Earnings call transcript: ICADE Q1 2025 reveals strategic diversification amid market challenges

ICADE, with a market capitalization of €1.81 billion, reported its Q1 2025 earnings, highlighting a strategic pivot towards diversification and resilience in a challenging real estate market. According to InvestingPro analysis, the company appears undervalued based on its Fair Value metrics, trading at just 0.36 times book value. Despite a decline in consolidated revenue, the company showcased strong EBITDA growth and maintained stable cash flows, leading to a modest stock price increase of 0.32%.

Key Takeaways

• Consolidated revenue decreased by 10% to €630 million.
• EBITDA surged to €145 million, up from €85 million in H1 2024.
• Successful diversification into student housing and light industrial sectors.
• Improved occupancy rates in well-positioned offices to 88.8%.
• Issued a €500 million 10-year green bond.

Company Performance

ICADE’s performance in Q1 2025 underscores its strategic efforts to navigate a challenging real estate market. The company saw a 10% drop in consolidated revenue to €630 million, continuing a trend of revenue decline (-7.37% over the last twelve months), attributed to a tough rental market in Paris. However, EBITDA showed a significant increase, rising to €145 million from €85 million in the first half of 2024, reflecting effective cost management and operational efficiencies. The company maintains an attractive dividend yield of 5.44%, among the highest in its peer group according to InvestingPro data.

Financial Highlights

• Revenue: €630 million, down 10% year-over-year.
• EBITDA: €145 million, up from €85 million in H1 2024.
• Net current cash flow: €144 million, stable at €109 million from strategic activities.
• EPRA NAV per share: Declined by 6% to €56.6.
• Gross rental income: Decreased by 5.1%.

Outlook & Guidance

ICADE confirmed its 2025 group net current cash flow guidance of €3.4-3.6 per share. The company anticipates a market recovery by 2027, following municipal and potential presidential elections. With a beta of 1.31 and a healthy current ratio of 1.84, the company demonstrates both market sensitivity and financial stability. It remains focused on asset rotation and portfolio diversification to mitigate market risks. For detailed analysis of ICADE’s financial health score of 2.48 (FAIR) and additional insights, visit InvestingPro, where you’ll find comprehensive reports and expert analysis among 1,400+ covered stocks.

Executive Commentary

Nicolas Jolie, CEO of ICADE, emphasized the company’s diversification strategy, stating, "We are gradually making progress in diversifying our portfolio." He acknowledged the challenging environment, noting, "The 2025 remained challenging for the real estate sector." Jolie also highlighted a pragmatic approach to asset pricing, mentioning, "We will not stick necessarily euro by euro to the NAV. We are pragmatic."

Risks and Challenges

• Challenging rental market in Paris with a 12% decline in take-up.
• High vacancy rates above 10% could pressure rental income.
• Tenant incentives averaging 28% may impact profitability.
• Macro uncertainties, including potential political changes, could affect market recovery.
• Continued need for strategic asset disposals to maintain liquidity.

Q&A

During the earnings call, analysts inquired about the company’s healthcare asset sales and its pragmatic approach to asset pricing. Executives also addressed questions about improving occupancy rates and exploring options for third-party investors, highlighting a cautious outlook amid macro uncertainties.

Overall, ICADE’s Q1 2025 earnings call reflects a strategic shift towards diversification and resilience, positioning the company to weather current market challenges while preparing for future opportunities.

Full transcript - ICADE (ICAD) Q2 2025:

Conference Moderator: Good day, ladies and gentlemen, and welcome to ECAD twenty twenty five Half Year Results Presentation. Please note this event is being recorded. At this time, all participants are in listen only mode. We will be facilitating a Q and A session towards the end of today’s prepared remarks. I will now turn the call over to your host for today, Nicolas Jolie, CEO and Bruno Valentin, CFO.

You may begin.

: Thank

Nicolas Jolie, CEO, ECAD: you. Good morning. Nicolas Agioli speaking. Thank you all for being here today on this call. Along with Bruno Valentin, we are delighted to present this morning ECAD twenty twenty five, our full results.

This presentation will be, of course, followed by a Q and A session. Let’s move on to Slide four for an overview of the key messages for the first half of twenty twenty five. ECAD delivered strong leasing activity with nearly 80,000 square meters signed or renewed, contributing to an improved occupancy rate for well positioned office and light industrial assets. In parallel, the Property Investment division secured over €100,000,000 in disposal of nonstrategic and core assets in line with NAV. In the first half of twenty twenty five, ECAD posted a resilient net current cash flow from strategic activities compared to the same period last year.

However, the contributions from the property investment and development businesses differed from 2024. Indeed, while rental income declined, the profitability of the Development segment improved following a deep review of our operations in early twenty twenty four to adapt to evolving market conditions. Against this backdrop and in complex market environment that calls for caution, we are confirming our full year guidance for group net current cash flow. This semester, we proactively managed our balance sheet and further strengthened our liquidity position with the successful issuance of a EUR 500,000,000 ten year green bond in May and the closing of EUR $290,000,000 in backup credit. Lines.

On the ESG front, ECAD distinguished itself in 2024 as the first publicly listed company in Europe to submit two separate shareholder resolution on climate and biodiversity. At our general meeting held in May 2025, we once again put these resolutions to a vote presenting the group’s performance in reducing carbon intensity, lowering CO2 emissions and contributing to biodiversity preservation. Both resolutions received overwhelming support with approval rates above 99%. On pages five and six, you will find the key figures for the first half of twenty twenty five. At group level, ECAD reported a net current cash flow of €2.03 per share.

Cash flow from strategic activities, namely property investment and property development, was nearly stable at €1.44 per share compared to €1.47 per share in H1 twenty twenty four. NTA ANAV declined by around 6% to €56.6 per share, mainly reflecting the decrease in the value of the property portfolio and the payment of the interim dividend. On the liability side, the loan to value ratio stood at 38.1% at the June versus 36.5% at the December, reflecting the decline in asset values and a still limited volume of disposals. The net debt to EBITDA ratio improved to 8.3x, thanks to a recovery in development margins this semester. Interest coverage remains very solid at 7.4x with an average cost of debt stable at 1.6%.

In the Property Investment business, gross rental income amounted to EUR178 million, down 4.3% on a like for like basis, mainly due to tenant departures. The gross asset value of the portfolio stood at EUR 6,200,000,000.0, reflecting a minus 2.8% decline on basis. The EPRA net initial yield remained stable at around 5.3%. In the Property Development business, economic revenue declined to EUR501 million versus EUR583 million in the same period last year. However, the operating margin turned positive again, reaching 2.3%.

Let’s look now at performance by business division, starting with property investment. Let’s move on to Page nine, which covers the latest market trends. In the first half of twenty twenty five, the rental market remained challenging with take up in the Greater Paris region down 12%, a persistently high vacancy rate above 10% and incentive of ranging around 28%. In an uncertain economic and political environment, tenant decision making processes have become longer. However, the trend towards more affordable, peripheral and well connected areas continues to gain traction, particularly in location like La Defense.

On the investment side, market conditions appear to be slightly improving with a modest increase in transaction volumes and greater investor liquidity, especially for larger deals, notably in the core plus and value add segments. That said, liquidity remains mostly concentrated in central location for now. In this context, ECAD recorded solid leasing activity with approximately 79,000 square meter signed or renewed in H1 twenty twenty five compared to 133,000 square meters over the full year 2024. These leases represent annual rental income of EUR 20,000,000 with a growth of seven point four years. This performance highlights the strong demand for ECAD’s well located office assets that meet high standards.

A standout example is the full relating of the Pulse Building in Sanmi totaling 29,000 square meters. We also demonstrated our ability to effectively manage business parks such as the Mouveau site in the North Of Paris. Following the signing of two leases this semester for over 7,000 square meter of light industrial space, the 21,000 square meter park is now fully let. Thanks to this strong commercial momentum, our occupancy rate improved to 88.8% for well positioned offices and 89.5% for light industrial assets. It’s worth noting that these figures does not yet reflect the positive impact of the pulse relating as tenant occupation will begin later this year.

We now turn to Page 11, which focuses on asset rotation. In the first half of twenty twenty five, ECAD secured over EUR 100,000,000 in disposal of nonstrategic and mature assets, including firstly, the disposal of the Nonci Regional University Hospital, Sercherou, representing a value of EUR 55,000,000 following the early termination of the public private partnership and the transfer of associated liabilities back to the Serjeureux secondly, the sale of a portfolio of five BNB hotels to a leading investor for EUR36 million at an average yield of around 7%, in line with the NAV as of 12/31/2024. A third transaction is under a signed promise to sell, a mixed use office and retail building in Marseille covering 3,300 square meter and valued at EUR14 million. This deal, also aligned with NAV, illustrates the continued liquidity in the market for core and smaller sized assets with yields of approximately 6%. Let’s move on to Page 12, which highlights our current project pipeline.

We have a diversified pipeline with limited CapEx of around EUR 300,000,000 planned over the next three years. This pipeline is expected to generate approximately EUR 50,000,000 in additional annualized rental income. In the first half of twenty twenty five, we launched three new core office projects delivering attractive yields on cost above 7%. These include two developments, Seed And Bloom, located in the heart of Lyon Parvio business district as well as Saint Credard, an office project in Toulouse fully pre led to Sopras. In line with the group’s CSR ambition, ECAD is fully committed to ensuring that all ongoing development achieve top certifications, such as ASQ and BRIM Excellence, all aligned with the EU taxonomy criteria.

In the first half of twenty twenty five, ECAD continued to advance its strategy to diversify its asset portfolio. Notably, in the student housing segment, ECAD signed a partnership agreement in July 2025 with Cardinal Compass, a student residence operator who will manage a future portfolio of assets on ECAD’s behalf under arrangements. In June 2025, the Property Investment Division already positioned itself to invest in a student residence in Yves Richeoussein, a joint development with the Filia Group. The project includes 194 units totaling approximately 3,600 square meter with construction set to begin in Q1 twenty twenty six and delivery plan for 2028. Additionally, two to three other student residence projects in the Paris region, representing around seven fifty beds by 2028, have already been identified in collaboration

Let’s now move on to the operational performance of the Development business line. The 2025 remained challenging for the industry, especially in the second quarter. The Development division recorded a stable orders volume with 2,116 units totaling €496,000,000 down by 8%. Activity in the individual segment declined by 11% in volume, in line with the overall market. This decline occurred in an unfavorable tax environment marked by the end of the P and L tax scheme, which led to a sharp contraction in individual investor activity with minus 35% compared to H1 twenty twenty four.

The momentum was more positive for owner occupier orders, which increased by 10% supported by favorable measures promoting homeownership. Bulk orders showed a 10% increase in volume but an 8% decrease in value. This discrepancy between volume and value changes is explained by a temporary shift in the product mix. Institutional investors continue to drive business activity as they accounted for 54% of orders in volume terms in H1 twenty twenty five. It is also worth noting that institutional investor activity has historically been stronger in the second half of the year with over two thirds of bulk sales made in H2 in both 2023 and 2024.

During the first half of twenty twenty five, the group demonstrated its commitment to building the City of 2050, in line with its ambitions outlined in the ReShape strategic plan. Notably, ECAD together with SET published the first barometer on French city fringes. The study’s finding highlights potential of 1,600,000 housing units, 15,000 hectares of economic land and 10,000 hectares earmarked for ecological restoration. ECAD aims to play a significant role in the transformation of these commercial areas. In this context, during the first half of twenty twenty five, ECAD acquired a portfolio of 11 real estate sites from Casino for €32,000,000 The portfolio consists of parking lots and developed land, building and ancillary units related to stores.

Two of these sites were co invested with CDS EBITDA. These sites offer a total development potential of approximately 3,500 housing units and over 50,000 square meter of retail space with an estimated potential revenue of around EUR 1,000,000,000. These development projects will take between ten and fifteen years to be completed. They include a holding phase of the asset prior to obtaining administrative approvals and relocating tenants, followed by the launch of traditional off plan sales development programs. I’ll now turn the floor over to Bruno to present the financial results.

Bruno Valentin, CFO, ECAD: Thank you, Nicolas. Let’s move to the financial results. Please find the group’s main P and L KPI on Slide 20. For the fourth semester, ecard’s consolidated IFRS revenue was down by minus 10% to €630,000,000 including a 5% drop in gross rental income from the Property Investment division and a 12% fall in Property Development revenue. EBITDA stood at €145,000,000 up on the same period in 2024, when €85,000,000 of impairment losses were booked following the review of the property development portfolio.

The Group net financing expense increased to minus €22,000,000 from minus €7,000,000 due to lower short term investment income and lower dividends from the Healthcare business. The Group’s net current cash flow amounted to €144,000,000 Net current cash flow from strategic activities remained relatively stable at EUR 109,000,000 compared with EUR 111,000,000 in H1 twenty twenty four. The key takeaways about the net current cash flow from strategic operations are as follows: lower return income from the Property Investment division for minus $0.17 per share, an increase in the net property margin of property development activity for $0.39 per share, and a decline in finance income for $0.21 per share. I will come back to this in more detail in the following slides. Let’s dive into the financial performance of Property Investment division in slide 22.

Gross written income decreased by 5.1%, mainly due to tenant departure recorded in the recent months and the gradual capitalization of negative lease renewals. These effects were partially offset by the positive impact of indexation, which has gradually moderated and still contributed plus 3.4% as well as early termination fees, mainly related to the to be repositioned offices. It’s also worth noting that the net return income was negatively impacted by higher vacancy costs. On Property Development side, economic revenue amounted to EUR501 million as of 06/30/2025, down by 14% year on year. This decline mainly results from a decrease in residential box sales, down by 32% in value terms, and a sharp drop in commercial segment with revenues down by 39% year on year due to the completion of major projects at the end of twenty twenty four, coupled with the low volume of new contracts signed in 2025.

The net property margin improved mechanically in H1 twenty twenty five following the impairments booked in H1 twenty twenty four. However, the decline in volume and the continued margin pressure of certain projects launched prior to 2024 has still negatively impacted the overall margin of the business. Let’s move on to slide ’25. The half year financial result is tending to normalize after 2024 year marked by a very high volume of finance income. Specifically, financial income for investment declined by more than EUR10 million due to both volume and interest rate effects.

Additionally, dividend received from our stake in Healthcare activities decreased by EUR 10,500,000.0, reflecting the absence of dividend paid by IHE this year. The cost of gross debt remains stable, with the average cost still low at around 1.6%. The debt projected for H2 twenty twenty five is fully hedged, and the average cost of debt for the full year 2025 is expected to remain below 1.8%, factoring in the new bond issue completed last May. Let’s turn to ECAT’s balance sheet. Slide ’27 focuses on changes in the value of the investment portfolio.

As Nicolas explained, the fair value of property investment portfolio stood at €6,200,000,000 given a decrease in value of minus 2.8% on a like for like basis. The April net initial yield was 5.3%, pretty stable versus December 2024. The April tap up net initial yield was 6.2%. Slide 28 shows a slowdown in value

Conference Moderator: adjustments across our portfolio by asset class.

Florent Laroush Gubert, Analyst, ODDO BHF: Slide For

Conference Moderator: well positioned offices, the adjustment over the semester stood at minus 2.7%, confirming the

Bruno Valentin, CFO, ECAD: slowdown slowdown in the declining values semester after semester. Large industrial assets continue to show resilience, with their value increasing by 0.4% this semester. As of June 2025, APRA NAV per share was equal to €56.6 declining roughly by 6%. This year on year change is mainly due to the lower value of the property investment portfolio, representing €2.7 share and the Atelier dividend paid in March 2025 amounting to €2.2 per share. Let’s move on to debt management.

The 2025 was marked by strong achievements. Firstly, a ten year green bond insurance of €500,000,000 Secondly, a bond buyback of million term notes maturing in twenty twenty six, twenty twenty seven and 2028 for a nominal amount of €268,000,000 Finally, the signing of €290,000,000 in credit facilities included €190,000,000 in additional lines. Together, this transition enabled us to extend the average maturity of debt reinforce our liquidity position to anticipate upcoming debt maturities, and increase our share of sustainable financing. As such, we have achieved our target of having 75% of our financing RIN or linked ESG objectives more than a year ahead of plan. Slide 31 is dedicated to our debt maturity schedule and liquidity position.

At the June, ECAD had a strong liquidity position composed of €1,000,000,000 in net cash and €1,800,000,000 in unused committed revolving credit facilities. This liquidity covered Group’s debt maturity through 2029. Now I will hand over to Nicolas for the conclusion and detail on the 2025 outlook.

Nicolas Jolie, CEO, ECAD: Many thanks, Bruno. Let’s move on to Slide 33 for the 2025 guidance. Based on the group’s half year results and expectations for H2, we remain cautious and reaffirm our 2025 guidance of a group net current cash flow of between 3.4 and €3.6 per share. This includes net current cash flow from non strategic operations of approximately $0.67 per share, excluding the impact of disposals. As of 06/30/2025, the annual net current cash flow from nonstrategic activities is already secured at over 85%, considering the income already recorded by ICAD in H1, including firstly, the dividend from Premier Healthcare and secondly, the finance income from the shareholder loan to EASU HealthCare Europe accounted for over six months.

Let me remind you that the contribution from non strategic activities does not include the payment of a potential interim dividend from Premier Healthcare in 2025. In conclusion, the 2025 remained challenging for the real estate sector. Nonetheless, we have continued to demonstrate our resilience through good leading performance in the Property Investment division, stabilization of the development activity and tight control of our CapEx focused on profitable projects. We’re also gradually making progress in diversifying our portfolio. And I would like to thank sincerely ECAD’s team for their strong daily commitment.

And with that, let’s start the question and answer session.

Conference Moderator: Thank you. Ladies and gentlemen, we will start the Q and A session now. The first question comes from the line of Florent Laroush Gubert calling from ODDO BHF. Please go ahead.

Florent Laroush Gubert, Analyst, ODDO BHF: Good morning, Nicolas. Good morning, Bruno. Thank you for this presentation. I would have two questions, if I may. My first question on offices.

So you have had a very strong leasing activity in ASH 1. Could you please maybe give us your view for leasing activity in ASH 2? And maybe any color on how the occupancy offices can evolve in Ash 2? So that would be my first question. And my second question would be on the healthcare activity.

So we can see that you have some discussions. Are you in view of any major deals that could be completed in 2025? Thank you very much.

Nicolas Jolie, CEO, ECAD: Thank you, Florent, for your two questions. Yes, indeed, taking the first question about the leasing activity in H1, we had a very strong leasing activity with nearly 80,000 square meter final renewed. And clearly with that, we came to the stabilization of the financial occupancy rate. And of course, we expect this occupancy rate for both well positioned and light industrial assets clearly to move up now. You know that as for the well positioned office, this figure, the 88.8% does not include yet the positive effect of the PULSE lease that has been signed and that should go into the ratio by the end of twenty twenty five.

So that’s the reason why we expect an occupancy ratio above 90%. That’s also our target for the light industrial asset. And as for the remaining to be repositioned asset, as already shared, know that for us this indicator is not really relevant because at one point, those assets are deemed to be vacated. That’s the reason why we work on repositioning scenario. But in the meantime, we are having very pragmatic discussion to save every euro possible as long as possible.

So that’s for the occupancy. Regarding the healthcare, well, indeed, you saw that on the presentation there was no major news to be shared today. But clearly, you saw that we stick to our strategy to sell. That led to the slight decrease in our exposure in premier healthcare on the first semester from 22.56% at the June. This came from two operations.

The first one was the signing of the share swap we’ve already shared at the beginning of the year with Premier. And the second operation comes from the sale by Premier Healthcare in June of a non strategic nursing home asset in France. This allowed ECAD to pursue €6,000,000 through a capital reduction by Premier Healthcare. So clearly, that’s what we intend to keep on doing. And in the meantime, you saw that we also worked on the agreement with Premier and the other historical shareholders to grant the extension of the coal option that was deemed to expire mid-twenty twenty five.

Clearly, this because ECAD has reaffirmed its strategy to sell and Premier and the existing shareholders also reaffirmed their strategy to invest in this SPV. So their idea clearly was to align the legal strategy framework to the indicative timeline we all have in mind. Once again, to be crystal clear, we’ve extended the historical agreement. So this call option, as it used to be, are non binding, clearly. That’s a call option benefiting to Premier and the other shareholder.

And maybe a word on the international SPV also, just to say that there’s still an ongoing marketing of the Italian portfolio. Well, clearly, it takes a bit of time. But just to remind you the figures, we are talking here about roughly €300,000,000 portfolio, which represents roughly twice the size of the investment volume in the healthcare Italian market. So it’s quite reasonable to say that it might take some time, but there are still some appetite on this portfolio. Be sure we will keep you posted as soon as we can and when there’s something to be shared regarding the healthcare progresses.

Florent Laroush Gubert, Analyst, ODDO BHF: Okay. Thank you very much.

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

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

Stephane Alfonso, Analyst, Jefferies: Yes. Good morning and thank you for taking my questions. First on Gasfonte. So we understand that Cryemia has extended its option. And my first question is whether this extension was made under the same term as initially agreed, in particular regarding the NAV clause?

And secondly,

Nicolas Jolie, CEO, ECAD: this move seems to suggest

Stephane Alfonso, Analyst, Jefferies: that Primunial is more confident in the ability to finance the acquisition, more likely not before 2026. Therefore, would they still try to bring third party investors? Or could they not complete the deal alone now? That’s my first two questions.

Nicolas Jolie, CEO, ECAD: Yes. Thank you, Stephane. Yes, as I just said, indeed, we’re extending the call option in the exact same terms from the previous agreements. So clearly, those call options, should they be exercised, shall be exercised at NAV, clearly. And the benefit to Premier and also the other historical shareholder as it used to be.

As for the potential third party investor that could join the club deal, either at Premier level or either directly, that’s still an option that could make sense that is not excluded either by Premier, the other shareholder or us. So it’s still also an option that is open.

Stephane Alfonso, Analyst, Jefferies: Thank you. And maybe one last question regarding the Marion project. There are market rumors suggesting that you may be considering a sale of this asset. If so, what would be the rationale there?

Nicolas Jolie, CEO, ECAD: Well, I’m sure you’ve all seen that currently there’s some good liquidity on the investment markets for corporate and value add assets in Paris CBD. There’s an increase in larger deals, more and more bidders, loads of cash on the last transaction. And as for the Marignon asset, on our side, we’ve already created a lot of value through the attention of a nonrecourse building permit that allow us to transform the former movie theaters areas into retail areas. So clearly, we’ve already went through a significant step in the value creation and we are now at a crossroad, clearly. We can either roll out the full redevelopment of the project and the asset with, as you saw, quite a limited amount of CapEx because we are talking here about less than €70,000,000 or we could either take the opportunity of a potential disposal given the favorable context, I would say, today.

Well, the key will be the value creation. We will have regarding these assets a very opportunistic approach. The idea for us is how is the best way to maximize and monetize the value creation either today, either at the end of the development.

Analyst: Okay. Thank you.

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

Conference Moderator: The next question comes from the line of Jonathan Matto calling from Goldman Sachs. Please go ahead.

Nicolas Jolie, CEO, ECAD: Jonathan?

Conference Moderator: Well, we are going to take the next question then from Ana Escalante calling from Morgan Stanley. Please go ahead.

Analyst: Morning. I have one question. When looking at your strategic operations, things appear to be stabilizing or at least a bit less negative than before. So I know there are many moving parts here and that some are more difficult to predict than others. But maybe you could please tell us when would you expect to see the trough in earnings in this strategic operation segment, meaning the net current cash flow, obviously?

Nicolas Jolie, CEO, ECAD: Yeah. Anal. Well, I would say that firstly, regarding the cash flows, we are focusing at this stage on the first step that we just talked about with Florent. The first step regarding the investment division is clearly focusing on the occupancy rate, first thing first. And clearly, we think we’ve reached a trough in the occupancy rate regarding the well positioned and light industrial asset through the recent improvements we’ve shared.

Once said that, I would say considering more globally the sector context, I would say that the market environment still remains challenging and uncertain, which makes it difficult, of course, at this stage, July 2025, to provide a precise outlook for 2026. I would say that more globally, what we expect is recovery more likely in 2027 for both business lines for two reasons. Firstly, regarding the investment division, we need time for diversification strategy to pay off and start delivering some new cash flows as you saw in the pipeline. And as for the development side, we’d say that the activity, as already shared, is more expected to pick up in 2027 after both the municipal election and potentially the presidential election. So that’s the reason why I think more globally on our activities and cash flow recovery, more expected likely in 2027.

Analyst: Thank you. Pretty clear.

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

Conference Moderator: The next question comes from the

Nicolas Jolie, CEO, ECAD: line

Conference Moderator: of Valerie Jakob calling from Bernstein. Please go ahead.

Analyst: Hello, good morning. I’ve got a question concerning your balance sheet. I mean, LTV went up quite a lot over the past year. And I think if I look at, you know, you said that selling the health care is taking time, and there is no certainty that the values, you know, won’t go down further. So I was wondering if you could share some thoughts you’re having with, you know, the rating agencies and how you think about, you know, your financial indicator, and what can you do to improve it in short term if you need to?

Thank you.

Bruno Valentin, CFO, ECAD: Regarding ATB, we have no change in our financial strategy. We keep target ATB ratio. This means below 35% including duties, over the horizon of the strategic plan, to the disposal, and we prove again this semester our ability to sell more than €100,000,000 at the ANAV. That is the first point. And maybe related to the rating, I think, as you know, we have already downgraded in 2024, And on the pre debt KPI, we have no issue about the net debt to EBITDA, and we have a comfortable ICF.

Of course, LTV ratio is expected to decrease with the disposal volume anticipated in the following months.

Conference Moderator: Yeah. So the next question comes from the line of Michael Finn calling from Green Street. Please go ahead.

Michael Finn, Analyst, Green Street: Yes. I have a few questions. My first one is on the sale of the and I’m just curious if you if you actually looked at any other options other than the current one. And I’m curious where exactly is the, you know, where is the bid price from the other options? Because I suspect that it’s probably quite a lot lower than the current NAV.

Nicolas Jolie, CEO, ECAD: Talking, Michael, you’re talking about the option on the health care?

Bruno Valentin, CFO, ECAD: Yes, yes.

Nicolas Jolie, CEO, ECAD: Yeah, sorry. I just said to Stefan that the exact same terms as before. So clearly, the option has to be exercised at NAV.

Michael Finn, Analyst, Green Street: Yes, but I’m just curious if over the last few years, if you have also looked at other options other than the current plan that I’m you curious where would the pricing be on those other options? Yes, that’s my question.

Nicolas Jolie, CEO, ECAD: Well, you see that we went through many different ways. We’re talking about the previous two operations crystallized this semester. The share squat agreement with Predica was at NAV for a total amount of €30,000,000 And as for the capital reduction that has been done consecutively to the sale of the non strategic asset, it has also been done at NAV, of course, at the size of the BIACO. That said, if we also talk about the potential opportunity of having some third party investors getting into the club deal, I would say that we’ll be pragmatic. I’m not saying that we necessarily have to sell a DNAV and only DNAV.

It’s a matter of time and volume. If someone comes with a large volume and the right timing, we can work on a satisfactory discount to be both attractive and pragmatic on our side. What we don’t want to do is reach a level where the discount

Bruno Valentin, CFO, ECAD: should

Nicolas Jolie, CEO, ECAD: be too significant because once again, we are talking here about fully stabilized assets, 100% let that deliver predictable and sustainable cash flow with values that have stabilized globally over the past months and years in a market where there are some more positive signals on the healthcare, I would say, as you saw on both listed companies, but also some real estate asset transactions. So that’s the reason why we will not do this at any cost. But clearly, we could be pragmatic and accept some discounts if someone comes with a significant volume clearly.

Michael Finn, Analyst, Green Street: Okay. And are you able to say over the last year or two, has someone come to you with an offer that perhaps the offer price was a bit too low, but at least there is an offer there? Can you or has it just not happened?

Nicolas Jolie, CEO, ECAD: Well, we had some interest, but as soon as some people are coming to you in a very opportunistic and aggressive mode regarding the shares, you quite quickly have to say, well, at this price, no need to write it down. But if you take, for example, the international SPV, that’s exactly also what we had when we were marketing the Portuguese assets clearly. And for those, we received some real LOI with commitment but with very aggressive discount. That was the reason why at that time, at the end of twenty twenty three, we decided to withdraw this portfolio from the market. So we had.

And also to be fully clear, we had also some international investors, a potential mark of interest in 2024 for shares in Premier Healthcare. But clearly, the uncertainty in the French political context at that time because it was the time where the Barnet government fought made international investors take a small step back from France for a while. That’s the reason why also it took a bit some more time. But, yeah, on stabilized assets, we have some people that are okay to dive in, being very aggressive. But the idea is to find how we can have a pragmatic and acceptable discount and not to oversized one.

Michael Finn, Analyst, Green Street: Okay. I guess is that probably 5% to maybe 10% in your view?

Nicolas Jolie, CEO, ECAD: I won’t give any proper figures because once again, it really depends on the volume. If someone is coming and say, well, I’m going to buy the remaining 700 or 800, it’s quite different from someone who wants buy 50,000,000 or 100 Yeah,

Michael Finn, Analyst, Green Street: of course.

Nicolas Jolie, CEO, ECAD: So it’s quite hard just to say a proper figure. But we won’t stick necessarily euro by euro to the NAV. That’s what I’m saying. We are pragmatic.

Michael Finn, Analyst, Green Street: Okay. And then final question, if I may, on the IHE assets that are currently in the market. I remember the portfolio in Portugal, I believe, one of the issues that you highlighted was the WALT was quite short there. I’m just curious, the vault quite short there. I’m just curious if it’s a similar issue in Italy or if all those issues have been fixed or are obviously not back there?

Nicolas Jolie, CEO, ECAD: No, clearly. Indeed, in Portugal, there was two things. Once again, we had quite a narrow market for a $200,000,000 portfolio, for once. Indeed, secondly, the world was around six years, which was quite low. We are having the discussion, well, Premier is having discussions with the tenants in order to extend because there are some potential extensions to be financed.

So this should come under global agreement. But as for Italy, this is completely different. We are talking here about a portfolio where you get some NCO but also some nursing homes, And all of that comes with a lot of work. I would say that the main issue for the Italian portfolio is what I explained is the matter of size. A €300,000,000 portfolio on €150,000,000 or €200,000,000 investment volume yearly on this market necessarily takes some time.

But there’s no world issue on the Italian portfolio.

Michael Finn, Analyst, Green Street: Okay, great.

Nicolas Jolie, CEO, ECAD: Thank you very much for your questions.

Michael Finn, Analyst, Green Street: Thank you. Next

Conference Moderator: question comes from the line of Jonathan Onataro calling from Goldman Sachs. Please ahead. Please ensure your line remains unmuted locally.

: Can you hear me now?

Nicolas Jolie, CEO, ECAD: Yes, Jonathan. Happy to have you back.

: Finally, thank you. Two questions, if I may, and sorry if some have been answered already. But the first question was just on the leasing, obviously, good volumes of deals. Can you talk about the sort of reversion that was, well, either captured or lost on these deals to whether they’re just passing? And the second question, noticed that EPRA LTV is actually increasing quite a bit and I wasn’t sure because your normal LTV wasn’t increasing as much.

So I just want to check there the reason. Thank you.

Nicolas Jolie, CEO, ECAD: Okay. So I will take on the reversion and Bruno will answer you on the prior LTV. Well, on the reversion globally on the global figure, no major update to share on the reversion potential on well positioned office. Just to remind you that at the December, it was minus 11%, you have that in mind. And globally, on the leasing activity and large volume, well, the signatures and renewals are globally in line with the RVs, with incentives in line with the market.

So nothing has changed. We are indeed gradually crystallizing signatures after signatures, this negative reversion potential. That is, of course, already factored in the NAV, as you know, but no major change on the reversion, especially on the 80,000 square meters that has been signed during the semester.

: And can you share perhaps a bit where these deals were signed, where they’ve done close to Paris or which business part they were? Yes,

Nicolas Jolie, CEO, ECAD: sure. It was a bit everywhere actually and on many asset class because, of course, the main transaction that was already in the first quarter result was the Pulse transaction. So nearly 30,000 square meters in the Northern Parisian region. That might be the second largest transaction talking about leasing during the semester on the World Parisian region. So that demonstrates that even in an area that is definitely struggling, when you fit the right criteria at the right price, you are able to find the tenant.

But we had also some transaction on the light industrial asset class. We’ve highlighted the movement. For example, we signed a lease with Alice Sebberg, which is a company dedicated to quantic computing and also with revenue, which is in construction development. And with that, the business park is now fully led. We are talking here about 21,000 square meter business park.

And on top of that, we had some transaction in La Defense. We had some transaction in our other buildings. More globally everywhere, I would say.

: Okay. So are you seeing incentives widen or decrease? I mean, know they’re decreasing a bit in La Defense as well. Is that what you’re experiencing? Or are you still seeing like sort of stabilized level?

No.

Nicolas Jolie, CEO, ECAD: As for the incentive, no major change, I would say. Of course, in the peripheral area, would say that the power of negotiation is definitely still in the end of the tenants rather than in the end of the landlord. But now we’ve reached a stabilization. Nonetheless, clearly, as for the incentive, we are at the highest level ever, I would say. But hopefully, within the new fundamentals and the attractiveness from areas like La Defense getting better and better and that might be strengthening through the, I would say, the uncertainty in the macro.

What we see that companies take more time to decide but they are clearly looking more and more at affordable prices. It has come back at their first one priority, at least the people we are discussing with. So hopefully at one point the level of incentive should lower down. And maybe a word from Bruno on your April and TV question. Yes.

Regarding April and TV, at the

Bruno Valentin, CFO, ECAD: June, in our calculation, you have to note that we have 100% of our dividend paid in March, but also at the July. So it means we have a full dividend in the net debt. That is the first point. And of course, we should improve with disposal volume anticipated in the following months that we already explained.

: Okay. But the the the so the the your reported LTV was increasing less than the EPRA LTV, which reached, I think, 47% or something like that. Any reason why you have this shift?

Nicolas Jolie, CEO, ECAD: I’m not sure to to to have perfectly understand your your question.

: I’m I’m I’m just saying Sorry.

Bruno Valentin, CFO, ECAD: It’s make you repeat.

: No. No. The I’m just I don’t have the figures in front of me, but the NPV your reported NPV is increasing by a certain amount, and your EPRA LTV is increasing by more than that.

Nicolas Jolie, CEO, ECAD: Yes, that’s why Bruno was explaining is that in the LTV calculation, we take 100% of the dividend, while in the other expense ratio, we only take what has been paid during the first semester.

: Okay. Very clear. Sorry.

Nicolas Jolie, CEO, ECAD: That’s the main reason for widening the gap.

: Very clear. Thank you.

Nicolas Jolie, CEO, ECAD: That should, of course, narrow in the second semester regarding this point. Thank you very much.

Conference Moderator: Okay. The next question is from Akanska Anand calling from Citi. Please go ahead.

Akanska Anand, Analyst, Citi: Hi. Morning, guys. Can you hear me alright?

Nicolas Jolie, CEO, ECAD: Yeah. Yeah. Very good. Happy to have you on the Okay.

Akanska Anand, Analyst, Citi: Two questions from my side. The first one is a continuation of the previous question on leasing, actually. So the new leases that have been signed in h one, are you seeing a difference in, you know, the the tenant mix? And what I mean by that, that is the is the incremental demand from tenants who are already in that area where the leasing is happening? Or are you seeing an increasing spillover from the CBD?

Because the rents in CBD are definitely the the gap the difference in rents between CBD and outside are is definitely widening? Or is the demand more from, you know, people who were, well, outside of Paris and trying to move into the Ile De France region? And if you could just provide, like, like, an approximate proportional split between the leasing in terms of these three types of tenants that I mentioned. And what could be the headwinds, probably maybe in the second half or going forward that we might not see this incremental or at least a similar level of demand for leasing?

Nicolas Jolie, CEO, ECAD: Okay. Thank you very much for your question. Well, I would say on our asset, we haven’t seen necessarily some large move from Paris CBD outside on peripheral offices. But what we’ve seen clearly is like people that are in La Defense don’t necessarily now go out from La Defense, which was the case maybe two years, eighteen months ago. And clearly now there is more and more interest on peripheral offices.

People move from one peripheral office to another seeking for more centrality clearly and that’s one of the major fundamentals that drives attractiveness of La Defense, I would say. And that’s the reason why for our transaction globally, it was people on peripheral offices that were already outside Paris mainly and that went from one asset to another or that were already on the existing buildings and that we were renewed or stayed in the building. That’s what we saw. Talking about offices, not talking about light industrial where the dynamics are still very good as we shared regarding the model. And as for the headwinds, I would say that what we saw more globally on the Parisian region, even if it was not really the case for recap, but on the second quarter, clearly people took more time to decide given the macro, the uncertainty on the worldwide macro but also the French macro.

We’ll see in the next quarter if the companies are still in a wait and see mode or either they are eager to make some transactions. So I would say that could be one of the major headwinds regarding the dynamic of the leasing market even if the brokers estimate a lending point around 1,700,000, 1,800,000 square meters at the end of the year. So slightly below last year, but globally still quite dynamic. And that could be also some positive sign for peripheral offices. What I was saying about the fact that on the priorities on which the company is focused for their decision, clearly the level of rents and the fact that they are looking for affordable rents now as a protection given the world uncertainty for the years to come could drive the demand for peripheral offices.

That could be a positive catalyst.

Akanska Anand, Analyst, Citi: Great. That’s very clear. And my second question, could you just remind us what the portfolio mix is expected to be post the completion of the current strategic plan?

Nicolas Jolie, CEO, ECAD: Well, we don’t give proper figures once again. But clearly, as you know, we intend to increase our diversification in very relative and dynamic asset class where we have some strategy key differentiating assets and know how. So I. E. Light industrial and you saw that we are able to create some value on assets like Le Moulin.

Of course, PBSA, student housing and we’ve already secured a first investment of roughly 200 beds in Yves Richelieu Saint and also data centers. I haven’t talked about data centers, we are still working on that clearly. So all in all, that diversification should dilute the current size of the office exposure. Nonetheless, we are still convinced that there’s a future for our office. That’s the reason why we are being selective but still looking at office development when the location is AAA and when the investment is dilutive.

That’s the reason why we set up this 7% yield on cost on the three new office developments we’ve made in Lyon for two assets and to lose for one asset. So the part on office should be diluted, but we don’t have a specific figure in mind to sure.

Akanska Anand, Analyst, Citi: Okay, that’s understood. Thank you.

Nicolas Jolie, CEO, ECAD: Thank you very much.

Conference Moderator: And the next question is from Veronik Mertens calling from Kempen. Please go ahead.

Veronik Mertens, Analyst, Kempen: Thank you for taking my question and for the presentation. Maybe one quick one on the development segment. I noticed that you stopped reporting the NCCF contribution from the Development segment or at least the split between the two. What’s exactly the reason for that? And is it fair to assume that it is still a negative contribution, especially since I saw that your net debt increased by 42% over the half year?

And if so, what’s the expectation for the full year from the Development segment? Thank you.

Bruno Valentin, CFO, ECAD: Yes. As you know now, ECAD is an integrated player with investment and development businesses, and we changed a little bit the presentation because we would like to improve the analytical presentation to make it easier to understand the group’s performance. So now you have an operation indicator for each business, and related to the other part of the P and L, we have a consolidated view and mainly on the debt management, of course, of financial results. And for us it’s a bit of you to appreciate the performance of group. And of course, we have no change versus initial expectation of the two business lines that we already explained.

Analyst: Okay.

Nicolas Jolie, CEO, ECAD: And maybe to add a word on the global trend on property development business. You saw that it was the end of the P and L scheme that had a negative impact on the orders by individual investors. Also, very low activity in commercial division. Clearly, there’s no major office development project to be launched, but we are back now in current economic operating margin to positive territory at plus 2.3. This is also the mechanic impact of the deep review we’ve made in 2024.

And so we are back on profitability after those impairments. In the meantime, apart from the P and L, also focus on the working capital to keep it under control, as you saw with the disposal of the Tobias asset, close monitoring on the stock and talking about potential positive signals for the market. We spent a lot of time discussing with political institutional to support the sector. Maybe an example currently, there are discussions to boost private rental investments with this private landlord statue, the Statue Du Bayeux Prive that could in a way replace the P and L as a private incentive scheme giving individuals a dedicated status private landlord. Hopefully this is something that could come into force at the beginning of twenty twenty six.

That’s globally for the whole environment for the Property Development business.

Akanska Anand, Analyst, Citi: Ladies

Conference Moderator: and gentlemen, there are no further questions. So I will hand you back to your host to conclude today’s conference. Thank you.

Nicolas Jolie, CEO, ECAD: Well, thank you all for being on this call. Have a nice day. Looking forward to seeing you, all of you, on the roadshows to come. Enjoy the summer and looking back at you.

Conference Moderator: Ladies and gentlemen, thank you for joining today’s call. You may now disconnect.

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