Chief Executive Officer, Wereldhave
Wereldhave CMD 2023: Management update - Matthijs Storm (CEO) & Dennis de Vreede (CFO)
All presentations from the Wereldhave Capital Markets Day 2023 and videos are available on: https://www.wereldhave.com/investor-r...
About Matthijs Storm
Matthijs Storm, CEO of Wereldhave, discussed the company's half-year 2026 results in a CEO Talk interview. He noted that the results were solid and in line with expectations, which he said may have led to a slight decline in the share price after years of outperformance. Storm stated that the company is not currently pursuing acquisitions that would be paid for with shares or require a share issuance, as they do not want to issue shares at the current level. Storm also commented on a new EU law regarding earnings stripping, which limits the deductibility of interest. He said that if the law is implemented as expected, it would significantly reduce the company's tax burden. He mentioned that the company sold a plot to a housing developer and highlighted new tenants, including a Basic Fit and a new Eat Meet hospitality concept, which have extended evening opening hours at one of their properties.
Transcript (10 segments)
M
Matthijs Storm0:00
Good morning everyone, welcome in what we call De Krakeling. It's a Dutch cookie actually, I don't know if there is an English name. That name, people in the neighborhood to the building where we are today. Very happy most of us are still people, unlucky with the weather of course. Happening as possible, if we have 500 people in the room, shout hand don't to ask. The we are today to as information. Possible I do the kick. CFO will give you a further update on the strategy. Mart van Kuik, our ESG manager, will tell more about ESG and sustainability. And after the break, Peter Polman, our chief commercial officer, will tell more about the leasing market. Jean Pau will tell you more about the operations, he's our chief operations officer. And then we have a lunch. The schedule but actually we're going to the bus and once we arrived in Capelle aan den IJssel, a suburb of Rotterdam, we will have a nice lunch and we will continue with the visit of the... First of all, from a strategy perspective, I hope I'm pressing the right buttons. Yes, this is what we presented back in February 2020. Dennis and I arrived in the company in 2019 and one of the first assignments we got from the supervisory board is to come up with a new strategy. We all... of retail market. The golden era of retail is over was one of the first statements we made. I think that was actually true and we drafted a strategy which we called 'Central' which we thought back at the time and we still believe it is the case. A very realistic strategy given the state of the retail market. I... word presentation Mars w over Buil and that is a problem we had to fix and we had to face. More about that later. If you look back over the last couple of years, what have we done? We've built full service centers. For those of you not that familiar yet with our strategy, what we do is we transform traditional shopping centers into what we call a full service center. In short, what does that mean? We realized and we acknowledge that in many of our shopping center locations, the center of retail as demand supply rental perspective was not in line anymore. We had to fix that. On the one hand, we had to shift the retail focus to mostly convenience, daily life because that's in the locations where we are active typically the most dominant, the best use. On the other hand, available we can office that can retail all there has to be fit, has to be synergy with the retail that we have in place. Once is completed, we will call it the full service center.
If you look at the numbers, most of you are in the financial industry, we have a lot of numbers today. If you look at the footfall of the full service centers, 23 versus can sign performance, one of the most compelling metrics. We had many centers also the two that you will see today where we had a stabilizing to slightly falling footfall every year. That's a pattern that we definitely broken through with the new concept for the locations you'll see today but also for the other full service centers. So that is working so far. Total property return in the middle. When we drafted the strategy, we said look, we don't want to be a company anymore only focusing on earnings and dividend next year. IR time 6 later, 7 more later. How weal it forward you can see the service centers performed very so far short period of time of course retailers also 13 versus % that's very decent out performance. Then on the capex program in the bottom, you can see originally we set 300 to 350 million, later on we reduced that to 291 and you can actually see we have about 103 million left to spend. We now have six assets completed. At the end of the year that will be nine roughly speaking, from a money perspective two-thirds down the road which I think is good where we are today. Caps is building construction high a little bit not that rapidly. I think it's good that over the past couple of years we've been pushing for these investments because the timing is a bit worse today than it was in the past. If you look from organization perspective, this is an effort we worked very hard on that. We did a rean restructuring in the Netherlands but also in Belgium as you know with the news that we posted on Wereldhave Belgium. On the top right you can see the new structure of the company from a numbers perspective. I think that's most relevant. Our direct genex will probably land at 10.9 million this year coming from more than 14 million euros in 2019. Next year there will also be a further small decline in the genex so you can see despite the inflation we're very focused on the cost savings. Then we go to finance and I'll hand over to you Dennis.
C
CFO6:37
Yes thanks Matthijs, and welcome again everyone. All I can say on this slide here, because the title I think tells the story, is that one of my priorities was to improve and protect the balance sheet. When we started back in 2019 with the strategy, we took the pain, the valuations pain especially in... we looked at the rent, we looked at top 25 tenants, and we basically said to those tenants, let's see where you are today with the rent. Is it over-rented or not? If so, let's see if we can break open the contract, basically set the values, the rent values, take the pain there also. We focusing on over the despite you the reset of the values and also the capex transformation program that Matthijs just mentioned. We still been able to improve our LTV a little bit more than 3%. I would estimate that by end of the year it will be a little bit lower than the 4.6 you see here. We comfortable, I would say, de coverage. So certainly if you look at the peer group, we are among the best of our peers. The target LTV for us remains the 35 to 40% as we have been communicating already a number of times. The biggest contributor to that would be to dispose the remaining two assets in France. We have been telling that story already a number of times of course, but certainly today with the capital market, we don't want to force sells against a large discount. We continue to improve those assets. If I look at Bordeaux, we now finalized FNB Court, which was very interesting investment. It's almost leased. When the time is there, we will put it on the market. On the other hand also capex program is running out. I would that in improve LTV.
US private placement markets. I think I'm not going to read it all out to you, but we have a long-standing relationship in the US. This is basically going back to times of large portfolio in the US, and we have been always maintaining that relationship with a number of important investment managers. So earlier this year, we've been working on refinancing some of the maturing US private placements for this year, which we successfully closed back in July. We put that press release out, and we immediately extended that effort, and I'm happy to say that we are about to close another US private placement deal for $100 million dollars. New we are the maturity schedule. As you can see in the back over the last period of time, we are moving more and more to secured market, but we are able to tap the unsecured market. Like I said, this year alone we did 100 million in the US. We also very close, very constructive discussions in Belgium for about 85 million euros of loans. 20 is new, 65 will be refinancing. I think it proves the strength of our balance sheet, which you seen to slide to go. So we are on track basically to refinance about 160 million euros out of the 170 million euros for 2024, as you can see right there, and also for longer term. So it will definitely also improve our debt maturity. I think this slide also tells a lot in a few graphs. When we started, I think the confidence was at a low point from our shareholders. And over the past few years, Matthijs and I and Jeroen and before that Ruud, we've worked very hard to meet a lot of people, a lot of shareholders. We also try to be very transparent in our communication. From the start really to have a clear story, a simple story: this is our strategy. Many, many meetings, and also to explain why we did sell those four French assets back in 2021. That really was at that point in time to fund our strategy. And we look back now, I think the timing was not so bad at the time. We took the pain like I said before. We have a clear roadmap. We restored the confidence. We see a lot of positive feedback coming now from our analysts, from the markets. And I would say we are preparing ourselves for the next phase, and that is growth. That I give it back to Matthijs.
M
Matthijs Storm12:42
Thanks thanks Dennis. Because that is phase two of Life Central. So when we drafted the strategy and when we presented the strategy, we said phase one is what you basically seen on the last couple of slides: restoring the balance sheet and of course transforming the assets into full service centers. We will continue to do, but phase two of the strategy is to achieve some growth. We think it's important to have scale, I'll get back to that later. But what we said when we drafted the strategy is that we want to be the market leader in full service centers in the Benelux, so buying in the Netherlands and in Belgium. And what you can see on this slide, and we want to be open about that, is that the market characteristics have been and have developed to be quite challenging. What we see is that many shopping center owners, pension funds, insurance companies, are slowly... Secondly, in Belgium you can see that on the bottom right, the yields are pretty low. You can actually see on this slide, I think it's the CBRE prime yield for Belgian retail. If you look at deals that are being on market, even lower yields, but it's impossible for us with our current cost of capital to buy. That is what it is. The IRR threshold that we apply for the transformations is also being applied for these kinds of acquisitions, and we don't see it changing rapidly to be honest. And what we also notice, and that is different with the past, is that larger private investors have entered the market. We were looking at a shopping center actually in one of the suburbs of Amsterdam. It was, I think, in value 50 to 60 million. Private investors... we looked at one of our competitors. It's been bought by a group of private investors. We see that more and more. They have a different IRR framework and cost of capital I think than we have, but what we see in reality is that they are pushing up the prices. I think good for our valuations, but it's challenging to grow. In addition to that, we have the regulatory changes in the Netherlands. As you know, the Dutch real estate regime, the FBI, has been abolished. The law has also passed now, I think a couple of weeks ago, two weeks ago, so it's a done deal. We've always prepared for that, we've always said it would happen, and it will happen. But of course going forward, as of 2025, you can ask yourself the question, if you buy an asset in the Netherlands, you will be taxed on that. And of course we have many ways to reduce the tax burden. If new tax compensation exists that we... in existing taxes that we have in place will increase, but you could ask yourself, is it worth to expand from that perspective? Also what we see on the slide is investment volumes. I think one day that will change again. US Benelux... Why do you want to grow at all? That's because we want to achieve scale. Scale is important for a number of things. I think most of you know this. The reporting requirements are increasing very rapidly, CSRD, and later in his presentation will also give you some more information on that. Of course ESG requirements, digital transformation, customer experience, and so on. Typically fixed cost base, smaller company, it is high. Also financial landscape, we have the US market which is very nice, but the European private placement market is still very limited. We're only active now in countries later on. It's also smaller banking landscape and also investment manager perspective. The business that most of you are in, there also of consolidation. Company does we... investment in Europe strategy, global strategy. Because of the size, liquidity is we have a lot in the feedback. And that is a pity. I think we have to work on that.
Skill what I wanted to mention to you today. This is something we are working on very hard at the moment. In 2024, we will give you an update about this growth strategy. You seen in the that we will come up with a new angle on that. Unfortunately, of course, I would have loved to present that to you today, but this is work in progress with us and the supervisory board. We are having very intense discussions about this. So don't ask too many difficult questions to Francoise and her team today. But we will have to be creative of course. The abolishment of the FBI also opens up new business opportunities, because the Dutch FBI was a very strict regime, so that could help in that respect. But we're also looking at other angles. We are transparent. And don't be surprised if we present that next year, because we think the next phase of the company is very important, and we probably have to think a little bit broader than just being the market leader on service centers in the Benelux.
This is an analysis we, you know, every couple of years do also together with the supervisory board, going through all the scenarios. And liquidation is also always a waterfall on that slide. You know what do we think, which scenario creates most value? And potential liquidation always is a scenario. At the moment, we don't think that is the scenario that will create the most value. We... maximize value of the company is an option. All right, there... further... No, we try to manipulate the chart a little bit, but the gap is still there. No, but we realize we've been trading... last night during the dinner with some of you, I also had this discussion. We go back to 2019, but I think since 2015 we traded at NAV to NTA discount, I should say. Even though it holds for all of the... I think this is something we work on in that respect. I understand your... Any questions? Dutch market?
Any questions? Dutch market? ... Change that is an option, that is one of the options on the table. That's all I can say about it right now. ... Yes, that's a good question. I think JVS is something that is, if you keep yourself within certain conditions, already possible under FBI. When the FBI is abolished, then of course it's much easier, less boundaries. So certainly you could think of management activities, you could think of some of the commercial activities. We are already sort of exploring in full service centers. For example, the point in service centers is selling... Do we have some other smaller commercial activities which we can further explore? So those are the things we are looking at as soon as we are preparing ourselves towards the 1st of January 2025. ... Yes, the preferred scenario is as we mentioned earlier, is to use the contribution in kind optionality, and not lower the payout of the dividend. So that's not something that is in scope at the moment. I think we have many shareholders who are also in the real estate stocks for the dividend. Of course it's nice to have the flexibility as of 2025. ... Nice to have optional plans. ... To the margins. ... SW think of SW. ... Use are... Is was...
Of the first asset I mentioned, I won't mention the names, but I think we were around 105 and they were 155 million, so that shows you it's a completely different context. And on the other asset, I think we were about 100 million and they finally bought it for 130, so that's 30 at least above where we were. Also, after the deal you talk to some other institutions who were in there, and I think the number where we were is where many institutions were, so they are, they're happy to pay up. I think they are generally more positive on the retail, and what I also sense is that many of them are rotating from residential to retail. So as you know, not everyone here who is non-Dutch, the Dutch housing market is under pressure, not in terms of prices but in terms of the investment market itself for larger volumes because of the new rental regulation, because of the new tax treatment for private individuals.
Of the... unit means we committed contract. We the flexibility we did is little things, you know, 500 here, million there, that made the saving that we did during Q3 and also the savings for 2024 where we reduced. It's comprised of that, it's a combination of a lot of things of course. We still want to build full service centers. Sometimes there are elements that you can pop, sometimes there are elements that you can do cheaper, sometimes there are elements that you can just cancel. You know, it was a nice to have but not a must have. That's where we've been really critical. And I think also for the first time towards the teams here in the company, we've been very clear. We've applied a different approach. We said look, we're going to give a capex budget for next year that is it. It's super strict. If the capital markets change, if the cost of capital comes down, or we arrange a lot of financing or whatever, we can always be a little bit more flexible rather than the other way. And I think also from a company perspective, also the people... People IR will be updated, we'll get back to that because we will also update the IR. Green Continental Europe. Any projects that fall below the threshold will be on hold or either be sold. We will continue to apply that strictly. So I cannot say at the moment how many those are, but I can imagine that some of the projects will be in the middle bucket. One is actually already in the sell bucket as we communicated back in February in the Netherlands. I can imagine more will become in the on-hold bucket. Jeroen, I see you looking at your watch. Yes, we are taking too much time. Okay, we have the day, we do later, and please over to...