VFB Soirée Thema: Winkelvastgoed met Comeos, Ascencio, Vastned Belgium en Wereldhave Belgium

Yes, thank you, Geert. Welcome from my side as well. My name is Sven Bosman. As mentioned earlier, Managing Director of Vastned Belgium at this moment, and in the future we are looking to do a merger, a reverse merger, on January 1st, whereby we will take over our Dutch parent, Vastned Retail. I don't know if everyone sees the screen well at this moment. But what is Vastned actually in the whole? So I will also talk about the total portfolio after the merger. Perhaps for practical matters, could you put it in presentation mode? Normally it is in presentation mode, but we see it in another mode. Maybe you need to stop sharing and share again, then it will work, I think. Yes, that's good, thank you. Okay, perfect. So yes, about the portfolio in the whole. So as announced, we are doing a reverse merger. It hasn't been seen that often, a reverse merger, certainly not since the new Code of Companies has come into effect, and it is also a cross-border reverse merger. As a result of this reverse merger, we will indeed take over the Dutch participations. That means that Vastned Belgium, which previously focused only on Belgium and had a portfolio of €310 million, will increase to a portfolio of €1.2 billion on January 1st. You see here for Belgium it says €320 million because actually one property was directly held by our Dutch parent, Vastned Retail. The activities in the future will consist mainly of the Netherlands, still the largest with 37% (almost 38%) of the portfolio, about €464 million, spread throughout the country, with the focus mainly on Amsterdam, Utrecht, and Breda. Then we have France: about €365 million, roughly 30% of the portfolio, mainly centralized in a few cities: Lille, Villeneuve-d'Ascq, because we are mainly a high street fund, Paris, Lyon, Nice, one property in Bordeaux, and a few very nice properties. In Belgium, our activities have been a bit atypical for the group because we focus mainly on high street, but in Belgium we had 25% of the portfolio in shopping streets, where Teeltwijn (the Golden Crossroads) is one of the largest assets we own, and we own half of the shopping street park. Then we have a number of activities in Spain, all in the city centers, mainly in Madrid and one property in Lyon and in Malaga. This property was not affected by the floods that occurred. I cannot talk so much about the past, but rather about the future, because we are indeed doing a reverse merger. We will probably get many questions about it later. But why did we do this? First and foremost, for a simplification of the structure. Previously, we had two stock exchange listings: one in Belgium for a portfolio of €310 million, and one in the Netherlands. That is not efficient. From that perspective, we want to simplify the structure. It will also simplify governance, because there will be only one management and one board of directors, instead of two. Synergies can also be realized; we currently estimate that at between €2 and €2.5 million per year. There is also talk that the fiscal costs will be higher than the fiscal costs, but that mainly relates to the former Dutch shareholders, because those fiscal costs, since France and the Netherlands had a double tax treaty at 0% between Belgium and France, a 5% double tax treaty applies for the flowing up of dividends. There is also an optimal debt financing possible, because the GVV regime does have a number of advantages and is viewed very positively in terms of financing. So we will now also be able to fully finance the debt financing at the level of Belgium. We are now in full discussions with all banks, as we are facing a financing exercise in the coming year. So that will help us to get much better conditions than previously in the Netherlands. We also hope to get increased liquidity and analyst coverage. Currently, the two funds are spread: one has a market cap of a small €150 million, the other €350 million. Through this merger, we will get a larger free float, so a larger tradable volume of shares, and we hope to reduce the discount, just like everyone else. The market cap as a result of this merger will be around €500 million, which will allow us to be recognized by larger institutional investors. The platform is very interesting and well recognized, which also provides confidence in the markets. The sixth point, I think, is also very important: the possibility to grow. Because Vastned Belgium has actually not made a single acquisition in the last six years, due to the suboptimal structure. From now on, we will be one entity again, we have the possibility to invest again, and investment will not be a goal in itself. It is really the intention to carry out value-adding investments. So we will not grow for the sake of growing, but only grow if it is also interesting for the shareholders, for you, and can thus generate extra dividend. A final point: portfolio diversification. The portfolio will also give the Belgian shareholder access to the Dutch, French, and Spanish assets. Some important points: the merger will take effect on January 1, 2025. There was a general meeting of shareholders who voted in favor. On the Belgian side, there was unanimous approval from all present, and on the Dutch side, there was a 99.9% approval for this merger. If there are no major events on the stock exchange on either side, it will in principle just take place. Of course, to protect the Belgian minority shareholders, to protect the small investor, we have built in a number of mechanisms so that if tomorrow there is a significant decline in Dutch or French real estate, we can still withdraw from this deal. Of course, that is not the ambition, but it is always a safety mechanism built in. There is a fixed exchange ratio locked in: for each share of Vastned Retail, the Dutch or Vastned Retail shareholders get 0.839 shares of Vastned Belgium. And that is based on an adjusted roll-forward EPRA NTA calculation. EPRA NTA is generally known as a parameter for valuation within real estate. Recently, there have also been a number of mergers in the UK based on EPRA NTA. Why the adjusted roll-forward? Roll-forward because we had to lock in the exchange ratio in May at the time of the announcement of the transaction, so we also took into account the budgets and forecasts of both entities and the dividend distributions. Adjusted is also to incorporate a number of points, possible risks, into this EPRA NTA, so that if they materialize, they will of course have no major impact on the Belgian shareholders. There are also a number of dividends to be paid out this year. That information is also public, so I can certainly share it with you. On one hand, there is a special distribution dividend paid out of €1. This dividend will be allocated to the Belgian shareholders. The Belgian minority shareholders will receive €1. That dividend was detached after the general meeting, so it went ex-dividend on September 27, but the payment will only take place on January 7. The reason we do that is that the payment will only go to the 1.7 million shares that are not in the hands of Vastned Retail, so that it reaches the right people. To also bring the results of this year to the right parties, we will also pay an interim dividend of €20 on November 22, and our Dutch parent will also pay an interim dividend of €700 on December 6. The other points we have already briefly discussed. And how will the group structure look? That you see on the right side: the former Vastned Retail shareholders will have about 89% in the new Vastned. That will also be the new name; the 'Belgium' part will disappear, and the existing Vastned Belgium shareholders, who have 35%, will then represent 11% of the whole, with activities in France, the Netherlands, and Spain. In Spain, you see that a change has taken place: on one hand, there were various Spanish subsidiaries that we are currently restructuring, and we will then directly hang them under one subsidiary under Vastned as a listed company. Regarding governance, we will have a board of directors of five persons. We work with a one-tier board, whereas previously the Netherlands worked with a two-tier board. Belgium has always had the one-tier system. It consists of three independent and two dependent persons who are connected to a number of major shareholders. And an executive committee consisting of Barbara Geissen, who has been working as CFO for about a good month, and myself as CEO of the new group. And of course we will also work with all necessary committees: an audit committee, a remuneration committee, etc. At the 748, important here is that we only take into account those 748 shares that are not the 3% ... the notification date. A VI of 6.5% participation from the Netherlands, and we had one other person, Mr. de Jonge, who had 3% of the shares, so there was a free float in Belgium of 31.5%. The Netherlands also had a number of major shareholders, mainly Mr. Van Herk with his company Van Herk Investments, and we also had a number of shareholders at the beginning of the year who made a notification for an AC in Concert notification, meaning they would show the same voting behavior. They represented about 20% of the shares at that time. Important here is that the concert, consisting of four parties, has actually been dissolved. They made a notification to the AFM last week or the week before that the concert has been stopped. Important that we also certainly do not want to avoid the question, of course, the refinancing. As said, we have a large refinancing coming up of €375 million that will mature in the coming year. These are all debts still from Vastned Retail that came due. On one hand, a bridge financing on March 1, and then a number of syndicated facilities worth about €250 million that also come to an end in September. The other financings you see in 27, 28, 29 are already the spread of Vastned Belgium. Vastned Belgium actually completed its refinancing in December last year and also closed various IRS to be sufficiently hedged. Currently, we are fully engaged in refinancing that €375 million, and we hope to give more news on that soon. The refinancing itself will of course also be part of the prospectus that we have to prepare, because those new shares will be offered on the market on January 1, 2025. For that, we are also preparing a prospectus that will probably be made public mid-December. Important is that currently the debt ratio is around 40% on a consolidated basis from the Dutch company, including the Belgian participation. And our objective is to keep it within the 40% range. If you ask me, it's more a range between 35% and 45%, depending on whether or not investments will take place. Another important point: in the whole transaction, I will go back to the shares. The 65.5% of Vastned Retail corresponds to 3.3 million shares. Those 3.3 million shares will become own shares of Vastned as of January 1, 2025. So they will not be canceled, and the company can use them to carry out capital transactions in the future. Again, it is important that during the general meeting and in the articles of association, it is stipulated that those 3.3 million shares can only be used after approval of the general meeting. So we will first convene a meeting where you can vote, so that there will be no dilution of the shareholders. What is the timetable of the merger today? The most important steps have already been taken. I think we have to pass two or three points today: the dividend payments that still have to take place, and of course the publication of the prospectus, so that the merger will be effective on January 1. The new shares will then be tradable from January 2, because the stock exchange is closed on January 1. The special distribution dividend will be paid on January 7. The Vastned share will be tradable on both Euronext Brussels and Euronext Amsterdam, but there is only one price formation, so it is not like before with two separate shares and two separate price boards. Now there is only one price board and one share that can be traded. I will go very briefly over a number of key points. I think an important point is the loan-to-value ratio. As you see here, from the Netherlands it has dropped from 44.5% to 40.5% because they have made a number of large divestments to also lower the debt ratio, taking into account the upcoming refinancing. The average interest cost is higher with us, of course, because a large part has been floating. The Netherlands also currently has a bridge facility that will have to be repaid at the beginning of the year, and we are now renegotiating. Vastned Belgium, due to the refinancing at the end of last year, saw its average interest cost almost double, but still the discount, just like with other GVV, remains quite high. Important is that we have a high occupancy rate: today, in the first half year, Belgium 99%, France was fully let, Netherlands 98.9%, Spain 91.1% (which has since gone to 100% on the 30th of September? We have a limited number of assets there, so one asset becoming vacant naturally causes a significant shift in the occupancy rate, but all in all, the occupancy rate remains above 98% over the past years and quarters. Also in terms of leasing activities, we remain very positive. We certainly succeed in passing on the inflation indexation to the tenants, and in certain cases, due to the good location of the properties, we also sign contracts above the market rent. Voila, here you see that in the first half of the year, there was a small increase of almost 3% (2.9%) and indeed a growth of €1 million was realized. Another point we also certainly do not want to avoid is that the city center, as already mentioned in the introduction, has been greatly impacted by online shopping. That has also caused the city center to be heavily affected. There have been rent reductions, stores became vacant, new rental prices, the rental prices are lower, certainly because we already have a high price per square meter. And on the other hand, in recent years, due to rising interest rates, we have seen higher yields, which have then played on the valuations. The largest decline was in 2020, with a decrease of €84 million on the consolidated portfolio. But the important thing is that we also see a light here in Spain and Belgium in the first half of this year: an increase of 0% in Belgium, an increase of 3% in the portfolio in Spain. France is still affected, but mainly because the investment climate in France is currently quiet. There are very few real estate transactions, making it very difficult for appraisers to determine valuations. Then I think this is the last slide I had for you: indeed about the credit facilities. And as I said, we see that the debt ratio has slightly increased over the years to 43%, but now in the first half of this year it has gone down to 40.5%, and that is also our ambition in the longer term: to keep the debt ratio around 40%, so that we do not go very high. And we will also implement a more active interest rate policy from the new Vastned, so much more with IRS, forward IRS, as other GVV do, which currently have a very low average interest rate. So there are many challenges, it will be a sporty two months until we can close the year, but we look forward to telling the new story and starting again with full courage on January 1, 2025, and bringing a nice story for you.

May I just jump in here? Because I find this a very interesting topic. We are owners of physical stores. What we have noticed in our portfolio, and also when we talk to other players, is that online business in Belgium is actually plateauing. The second observation is that online business and physical stores are two separate types of customers. The customer today seeks convenience and experience, which you don't get via the internet. If you want a flight ticket to Spain or Italy, you do it online, probably via a site like Chero near Asensio, and you don't go to a store or a retail park. But if you want service and to book a trip, you go to a travel agency. So those two are really separate. We even see that online players like Cool Blue or Amazon in the US are starting to take physical stores, and that the actors who were forced to sell online during COVID are actually returning to physical stores. So these are two complementary consumer behaviors, not in opposition. And we see that, as shown in the visitor numbers, they keep rising, and in the turnover of our tenants. So I think that this is often mentioned as a threat—I won't deny that it is a different type of trade—but we look with confidence at the physical store and the experience and consumer behavior, which allows us to maintain our KPIs.

Yes, I certainly agree with Nicolas. I think what's also important is that today, a number of pure online players are also evolving to physical stores. We have in our portfolio a Cool Blue, a My Jewelry, which all originally started as pure online players but have now transferred to a physical store. I think the experience remains important in the physical store, as Nicolas mentioned, and of course the location. A good location still ensures the necessary customers come to shop.

No, we have had no problems.

Well, that estimate is purely a saving on operational costs, €2 to €2.5 million. There is actually no account taken of the fact that the more favorable financing conditions in Belgium compared to the Netherlands also play a role. If we had had to refinance in the Netherlands, it would have been at a more expensive rate than today under Belgian conditions. So that is a synergy separate from that, which is not yet included in the calculations and communication.

No. So there will be no more dividend in May 2025. It will be paid out now. We have a minimum dividend of €30 that we will pay on November 22. So normally on November 20, the coupon will be detached, and then the dividend will indeed be paid on November 22. As a result, there will be no dividend payment in 2025, and the next dividend payment will be in 2026.

Yes, that's right. We also have a Blokker in our portfolio in Utrecht, but there are already discussions with another party next to it that wants to expand, so the risk is actually very limited. So the possible impact is indeed very small.

Yes, well, today, if you look, we have seen a trend, certainly during COVID, that people often went to retail parks because footfall was much higher than in the high streets. But I was on the Meir this week, and if you look, it's still very busy. There are still many people shopping on those streets. So I think they have found a good mix. Good example in Mechelen: JBC now has a store on the Bruul and also in the retail park Malinas. So there are two JBC stores, both in a retail park and in the high street. I think you also get a different dynamic in the cities. People from the countryside who leave will go less to the city; they will go to a retail park if they have the option. But you also see in the cities that people experience mobility differently, with car-sharing, e-steps, e-bikes, etc. That public still comes to the high street. So I think both will become a nice mix. And of course, certain cities are affected, mainly the B cities or smaller ones, where the shopping area is emptying out, with increased vacancy. But if you look at the major cities like Bruges, Brussels, Antwerp, Ghent, the high streets are still full and vacancy is very limited. Empty stores are quickly filled, so again, location is key. Good cities remain a draw.

Sven, with us, as a result of the merger, we will already get 17% own shares. So I don't think there is much capacity to buy more at the moment.

Sven, do you want to respond? On our side, it's also the same. All loans of the Belgian entities were refinanced last December. We had 125 million that came due in July this year, which we refinanced last December. We were able to benefit a bit from the depth in the forwards and the IRS that were available in December. But part of our explanation also lies in the fact that in the Netherlands, the treasury policy at the time did not allow forward IRS to be concluded. So an interest rate swap always had to run parallel to the loan, so you couldn't buy an IRS for the future. That is typically done by many GVV's to hedge before rising rates. But that was not possible in the Netherlands because of some negative experiences with other companies that started trading in these financial instruments, which is not the purpose of a real estate company. So that has resulted in us having to refinance everything at the same time, and the parameters were unfavorable at that time. I think we can be satisfied that we are now at an all-in cost of 3.7%, given where rates were last year. It's high, but we'll live with it for now. That doesn't mean we won't be more proactive in the future. If rates fall, we may also do blend and extend on those IRS to lower our interest costs. And for future refinancing, we are looking at a better spread of maturities so that only a fraction of the debt matures each year.

Yes, that's indeed a way. And if I can add to that: you also have to look at the financial conditions in Belgium. The interest costs are actually much lower than in the Netherlands and other countries. So we have had increased costs, but it's much lower than in our neighboring countries.

I can also just echo that. I think sometimes you can also enter into a temporary agreement to fill a store. That is only beneficial for the attractiveness of a shopping street, as opposed to empty stores with a 'for rent' sign. So it's sometimes done, but always very limited.