CEOInterviews.AICEO Talk: Matthijs Storm (Wereldhave)

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Nico0:08

Welcome and nice that you're watching a new episode of CEO Talk. Program at Aandelouder where we talk to directors, CEOs, CFOs occasionally of listed companies. And today with us is Matthijs Storm, CEO of Wereldhave. Matthijs. Old hand again at least here in the show. You come by regularly.

M

Matthijs Storm0:24

Yes, certainly.

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Nico0:24

Good that you're here. This morning the trading update, yes, seen. Not much going on, right? It all went well.

M

Matthijs Storm0:29

No, I think reasonably solid and we are very satisfied with that in these uncertain economic times.

N

Nico0:35

Yes. Yes, that's how it is, because of course you all have to deal with that, everyone does.

M

Matthijs Storm0:39

Yes.

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Nico0:40

Do you notice anything in the shopping centers that consumers are a bit... because we look at investor confidence and consumer confidence, that's all going down a bit.

M

Matthijs Storm0:48

Yes. Yes.

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Nico0:48

Do you see that reflected in the first quarter figures? You don't really see it yet, right?

M

Matthijs Storm0:52

We had an increase in visitor numbers of over 2%. We collected more than 98% of the rents, you know. You often see it quickly in payment arrears and you don't see it there yet. So those are important indicators for us. Occupancy is still around 98%. What you do see are two things. In March you see some figures regarding retail sales in the fashion and shoe industry, you see a slight decline. Well, then you assume that has to do with the situation. We'll see how that develops.

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Nico1:22

Yes. What I also think is of course inflation is not just going away. There was also something in the news about that this week.

M

Matthijs Storm1:28

Yes. Yes. The hospitality sector for us is about 10% of the rent, which of course has taken a lot of hits in recent years during the corona period. Closed, closed the longest, forced closed. Then after that in the energy crisis Ukraine, suffered from rising energy prices. They use a lot of energy, rising minimum wages for staff, rising product prices. So yes, that is a segment where we are a bit more cautious.

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Nico1:53

Alright. Well, we'll see. So, we'll go through those first quarter figures later. What are we going to do today, Mick? May I put the presentation on screen? Nice cover. CEO Talk Matthijs Storm of Wereldhave. There he is. And a short introduction of Matthijs himself of course, but also of Wereldhave. The man and the company, as they say. The man makes the company, but maybe in this case it's justified. Then we'll look at the Live Central strategy you implemented in 2019. I must say when you started, you were appointed there. You make a plan.

M

Matthijs Storm2:24

Yes.

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Nico2:24

And then you get corona. What did you think then? Plan B?

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Matthijs Storm2:27

Yes. No, I didn't think that. Because we had thought about that plan for nine months. So you don't just throw that away. But other priorities came up because we had to refinance. When I came in, we actually wanted to do a 300 million bond issue. But yes, I was only one month in, because we had an MTM program then. So we could do that. I thought: 'Yes, let's not do that, because even in a bond roadshow you need a story. Less so than on the equity side, but you need a story.' I said: 'You know what? We'll do that in March next year.' Well, the rest I don't need to fill in, Nico. And we certainly didn't see that coming. So 2020 was entirely focused on refinancing and also selling. In the Netherlands we sold a few things. The year after that, of course, the French transaction of Viacentra. And with that we gradually got the financial profile back on track.

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Nico3:08

Okay. A special time. Well, we're going to talk about the Live Central strategy. Then we'll look at the quarterly figures or trading update for the first quarter, and yes, we'll look at the Wereldhave share and eventually we'll get to the shareholders' meeting on May 13. Let's start at the beginning. Matthijs, Matthijs Storm from Limburg, right? Heerlen.

M

Matthijs Storm3:33

Yes. In Heerlen I grew up. In Limburg they considered me an import Limburger, because I wasn't born there. I was born in Groningen and my parents come from other parts of the country.

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Nico3:41

So can you speak Limburgish or not? Or only Gronings?

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Matthijs Storm3:43

No, I can't myself, but my wife was born in Maastricht. So when she speaks with her mother, I can follow a bit. [laughter] But yes, I do feel Limburgish. I grew up there.

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Nico3:52

I used to have a colleague from Kerkrade who, when he called home, I couldn't understand him. I really couldn't understand him.

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Matthijs Storm3:56

Yes, I went to Roda JC my whole youth in Kerkrade.

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Nico3:58

Oh yes. Well, he did too. Yes, he did too. Good. Well, you've been an analyst for a long time. Always been an analyst and suddenly, let's say, you got your feet in the mud. How was that change? Was that always something you aspired to or not?

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Matthijs Storm4:12

Yes, I did. I knew that if it could happen sometime and if it worked out, I would really like to be in the business myself. As an analyst and also as an investor, you always stand on the sidelines. And then you also see, looking back at the past 8 years, that some things you can spot on very well. To give an example, my vision at the time was that Wereldhave had a lot of what I called oversized convenience centers. Actually neighborhood shopping centers for daily needs, but they had become too large, so they also added a bit of fashion. City Plaza Nieuwegein also tried to attract visitors from Utrecht. That is a difficult story, I think. That was a good observation, because it turned out to be true. We addressed that with the transformation to full service centers. Yes, other things you see less well from the sidelines. One of the things I discovered at Wereldhave is that despite the fact that when I came in it was actually going quite badly, there were also a number of very good things within the company. Among others, the people who worked there. And if you look at the core team of Wereldhave now, it has become much smaller, but a very large part are people who were there then too. It's a very good team. Only you don't see that on the stock exchange, because then the share price is bad and the results are bad and everything is bad, but that's not how it is.

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Nico5:21

Yes. Yes. Alright. Good. Well, let's look at Wereldhave. We are Wereldhave, pleased to meet you indeed. Many service centers is now the new word actually. We often say retail, but you are actually much more service centers. Well, here we have some photos. They come in.

M

Matthijs Storm5:39

Yes. Yes.

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Nico5:41

Well, back to 2019. I said it already, oversized convenience centers. We have many centers in our portfolio, if I go back to 2019. Centers we researched, the locations researched, prime locations for all daily needs. That's not just the supermarket, but also the drugstore, the optician, there can also be some hospitality, all related things. The moment you have 50% fashion and shoes in such a center, then you are no longer the daily center. Then you are actually what they call a destination.

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Matthijs Storm6:11

Was that the case at that time? Was that really... Well, that's still the case now. Only you don't want to be in between, and a number of our centers were really between a rock and a hard place. Yes, that is the more defensive reason. The more opportunistic reason is that we also researched the locations: what else can you do there? And then you see that especially in the Netherlands, but also in Belgium, you are always in densely populated areas. That means you can also do other things. You can make housing, you can add healthcare, which we have done in many places. You can add a gym. We have many Basic-Fits in the portfolio now, and so on. And we have done that. The nice thing is that it reinforces each other. So we don't just add something to fill space, but we add something that has synergy with the rest, so that they benefit from each other.

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Nico6:53

Yes. Oh, clear. Four countries now.

M

Matthijs Storm6:58

Yes, because Luxembourg is not there, right? That was recently acquired or did you already have Luxembourg? Well, when we presented the strategy in 2019, we said Benelux. At that time we didn't really think we would also add Luxembourg. But we had said Benelux, and then a nice opportunity came last year. So we bought two centers there last year and we are very happy with them. Good market for us. Very stable market, you also see in these times. You also saw in the quarterly figures, I'm getting ahead of myself, 23.5% positive leasing spread in Luxembourg. That's really nice to see. You buy that and the first few contracts are immediately 23.5% higher on average. So now a lot of people come by, because everyone wants that. Everyone wants that, maybe that's why, I don't know.

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Nico7:38

Yes, undoubtedly. And France is of course a story. We've talked about it before. We still want to sell the last two centers. So ultimately the focus is Benelux.

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Matthijs Storm7:47

Yes. Yes. Ultimately we also want to add a country again, and we've discussed that here before. There will be a time when a country is added. Only at this moment there is so much good stuff to buy in the Netherlands and Belgium that there is no reason at all to go to a new country today.

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Nico7:59

Yes, that sale of those French shopping centers, is there some progress or do you say, well, we'll see how it goes. Because it remains a difficult story.

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Matthijs Storm8:10

It could be that a bid comes out of it, but that is one of the things that has taken much longer than we hoped. In 2021 we said, I think, that we wanted to sell those last two within 12 months. Yes, the French market, the investment market, and you are dependent on that, is pretty much dead. While other markets like Spain, Italy, England, but also the Netherlands have always had quite a lot of transactions. It will come back, but at this moment it is still... Yes, we also see it a bit in the economic figures in France. It's all a bit slower there than in the rest of Europe. That's right.

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Nico8:46

Geographic business profile. Well, yes, Belgium is the largest. Belgium is now the largest. It's actually a Belgian company. Congratulations.

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Matthijs Storm8:54

Well, [laughter] there's nothing wrong with Belgium. Nico, it's a wonderful country. You don't pay transfer tax on acquisitions if you do a share deal. We are a REIT, a GVV. So no corporate tax. Belgium has much fewer shopping center square meters per inhabitant than the Netherlands and also than France and many other countries. That is for us, so there is room to grow. We'll get to that later. Not only room, we are growing there and we will continue to grow. That is also written in today's press release that we will do acquisitions again in Belgium. Yes.

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Nico9:24

Yes. Yes. Okay. Nice. And then the distribution, the portfolio. Those offices are also in Belgium. The offices are in Belgium. That's a bit of legacy. We're going to sell those too.

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Matthijs Storm9:34

Yes, we have actually already sold one small office building outside Brussels and the goal is to sell the rest.

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Nico9:41

Is that separate from the shopping centers or is it...?

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Matthijs Storm9:43

It's completely separate. It has nothing to do with it. No, no, no, if it were an integral part, you could say maybe it's a kind of full service center, but it's completely separate. Berghem in Antwerp is near the station. It's fully leased. That's the better of the two. We will appoint a broker after the summer and it will be sold next year. There is some waiting time, as they call it. We have let it slide into another vehicle. And if you wait 2 years, you can do a transaction, a share deal without registration rights. That saves the buyer 12.5%, so we can get a much better price.

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Nico10:16

That office market. How do you assess it? Because I don't hear very good stories about it, but...

M

Matthijs Storm10:20

Yes, the office market is, I'm not a specialist in the office market, but I think we all see, not only in the Netherlands and Belgium, but in many countries, that the office market is difficult at the moment. It was difficult after covid, but it's also difficult now with the rise of AI. There are also investors who say that AI will do to offices what e-commerce did to retail. Yes, that's a very generalizing statement, but there is a kernel of truth in it. So it's not an easy market today. But well, companies need fewer people. At least if you look at the banks that are laying off thousands of people. Yes, and especially in the back offices, of course, so the impact is even greater. So well, I'm glad we're mainly in retail. Nico.

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Nico10:59

Yes. Yes, very good. Very good. Then the tenant mix.

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Matthijs Storm11:02

Yes, the big ones at the top, Ahold and Jumbo. Do you absolutely need such a supermarket in your shopping center to get people for daily groceries? In our concept, yes. And especially in the Dutch portfolio, that is really the anchor in the neighborhood, of course, that people go to the supermarket and there is a lot of spin-off from that. There are also other brands and names. For example, Action can also attract an incredible amount of public. But also drugstores like Kruidvat or Etos can have a lot of pulling power. There are several concepts that do that. But the supermarkets are extremely important, especially in the Netherlands. But also in Belgium, all assets have a supermarket as an anchor. And even the two French assets that are for sale both have an Auchan and an Intermarché as a tenant.

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Nico11:47

Is there a type of store that is truly indispensable in a shopping center? Or do you think you must have that?

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Matthijs Storm11:55

Indispensable, I don't think so. So if you don't have a drugstore or an optician, I think the shopping center can still function perfectly. But I do think if you have the complete offering, you have the best proposition. And you also see that they seek each other out. So if you have eight out of ten pieces of the puzzle, you'll get the last two as well, because those retailers also want that, because they know, and that is of course a bit of the proven concept of the full service center, that it works. What is the best place to be? In a shopping center. Yes, that depends entirely on what kind of store you have. Of course, you have a lot of foot traffic next to an Albert Heijn or a Jumbo. But for some retailers, for example, visibility from the outside is also very important. In Kortrijk we have a few very nice units on the parking lot. They are not next to the supermarket, but they have a very nice visible location. That can be more important for a fashion retailer. So it really varies per location. Okay. Nice. Good.

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Nico12:52

We go to the strategy as implemented a few years ago, 2019. That seems so long ago, Matthijs. 2019. And maybe it's good to explain how you thought that out.

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Matthijs Storm13:05

Yes, I think we've already discussed part of it. The observation that we have a number of centers that fall between a rock and a hard place. Are you there for daily needs or are you there for entertainment and as a destination, as the English say. So we had to address that. We had to address a balance where there was too much debt, and finally we saw opportunities, the more opportunistic part, to add other forms of use. That has been the whole first phase. That balance is now completely in order. After all the sales, we have a triple B stable credit rating from Fitch. That is the most important confirmation, I think. Loan-to-value is at 42%. We have 313 million in cash and undrawn facilities. So even if the war in the Middle East escalates, we have enough room to absorb that. So that's done. The transformation from traditional shopping center to full service center is completed for the largest part of the portfolio. We still have a few to go. That said, we are now in phase 2, growth, and in growth we buy new things and they are all transformed again. So that pipeline of transformations is also replenished by acquisitions. And eventually you get to number three, which is scale. And scale is what we've always said, and at least 2 years ago we had a separate presentation. That eventually we still need to grow a bit, and we don't need to become 10 billion in portfolio. That's not necessary at all. But we do need to eventually move towards 3.5 billion, maybe 4 billion, to be able to make optimal use of the stock exchange, both in terms of being on the radar of all investors. For some investors, we are still too small. Yes, you just did a roadshow in America, in New York. We now have about 20% of our investors are American investors, but there are also a few among them who find it a very nice story, but just say: 'Yes, at this moment you are still too illiquid and too small.' Again, you don't need to become four times as big, but with gradual growth, with policy, you will eventually get there and then you will experience the benefits. On the debt side, yes, I already mentioned bonds, we are still too small for that. An issue often starts from 300-350 million. That's too much for us today. If we have a portfolio of 3.5-4 billion, then that is possible and it's a very nice spread and diversification of our debt profile.

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Nico15:12

Yes. Yes. Alright. So that growth is coming. You're working on it. Explain what the 15-minute city is. 15-minute city. So you should be able to do everything within a quarter of an hour if you are in a 20% center.

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Matthijs Storm15:23

Yes, that's the idea. No. Yes, this is an existing concept that has been around for a long time. It now has more traction because you see it coming back in more places. The idea is very simple. People should do more things near their home. And that of course has to do with the problems of traffic, the challenge regarding CO2 emissions. And also because the housing market, the retail market, the office market, as we just said, is changing a lot. And you actually see that places where you offer multiple things, not just offices or just shopping, function best. We didn't invent that either. And you see that in many places in the world. We are busy with that.

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Nico16:00

Yes. Alright. We have a few examples, I think, but first the daily needs. You already talked about that.

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Matthijs Storm16:08

Yes. Well, this is, you see here tangible and intangible. If you walk through one of our full service centers, you can see all the tangible things. There you see especially the mixed use, the other forms of use. In the past, you didn't see a Basic-Fit in a shopping center. When I started and we did the first Basic-Fit in Presikhaaf in Arnhem, if I look back at the comments that came online and the emails we received. People said you're crazy to put a fitness chain in a shopping center. Yes, because they take up a lot of space and they pay less, I assume. Yes, but they are in places that are difficult to rent to others. Often in a basement on the first floor. In Presikhaaf in Arnhem they are also in the basement. But the nice thing is, and we measure that now, that the other retailers also benefit. And people don't just go to the fitness and then go home, but often also buy other things. That's what we do it for. Plus it attracts a very young target group. And in some of our centers in those neighborhoods, like Presikhaaf in Arnhem, you see an older target group. This was exactly the target group, the young people we wanted to add. So it has multiple functions. And on the intangible side, it's mainly about services. That can be services for consumers or for tenants. A nice example is The Point. That is a physical unit, but there we offer all kinds of services for the consumer. So you can do all kinds of things there. You can pick up and drop off packages from a number of operators. That is a great success. We earn something from it. It also attracts a lot of foot traffic. ATMs, people, ATMs are disappearing from the street. Especially older people still want to have cash and they want to do that in a safe place conveniently. Those are really things that make people come to your shopping center and then you have them inside. For us it's ideal if they disappear from the street and we and the operators of those ATMs are very happy with our locations. Deposit return has recently been added. So returning deposit bottles and cans is still quite a challenge. There are also a number of companies that have jumped on that and they rent space from us in The Point, in our unit where we offer all kinds of services, and then people bring the bottles, they can return them there. All that kind of stuff. So we earn from it, but it also attracts people for a certain reason to the center and when they are there they also buy something else.

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Nico18:12

Yes. 1+1=3, we say exactly. The value creation is nice. You did this nicely, because this is how it was before.

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Matthijs Storm18:20

Yes. And it's mainly about the red part, a relatively high rent. That was, I think, companies maybe also had difficulty letting go of that, to accept that you have less rent than maybe, rather than having it empty. Well, what you have to accept, it's not always the highest rent, because sometimes it's already empty and sometimes it's temporarily rented at low rents. It's often in the periphery of your center, of your shopping center. But I think what is difficult for companies is that you have to make room for it. You have to adjust your valuations, you have to free up capex to invest in it. And the cost comes before the benefit. That was of course also when we announced the strategy in 2019. The values of the properties went down and we were going to invest 300 million and the rent didn't go up immediately. That's why we also received quite a bit of criticism. It's a long-term vision. Many companies focus on the result, just like we have a quarterly result today. That is also important. But the strategy must be a long-term strategy. And that is the reason why we are doing so well in the last few years, because that is actually the payoff of the strategy we implemented then. Only that is only visible in the last few years.

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Nico19:26

Okay. And what happens here is that different types of stores come in.

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Matthijs Storm19:31

Yes. Yes. Yes, so what you see here from left to right, Nico, is that on the left is actually the traditional picture where you already have some problems in those red boxes with a number of tenants, for example in the shoe or fashion industry, who leave or have difficulties, where the rent goes down. And you have to do something. You also see it in city centers. We just talked about Heerlen, where I come from. There you see the city center emptying. If you don't pursue proactive policy, it only gets worse. Then the vacancy is almost contagious. And ultimately in the long term you will make less return. And on the right side, full service center, we invest. Again, the cost comes before the benefit, but ultimately you attract tenants from other sectors. You see that in the light green blocks. I already gave Basic-Fit as a nice example. And in the long term, you will get a better center and you will attract new parties. And that's very nice. We are now very active with that, attracting a few very large brands that, I think, would not have come to our centers 2 years ago. For example, we have signed Sephora in Belgium in a number of places. Yes, that is a party that a few years ago really wouldn't have come to us. It's a party that is actually the best performing health and beauty retailer at the moment. That is, I think, also a consequence of us investing, that the center is alive and functioning well. Then they also want to be in your portfolio.

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Nico20:54

Yes, then they will also come with Louis Vuitton and all those expensive brands, so to speak.

M

Matthijs Storm20:58

We can't afford those.

N

Nico21:01

Well, good. Anyway, the transformation is clear.

M

Matthijs Storm21:07

Yes, maybe it's nice to explain what you see here.

N

Nico21:10

Yes. Well, here you see that, I already mentioned nine months that we made a plan. Came from analyst, also got quite some criticism. Because do you need months to think about what you want to do? But I'm very glad we did that, because you see that maybe on the left under that heading one, there were whole analyses and research done before presenting this strategy. Because ultimately it is also location-dependent. You can make a very nice plan: I have a too large shopping center and I'm going to put some mixed use in it. But it has to fit the catchment area. There has to be demand for it. It has to be financially feasible. The municipality has to cooperate. Those are all things that we check in a nutshell. Is that very different per municipality? For example, in Maassluis we had Koningshoek. Good shopping center, but too large, too much fashion. We wanted to put a Basic-Fit there. The municipality didn't want that and we visited a few times, and then it stops. Then we don't flog a dead horse, because that's just the beginning. If we want other things, then we sell it. That one was sold. We sold Tilburg, we sold Rijswijk, we recently sold Roosendaal. In some places it didn't work to make a full service center. We have since sold all of them. And what remains are either completed full service centers or they are still in transformation. And those that have not been touched will eventually be transformed.

Yes. Okay. Let's look at points 2 and 3.

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Matthijs Storm22:30

Yes. Well, points 2 and 3 are actually a continuation of that analysis. So we not only analyze the asset, but also the tenants. Back in 2019, if you looked at the top 30, almost half of the tenants had a red flag. Various analyses on the tenants. What is a red flag? For example, large payment arrears, poor credit situation, a concept that can also have soft things, like our leasing managers think, well, this is no longer competitive. Look, the arrival of Sephora also means that certain other retailers in health and beauty, like in April in Belgium, O Planet Parfum, they then have a very hard time and they don't invest. Well, such a tenant eventually ends up on red. There were many of those with all the brands we know from the old V&D, KBB estate, etc. There were a lot of red flags. Yes, after the bankruptcy of Blokker and the fact that we immediately re-let everything at a higher rent, we also said in the press release: 'This was the last on the list of the top 30 that still had to go.' And that is now done. So the quality of the rent is now good. There is nothing in our tenant list. Look, there is always a local flower shop or something that can go bankrupt. But there is actually nothing else that we say: 'Well, that is a big risk at the moment.' That can change over time, but at the moment we are fortunately through that.

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Nico23:41

Alright. Let's take one as an example. In Nieuwegein, I once went there a few years ago with someone from your company. I forgot the name, but that was years ago. It looked spick and span.

M

Matthijs Storm23:52

Nice.

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Nico23:52

I'm serious. Yes, I thought it was a very nice shopping center.

M

Matthijs Storm23:54

If it already looked spick and span a year ago, then today it's even nicer. That was a long time ago for me. But it's in a residential area, right?

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Nico24:01

Yes, it's in the middle of the center of Nieuwegein. That's actually where the people from Nieuwegein, part of IJsselstein, part of Houten, they come there and that is the primary catchment area. No people come from Utrecht or whatever, or at least they might come sometimes. But you have to focus on that primary catchment area. Those people who lived there and didn't come yet, you have to attract them. Those who come can come more often, can stay longer. That is our goal here in Nieuwegein. It's going quite well. Center with very good foot traffic. And there, top right, I think the nicest picture, you see the floor plan of the center and you see all kinds of our concepts coming back. Health and fit is a health cluster with various primary healthcare including a physiotherapist, a general practitioner, a blood bank.

Are they all together?

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Matthijs Storm24:46

Preferably. We have done that in other locations as well and that will also happen here, those lease contracts have now been signed. Yes, our fresh concept with the greengrocer and the butcher and such opposite the supermarket Albert Heijn. We have a piece of retail, you see there on the left. So just a block of shops sold and the buyer will turn that into housing. Okay, fine. Basic-Fit is in it. You see a very nice hospitality square where our eat and meet concept, what you saw here, is that the hospitality was very fragmented throughout the center. Yes, we have concentrated that so we can do more investments, for example in the square and seating where people can have a nice sandwich. There it functions better. We have a lot of data about that, if you do it fragmented throughout the center.

N

Nico25:28

Yes. Yes, then I understand it's much cozier.

M

Matthijs Storm25:30

Yes.

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Nico25:30

Then here we have another one. Arnhem, Kronenburg. How far are you with that?

M

Matthijs Storm25:34

Phase one is done. And it's fully leased. And there you see the pictures, a very nice La Place and an example of an eat and meet. There on the bottom right and top right. A bit hard to see, but then you see...

If you zoom in, you see the entrance of the Jumbo, which has now been added to the supermarket. So we are very happy about that. It's completely rented out, as I said. And we are now working on the drawings and preparation for phase 2. We will start that next year. So we are doing it in phases. It's a large center, one of the larger centers of Wereldhave. It has been in the portfolio since 1979, always performed well. But we are doing it in steps, otherwise you have too large a transformation project at once. And we want the shopping center to continue functioning while we work on it.

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Nico26:13

Yes.

M

Matthijs Storm26:14

So that's why.

N

Nico26:15

Is that also where the houses are being added? Where you?

M

Matthijs Storm26:18

Yes, houses are also being added here. So ultimately you see the potential to build 700 homes. We are now in the first phase, essentially. Those are also customers. Sorry. Those are also customers, because they will come there to do their shopping, of course.

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Nico26:27

Exactly.

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Matthijs Storm26:29

So that is, and the municipality is also investing in green spaces and things. So gradually it becomes a, yes, an even more beautiful area.

N

Nico26:34

Alrighty.

M

Matthijs Storm26:35

Um, yes, phase 10 centers completed. So you need a few more, I understand. Yes, we need a few more, and those few become more, because one of the projects in transformation at the moment is Knauf Schmide in Luxembourg. Yes, that was acquired last year and is now in transformation. So yes, I just said, if we acquire another Belgian center this year.

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Nico26:54

Yes.

M

Matthijs Storm26:55

Yes, ultimately that will also go into transformation. Yes, right? So if you look at, say, competitors, but other parties, you see that they are doing the same thing, following us, also going in this direction. Because it is, in hindsight, a logical concept actually. We are not Simon Property Group with a portfolio of 100 billion, right. So ultimately we didn't reinvent the wheel. I think what we did is create an environment where you can transfer transform a shopping center into a full-service center, due to those write-downs, due to the CapEx we freed up, due to the balance sheet, due to a team and organization we created that is really focused on adding new forms of use. The leasing managers in 2019 were not used to talking to healthcare operators, to give an example. So we created that entire platform. I don't see that at our competitors. A bit, you also see a fitness addition at a competitor of ours in a shopping center. Yes, of course. So bits and pieces you see here and there. But I think we are the only ones who, and we also said in 2019, were the first with a transformation strategy to respond to new retail due to e-commerce.

N

Nico28:08

Yes. Alright. Clear. Um, let's see.

M

Matthijs Storm28:10

Here we see the results of it. Because it is demonstrably better, I should say. It is demonstrably better. Yes. No, you see it in the footfall. Visitor numbers are significantly higher. And the turnover of the tenants, perhaps even more important, is much higher. And also the total return of those assets. So that is also one of the long-term KPIs we have added. Not just looking at what cash comes out, but also looking at the long term. It's a bit of income, but also a bit of capital value growth, as they say in England. Growth of value.

N

Nico28:54

Yes. Well, very good to see.

M

Matthijs Storm28:55

And that includes the CapEx and everything. So that is actually the proof that yes, we spent a lot in the beginning, which didn't immediately increase the rent, but ultimately the total return with that investment, because it's all included, has been better.

N

Nico29:08

Yes.

Yes. Very good. Then we come to the next phase. Growth. And you have made quite a few acquisitions recently.

M

Matthijs Storm29:15

Yes.

N

Nico29:16

Quite active actually.

M

Matthijs Storm29:17

Yes.

As if, I think one of the few. We are now also at, yes, that is, I think, if I put on the analyst hat, yes, I find it incredible that we are the only ones growing. Yes. And the investment market is good. We are buying at yields of 8% or higher. Well, if I go back through my 25 years in this business, I have never seen that.

N

Nico29:38

No.

M

Matthijs Storm29:38

Operationally it's going better. Not only for us, but also for others. So of course we had a hard time with e-commerce. That is now stabilizing, online sales are flattening out. And you see many tenants expanding and little has been built in recent years. The consumer is still doing well. Of course, there are geopolitical tensions, but actually a good underlying market. Financing is available and historically relatively cheap. Especially the cost of equity, because share prices have risen.

N

Nico30:06

Yes. Yes. Yes.

M

Matthijs Storm30:07

Yes. If you don't buy now, then I don't know when you will buy.

N

Nico30:11

So you are saying that there is still a lot of room for further growth. The policy and that is also what we said, we must keep the balance sheet strong. So not like in the past, large acquisitions with a lot of debt. Step by step, each time one shopping center or two centers, or even smaller strategic things like we did in Q1. Hema and Intermarché. Yes, you buy two smaller things for 12 million with new shares. We didn't give a discount on those shares. They were issued at the market price. So shareholders have no disadvantage from that. And that strengthens our loan to value again. And these things were bought at a 9% net initial yield. So that is good for the balance sheet and good for earnings.

Yes. Yes. Very good. Let's see. We have a number of Polderplein. That was the first, I think, the first that was next to another shopping center for you, right?

M

Matthijs Storm30:53

Yes, we had in Hoofddorp, you have a covered part and half of that, the Vier Meren was already ours. Bought from Rodamco once. And Polderplein was not ours. That was from Dela. And we bought it indeed, also with such a share issue.

N

Nico31:08

Yes, it's a case of neighbor's land is only for sale once.

M

Matthijs Storm31:11

That's exactly what it is.

And no, but that gives you immediate synergy. What else do we have? Luxembourg.

N

Nico31:16

Yes.

M

Matthijs Storm31:17

Yes. Then came two in Luxembourg. Maybe it's nice to tell, what you saw with Polderplein was also the first share issue of Wereldhave in a long time. We then issued quite a bit below the intrinsic value. There are different opinions about that in real estate. Is that allowed or not? Well, we think it's important that value can be created in the long term. It doesn't have to be on day one, but in the long term you create value, especially because of the strategic aspect you mentioned. But you did see in the reaction of the share price after the placement that we underperformed a bit. There were also investors who said, 'Are you issuing shares at a 30% discount to the market price?' So it was also the first placement in a very long time. And you saw with the placement for Knauf Schmieden and Pommerlog, we had a book that was eight times oversubscribed and then we only had to give a 2% discount and after that the share price actually did very well. So it was also the first one we needed for Polderplein to show investors that this works. Actually, a bit like the strategy.

N

Nico32:31

Yes.

Okay, let's see. Um, let's see what else is fun about Luxembourg. They are both quite large.

M

Matthijs Storm32:37

Yes, those are quite large centers.

N

Nico32:39

Yes, where is the other one? The Vredeplein.

M

Matthijs Storm32:42

Yes, Pieter Vredeplein, that's a smaller acquisition. It's in Tilburg. Nico, we used to have Heterlein and Emage there. We started a very large project there before my time, with the municipality. A very nice project where we acquired some additional property and essentially created a shopping round, so I think we now own 70% of all shops in the center of Tilburg.

N

Nico33:00

Right.

M

Matthijs Storm33:00

Yes.

And on the Pieter Vredeplein, we were still missing a few shops, and they belonged to a Dutch investor who wanted to sell them. Okay. We said, fine, we want to buy them, and we pay with shares. That was last year, and we bought them.

N

Nico33:13

Yes. Well, if that man has kept his shares, he has done well. Yes, that's how it works sometimes.

Let's see. Um, what else do we have here?

M

Matthijs Storm33:20

Yes, so that is the next piece actually. In Belgium, we bought Viel Deun Charlaach in November last year. A typical Wereldhave shopping center. Large supermarket and about 70-80 shops. We are now changing the supermarket. We bought that unit from Intermarché. That Intermarché is leaving there, we know that. We are already in talks with two chains for a new supermarket. A new format. And we will also fill part of that space, probably with a big box format. I can't name the name yet, but further typical Wereldhave shopping center, 2000 parking spaces, free parking. Much focused on discount. Charlais is not the big engine of the Belgian economy. It is a large city. If you have a shopping center there, you want to have it for those consumers. And those are shops that compete on price.

N

Nico34:07

Yes. And that is not the high-end shops, certainly not your Louis Vuitton.

M

Matthijs Storm34:10

An Action must be in it.

N

Nico34:12

Yes, but that's good. You keep that too.

M

Matthijs Storm34:15

And then you see the last two are two small ones we bought this year in Viel Deun Chaloa. That same center, we bought the Intermarché. So now we own everything. That is also our strength compared to the high street, where ownership is always fragmented. We want to own everything.

N

Nico34:31

Yes.

M

Matthijs Storm34:32

Well, that's also a nice bridge to Overvecht. In Overvecht, historically we had five shops. Overvecht is basically a center that fits very well with Wereldhave, and Hema became available there. So we bought it. At a very good price, we could acquire it. Again in shares. And we are looking at how we can get more control in that center. Our partner from Zoetermeer, Sopie, is also there, the largest owner.

N

Nico34:57

Oh.

M

Matthijs Storm34:57

So we will see in the coming months and years. It's more of a long-term project, but I think in terms of location and type of center, it fits us well.

N

Nico35:05

Yes. And how does it work? Are you actively looking for such opportunities, or is it a lot that is offered by parties? The funny thing is, we bought Hema and then we got 20 messages from people who also want to offer something. So let's see if you can do that.

M

Matthijs Storm35:23

That's good.

N

Nico35:23

Then the next phase of growth, yes, in the Netherlands it's a bit difficult because of the FBI status, the transfer tax. So it's effectively made even more impossible, I think, to really take over here. It's difficult to grow with 100% equity. That's why we said we still grow in the Netherlands, but in the way of Zoetermeer, a joint venture with, as you see on the slide, with Sovdie. So this year we want, we are also in talks to do a next Zoetermeer. It doesn't have to be with Sofie. That's allowed. The financial partner who wants the exposure but not the SM. We have the asset management platform. We do everything ourselves, leasing, marketing, asset management, financial management. There is room to do that, or we have a very good team. Sofie did a tender for this asset with 10 different asset managers, and they wanted to work with us. That is, I think, a stamp of approval for our Dutch organization.

Yes. Yes. Okay, good. And is there a lot of room for that in the Netherlands? How do you see that?

M

Matthijs Storm36:24

Well, not much, because we are a small country, but there are enough centers for sale. And that's where we started today. Yes, also in Belgium, the Netherlands, there are enough things for sale. So no reason to focus on other markets. Look, ultimately we won't have 20 joint ventures in the Netherlands, but towards five or six in the long term would be a very nice number, where you maintain the Dutch platform and earn good money from it. While at the same time you extract some equity from the Dutch market. Because we are also willing to do joint ventures for existing assets. Then we just take out a piece of equity.

N

Nico37:00

Yes. And then you allocate that to Belgium or you reduce debt. Because we are still at 42% and we need to be under 40%. That's 12.

M

Matthijs Storm37:07

Yes. Yes. Yes.

N

Nico37:07

So that's the Netherlands. Then to Belgium. We grow in Belgium. You say there is still a lot of room. Because less densely populated in terms of shops than in the Netherlands. Is there something to be done there, or also via joint ventures?

M

Matthijs Storm37:20

No, in Belgium we really grow with equity. Because in Belgium we are tax efficient. One step back in the Netherlands. Important reason in the Netherlands, which you already mentioned, why we don't want to grow there with 100% equity? That's the fiscal climate. And in Belgium, that is still favorable. So in Belgium we want to grow with 100% equity. There are also a number of centers for sale now. So we will see in the coming months and quarters what we will do.

N

Nico37:45

Alright. I'm curious. I'm curious. Um, income. Yes.

M

Matthijs Storm37:47

Yes. You have all kinds of ways to generate additional income.

N

Nico37:51

Yes. I read about advertising screens in the shopping centers. They are now placed everywhere, I understand.

M

Matthijs Storm37:57

They are now, I think, I look at Rick, they are now placed everywhere.

N

Nico38:02

Yes. Yes. So we are very happy with that. You run advertisements on them continuously, and you can generate income from that.

M

Matthijs Storm38:07

Yes. We get income from that. A fixed part, a variable part, so we also have a sort of skin in the game. So that is running in Belgium, we will tender it this year. The contract is expiring there. So we assume we can make a nice step there. Luxembourg as well. And that's also nice, you know, those centers you acquire, which we just saw. Luxembourg, Charleroi. Then you go there and you get 20,000 euros from screens with a local operator. Yes. If we can place that with one of our partners, then there is much more money to be made. And that is nice with the income. When you acquire, you can do all the examples that are here, and you mention the screens, but also regarding solar panels. EV chargers on the parking lot, we earn 3,000 euros net per parking spot with zero investment. Yes. Well, unfortunately we can't convert 2,000 parking spots. Then we would do 6 million. But let's do 100. We'll take 300,000 euros without investment. But that is significant. 300,000 on a rent roll of 10 million.

N

Nico39:04

Yes. No, certainly. It's just extra actually. And I read about a deal with Amazon with those lockers.

M

Matthijs Storm39:11

Yes, with the lockers.

N

Nico39:12

Well, it was very nice to see that Amazon itself also mentioned Wereldhave in the press release.

M

Matthijs Storm39:18

So we have also mentioned that. I mean, it's nice when a large American company mentions Wereldhave. No, we are very happy with that. And it's also an example for us. It's income, but it's also good for footfall. I already mentioned the point with the packages, but also those Amazon lockers. People go there, drive there, often free parking, park, pick up a package. If you need to do something else, you often go there too.

N

Nico39:43

Yes, almost always. One more thing about the houses that are being added. You are doing that in Arnhem, you just said with Amvest. How exactly does that deal work?

M

Matthijs Storm39:51

Well, very simple. Just like the deals in other locations, we sell the right of superficies. So we are not home developers. So you don't have to make investments. No, because we have a different cost of capital. We are not a home developer. We also don't have political connections. We are seen differently by a municipal council than such parties. So I think it's very logical to do it that way. But we do have the advantage, as you said, that more people live around the center. And if we can get a nice amount for the right of superficies without giving anything away, that's free money for us. And we can use that again in the transformations.

N

Nico40:28

Yes.

Well perfect. All nice extra things.

M

Matthijs Storm40:30

Yes. Good, let's look at the share, Matthijs. Oh no, we'll do the quarterly figures first. Oh, not too fast. Easy does it. The quarterly figures this morning. Yes, can I say quarterly figures, because we actually say trading update. You are one of the few, I must say, because I see many trading updates and most companies just say how things are going, but they don't come with concrete figures. Do you do that consciously?

Well, we made a choice in 2019 to become much more transparent. We had just talked about acquisitions, but if you look at the disposals, the assets we sold, we have no CapEx obligations left. We have given no rent guarantees. There are tricks that a real estate fund can use to sell at book value. We don't do that. That was also a conscious choice. That is also because Wereldhave in the past sold a shopping center in Finland and later that day it became clear that some things had been given away. Yes, I had a dislike for that as an analyst. Better to just say it. We sold 40% below book value in France in 2021. Yes, that is not nice, but you better say it. You can also make it 30% and then later say it's 40%, and then you let analysts calculate, and they still see it's 40%. Better to just say it's 40%. It is what it is. And that transparency we started then, that's where it comes from.

N

Nico41:38

Okay. Well, let's go through the numbers. Um, 45 cents, that's the direct result. A very small minus in the indirect.

M

Matthijs Storm41:47

Yes, but that also has to do with derivatives. So value changes due to the interest rate. That's a big component. The valuations are not, yes, we are happy with a growth of 2%. If you look at our guidance of 1.85 to 1.95, take the midpoint, compared to 1.86 last year, you are also around 2-3% growth. That's also the reason why we can maintain that guidance. We are on track. Look, we have an inflation assumption of 2% in there. Well, today we can all say that might be a bit cautious, maybe a bit higher. So we feel comfortable with the range.

N

Nico42:26

What about the geopolitical tensions that also play a role in consumer confidence. Do you hear anything about that from your retailers? Are they complaining?

M

Matthijs Storm42:34

Well, not complaining. But what you see in the first quarter, you don't see anything of that yet. We started today with that. What you do see now in some retail sales figures, especially in fashion and footwear, it is slowing down a bit. Not for everyone, but we see some figures. We have those nice dashboards nowadays where we can track that. There you see some effects of the consumer confidence, which naturally decreases a bit.

N

Nico42:59

Well, let's take a look at the share.

M

Matthijs Storm43:01

Yes, the share is actually doing quite well. We don't have a graph, but I saw it's around 2 euros. The low point was 6 euros, I think, during corona when everyone was panicking. But it's actually progressing nicely. Especially the last two years, we are number one in the peer group, I think. It always depends on the timeframe, but ultimately we are there, I always say, to offer a risk-return between equities and bonds. That's also what this slide shows. You shouldn't make it too exciting or too complicated. And people understand what you do. Predictable. Each year a bit of growth. Each year a bit higher dividend. That's what we aim for.

N

Nico43:42

We see it here. We see it here. I can already say that you will probably come out at 1 or 1.96. But that's your estimates, Nico.

M

Matthijs Storm43:49

Yes, I can't say anything about that.

N

Nico43:50

But I see that, I always think it's nice that you also see in the share price reaction at the half-year that it ticks up by 1-2% because it's actually predictable. No wild swings anymore.

M

Matthijs Storm44:01

Well, look, what also plays a role, I talk about acquisitions and others, we only include in the beginning of the year what is certain. We don't put an acquisition in the pipeline. You understand? And some analysts do that. Yes, well, that's their choice. Their voluntary choice, but we don't do that. So when you do those transactions, it has some effect.

N

Nico44:19

Yes, I was calculating. 71% payout ratio. Is that where you feel comfortable?

M

Matthijs Storm44:29

Yes, at this moment. We have a payout policy of 75 to 85%. But we stay below that as long as the debt ratio is above 40%. So we are just cautious. When the debt ratio drops below 40%, we will go back to that payout range. That's how we have always communicated.

N

Nico44:48

Yes. So we'll see when that happens. Have you ever considered share buybacks instead of dividends? Is that something you are open to? Because share buybacks increase debt, but you do it when the price is very low.

M

Matthijs Storm44:59

Yes, but if our share price, for whatever reason, in a crisis goes down again, then we are open to that. And we have already published the AGM agenda and there is a point again to authorize the board to buy back shares. So that indicates that we are willing to do that if it is opportune.

N

Nico45:17

Okay.

M

Matthijs Storm45:18

Yes.

N

Nico45:19

Well, here you have a nice graph. It shows all the other competitors, shall we say. They are not named, that's not necessary.

M

Matthijs Storm45:28

No.

N

Nico45:28

One, but you are doing well.

M

Matthijs Storm45:30

We are doing well.

No, I am very happy that we have been able to restore confidence among investors, and we will undoubtedly have periods when someone else does better. That's not the most important thing, but I think with that steady growth, we now have an organization, a balance sheet, and a business model that is very solid, that can withstand crises like in the Middle East to generate a bit of growth every year for investors. And as I said, a risk-return between equities and bonds. That is the most important thing.

N

Nico45:58

Yes. Yes, this is also striking, because it is a very clear thing. We also look at this ourselves. This is from the website Short Sell. It gets data from the AFM. You can see how many shares are short, and that has almost completely disappeared at your company.

M

Matthijs Storm46:12

Yes, it's almost gone.

N

Nico46:13

Yes, that is a clear sign that people who short think, well, I know from my previous job many of those hedge funds. And the policy of the previous management was not to talk to hedge funds.

M

Matthijs Storm46:24

Oh.

Well, why wouldn't you talk to them? So we just go and convince them that they should cover their short, and that helped a lot in the share price increase in the beginning.

N

Nico46:31

Yes. Yes. Okay. Yes, that makes a difference. Is the investor base in your share changing? Is it becoming more institutional?

M

Matthijs Storm46:41

Well, you see that in the middle graph. So if you look at specialized real estate investors, those are parties that only invest in real estate stocks. That is now 14% or 16%. Family offices or just no, those are institutional parties, part of an insurer or wealth managers. That is now 16%, and I'm not counting the Vanguards and Black Rocks, the passive funds. These are parties that make active choices.

N

Nico47:10

Yes.

M

Matthijs Storm47:10

And then on the far right, you have the attendance at the AGM. That is always an important thing for us. Look, in the Netherlands, different rules apply if your attendance is above 50%. For many agenda items, you then need a simple majority. If your attendance is below 50%, you need two-thirds for some items. We think it's important to have an attendance above 50%, because that gives the fairest picture for all shareholders. We are for all shareholders. So you see that in recent years we have made a nice step up. Last year a small step back. So we really hope that everyone who is a shareholder also votes. Preferably for all agenda items, but it's also fine if people are against certain items. But it's nice if people vote.

N

Nico47:59

Yes. Well, we can see how that goes. I have to be honest, we don't pay much attention to that at the shareholder, but it is something that people can do. I know a group of people who go to all those shareholder meetings. I think it's great. Recently I spoke to someone who said that at Heineken, for example, Mrs. Heineken herself stands behind the bar afterwards. Nice. And then I see you, that's fun, right? I think it's really nice. Yes. I walk, we always walk around for another 2 hours. Yes. Sandwiches are served, and with us no beer unfortunately, in the afternoon. But no. Oh yes. Yes. No, I think that's great. And there are people with three shares and people with 300,000 shares. But it's great fun. It's also one of the few moments where you can get a feel for this party. How they perceived an acquisition or a sale or that other income, all that kind of stuff. So yes. Well, and it works the other way too, because if you are a shareholder and you go there, you look, you speak to management, everyone is there, the CFO, the supervisory board. So you get insight into, I said earlier, the guy makes it, but it is true, there is a company behind a share. And a company is run by people. And those people are there, and you can see who does that. And you also hear sometimes, between the lines, 'How is it really going?' Yes, but you also get some things. No, no, I understand people want to get a feel for it, and this is the moment in the year to do that.

M

Matthijs Storm49:22

Yes, let's see. How exactly does it work? Because you can vote, but you don't have to be present live. You can vote now already, I understand.

N

Nico49:30

Yes. Well, you can vote from April 16, so indeed from today. Yes, you are right until May 7. We have some links here. They are also on our website. You can vote via ABN AMRO, for example. People can cast their vote. It works quite simply, to put it that way. And then you can check the boxes whether you are for or against, and submit the vote.

M

Matthijs Storm49:51

Yes.

N

Nico49:51

Yes. And then what items are on the agenda?

M

Matthijs Storm49:54

Well, there are standard items: the discharge of the board, approval of the annual report, that kind of stuff. We also always have a few items for the issuance of new shares. That is not the case for every company, some have more, some have less. We ask approval for the buyback of shares. All that kind of stuff.

N

Nico50:13

Yes. Okay, fine. And, is this at your office?

M

Matthijs Storm50:16

No, this is not our office. Our office is a bit more nicely decorated than this. But this is a large hall in the old Hermitage. That is the Hermitage Museum in Amsterdam, which is a beautiful museum. But it's a very nice location, I think, in the city center of Amsterdam. Where it is now. Okay. Here it shows how it works. How voting works for shareholders. So you can also vote by proxy. Yes, that's possible. Register on time, and then yes, the most important thing. And if you want to go, you can go if you register on time. You can also go. Do you have to register? Well, if people want to register, they can contact our investor relations, details on the website. Then we can take care of that. And people get a device there and then they can vote.

N

Nico51:04

Oh fun. I'll buy some shares. I'll come too.

M

Matthijs Storm51:05

Well nice, Nico. A day out. Well, great. Um, we are at the end of the show. Matthijs, nice. Better retail day live.

N

Nico51:12

Yes, better business for you too. Going well, going in the right direction. The lines are going from top left to bottom left, top right. We like to see that. Dividend is nice. So not much to complain about for shareholders, I think.

M

Matthijs Storm51:24

We'll hear that at the AGM. But if there is anything to complain about, we'll hear it on May 13, and it's always nice to have a conversation about that. So we'll hear. Thank you for coming.

N

Nico51:33

Absolutely great. Thank you. Thanks for watching. Goodbye.

CEO Talk: Matthijs Storm (Wereldhave)

About Matthijs Storm