Earnings call transcript: ICADE Q1 2025 reports stable rental income

ICADE reported its financial performance for the first quarter of 2025, highlighting a stable revenue stream and strategic developments in property and leasing activities. Despite a challenging market environment, the company maintained liquidity and continued its focus on prime real estate projects. According to InvestingPro data, ICADE maintains a strong financial health score of 2.84 (rated as GOOD), with a robust current ratio of 3.5, indicating solid short-term liquidity management.

Key Takeaways

• Total IFRS revenue increased by 1.2%.
• Strong liquidity position with €2.3 billion available.
• Property Development division saw significant growth in orders.
• Leasing activity included 50,000 square meters of signed or renewed leases.
• Maintained cautious guidance due to macroeconomic uncertainties.

Company Performance

ICADE demonstrated resilience in Q1 2025, with a modest increase in total revenue and an impressive gross profit margin of 86.78%. The company capitalized on its strong liquidity and strategic focus on upscale developments in key locations such as Nouilly and Lyon. Despite a slow leasing market in the Paris region, ICADE’s strategic leasing activity showed promising signs, particularly in the La Defense and Western Crétions regions. With the next earnings report due on May 19, 2025, investors following InvestingPro research reports can access comprehensive analysis of the company’s performance trends and market position.

Financial Highlights

• Total IFRS revenue: Increased by 1.2%.
• Gross rental income: Stable at €94 million.
• Like-for-like rental income growth: 0.5%.
• Liquidity: €2.3 billion.
• Revolving credit facilities: €190 million signed in April.

Outlook & Guidance

ICADE maintained its 2025 group net current cash flow guidance of €3.4-3.6 per share. The company remains cautious, acknowledging the uncertain political and macroeconomic environment, but expects stabilization in rental income and property development profitability.

Executive Commentary

CEO Nicolas Jolie emphasized the company’s ability to secure positive reversion in new leases and highlighted the attractiveness of the Echo Tower in La Defense. Jolie expressed caution given the current environment, stressing the importance of strategic positioning and tenant discussions.

Risks and Challenges

• Political and macroeconomic uncertainties may impact financial performance.
• A slowdown in the Paris region leasing market could affect occupancy rates.
• Potential refinancing of 2025-2026 debt maturities requires careful management.
• Market volatility and tenant negotiations could influence future income streams.

Q&A

During the earnings call, analysts inquired about occupancy rates for repositioned offices and potential refinancing strategies. Discussions also focused on the company’s cautious approach to guidance and ongoing negotiations with major tenants like KPMG. The analyst consensus remains bullish with a 1.75 rating, suggesting positive sentiment despite market challenges. For detailed analysis of ICADE’s market position and growth potential, access the full Pro Research Report available exclusively on InvestingPro.

Full transcript - ICADE (ICAD) Q1 2025:

Conference Operator: Hello, and welcome to the conference call ECAD Results as of 03/31/2025. Please note this conference is being recorded. And for the duration of the call, your lines will be on listen only. However, you’ll have the opportunity to ask questions, and this can be done by pressing star one on your telephone keypad to register your question. I will now hand you over to your host, Nicolas Jolie, CEO and Bruno Antin, CFO, to begin today’s conference.

Thank you.

Nicolas Jolie, CEO, ECAD: Good morning. Nicolas Julie speaking. Well, thanks to everyone for being on the call today. Well, I’m happy to be here today with Zika’s new CFO, Bruno Valentin, who’s just joined the group last week. Delighted to welcome him to the team, and I’m sure he will make a great contribution to the financial team and to ECAD.

So this morning, we are pleased to present CCAD’s results as of 03/31/2025. This presentation will be, of course, followed by a Q and A session. So let’s move to Slide five for an overview of the main messages of the first quarter of the year. Investment division reported a good rental activity with circa 50,000 square meters signed or renewed during the quarter. This volume was boosted in particular by the signing of Pulse building with the Saint Saunders departmental council for 29,000 square meter.

The resilience of the financial occupancy rates for well positioned assets was confirmed at 88.4%, excluding the positive impact of PELT. Revenues were pretty stable with like for like growth of 0.5%. ECAD’s Property Development business grew in volume and value, supported by good momentum in the Residential segment. However, we remain cautious about the pace of recovery given the still uncertain environment and French political agenda. On balance sheet aspects, ECAD confirmed its very strong liquidity position at EUR 2,300,000,000.0 at the March.

Additionally, in April, the group signed EUR 190,000,000 of revolving credit facilities in attractive conditions in line with existing financing. Lastly, we reaffirm today our 2025 group net current cash flow guidance presented last February. Let’s look now at performance by business divisions, starting with Commercial Investment. The leasing market got off to a slow start in Q1 twenty twenty five with a take up of 420,000 square meter, down minus 6% compared to the same period last year. Activity was driven by medium sized transaction of between 6,000 square meter and by positive momentum on the outskirts of Paris.

During the first quarter, ECAD’s team posted a very good performance with circa 50,000 square meter signed or renewed. These signatures and renewals represent an annual rental income of EUR 12,000,000 and a road of nine point one years. In particular, ECAD signed the largest deal of the quarter with the Saint Saunders departmental council for the entire Perth building in Saint Saunders for a twelve year term with no break option. The teams also managed to sign a lease on an extra 4,200 square meter in the Gem Building in Aubert Viedier with the same tenant. These leases on these assets are due to start in late twenty twenty five, early ’20 ’20 ’6.

Ityad also signed or renewed nine leases covering a total of more than 5,000 square meter in La Defense and Paris De France area in Q1 twenty twenty five. The financial occupancy rates stood at 83.1% as of 03/31/2025, minus 1.6 points compared with 12/31/2024. The decline in the occupancy mainly concerns office to be repositioned as expected. In the well positioned office segment, the financial occupancy rate remained resilient at 88.4%, thanks to leases signed in the next building in Lyon and the Toureco Building in La Defense. Taking into account the lease signed in February 2025 for Perth, the financial occupancy rate of well positioned offices stood at 91.1%.

Let’s now move on to the operational performance of the Development business line. Continuing the trend observed in H2 twenty twenty four, we’ve seen a good sales momentum in the residential sector. At the March 2025, the Property Development division recorded six ninety seven orders, totaling EUR $2.00 9,000,000, up by plus 16% in volume and plus 22% in value, driven by both individual and bulk orders. Individual orders represented four thirty two units for EUR 148,000,000. The growth in value was due to a different product mix with an acceleration in the sale of upscale development projects such as Saint Jean Philippe Victor Hugo in Nouilly and CMR Lafayette in Lyon.

Institutional sales were also up, but this is also due to base effect given a low volume in Q1 twenty twenty four. Institutional investors accounted for 38% of orders in volume terms, which is, as you know, generally less than the final share on a full year basis. Let’s move to Slide 10, in which we present the trend in consolidated revenue as of 03/31/2025. ECAD’s total IFRS revenue saw an increase of plus 1.2%, coming from a slight growth in revenues in the two business lines. Let’s jump directly to next slide for details on Property Investment division.

As of 03/31/2025, gross rental income from property investment remained stable at circa EUR 94,000,000. On a like for like basis, the change was plus 0.5% year on year. Gross rental income was adversely affected as expected by certain departures in 2024 and negative reversion on renewals. Indexation had a positive impact of plus 3.3%, but at a slower pace than last year. It should be noted that rental income was also boosted this quarter by the positive effect of early termination fees received on office to cease to be repositioned.

Economic revenue from property development amounted to million as of 03/31/2025, down minus 2.2% compared to the same period last year. The changes in revenue reflects differences in performance between market segments. Revenue from the Residential segment totaled EUR $2.00 5,000,000, up by plus EUR 16,000,000 compared to the March 2024. In Q1, this increase continued to be fueled by the good sales momentum seen in H2 twenty twenty four among individual investors and first time buyers for homes sold individually. Revenue from the Commercial segment was down by minus EUR 32,000,000 compared with the same period in 2024.

This is due to the completion of major projects at the end of twenty twenty four and the absence of new commercial contracts signed in 2025. To be noted also that the economic revenue includes the proceeds from the sale of the Tobiag Building for EUR 19,500,000.0 completed in Q1 twenty twenty five. Let’s move on Slide 14 for the 2025 guidance. Based on the group results as of 03/31/2025, and year end forecast, the group net current cash flow 2025 guidance is unchanged. We expect, indeed, group net current cash flow of between EUR 3.4 and EUR 3.6 per share in 2025.

To be noted that the group net current cash flow includes EUR $0.06 7 per share coming from non strategic operations. For the sake of clarity, this amount, as already explained, has been estimated without the impact of disposal of these activities or the repayment of ICAD’s loan granted to IASUR. The guidance will be adjusted in due course as and when disposals are made during the year. Well, to wrap up, I would say that the limited growth in sales in the first quarter twenty twenty five reflects in particular some departures in 2024 and the slowdown in commercial property development activity. Nevertheless, ECAD’s team achieved a number of very good operational successes at the start of the year, including robust leasing activity with the full relating of the showcase post building and growth in housing orders in the Property Development division.

The teams are fully mobilized to continue in this direction and in the deployment of ReShape strategic plan. With that, let’s start the question and answer session.

Conference Operator: Thank you, The first question comes from the line of Veronik Mittens from Kempen. Please go ahead.

Veronik Mittens, Analyst, Kempen: Good morning all. Thank you very much for your presentation. For me, some questions around your your rental income and and the like for like of that. So I noticed that the well positioned office are minus 4.3. Is that purely driven by post billing that’s that’s vacated?

Where on the other side, you see offices to be repositioned at plus 24%. So what’s exactly in there? And then lastly, on the on the light industrial, again, there was also a slight drop in in vacancy and a like for like below indexation. So I was wondering if you could give an update what you’re seeing in that segment and how leasing activity and discussions are going there.

Nicolas Jolie, CEO, ECAD: Hello, Veronik. Thanks for your question. Well, starting with the first question regarding the like for like and more especially on the well positioned offices. This indeed come from two main effects. The first one, as you highlighted, is mostly the departure of the Olympic Committee on the Pulse Building.

This is for the first one. And second effect is a base effect as we received EUR 2,000,000 of indemnities on the well positioned asset last year in Q1 twenty twenty four. Regarding this like for like on well positioned, we do not expect any further deterioration in 2025 regarding the also the financial occupancy rate and the rents growth. And about the occupancy rate regarding Light Industrial, where there’s a slight decline indeed in line with our expectation, given the announced departures that are now taking effect. On the Light Industrial, nevertheless, there was some good news to be expected with a signature done in April, which represents more than one point in the occupancy rate.

We’ve talked about that in the annual results. We had just delivered roughly 5,000 square meter building that has now has been let through the signature of a new lease in April.

Veronik Mittens, Analyst, Kempen: Okay. That’s very clear. And on rent levels in the Light Industrial segment, is there still some positive reversion left? Or what’s your expectation there?

Nicolas Jolie, CEO, ECAD: Well, clearly, the Light Industrial asset class is, in our view, a business that could be impacted by the macroeconomic context. But nevertheless, that is the reason why we are focusing on the Primus location. And regarding that, fortunately, ECAD offers unique location selective on Primeletting. We are able to crystallize some positive reversion in the new leases we are signing. But once again, this should, in our view, stabilize given the macro in the coming months and years.

Veronik Mittens, Analyst, Kempen: Okay. Very clear. Thank you.

Nicolas Jolie, CEO, ECAD: Thank you, Veronik.

Conference Operator: The next question comes from the line of Stephane Alfonso from Jefferies. Please go ahead.

Stephane Alfonso, Analyst, Jefferies: Good morning, and thank you for taking my questions. Two questions, if I may. The first one on Offices. Would it be possible to provide an update on the ECO Tower, particularly in terms of the inventories as I mentioned that the lease with CAPP MG is set to expire by the end of the year? Also on offices, are there currently any advanced negotiation in asset disposals?

And finally, on e cap promotion, others increased in volume on in value terms, and it suggests that prices have increased high single digits. And I was wondering to what extent has the mix effect contributed to this growth? Thank you.

Nicolas Jolie, CEO, ECAD: Okay. Thank you, Stephane, for the question. Starting with offices on the Echo Tower. Indeed, we saw that this clearly benefits from the improvement in the macro dynamics of La Defense District, as you saw. And we’ve signed some new leases last year and this year on the Echo Tower.

Indeed, the major tenant of the Echo Tower is KPMG, as you know, with an end of the lease, which is in 2027 likely. As you know, we have close relationship with all our tenants and especially with our major tenants. So of course, we are in close discussion with KPMG regarding what they intend to do in 2027. But discussions are great with them. And the Echo Tower is honestly attractive in our view as an asset, benefiting from the strong fundamentals of La Defense and the fact that it offers affordable rents, which given the outlook on the macro could be attractive for some tenants in our view.

As for asset disposal, well, no major announcement to be made since February. But once again, we stick to our strategy, focusing on the one hand on disposal of non strategic assets and also some mature assets when we are able to find some liquidity, such as what we’ve done last year action. And that’s exactly what we intend to do this year. So maybe more to come for the actual results. But we see that there are still some money when the assets are mature on strong fundamentals markets.

And as for recap promotion, as I said, sharing the results on Q1, indeed, there was some good news, positive figures, especially on the individual. On the value, in Q1, as I said, the main reason comes from the fact that there’s a mix. And especially, this was driven by some sales made on our Noni development, which is the refurbishment of the former hotel assets into some more premium housing lots, which are doing quite well, actually. So this is one of the reason expecting the difference between value and volume evolution regarding individuals. Okay.

Thanks, Stefan.

Conference Operator: The next question comes from the line of Sam King from BNP Paribas. Just

Sam King, Analyst, BNP Paribas: one question, please, on the Paris occupational market. You mentioned that it’s been a slow start to Q1 with take up down 6% year on year. But also one of your peers reports this morning that La Defense take up is up 15% year on year. So I would just be interested what you’re seeing on a regional specific basis within Greater Paris as it seems like there’s quite a wide divergence in performance. Thanks.

Nicolas Jolie, CEO, ECAD: Yes. Thank you, Sam, for the question. Well, exactly that’s what we saw. There was a slight decrease, minus 6% indeed, in the take up of the space in the Paris region. And this was quite heterogeneous performance by zone.

And indeed, the Western Cretions, including La Defense has done quite well with plus 16% at roughly 130,000 square meter. It was driven by mostly the first ring. This exactly what we see in the discussion we have with some prospects where you are able to offer the well positioned asset with the good criteria and when you are located on the major transport hub, well, you are to mill it. So that’s exactly what we see on a daily basis through the discussion the operational teams have with some existing tenants on-site and new potential tenants with whom we are discussing. And that supported, as you saw, the strong figures on our operational performance this quarter because signing 50,000 square meter for first quarter of the year is definitely a very good performance.

Sam King, Analyst, BNP Paribas: Sure. That’s helpful. Thank you.

Nicolas Jolie, CEO, ECAD: Thanks, Sam.

Conference Operator: The next question comes from the line of Eleanor Frew from Barclays. Please go ahead.

Eleanor Frew, Analyst, Barclays: Hi team. Thank you for the presentation. Just one from me. On the to be repositioned offices, I think you flagged you expect to lose rent there this year, but maybe how does that 50% occupancy compare to your expectations? And where do you expect your occupancy in that segment to end up at the end of the year?

Nicolas Jolie, CEO, ECAD: Okay. Hello, Eleanor. Thanks for your question. Yes. Indeed, it’s in line with our expectation as we are we’ve shared transparently with you.

We expect most of the to be repositioned asset to be vacated and emptied out at one point. That’s exactly what we see. Even if from time to time, we are able to secure some pragmatic discussion with some tenants such as S and T and Le Monnet with 15,000 square meter, that what we shared on the full year results. But nevertheless, at one point, we expect those buildings to be emptied out. So clearly, in a way, the occupancy rates on those assets that one point does not have a full relevancy, I would say, because at one point, they’ll be emptying out fully.

So this is in line with what we expect. Have in mind that, as shared during the full year results, there are still a bunch of to be repositioned assets contributing to the expiry schedule for 2025, roughly EUR 13,000,000. But that’s the reason why we expect the occupancy rate to keep on lowering down, while in the same time, the operational teams are fully committed to redevelop those assets successfully because, for example, I’ve talked about the CGMR Lafayette redevelopment in Lyon. And clearly, this one supporting the good figures on housing lots in the property development division for this quarter, while those 100 housing lots redevelopment comes from a former office building to reposition. So while those buildings are in senior, the operational team is fully committed to work on the redevelopment scenarios.

Eleanor Frew, Analyst, Barclays: Thanks very much.

Nicolas Jolie, CEO, ECAD: Thanks, Eleonore.

Conference Operator: The next question comes from the line of Neeraj Kumar also from Barclays. Please go ahead.

Neeraj Kumar, Analyst, Barclays: Good morning, everyone. Just a quick one from my side. How are you thinking about the refinancing of 2025 and 2026 debt maturities? Do you think the bond market is attractive for a potential refinancing?

Nicolas Jolie, CEO, ECAD: Hello, Niall. The Well, as for the financing, clearly, the financing costs are impacted by the volatility on credit and equity markets, clearly. But we had been cautious in our guidance with the target cost of funding to maintain that between 4.55%. So that’s what we expect. We are looking at the opportunity in order to manage, as we’ve done in the past, closely our balance sheet and the lines that will mature in 2026 and 2027.

Neeraj Kumar, Analyst, Barclays: Got it. Thank you.

Nicolas Jolie, CEO, ECAD: Thanks, Norils.

Conference Operator: The next question comes from the line of Florent Laurent Joubert from ODDO BHF.

Nicolas Jolie, CEO, ECAD: I

Florent Laurent Joubert, Analyst, ODDO BHF: would have one question actually on the guidance. So we understand that you remain cautious, at this stage for the rest of the year. Your guidance can be considered as conservative. So how can we consider, today’s guidance as a flow? And what could drive so based on these figures at the end of Q1, what could drive now and later in the year to an upgrade of the guidance?

Nicolas Jolie, CEO, ECAD: Okay. Hello, Florent. Thanks for your question. Well, once again, if we look back at the guidance, so 2025 guidance, so between EUR 3.4 and EUR 3.6 per share, we took indeed a cautious approach on business lines given the current environment. We as for the Investment division, we plan a decrease in rental income due to decline of positive effect of indexation and the full year effect of twenty twenty, twenty fourteen and departures, which is already, as you see in the figure, quite crystallized in the Q1 figures.

And as for the property development business, we expect improvement profitability after the strong impairment losses in 2024, expecting to return to breakeven in 2025. But even if there are some positive signs, well, I mean, news can always wait. So that’s the reason why we remain cautious. There are still some uncertain political and tax environment in France and there’s the global macro. And as for the healthcare activities, we try to figure out dedicated assumption of $0.67 You know how that this is based to be easier for you to model and we, of course, update this figure when and how the disposal will be made regarding the healthcare.

Conference Operator: Okay. Thank you very much.

Nicolas Jolie, CEO, ECAD: Thanks, Laurent.

Conference Operator: There are no further questions. So I’ll hand back over to you to take questions from webcast if it’s the case. There are no further questions coming from phone lines, so handing over back to you.

Nicolas Jolie, CEO, ECAD: Okay, great. Thank you very much. Well, we were happy with Bruno to have you around the call today. Looking forward to seeing you soon and shall, of course, be in July. But looking forward to seeing you before that.

Have a nice day, and enjoy the rest of the week. Bye bye.

Conference Operator: Thank for joining today’s call. You may now disconnect your line.

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