Earnings call transcript: Kolonial sees strong growth in Q4 2024

Kolonial, with a market capitalization of $16.4 billion, reported solid financial results for the fourth quarter of 2024, with significant growth in key areas such as cash flow and earnings. The company continues to leverage its prime real estate assets in major European cities, contributing to its robust performance. Earnings per share reached €0.33, while the company’s gross asset value increased to €11.6 billion. According to InvestingPro data, the company maintains a "GOOD" Financial Health Score of 2.59, reflecting its strong market positioning and operational success. The stock has delivered an impressive 26.4% return over the past year.

Key Takeaways

• Kolonial achieved a 6% like-for-like rental growth.
• The company’s occupancy rate stands at a healthy 95%.
• Significant projects, including the Magnum and Mendez Alvaro, are underway.
• The company reduced its carbon footprint, enhancing its sustainability ratings.
• Dividend increased by 10% to €0.30 per share.

Company Performance

Kolonial has demonstrated commendable performance in Q4 2024, with a notable 12% increase in EPRA earnings compared to the previous year. The company’s EBITDA stands at $1.7 billion, with a P/E ratio of 24.26. The company’s focus on prime asset classes in cities like Paris, Madrid, and Barcelona has resulted in superior rental growth compared to its peers. This strategic positioning has allowed Kolonial to capitalize on the polarization in the prime office market and the corporate trend of returning to offices.

Financial Highlights

• Total (EPA:TTEF) cash flow: €391 million
• Like-for-like rental growth: 6%
• EPRA earnings: €193 million (+12% YoY)
• Earnings per share: €0.33
• Gross asset value: €11.6 billion (+2.8% like-for-like)
• Net tangible assets: €6 billion (+12%)

Outlook & Guidance

Looking ahead, Kolonial has set its 2025 EPS guidance between €0.32 and €0.35, with expectations of an additional €150 million in future rents. Analyst consensus from InvestingPro shows price targets ranging from $9.69 to $14.76, reflecting mixed opinions about the company’s growth potential. The company anticipates continued double-digit growth in EPRA earnings and is exploring a potential merger with SFL in the second half of 2025. This strategic move, along with its opportunistic capital recycling strategy, positions Kolonial as a potential net buyer in the market.

Executive Commentary

CEO Pera Vignoles emphasized the company’s strong market position, stating, "We are clear believers that this is positioning the company in a unique position in terms of supply and demand." Additionally, he noted, "We have been delivering superior rental growth in terms of like for like," highlighting Kolonial’s competitive edge in the industry.

Risks and Challenges

• Supply chain disruptions could impact ongoing projects.
• Economic downturns in Europe may affect rental income.
• Increased competition in the prime real estate market could pressure margins.
• Regulatory changes regarding environmental standards may require additional investments.
• Potential delays in major projects like the Magnum and Mendez Alvaro could affect future earnings.

Kolonial’s Q4 2024 performance underscores its strong market position and strategic focus on prime real estate assets, setting the stage for continued growth in the coming years. For deeper insights into Kolonial’s financial health, valuation metrics, and growth prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro, which provides detailed analysis of over 1,400 top stocks.

Full transcript - Rockwell Collins Inc (NYSE:COL) Q4 2024:

Pera Vignoles, CEO, Kolonial: would now It’s a pleasure of me today to share the results for 2024. I believe they’ve been excellent and satisfactory, but I will be in a minute now showing the details with you. I would like to start maybe with a few words on where does Kolonial stand today in terms of strategic positioning and how we’ve seen, generally speaking, 2024 and how do we see the evolution in 2025 based on last year. And then we’ll be able to share results for the last year. I would like to say that the strategic positioning of Kolonial is based in two pillars.

The pillar of the unique positioning of Kolonial into prime asset class sector. We are clear believers that this is positioning the company in a unique position in terms of supply and demand, which is resulting in a pricing power that is delivering fantastic results that allows the company to leverage on its attraction of the best clients and in the end to have above average rental growth. This has been resulting and this year will be again a good example in a very strong earning growth. One thing that I would like to highlight is that with the results of this year, we’ve been so far having for the last two years a 15% CAGR growth in our EPS. And there is a very clear link in our view between this performance and the fact that we own almost an entire our entire portfolio positioned into prime asset class.

So we are firm believers that there is a market that allows for enhanced returns with a strong range of growth and superior pricing power in the sector where we are. Together with this, the other pillar of the strategy of Kolonial, is our capacity to evolve in the evolution of cities, in the evolution of our client needs and in the trends that are surrounding us in terms of human transformation. So I think that current and future returns of Kolonial will be based on our base case strategy, which we like. And on top of that, in the capital allocation that we may be deploying into new urban transformation themes. How do we see year 2024?

How do we see year 2025? I think that there are tailwinds in the operational performance of our sector, not only in the last few months, as you know, in the last few years. And there are a number of reasons that explain why our operating performance is strong. First of all, macroeconomic fundamentals are strong in our home markets. You know that our positioning is Spain and France.

And for example, today, Spain is leading European growth in terms of performance, of GDP growth. It’s a differential kind of performance, and we are benefiting from that. Second, we are also a super clear example of another trend that is happening, which is in the office sector, further polarization. There is a clear different performance between super prime office market and the secondary locations, together with another fact that we are experiencing, which is a clear trend of corporates, corporations to favor people coming back to the office is an evidence in our daily life that this is happening. People coming back to the office in enhanced qualitative terms, meaning lower density, higher quality of the office environment.

And this is also providing a tailwind for our business. And last but not least, if you look at the dynamics of supply and demand, it’s not only that demand is remaining strong. It’s that the scarcity play in our local market, in the niche where Coronio plays, it’s becoming more and more evident for a number of reasons. It’s not only that where we are, it’s a little bit inapplicable. You cannot replicate the best locations even if you want.

On top of that, there are other megatrends that are happening in cities that are making the best offices even a more scarce source. We’ve seen, for example, in recent months, how a number of offices have been disappearing from the market to be transformed into residential. There was some recent research talking about almost 300,000 square meters of former office being transformed into residential. There’s another example about the new urban planning and Paris being approved that is affecting several hundred of office assets that are expected to be transformed partially or totally into residential assets. That’s creating an environment of additional scarcity.

The office supply is shrinking. That’s another tailwind that is helping us. So in the end, I think that the dynamics of our business are improving, remain very strong and explain the results that we are having. I think that with the presentation today, we will be able to explain and demonstrate this more in detail. Having said that and having gone through this introduction, I’m on Page six to give you the highlights, the main KPIs of Kolonial for the year 2024.

Our first numbers are referred to cash flow growth, which remains very important. We finished year 2024 with €391,000,000 And more importantly, with a 6% like for like rental growth, which is a fantastic number in absolute terms and also in relative terms. Up until now, we have not seen any other company reaching this kind of growth in like for like terms. Our EPRA earnings are $193,000,000 in terms of recurring profits, which is 12% more than 2023. And the EPS that this means it’s $0.33 That means more that a range of guidance that we provide at the beginning of the year.

So very strong sustained cash flow growth. The second set of numbers have to do with our operational performance. The rental growth is 5% year on year. We compare whatever we signed with the previous year ERV numbers into in our evaluations. 5% that becomes 6% if we talk about Paris in particular.

So obviously, the pricing power is clearly demonstrated. And the rental growth goes hand in hand with the other dynamics that are happening at the company. If instead of rental growth, we talk about release spread, we talk about 8% year on year for the group, 20% in Paris. Finally, occupancy remains at 95%. We will explain more in detail the dynamics related to occupancy, but operational performance remains super strong.

The third set of numbers is about asset values. We’ve said in previous presentations that all of this cycle that we are going through was characterized on the one hand with the excellent operational performance as opposed to what some people may think when they read the newspapers, but numbers are numbers after so many years of evidence. The other thing we said is there’s a one off adjustment that has to take place or had to take place because of interest rates rising and therefore yields rising. That was the tone that was affecting our situation 2022, ’20 ’20 ’3. And 2024, what we’ve seen is that asset values are bottoming out.

Clearly, in the first half, we were seeing stabilization of the market. This has been again the case by the end of the year. If anything can be added, maybe is that you see already growth in our gross asset value. The gross asset value of the company stands at BRL11.6 billion at the end of twenty twenty four with a like for like growth of 2.8%, which is good. And as we will see later on, it’s at the top of the evidence of than half today in our sector in Europe.

Net tangible assets grow more than $500,000,000 to reach a number of $6,000,000,000 The net tangible assets per share, it’s now $9.62 You know that we went through a transaction in the first half of the year that had an impact in the number of shares that we have. Adjusted for that transaction, for that capital increase, there is a 1% like for like growth into our NTA. So asset values showing inflection point. And finally, we remain with a solid capital structure after so all of these years, our credit rating remains same at the BBB plus If anything, the Moody’s rating has improved, BAA1, with a loan to value remaining in a very comfortable zone and financial costs also in a very safe heaven of 1.2% interest rate. We always share in our presentation Slide seven with all of our friends because a picture is better sometimes than anything else.

And in this Slide seven, you can see how we are in terms of occupancy, a little bit explained because of where we are. So real prime locations deserve what you see here. And of course, as a consequence, at the top of this page, we are experiencing rental growth and net rental income like for like in very healthy terms. And that is just a consequence of the definition of what the company is. Finally, in this introduction, what we would like to share with you is our view of this inflection point that we are seeing in the office market at the end of twenty twenty four.

You can see in the chart on bottom of this page left how the asset values have evolved 2021, ’20 ’20 ’4 and they give a hint of where the cycle may be today. So if operational performance has been always very good in all of these years, but asset values had to adjust to the new environment, today we see return to growth in asset values on the back of a prime portfolio. And probably pointing out to a very much better kind of cycle in next year. This is our introduction with the main highlights about the numbers that you can see have been remarkable. Now we enter into the next section, we will provide you with more details about our financial performance.

Carmina, CFO, Kolonial: Karmina? Thank you, Pera. So in Page 10, you can see how rental income growth basically back on the core portfolio, growing year on year 4%, basically highlighting 6% growth like for like thanks to the core portfolio. Additionally 5% thanks to the delivery project and these two main impacts both of them has been overcompensated there negative impact due to the disposals that we did in the last year and at the beginning of this year 2024. So very strong gross rental income, 6% like for like, growth of 4% year on year.

And if we go in next page 11, what two are the main drivers behind the 6.4% growth rental income like for like. Basically, we have a very positive impact as you know, thanks to the indexation. As you know, all of our contracts are linked to CPI in Spain and ILAC in France. And this has been adding 3.7%. On top, the pricing power of the quality of portfolio are adding another additional 2% and additionally and finally a slightly positive impact of thanks to the occupancy.

And this strong performance, this strong like for like growth are across the market where we are, as you can see in this page, highlighting both gross rental income and net rental income with 7% total group in terms of net rental income. But when you look at Paris, Madrid and Barcelona, all of them with a very outstanding levels of seven percent and six percent in Madrid and Barcelona, well above other peers that we have seen in Brazil in the market. This strong rental income, it’s been translated into a very strong growth in EPRA EPS. In Page 12, you could see what are the main impacts or the main drivers of this growth on EPRA EPS. The first one is 10% additionally EPS earnings sorry, EPRA earnings thanks to the core portfolio, this pricing power and this rental growth that then you will see in more details.

The EPRA earnings, again, we have a very positive impact of $11,000,000 7 percent, thanks to the project that we have delivered during the last part of 2023 and impacting full year in 2024. And additionally, 3%, five million thanks to the financial cost and the very active debt management and cash management during 2024. So 12% increase in EPRA earnings and when you look at in terms of EPRA EPS, this acceleration of rental growth has been impacted very positively. And of course, beating the upper range as we as you can see as well in this page. We last year, we guide the market between 3032%.

During the year, we were more guiding at the top level of this guidance. And thanks to this acceleration of rental growth, we are beating in the upper range of the guidance, closing the year with per share. Another important impact on the P and L in December 2024 are the appraisals. As you know, we updated our appraiser two times twice per year. And you could see here how the asset value increases basically on the back of this rental growth of this pricing power and on the back as well of the project deliveries.

So the rental growth, thanks to that it’s increasing 2.8% and the gross asset value at the end of the year shows a figure of close to €12,000,000,000 11 point 6 billion euros And this growth acceleration of the appraisal has been as you could see here, in other markets, probably outstanding in Paris, thanks to this price in power on France. But Madrid and Barcelona as well showing a positive growth of 2.4% Madrid and 1.3% in Barcelona, basically accelerating in the second half of the year. So this means that we believe that this we are in the moment of recovering the appraisal based basically on the market fundamentals, in the market where we are, in the niche of the market where we are, bottoming out the yields thanks to these rent rates being stabilized and of course, thanks to the project pipeline that we are going to deliver. So very positive numbers of gross asset value growth and very positive in the projects that we see in the future. And this translated into a significant increase of net total assets up to EUR6 billion.

So in absolute terms, we are increasing our net total assets of 12%, thanks to the NTA growth, but as well thanks to the capital increase that we have been executing during 2024. And when we look at in relative terms, comparing ex capital increase, the NTA increasing 1.1% in comparable terms. If we consider the NIM share in place after the capital increase, the NTA December 2024 shows a figure of per share, beating the Alpha X guidance when we announced the capital increase during the 2024 mid of the year. On the liability, as we have been share with you during the year in the quarterly results, As you know, we have been able to do a very active cash management. But during the beginning of the year, we were able again to stop the market with $500,000,000 green bond issuance.

It was a very, I would say, outstanding capital markets demand with eight times oversubscribed, high demand, the highest that we see in the sector in the last two years. And these higher demands at the end, we have been able to lower the spread, the lowest level that we’ve seen since 2022 in terms of the spread. And the resulting coupon for this $500,000,000 green bonds has been in 325%. Thanks as you know of the pre hedge position that we took in 2021, the cost assigned to this new green bond is to 75%. So very positive feedback from the market perspective, top tier order book.

And we are proud that this eight times oversubscribed, we have been able to tap the market with a very, very interesting financial conditions. And this means that during the year, this active asset liability management, capital increase, disposal that we were able to do during the beginning of the year. The debt has been reduced €400,000,000 4 hundred million euros And the net EBITDA in the operational portfolio has been also improved to 10.7 times. And consequently, the long term value shows a figure of 36% and the April long term value went from 47% to 43%. And in terms of the liquidity, we have a very strong and healthy position in terms of liquidity, in terms as well of the cost of debt.

So today, Kolonial has benefits of having billion in terms of cash and raw facilities of liquidity, which covers more than 1x, 1.3x the future debt activities for the following three years.

Carlos, Unknown Executive, Kolonial: Carlos? So with this, we step to the operating KPIs to the portfolio management. On Page 18, you see the effort, all of the work done during the year, 134,000 square meters signed, 54,000 of new lettings of new available space that has been signed. This is equivalent to an annual rent of 52,000,000, 40 percent is in Paris. This is equivalent close to million.

We’ve signed in Paris roughly 20,000 square meters, that’s 20,000,000 divided by 20,000. This is roughly per square meter more or less on average. So we are really setting the benchmark in terms of rental price, both in Paris, Madrid and Barcelona. If we go to the next page, we see the metrics more specifically, release spreads very high, 8% basically driven by a high double digit release spread. In Paris, Twenty Percent.

Rental growth, very good, very high across the board in every city where we are, Paris, Madrid and Barcelona. Again, Paris with the highest level and also contribution from indexation. At the end, as Pera introduced at the beginning, this again proves that really we have the right product. There is a strong polarization going on to really have very specific high end product. Moreover, the office supply is shrinking, so the scarcity play is getting stronger and stronger, and we are having now in a very super strong short term momentum, especially in Spain regarding its comparable economics.

If we then go on the next page, we see the vacancy profile. Vacancy profile is ultra strong. We are at a total vacancy of 4.9%, but 2.2% is basically new entries into operations or projects that have been delivered and available space from the Cliteria assets contribution that will be let up. These assets have been just contributed quite recently at the beginning of the month of July. If we then look at the like for like comparable portfolio, we’re at 2.8% vacancy, so slightly below previous year.

As you can see, when we look at the breakdown of the 2.8%, there’s almost no available space in the prime areas of Paris, Madrid and Barcelona. We have some available space from very good product in Barcelona in the ’22 ad that is gaining momentum. We are currently in conversations that if they we succeed with them, the 1.1% that we have in vacancy attributable to the Barcelona Twenty Two ad segment would go down by 70 basis points to 0.4 and the like for like occupancy of 2.8 would go down to 2.1. So very, very strong, very healthy and at the end this also allows us to have strong rental growth. On the next page, we see one of the main short term additional rent contributors that will fill the EPRA EPS and the EPRA earnings during 2025.

This is a Mendez Alvaro and Madnon project that we have been delivered now and entered into operation. We have already today signed and we’ve almost full signing close to 20,000 square meters, very good tenants. And what is more important than that is quite a significant underwriting and significant rental price above the initial underwriting and also above our ERV of the beginning of the year 2024. And we have ongoing interest, strong market interest currently in conversations and or with market interest and a lot of visits for additional 20,000 square meters. So this product, it is really a unique urban compass, is evolving very, very strong.

Page 22, some words on our Sustainability credentials that at the end, it’s a proxy for the high quality that our portfolio has. You can see it at the end also in the Justelymeeting credentials. What you see here is, as you know, we measure all of our carbon footprint, all of the categories that apply to our business, that apply to Colonial. We started with this in 2021. We have brought them down significantly from 170,000 kilotons to 170 kilotons to 53 kilotons.

And this is also thanks to a very efficient management of our projects. We are experts in delivering high quality project. We set a carbon target and we are well below the embodied carbon target in the projects that have been delivered recently, the Galang, Helvetkev and beyond. If we go to the in use emissions to the energy transition view, we have reduced dramatically the in use emissions from the first year we started to measure this in 2018. We are today at a level of three kilos per square meter.

So this we could almost say it’s really neutral, it’s very difficult to go lower. And in terms of the portfolio, you know that it’s a high quality portfolio. As a consequence, all of the portfolio has pre LEED and FASQA certificates. And not just quantitatively, also qualitatively will have improved a lot, whereas last year 94% of the portfolio had pre very better or equal than been very good and lead gold, today it’s almost a full portfolio. So also qualitatively a good performance.

And at the end, this is also reflected in ratings. Just analytics, we are leader on the FX35 across all industries and all participants in the world. We are among the 21 best companies with the best rating among 15,000 companies. CDP, we have repeated for the fourth year in a row the maximum rating that is the A score. And on recipe, we also at the high end, five star rating, very much relevant also.

We are really at the top end in development. We are experts on creating the best product, so top end rating in development.

Pera Vignoles, CEO, Kolonial: Thank you, Carlos. Maybe now on my side, some final remarks about closing remarks for the present and some guidance and vision for the future. I would like to share a number of thoughts and convictions. The first one is that I am on Page 26. In the end, Kolonial means a number of assets with a unique positioning that it’s proven that they deliver superior rental growth and that we are going to enhance this with returns from our project pipeline and also with the support of a sound financial strategy and capital recycling.

All of this is resulting in a high double digit EPRA earnings growth for the last four years. The message is our base case with what we owned, we are delivering very sound and solid returns in terms of operational performance. The second message, which is Page 27 is, on top of that, the moment of the cycle where we are means that rental growth is driving an uplifting portfolio valuation. Nothing is happening to the yields. Rental growth remains the main value driver in terms of future performance.

In that scenario, what becomes important is who has the capacity of delivering a stronger rental growth. We are proving that we are delivering a stronger rental growth If we, on top of what we’ve seen in the past, add this vision of the cycle, that’s another message that we can deliver in the future. Page 28 reinforces this message of there is a market that is performing in a certain way instead of operational performance. There’s a market that is providing a hint of where the cycle is. But third message, some people are doing in a way and some people are doing in a different way.

And on Page 28, you can see how we have been doing in the last year. And you all of you that follow us regularly, you will agree with me that it’s not now that we come with this superior, let’s say, performance. It’s almost in every presentation that we say a little bit of the same. So if we go from beta to alpha, here we are with our superior performance. My next message would be, okay, our base case is strong.

Our base case is providing superior rental growth, but we have some ships in the shipyard that are about to deliver substantial additional performance in the next few years. Our pipeline of alpha projects, the first thing to say about them is that they are, of course, in the course of being delivered, but the potential they have is substantial. And to put it in a way that could be comparable, the number that we could share with you is that our Alpha Ekix pipeline plus the recent Magnum project, that is equivalent in terms of future power of $0.11 in our EPRA EPS. That means 33% compared to our EPS in 2024. So we believe that when paying attention to Colonial, we have to pay attention and what we have now in hand and what is there around the corner waiting to provide additional substantial cash flow.

A quick comment on this project. You can see on Page 30, where we are, scope with already deployed almost 29 of the CapEx, but the project is on track with the objective of delivering by mid-twenty six almost $20,000,000 of rands that is more than a 9% on the earth IRR. Sanchida Avila, the life science health care project is also underway. We’ve just gone through the building permit. This will deliver additional $6,000,000 of stabilized rents.

And this lead us to the next comment, which is in delivering these projects, we are also deploying colonial capabilities in the direction of not only providing value through office use, but through whatever human transformation may mean for every specific building. On next page, on Page 31, you can see Condorcet. Condorcet, we’ve just gone through the building permit. This is a project that will be providing more than $20,000,000 of stabilized rent and on geared more than 9% on geared IRR. And finally, on Page 32, Santa Hortensia, which is expected to deliver a stabilized rent of $18,000,000 again, more than 9% IRR with a kind of mixed use nature.

So the message is we’ll have what we have, but then we expect what we expect from the pipeline that we are managing. And as you can see in the Alpha X pipeline, it’s not only about cash flow, it’s also about the nature of the business that we are deploying. And what you can see here is that we are looking for maximum value extraction from each asset, which means tackling into new uses as the human mix use that you can see in San Hortensia or the life science and health care use that you can see in Barcelona as well as in other places. A couple of final comments. Geographically, we are happy to be focused in the leading European cities according to the European intention surveys that are available.

Paris, Madrid and Barcelona are showing a lot of strength and that’s also very good positioning for us, which means in the end, Page 34, that we expect to follow in the path that we have, which should send us from around million to close to million after the delivery of all of these projects. So my final comments would be, we have shared with you today results that again are, we believe, strong and outstanding, that are very good in absolute terms, that are better, that we can see out there in the market, that it’s not only a one off of one year, it’s now 15% CAGR in EPRA earnings growth in the last three years. That is, of course, based in the excellent operational performance that our positioning in the market is delivering, but is also in the because of a particular moment of the cycle where we are, which is also another interesting point when we look at the capital value growth and the inflection point that we are going through. It is obvious now that we are delivering superior rental growth in terms of like for like. The 7% number that we’ve seen, it’s very, very satisfactory.

And that is based on the positioning of our company into the prime end of office building. Looking forward, we expect to add more than 150,000,000 of additional rents. That’s coming from an already existing pipeline. This pipeline is characterized for this uniqueness, but also because of its ability to extract maximum value through human transformation, taking advantage of these new themes. That’s why we are adapting to our portfolio into a territory where you will see capital allocation in excess of $1,000,000,000 into new human transformation schemes.

Our comments on guidance on EPS and other fundamentals, we remain convinced of strong ongoing growth. We believe that revenue growth will remain in like for like terms in line with previous years in terms of growth. We believe that the EPRA EPS CAGR for the next few years will remain strong. Here, we always have to remember existing cash flow plus cash flow that will become available with the delivery of the pipeline that will allow us to remain with this path of double digit growth that we’ve seen in the past also projected into the future. In the short term, we you know that we have the reputation of our beginning of the year, notes remain prudent about our views that what we may deliver by the end of the year.

But our guidance for this year is already providing a range of $0.32 to $0.35 as initial guidance of what our earnings can deliver. And last but not least, the Board of Directors of Colonial will be submitting to the shareholders meeting dividend for 2024 to be paid in 2025 of $0.3 per share. That is a little bit more than a 10% compared to last year. Again, it’s another milestone in the history of dividend growth that has been very substantial in recent years. And this is obviously based on the conviction that the fundamentals of our company are being very strong and are expected to remain very strong in the near future.

So that would be our presentation today. Thank you for your attention. And as usual, now we are available and ready for the questions you may have. Thank you.

Moderator: Thank you. Now we already have the first question, Markus Kolesa. Please go ahead with your question.

Markus Kolesa, Analyst: Hi, good evening, everyone, and thank you for this presentation. I have three questions, if I may. The first one would be on the like for like revaluation because I see different numbers, so I’m a little bit lost between the plus 3% in your presentation and in the report, I think it’s Page 31, I see a lower number with a negative full year evaluation for Madrid and the lower number actually makes more sense with your P and L revaluation, which is $126,000,000 so plus 1%. So maybe we can take this question first. One hundred and six million

Pera Vignoles, CEO, Kolonial: dollars Yes. Will I answer the three questions or one by one, Marcos?

Markus Kolesa, Analyst: Okay. I can give you the three questions as you prefer.

Pera Vignoles, CEO, Kolonial: No, no, as you wish. We’ll go ahead with the three and we answer the three of them, of course.

Markus Kolesa, Analyst: Okay. The second question is on your dividend. You surprised quite on the upside and you’re going to have a payout on AFFO probably way above 100%, one hundred and thirty %. To make it simple, you have 33p of earnings and 10p of maintenance. So my question is why such a high payout, especially as it wasn’t expected by The Street?

Is one of your main shareholders asking for it? Or is there any reason or anything which will next year make your cash flow increase massively to come back to 100% payout? And related to this question is my third one is the increase in maintenance CapEx, which went up 50% on the if I’m right from $28,000,000 to $56,000,000

Pera Vignoles, CEO, Kolonial: Look, I would ask Carrefour (EPA:CARR) to enter into the first and third question. Thank you, Marco, for your questions. Maybe I will take the second one on the dividend. First of all, know that dividend is not a requirement of anyone in particular. It’s a joint view on where we are as a company.

When you look at the historic EPS of the company and its performance, it’s been super solid in the way of growing at a double digit path. And of course, as you were saying, our EPS is 33% and our dividend is 30%. On top of that, we look at the future and of course, we look at the future short term and long term and we see a generation of cash, which is strong enough and strong assured to provide this. And this high conviction on our capacities of delivering the ZPS is what have been driving the decision on dividend, which

Carlos, Unknown Executive, Kolonial: to

Pera Vignoles, CEO, Kolonial: be transparent. It’s just slightly above more market consensus. Market consensus was 29%. In the end, when we realized the kind of returns, how things are evolved in 2025, we thought that we could be comfortable shifting from 29% to 30% and this because of this short term and long term conviction that we took this decision. Maybe, Carlos, if you want to step on question number one and three.

Carlos, Unknown Executive, Kolonial: Yes. On question number one, first of all, the like for like, as you can see, is positive 2.8% year on year, 3.3% Paris, two point four % Madrid, one point three Barcelona. Then I imagine that you are looking at the detail on the operating portfolio in Madrid. There is a slide, it’s like 1% is below 1% a slide correction on the portfolio in operation. This comes basically from the first half of the year as there was still a correction when you look at the second half of the year.

It’s clearly on the recovery side. On the mine talents CapEx, I don’t have here really the details. It’s the EPRA classification, I mentioned, but we can clarify in one on one call, part of CapEx that is here also, and it’s not a pure project, it’s a renovation program. So we have a little bit of renovation programs this year. So this is the part of the maintenance CapEx that is a little bit higher.

So it’s not the pure maintenance CapEx principle maintenance CapEx is remaining in line with previous years.

Markus Kolesa, Analyst: Years. Okay. Thank you very much. And so I understood well the yes, so you have a 2.8% total revaluation with a 2% just the standing portfolio and a big revaluation from the project, which makes Magritte positive on the full year.

Carlos, Unknown Executive, Kolonial: Exactly. As you see, we are delivering we have delivered we are coming out of the project delivery cycle in Magnum that is very significant. And we are moreover pre letting at much higher ERVs than expected. So it’s a big project. So this is driving part of the project delivery alpha created value creation.

Markus Kolesa, Analyst: Okay. Thank you very much.

Pera Vignoles, CEO, Kolonial: Thank you, Marcos.

Moderator: Thank you very much for the question. We now move on to next question, Venonique Mirtens. Please go ahead with your question.

Venonique Mirtens, Analyst: Good evening, all. Thank you very much for taking my question and for the presentation. Maybe first looking into the guidance, it’s quite a wide spread that you gave, almost 10%. So what is currently the uncertainty? Is that indeed pre leveling around Magnum and some of the other projects?

Or what explains the big range that you provide us?

Pera Vignoles, CEO, Kolonial: I, Maric, you know us very well. I would say that at the beginning of the year, there’s a potential for different things performing in a different way, but nothing relevant. I would say that at the beginning of the year, we prefer to do this, let’s say, more wider guidance and then to narrow it as year goes by, nothing in particular.

Venonique Mirtens, Analyst: Okay. And then maybe looking at the 2.2% vacancy, you already mentioned briefly that there’s around 20,000 square meters in discussions for LatAm. Is that also at the same level 7% ahead of the previous ERVs? And how are other discussions going around that 2.2 vacancy at the moment?

Pera Vignoles, CEO, Kolonial: Very good. Yes, and maybe with this I also provide a little bit of flavor of how do we see the year at this time now that the February is about to end. At this moment, I think that what we’re seeing is a market performance completely in line with what we saw last year. If I had to say anything, it’s that letting activity remains strong. Probably, we will be sharing good news in particular regarding Barcelona that, let’s say, has been lagging a little bit and there have been a number of progress in this front.

Regarding Magnum, Magnum, we are quite confident as we speak about how this can behave in during this year 2025. We’ve been close to 20,000 square meters of surface lead. I think that we should be ready to make it at 80 or so led by the end of the year. Current conversations that we have today are supporting this conviction. So it’s not, let’s say, hope about what discussions we have in the future.

Current discussions are good. We know this business. There’s a little bit of volatility at the beginning of these projects, because there are many, many conversations that can in the end be transformed into actual rents or not. But based on our experience, I would say that our conviction is on the high end of things that can happen regarding Magnum. So generally speaking, letting activity remains very strong.

Expectations for the project, in particular for Magnum, are very good and rental growth, I would say, in line what we’ve seen in the last year.

Venonique Mirtens, Analyst: Okay. That’s fair to hear. Thank you. And maybe one follow-up on that. You mentioned that there are still some reversionary potential also in Spain, but the releasing spreads this year were around zero.

There are quite some breaks coming up in your portfolio in Spain. Are you still confident on positive reversion on those breaks and expiries this year?

Carlos, Unknown Executive, Kolonial: Yes. On the reversion, as we also explained in previous calls during the year, we most of the last two years, we’ve come through indexation and the extension started earlier and much higher in Spain. So more or less, all of the portfolios, many of the portfolios in the market are at more or less at the passing branches of the market brand. And from there on, we will see now more and more differentiation between prime portfolios like ours and other portfolios because the release spreads and rental growth will be more or less at the same level. And all of the product projects that we have now and Magnum and also the available space is really high quality space with scarce supply in the market.

So we should see a progressive similar number of ERV growth and release spread in our portfolio. And we should see if all of the people are reporting in the proper way, more and more negative release spreads on assets that are in secondary locations or that are not that high quality. This is basically what we’re going to see going forward in Spain. We are confident with good product. We think it will go very well.

Venonique Mirtens, Analyst: Okay. Very clear. Thank you.

Pera Vignoles, CEO, Kolonial: Thank you, Aure.

Moderator: Next (LON:NXT) question please, Pierre Clouard. Go ahead.

Pierre Clouard, Analyst: Yes, good evening. Thank you for taking my questions. Just coming back on the guidance. So basically, you’re expecting a like for like rental growth in line with previous year, so let’s call it 6%. As the indexation will be lower, are you expecting the uplift to be even stronger than in 2024?

Or do you expect a strong improvement of the vacancy in Barcelona? If you can drive us through the top line expected growth for 2020, if that would be useful.

Carlos, Unknown Executive, Kolonial: Yes. As you correctly said, the indexation has more or less stopped this engine or has gone more down for everybody in the market. In Spain, as you can see, it’s already more on stabilized levels for everybody. It’s at around 2% to 3% also in our portfolio, the indexation contribution. And then you see that we have that our product always gets a significant extra spread on indexation in terms of rental growth.

So this is going to remain strong. And on the back of a scarce supply, we are confident on this. And then as also our CEO mentioned, we are seeing and we think it can continue an increased momentum, especially also in the Spanish markets on the back of a stronger economy and increasing momentum in Barcelona. So we should also have some additional contribution from improvement in occupancy. If we put all together, we are confident and we are with a strong conviction that we will remain in these healthy levels of like for like that we have shown in the last years.

Pierre Clouard, Analyst: Okay. Okay. That’s clear. And a follow-up on the guidance. Did you take any disposals in the guidance or not?

Pera Vignoles, CEO, Kolonial: You mean, if in our expectations there are relevant disposals? No?

Pierre Clouard, Analyst: Yes. Between ’33 and ’35, is there any disposals?

Pera Vignoles, CEO, Kolonial: No, no, no. I think that well, as you know, this year, the main characteristic of this year is, let’s put it this way, we have some ships in the shipyard that are not contributing to the EPS. Then there’s also sorry, I was interrupted. Then, of course, is the different speed that we may expect about Magnum that may contribute more or less to and finally, as you know, at this time of the year, we prefer to be more wide in expectations than narrow, but there’s no specific topic that we may bring us up or down just because of that specific topic.

Pierre Clouard, Analyst: Okay, understood. And then the final one on your capital allocation. How do you view your disposal acquisition strategy in 2025? And especially in light of your April TV at 44% and also given the fact that your net initial is still pretty low. So are you more now in the acquisition mode?

Or are you just betting on your pipeline?

Pera Vignoles, CEO, Kolonial: Yes. No, look, first of all, we have like two convictions, is that we have long term convictions that inspire whatever we do. Let’s say, more importantly, that the short term dynamics. In the short term, we are very much opportunistic in the opportunities that we may have on the sell side or on the acquisition side. By definition, we are fond of capital recycling that is providing with more value in selling and buying.

Our conviction is that we will remain in this capital recycling mood. If I had to say something is that we would be more net buyers than net sellers. This is because of two reasons. One is we believe that if we read the cycle, that it’s what we have to do, most of all, thinking about long term value creation. When the cycle shows some specific shapes, sometimes it’s difficult to take certain decisions, but this is our conviction.

Second, we are firm believers on the strength of our capital structure. Sometimes, some metrics may not help us in a certain direction. But as I said before, year after year, we are at the high end of the rating levels. And year after year, when you look at our performance in the bond market, we remain super strong in terms of appetite by the debt providers. So based on that, as I said, we remain opportunistic.

We know that we are more prudent than the opposite as a company. But having said all that, we’ll be recycling capital in an opportunistic matter. But if anything, more net buyers than net sellers.

Pierre Clouard, Analyst: Okay. And what’s your target in terms of April TV? Up to 50% again?

Pera Vignoles, CEO, Kolonial: No, no, we don’t have well, if you can want to take this one, Carmina?

Carmina, CFO, Kolonial: No, I think no. Every time, no, you ask for the target loan to value. We are not managing the company without targeting the long term value. We are managing the company as the CEO says, no, this capital recycling, trying to find good opportunities that face value, understanding what are the levels of the ratings approach, metrics they are doing. So it’s a fact of expected and predictable and quality of the cash flow.

It’s a matter of policy as well of hedging and liquidity. It’s a matter of good opportunities that make sense holistically, analyzed being analyzed by the rating agencies now.

Pierre Clouard, Analyst: Okay. Thank you very much.

Pera Vignoles, CEO, Kolonial: Thank you,

Moderator: Next question, Celine Xu. Please go ahead with your question.

Celine Xu, Analyst: Hi, Pia. I’ve got three questions. My first question is about the contribution of the merger with SSL into your 2025 EPS guidance. So if you could shed a light on that. The second one is about the surrender premium that’s taken into account in your rental growth in 2024.

What’s that number? And the third one is about more capital allocation. You’ve not indicated any disposals in your earnings guidance, but you still have CapEx to fund a priority that’s 45%. So would you consider using equity again to fund this CapEx and further opportunities? Thank you.

Pera Vignoles, CEO, Kolonial: Thank you. I will start with the last one. We are not contemplating any equity raise. And as I said, we are, let’s say, in terms of capital recycling, we will be opportunistic and always to remain with a healthy and very sound capital structure for the company as we always have. And the other two questions, Carmina, if you want to add on the SFL question?

Carmina, CFO, Kolonial: Yes. Well, on the SFL question, as we have been released last week, we approved the economic terms of the merger, but we need to follow all the legal parts that this kind of transactions needs to fulfill. And the following part, it’s approving formally the merger measure agreement. But first, we need to release the annual result, which is we’re not doing now in the market and then all the legal process by the regulators. So we expect probably more in the second half of twenty twenty five rather than first half of twenty twenty five because we all these kind of cross border measure regulations are not, let’s say, speeding.

They need to follow different. And this is as well in the guidance as you was asking about what are included in the guidance. This is the reason why this guidance is a little bit wider because we don’t know today what could be the final, I would say, resolution from the all the parts that we need to fulfill.

Celine Xu, Analyst: Okay. So, Karnina, is it it is in the guidance currently, and that’s why it’s wide?

Carmina, CFO, Kolonial: There is no direct impact in the guidance. But if it could be settled in the first half of the year, we could have a positive impact. If it’s settled second half of the year, the positive impact would be more in 2026, not in 2025.

Venonique Mirtens, Analyst: Right. Okay.

Pera Vignoles, CEO, Kolonial: And, Asim, I missed second question. Could you repeat it?

Celine Xu, Analyst: Yes. It’s about the surrender premium that’s in your rental growth into your rental income, sorry, in 2024. How much was it?

Pera Vignoles, CEO, Kolonial: I am not following you. I’m not understanding the question. So rent the premium?

Celine Xu, Analyst: Tenants exit. So I’m guessing that’s WeWork (OTC:WEWKQ) in Paris.

Carmina, CFO, Kolonial: It’s very immaterial. So what’s happening, yes, I think it’s very immaterial there.

Pera Vignoles, CEO, Kolonial: Not relevant.

Carmina, CFO, Kolonial: Yes, it’s not relevant. We will call, no, no, Samu will call you with exactly the number, but it’s very immaterial gross and tal income, not significant.

Celine Xu, Analyst: Okay. Thank you.

Pera Vignoles, CEO, Kolonial: Thank you, Zane.

Moderator: And now next question from Florent Laroche. Please go ahead.

Florent Laroche, Analyst: Yes. Good evening. Thank you for this presentation. I would have two questions. My first question is on your EUR 150,000,000 of future wins that you expect.

How much can we expect maybe from Weibration? So and or maybe the question could be asked differently. So how we can assess your potential of Weibration at Colonial? And my second question, just to clarify on the guidance for the long term. So you expect strong APO EPS growth.

Do you take into account any disposals in this guidance or no disposals? Thank you.

Carlos, Unknown Executive, Kolonial: I will start with the first question that you put. It’s on Page 34. On Page 34, you have all of the building blocks of the additional brand potential that is in our portfolio. As you can see here, renovation program and Magnum at the beginning project pipeline and we have a last building block where we have the full potential of the reversion. This is called a combination of rental upgrades and leasing up the space up to 100%.

And here is a significant amount of money to be captured.

Florent Laroche, Analyst: Okay. Thanks a lot for that.

Carlos, Unknown Executive, Kolonial: Doris?

Pera Vignoles, CEO, Kolonial: The second part is about guidance, long term guidance and disposals assumptions on this long term guidance.

Carlos, Unknown Executive, Kolonial: Yes. I think it has been also answered in the previous question. So we are not factoring in the disposals even though we have a speed rate of capital recycling in general. So if we dispose, it’s to reinvest the money improving the average returns of our portfolio.

Florent Laroche, Analyst: Okay. That’s okay. No disables. Okay.

Carlos, Unknown Executive, Kolonial: Yes.

Florent Laroche, Analyst: Okay. Thank you very much.

Pera Vignoles, CEO, Kolonial: Thank you.

Moderator: Next question, Ana Escalante. Please go ahead.

Ana Escalante, Analyst: I would like to ask about your capital allocation, because if I understood it correctly, you are saying that you are looking to sell assets opportunistically and redeploy capital into developments. But then when we look at the forecast for capital values that you saw in

Celine Xu, Analyst: your

Ana Escalante, Analyst: presentation, Those forecasts are quite or they are forecasting quite significant growth in asset values in offices. So yes, what we are missing here is that you don’t think that there is that much capital value growth ahead and therefore acquisitions at current levels don’t make sense? Or do you think that you can achieve even better returns in developments rather than in asset acquisitions?

Pera Vignoles, CEO, Kolonial: Anna, when you’re talking about future capital values, you mean which ones in particular? You mean the one

Ana Escalante, Analyst: CVRO forecasts that you saw

Pera Vignoles, CEO, Kolonial: in the presentation. Okay, okay. No, what I think that here, what we are trying to share is our vision of where the cycle can be and of course not a particular projection of our own capital values. But it’s true that if we believe that capital values have an upside, this has a number of implications. This has implications in your projected debt ratios into the future in the same way that we’ve now gone through a period where everybody was concerned about the LTV.

Because of the values going down, at some point, people may think that this same analysis should be done on the assumptions of values going into a different direction. So that’s more or less what that’s why we’re trying to share here. Having said that and going back to your initial point, in terms of capital allocation, we are neutral, as I said, not net sellers, not net buyers and chasing opportunities. And I said, if anything, maybe net buyers to capture opportunities that maybe they are in the market. But I think there’s no particular mismatch of numbers because this projection of capital values was just a way of sharing our view that we have if we manage the company thinking in the long term, we may I think we may we should look at the cycle in a different way than if we were in 2021 or 2022.

That’s what we wanted to share.

Ana Escalante, Analyst: Okay. Thank you.

Pera Vignoles, CEO, Kolonial: Thank you, Anna.

Moderator: And now, Fernando Abril. Please go ahead with your question.

Carmina, CFO, Kolonial0: Hello. Thank you very much for taking my questions. I have three. First is with regards interest expenses. So good liability management again this year.

So but I don’t know if you had, let’s say, extraordinary interest income. So I would like to I would like to know what is your projection? So what are you including in your guidance of EPS in 2025 with regards interest payments? Secondly, is with sorry, because I joined late to the call, so I might miss these comments. But I would like to know your views on the investment market in Paris, whether you are seeing improvements or still mute?

And third, it was well, first, these two questions, please.

Pera Vignoles, CEO, Kolonial: Yes. Luca, I’ll take the first one, Carmina, on interest expense.

Carmina, CFO, Kolonial: This year on the interest expense, you see cost of debt $1,700,000 net financial impact $1,500,000 basically because we had as we have been released and share with you in the last quarter, we have cash available during the year thanks to the capital increase that now we are going to allocate in the CapEx and we have been managing this cash. So this is the difference between 1.7 cost of debt and net cost of debt of 1.5. So this is a positive impact that has been during the year. But for the future, for the future, as you know, we took a pre hedge in 2021, basically hedging the future debt maturity, 50% of the future debt maturity for the following years. At what rates we could close this project in 2021 at 0.7% basically.

So it means that 50% of the future debt that will expire during the following years, as you see in in the information in the longest one in the business evolution. 50% are prefetched at very low rates and the remaining part is a floating rate, so at the mid swap at every moment. So if you forecast the potential interest cost, consider this research, which is publicly and it’s in the annual accounts very detailed. And you can, I would say, estimate the interest cost for the future in the following years? At the moment that we are updating 50% of the debt at market levels and the other 50% at pre hedge at 2021 levels.

Pera Vignoles, CEO, Kolonial: The second part of the question, Fernando, on the investment market in France, maybe several comments. The first comment is that obviously with available figures, it remains very much in the low range of what historically has been. So no big news about that. We all know that it’s still in a very low transactional level. There, what I may share is our personal experience about our specific market.

And our specific market, which is Prime CVD, it’s that if we pretend to buy anything above the yields implied in evaluations, you find nothing. There’s no one there as a willing seller for a prime asset. I have to say that obviously, ourself, we have zero interest if we had to sell at a higher yield, let’s say, at a discount because we are a firm believer today that when you look at the expected IRR that an existing asset with existing yield that today has is about to deliver. I think it’s a very good investment case for our shareholders. So the experience I’m sharing today is in prime assets, very low transactional volume, but because people is not willing to transact based on the conviction of the value that is there in those specific assets.

If we had to talk about other parts of the market, I think that my answer will be more difficult about why there’s no more transactions, if the yields are representing or not representing where the real market is. But I can talk for our local market. Our local market, we cannot invest at higher yields than you can see in the market today. And maybe that’s why the local volume remains a little bit low compared to the history.

Carmina, CFO, Kolonial0: Okay. Thank you. Just the last one was just to confirm, I think it’s obvious, but just wanted to confirm that the EPS guidance for 25% is based on a higher share count. I mean, it is including the full dilution of the criteria there. So I understand that stable EPS from 0.33% to the range you’ve mentioned.

It is assuming a big increase in the absolute number in euros? Yes. Okay. Thank you. Yes.

Okay, thank you.

Carlos, Unknown Executive, Kolonial: Today’s number of shares, Hospitalitya, the yield is $627,000,000 of shares.

Carmina, CFO, Kolonial0: Okay, perfect. Thank you very much. Thank you, Fernando.

Moderator: Okay. There are no further questions. I now give back the floor to Mr. Pera Vignoles.

Pera Vignoles, CEO, Kolonial: Well, just a few seconds just to thank you for the attention, to share our satisfaction with 2024. We’ve been a very good year again and confirming with numbers our convictions in terms of positioning. We are also convinced that 2025 is going to be in the same direction. We are at a very interesting moment of cycle when the cycle may change. It’s always difficult to have visibility and to manage, but we are here for the long term and that’s a very interesting moment.

And hopefully, in the future, we will be able to share with you additional good news in this sense. Thank you and have a good

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