Of course, we can only look forward for 6 to 9 months, like I mentioned, since people have to let us know 6 to 9 months in advance what they want to do. So the next element or the next point is the end of the year. But people have only to mention it 6 to 9 months. But in our discussions and in the negotiations we see with our clients, we see that people now say, no, the situation is stable. Okay, can be low, but stable, and we want to stay where we are.

Do we see any opportunities in data centers?

Yes, of course, there are always. But, let's say, it stays very an owner-occupier market where the big ones are really investing by themselves in their core. For them, it's really core. It's their core business so they invest by themselves. And yes, for some, I would say, second tier or third tier providers, we can look at it. But then indeed, it's not about the location, it's about availability of electricity. And then also how near is the cable. And then yes, you need just a location which becomes free with enough energy. And for example, in the Netherlands, this is a big problem, energy. You can have the most nicest piece in Schiphol. Well, all new data centers are forbidden in the Amsterdam region due to lack of electricity. So it's really a question of electricity. And when there would be an opportunity, we will look at it, we will investigate it. And if we can do it, we will do it. We have already developed 20 years ago a data center. But let's say, it's not one of the driving forces or we don't calculate on data centers to realize our growth.

And then we have another question coming from [indiscernible] on where we expect the market vacancy to land before demand of developments will pick up? And where do we see market rents versus inflation given the current dynamics? Maybe just to give a general comment. So on the developments under construction or what has been delivered in recent years in aggregate has been around 6% of total stock has been delivered every single year, and that dropped now to 4%. So it's not to say that there are no new developments. I think in the market in general, this is just -- people are refraining from starting on a speculative basis, which is also reflected in the fact that the pre-letting rates are currently at 70% and that developers in general are going to be less keen in the current geopolitical macroeconomic uncertainty to start on a [ spec ] basis. Unless there is something to add?

Yes. No. I think indeed, let's say, rental growth like Mick said, is now I think it's coming down and normalizing but still growing and more following inflation now. And then, indeed, for the rest, I think market trends will be the same as we mentioned for our portfolio. And of course, there can be differences in specific micro markets when there is -- but in general, we see developments are indeed more again, if they are done build-to-suit and not speculatively the new ones, and it's more than -- if there are differences, then it is micro market driven.

And then a question on the achieved reversion in '24 of 12% on the 500,000 square meters. How likely is it that we will be able to capture part of that 11% reversionary potential throughout '25?

Well, it's always difficult to comment on specific contracts, countries or short term. But what we can say is that we look at it from an aggregated portfolio perspective. And we said that one of the hypothesis in the growth plan throughout '27 was to capture. In the global portfolio of -- at that moment, at the start, 7 million square meters or EUR 1 per square meter on top of inflation, which means in total EUR 7 million throughout the growth plan, and we are well on track to achieve that. And it's -- the current status is that we already realized 40%, contracted 40% of that. Obviously, in general, EUR 1 per square meter over the total portfolio, but it's always related in practice to a couple of contracts coming to an end date each year. and we are well on track for that. And that should then translate into 40 bps, 50 bps above indexation in the like-for-like rental growth throughout '27.

And then we have a few more questions on the EUR 500 million in exclusive negotiation that as Joost already mentioned, we have provided as many details as possible. And if not, it would be already included in the pipeline in execution. Maybe just one more question to clarify on the ERV. Should we understand that they have been declining in Q4?

No, no, they went slightly up.

And then another question just on the general market. There is scarcity of land in Western Europe. But in the past 5 years, a lot has been built. Do you see any risk of overcapacity?

No, absolutely not. On the contrary, land stays very scarce. And they stay -- there is, let's say, now a cyclical calming down of the market. But structurally, our market stays very healthy. And structurally, the demand for warehouses add value activities, production will stay there and will be needed in a world where, let's say, the omnichannel is still growing at a penetration degree of e-commerce is still low. We are still -- that's still a positive trend there in the omni-channeling of us as European consumer. For example, in food e-commerce. And besides this, the continentalization, strategic stocks bringing back to Europe for the case -- in case of. And third thing, some reindustrialization like, for example, discussions today about the defense industry. You read a lot about. Yes, we, as Europe have to build up, again, our own defense industry. Well, therefore, we will need production sites. We will need warehouses. So no, the structural trends stays really positive.

And this concludes currently the entire Q&A session. If there will be any open questions, feel free to reach out, of course. And then I would like to hand the floor back to Joost for his final remarks.

So thank you for attending today. And if I'm looking forward, I see 3 really positive elements. And we are growing towards a EUR 10 billion plus logistic real estate company, and that's good for investors so we can create the big, safe, liquid play in Western Europe in logistics. That's what a lot of investors ask. And it's also good for our clients because then we can offer them more and more cross-border solutions for which they are asking and coming to us. Secondly, I think we showed that we can grow further, but not only grow for growth but really profitable growth. Like we showed, besides the EUR 1 billion of last year that we have now an investment pipeline in execution of EUR 1.1 billion at an NOI of 6.6%. So we can grow even when we become bigger, and when you become bigger, it's more difficult, but we stay continuing to grow profitably. And like I just mentioned in the last question, all of this is only possible thanks to a structural long-term good fundamentals of the logistics real estate sector. And yes, there is a limited cyclicality in our business, which results in 2% max 3% occupancy. And that change in occupancy, we can handle always, in the past, today and in the future, without changing our targets. Thank you for listening. And further on, if you have any further question, Alexander is yours.