Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Healthcare real estate now constitutes 75% of Cofinimmo SA/NV (CFMOF, Financial)'s portfolio, earning a spot in the EPRA Healthcare category.
- The company reported excellent operational results for the first six months, surpassing the outlook.
- Cofinimmo SA/NV (CFMOF) has been recognized as one of the most sustainable companies in Europe and globally.
- The company maintains a robust occupancy rate of 98.6% across its property portfolio.
- Cofinimmo SA/NV (CFMOF) achieved a 3% growth in gross rental revenue year-on-year, with a like-for-like rental increase of 2.1%.
Negative Points
- The debt-to-asset ratio increased slightly from 43.8% at the end of 2023 to 45.2% by mid-2024, primarily due to seasonal dividend payments.
- The IFRS net result decreased significantly by 55% from the first half of 2023.
- There was no M&A activity in the healthcare segment during the first half of 2024, indicating a quiet market.
- The office segment experienced a 3.1% depreciation in value, reflecting market condition shifts.
- The company faces challenges in achieving its divestment target of EUR270 million for the year, with many assets still under due diligence.
Q & A Highlights
Q: The first question is on the North Rhine Westphalia developments, which seems to be where you been actively canceling developments there. Can you share if there's been any costs to reducing your committed pipeline on that development?
A: Yes, of course. So basically, you remember this was indeed a committed pipeline. And basically for two of the projects, we could benefit from a window to have the project no longer committed, resulting from a potential change of shareholders for one of the operators. We had the opportunity to exit from this commitment, and we decided it would be better to do so.
Q: On the disposals front, you have a lot of assets held as for sale. Could you give us a bit more color on what type of assets?
A: It's a mix of both offices and healthcare since we have an asset rotation policy in both segments. The percentage today is not yet firm because there are still many discussions, but this year will be more balanced compared to last year, which was mostly offices.
Q: Regarding the Spanish Healthcare portfolio, there's been a deal recently with DomusVi selling a large portfolio at an interesting value per bed. How does this compare to your fair value of your Spanish portfolio?
A: Our portfolio is mostly new and does not have a cap on indexation, unlike the DomusVi deal. We are not concerned about a spillover effect from this transaction to the valuation of our portfolio.
Q: On the disposal targets, how confident are you to achieve EUR270 million of disposals this year given the asset value declines?
A: We don't see the discussions we have linked to the evolution of valuation as an obstacle. We continue to believe this target is possible, and we have a track record of achieving our targets even in challenging environments.
Q: What is your guidance for like-for-like rental growth for this year and beyond?
A: We provided guidance for the top line of the company in February, including changes in costs. The 2% was the assumption of year-on-year indexation, but you have to account for other items like renegotiations.
Q: Do you expect the same magnitude of portfolio downward revision for H2?
A: No, we just put a mathematical hypothesis for the sake of the projection. It's not an expectation but a way to draw the line without further push out.
Q: Can you split the net initial yield of the CBD asset and the rest of the office portfolio?
A: The CBD represents 69% of our office portfolio. The yield for the CBD is much higher than the average, but the non-CBD part is becoming extremely marginal.
Q: What gives you the confidence to achieve the EUR270 million disposal target in H2?
A: The confidence comes from our track record over the last two years. We have a wide portfolio of assets and can be flexible in our asset rotation program to meet the target.
Q: Is there any threshold of the debt ratio above which you would cut the dividend?
A: We don't have a magic number in mind. The management's work is to go through the self-help route, and we remain confident that we can continue without needing to cut the dividend.
Q: Do you see any interest in the large office portfolio as a whole?
A: We see signs in the market that the mood has changed compared to six months ago. Some people who were silent are now asking questions, which is a positive sign.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
