Warehouses De Pauw SA ($WDP)

Good morning, everybody. For the first time, we are not all together in the same room for an investor call, the proof of our growing European platform. Too much business to do. So we have to spread our spendable time better between clients and investors. Yes, our new 2030 vision announced with the full year results landed very well internally and externally within team WDP, our clients and our investors. It boosted our enthusiasm to build out the EUR 10 billion-plus platform for tomorrow. And yes, we made a perfect start by gathering already new building blocks towards 2030. One, by enforcing our international team and also by assembling on building out in the short term, a new unique land bank from Zwolle to Marseille together with interesting add-on acquisition developments, redevelopments in all our countries. All of this is fully supported by more and more clients asking to do business with us in more countries. Since my statement, we can now offer solutions from Helsinki to Madrid and Rome. And all of them will be realized step-by-step in the coming quarters, of course, all fitting within our EUR 500 million investment envelope per year. So I can say with confidence that we are seeing a lot of activity in the different business segments we are in, even though we are still living in volatile times. And this is really a big difference versus a year ago. Back then, almost everybody was waiting for more stable times. Today, people are increasingly accepting that volatility is there to stay and that we have to handle with it. And for the short term, Q1, of course, can never deviate really from what we announced 2 months ago with the full year results and the outlook. So yes, we can, of course, confirm our EUR 1.6 earnings per share guidance for '26. And the most important news of this report is that we replenished the investment pipeline with EUR 140 million new investments consisting of 4 new pre-let developments and an add-on acquisition at an NOI of 6.9%. And so we keep the pipeline in execution at EUR 700 million. And we also signed 100,000 square meters of new leases across the developments and kept the occupancy within the normal foreseen levels of 97% to 98%. So a clean sheet to steer even with all the volatility around this. Time for Q&A. Alexander, the floor is yours.

Good morning, and welcome to the Q&A. [Operator Instructions] We already have the first question in line from Marios. [Operator Instructions]

Great. I've got 2 questions from my side. I'll ask them one by one as mentioned. So firstly, you mentioned this morning that you see demand broadening, you've got larger space requirements selectively coming back to the market. If I look at your leasing volumes and the proportion of leases renewed through Q1, I think this was running lower year-on-year. And of course, we've now got the renewed uncertainty around the conflict. So how are you thinking about leasing volumes through the year? Should we expect an improvement? And are we on track to get to that 90% renewal rate?

First, indeed, demand and the renewal rate is also depending on and can differ from year-to-year on the moment when the renewals will be there. There can be a lot of renewals in the beginning of the year or in the end of the year. But in general, let's say, like we said, we see a lot of activity. There is more and more demand in the smaller spaces, let's say, there, we have already since last year, a normal market, in the market up to 10,000 square meters. As from September, then we have seen new strategic partners and strategic decision-makers coming back to the market because they said, look, we can't wait for more stability. We go for it. We have a vision. We think that we can also use the moment versus our colleagues who are still hesitating. And now since the beginning of the year, we also see new tenders for bigger spaces. And so more and more, everything is normalizing. I think if we are still missing one thing, then indeed, you can say, okay, there is no economic growth yet. So let's say, the normal daily extra square meters that we have, one, economy goes up. So the cyclical square meters there, let's say, people are still hesitating because yes, economy is not yet retaking. So -- but we are, let's say, confident about the demand and the occupancy.

Very clear. And then just secondly, on country managers now in place across Italy. What are you tracking there in terms of portfolio opportunities to ramp up exposure? And how should we think about the timing of this coming through?

Well, we always said that the new countries are part of our '27-2030 plan, but that we will engage them now in order to prepare the future. And let's say so, we -- and they are just, let's say, engaged. Spain started the 1st of March. Italy starts the 1st of May. But let's say, now we are onboarding them. They will make a plan about the market, about how the competition is handling, about where are the possibilities, the opportunities for us. And so now they have the time to prepare. And then at the right moment, they will come with a development or an acquisition. So let's say, we did it now instead of waiting and having a portfolio, we hire them upfront, but let's say, give them also a little bit time to get and to learn our DNA and to learn the markets and go forward. So it is indeed within the 2030 plan.

The next question is coming from Frederic from Kepler. [Operator Instructions]

I hope you can hear me. Just one question on the renewal on existing lease. I'm not so sure you mentioned at which level of rate these were realized. So can you comment on that? And maybe can you give a comment on the ERV growth on your respective market for Q1? That would be the first question.

Mick, will you take this?

Yes, I'll take that one, Frederic. The lease renewals were done at the ERV, so at levels in line with the spread between contractual rents and ERV and let's say, between 7% and 9%, that was, but we can confirm those ERVs. And then the second part of the question was the ERV trend across the markets was flat, which is also normal with a bit of market volatility. But the good thing is we are capturing the spread.

Yes. The fact that we are now at 7% instead of 10% means that we can capture the potential and then it can go up again.

And then can you maybe comment a bit about -- because you are referring to the fact that you are seeing more appetite for larger units. So to -- can we conclude that for the upcoming months, you should be announcing something relatively large, a bit to the same extent that what you have been announcing in Antwerp, for instance, in your development pipeline?

We have to see -- let's say, we have to stay cautious. But yes, we see people -- we see big demand like indeed, the Antwerp development is a very nice one. I think this is a good example. And yes, of course, it will be not the last one on the contrary. But say, it's too early to say when will it still be before summer the intro. We see much more activities, and there will be very nice things to come in the near future.

The next question is coming from Suraj from Green Street. [Operator Instructions]

Just one question from me. Could you please provide some color on how construction costs are trending in real time across your key developed markets given the conflict in the Middle East? It will be interesting to hear your thoughts on that.

Let's say, it's a combination of 2 factors. First of all, indeed, there is some, let's say, nervosity with our contractors about, yes, those elements of their materials who are, let's say, linked to oil prices like isolation, of course. But on the other hand, there is also not a lot of work. And that is the difference versus, I would say, the post-corona time, then you had indeed prices exploding of materials, and there was a lot of work. And then indeed, the total cost -- of the total construction cost went up. But now, let's say, there was still a downward trend since there was less activity. And yes, there is now -- they are, let's say, thinking, have I still stock? Can I already reinvoice extra price, they try to, let's say, use those elements. So -- but on the other hand, there is not so many work. So I think today, prices are flat and at a low level. But yes, depending on how long it takes, depending on the problem in the Middle East, there could be for some elements, a little part, higher part, but it's not like -- it's not the same like after COVID. There is still demand -- less demand, so for new buildings so the margins are lower. And I think today, it's compensated and prices will, let's say, at least very well and not a problem to do profitable projects.

The next question is coming from Vivien from Degroof Petercam. [Operator Instructions]

I had a question on the investment market. Just wondering of what you've seen in terms of new assets portfolio put for sales, if there is still, I would say, a new portfolio put on the market since the conflict? Or do you expect some, I would say, lower liquidity and therefore, lower opportunities for you to acquire assets on the market?

I think no, I said the contrary in my intro. There I said that we see a lot of possibilities, a lot of activity that we are negotiating some very interesting acquisitions, let's say, in all the countries. So no, I cannot say that there is less liquidity. On the contrary, let's say, since the beginning of the year and since last year, I think there is more and more liquidity and that didn't stop, let's say, the last month, no. More than enough possibilities for us in all the countries.

Perfect. And then a second question was on the contribution of solar energy. You made some comments in the press release. I just wanted to get a bit more detail there and if you could provide any guidance on what to expect in the future quarters and the contribution to the top line.

Mick, you will take this?

No energy, you mean, Vivien?

Yes.

For the income from energy, we look at the full year number, and then we can still confirm what we have in our budget in the guidance. You can also see the details in the annual report in the order of magnitude of EUR 26 million for the full year.

The next question is coming from Paul May from Barclays. [Operator Instructions]

A couple of quick ones from me. First one on the vacancy rate movement and the disposals you've done. Are the disposals -- the disposals have an impact on that vacancy rate in terms of how they've moved that? Or is that purely just an underlying operational movement? It should be quite a quick one and then I've got a second question.

First of all, on the disposal, no, that didn't have an impact because that disposal already happened of the Belgian side happened in Q4. So in Q1, it was the normal usual movement of tenants and it's fully in tune with our budget and which we guided for at the start of the year that we see a normal occupancy rate in a normalized market of between 97% and 98%. And this small quarterly movement just reflect the usual tenant movements.

Okay. Perfect. And then second one, you mentioned obviously in the opening and the last question about acquisition opportunities definitely being there and I think if anything potentially increasing given higher rates for some of the owners of those assets. How would you look to fund those? I think at the full year, you mentioned if there was a large transaction, you'd happily equity fund it. But obviously, your leverage position has been creeping up. I just wondered how you're thinking about that with these increased opportunities on the acquisition side that you mentioned?

Well, first of all, Paul, I mentioned that we see indeed acquisition opportunities, but that they all fit. I added that clearly, that they all fit within the EUR 500 million investment envelope we have every year. So today, they are perfectly fitting in. But like we mentioned at the full year results, if there is a special extra transaction at a certain moment, then we will investigate it, and we will put it against our cost of capital at that moment. And then, let's say, we can see what we do. But the most important thing is the fact that we have EUR 500 million a year. And let's say, this is as from '27 to 2030, even EUR 2 billion we have during 4 years to invest. And everything today fits perfectly within that EUR 500 million envelope. And if there is more, like we said, then we will investigate it. And if we can create value, we are open to do it. And if not, we will not do it.

And just to check on the create value, is that more an income-led view? Or is it an asset value sort of NAV-led view? I think in the past, you've been more income led, but just to check.

Income-led.

We want to -- our main metric is earnings per share creation and having on all the assets, a solid correct risk-adjusted long-term total return -- property return. That's how we look at it.

The next question is coming from Ana from Morgan Stanley. [Operator Instructions]

My question is on your outlook for market rents, so ERVs. I believe that in the full year results, you mentioned that you were expecting market rental growth to come back in line with inflation and in the long term, maybe above inflation. However, the first quarter, we've had another quarter of flat ERVs roughly, and therefore, your reversionary potential is compressing. So yes, I just wanted to know how are you thinking about this, particularly as with inflation going up, you would probably see a little bit more of this reversionary potential in the absence of ERV growth.

Yes, but that never follows so fast. Yes, there is, again, a little bit more inflation. And so yes, that will be -- and we still believe that ERVs will grow at least for the short term with inflation. But let's say that has to take some time. It's not quarter-on-quarter, we have to see that in -- and indeed that, let's say, the inflation went up just the last month and that, let's say, ERVs are not following month-on-month on that, but that's, let's say, on a yearly basis more you have to look at on a yearly basis and in the longer term. Mick?

Yes, absolutely confirmed.

The next question is coming from John from Kempen. [Operator Instructions]

Just one on the like-for-like rental growth. I noticed it dipped a bit over Q1, but guidance for 2% is still reiterated for the full year. Is there a timing or base effect in here to bring it back to this level? Or do you expect occupancy to really materially improve here?

I think the figure we show is broadly in line with what we guided for at the start of the year. There, we said a like-for-like rental growth expected for the full year around 2%. And we, at that moment, said within indexation will be a bit less than 2% for the full year. We have around 50 basis points coming from reversion, and that would be then partially offset by the impact of temporary vacancies related to tenant movement. So what you see is actually in tune with that guidance.

We also have one question for you, Joost, in the chat coming on cold storage. Can we -- can you give some additional feedback on the exposure to cold storage and the attractiveness that we see in that submarket compared to conventional warehouses?

Well, indeed, it has always been a very interesting segment within our business since indeed, you need to, let's say, you can make better warehouses, there is more equipment in. And then indeed, let's say, in those warehouses, people stay longer and more and more -- let's say, more and more products need to be in cold warehouses and the legislation everywhere in Europe is getting up. So the requirements are indeed more severe. So let's say, more and more goods needs to be in cold storage. And there is still, let's say, in cold storage, there is less activity and I would say, less buildings available. So there is almost always full occupancy in cold warehouses. Cold, meaning them, let's say, positive between 2 to 4 degrees or around 10 degrees. Of course, then you still have the deep freezers too, also a very interesting segment since indeed, there is less supply in those things, and we are able to develop them and more and more clients are wanting it. So it's a very interesting add-on segment in our business and growing.

[Operator Instructions] In the meantime, also to highlight there are no further questions. Some of them have already been covered, so we can cover them again off-line if need be. And that said, there are no other people in line to ask a question. So I will give the word back to you, Joost, for any concluding remarks.

Okay. Thank you, Alexander. Indeed, we are only 2 months further than the announcement of our new vision and so that cannot deviate. But I think I can just repeat 2 things, indeed that we have a clear ambition towards 2030 with a very clear goal. We want to create a fully integrated EU platform providing total supply chain infrastructure solutions. And above that, and again, based on Q1 and the long term, where we are already building forward, we can say that we are delivering today with a vision for tomorrow. And so above-average growth with a below average risk profile. Thank you all. And we stay, of course, always available for all your further questions about this and about the future towards 2030. Thank you all, and have a good Friday.