COL.MCCOL.MCBME
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Operator: Ladies and gentlemen, welcome to Colonial SFL Full Year 2025 Results Presentation. [Operator Instructions]. I would now like to introduce Mr. Pedro Vinolas, CEO of Inmobiliaria Colonial SFL. Please sir, go ahead.
Pere Serra: Thank you. Good afternoon. This is Pedro Vinolas speaking. Welcome to the 2025 full year results presentation. It is a pleasure to share with you the results of the company for 2025. We are going to run you through this immediately. There are 2 things that we would like to do today. One is report to you these results, this excellent set of results. Second, also inform you about relevant matters, recent events and the strategic framework that the company is using to run ahead of its strategy. I'm on Page 4 of the presentation. So let me start you directly with the highlights of the results of our company for 2025. As you will see, we believe that these are outstanding operating results with solid execution of the disposal program. Main highlights. In terms of cash flow and cash flow growth, we are presenting a total gross rental income of EUR 399 million for 2025 with a very impressive 6% like-for-like growth attached to this, EPRA earnings of EUR 211 million, 9% more and an EPRA EPS of EUR 33.6, that is confirming the guidance that we've been sharing with the market in the past. In order to produce this cash flow growth, we've been able to deliver an excellent operational outperformance. Rental growth in terms of ERV growth is 7% year-on-year like-for-like. It's particularly remarkable that this 7% becomes a 9% if we talk about Paris. The release spread is 8% year-on-year for the group, 16% in Paris. And the occupancy, it's 92%, remaining at the standard high levels that the company is used to. Translated into asset value growth, the gross asset value grows 3.0 like-for-like, reaching a new figure of EUR 12.2 billion. The NTA, the net tangible assets is now EUR 6.1 billion. The net tangible assets per share becomes now EUR 9.70 per share. And this is also supported by relevant capital recycling activity. We will share more details today about recent events regarding this strategy, but the main headline would be disposal program on track, EUR 300 million delivered year-to-date, everything in line and confirming appraisal values. As a result of that, loan-to-value 37.1% and always with a contained financial cost that is 1.91%. This would be the highlights of the results that we will be sharing with you in detail immediately. It is important today also to provide a little bit of framework and also information about recent events that provide additional light into this recent performance. I'm on Page 5. First of all, as I said, these results are proving that prime asset class are delivering a strong rental growth, which is, number one, superior to pricing power, more than 400 basis points above indexation. It is also clear that these results are not only very good in absolute terms, but also in relative terms to our peers. 7.2% like-for-like growth for Colonial SFL in Paris for the group, 5.8% any peer well below this performance. So this first message is our positioning is delivering consistently superior growth. But moreover, we would like to share with you some additional news on our progress in other directions, such as the disposal strategy. We would like to announce today that the disposals have reached, as I said, a EUR 300 million year figure. This is based most importantly, on the fact that we recently executed the sale of a landmark asset in Paris, 83 Marceau that we have sold at roughly speaking, EUR 240 million. That is in line with appraisal values that is, roughly speaking, 4% or even below in terms of yield. So these are additional news that we would like to share with you today. As a result of that, the group has been having progress in the deleveraging of its capital structure. Group pro forma LTV is coming down 105 basis points based on LTV or 156 basis points if we use the EPRA LTV measure. So good set of results and additionally speaking, very additional good news regarding recent transactions. Page 6, just to illustrate these headlines, you can see the traditional footprint of Colonial SFL in different markets. But particularly, I would like to highlight where do we finish the year in terms of rental growth, 9% Paris, 6% Madrid, 5% Barcelona. We'll come back to this, and we will be particularly more detailed in the performance of certain markets such as Paris. And as I was saying on Page 7, besides the results we are presenting today, we are confirming our execution of the disposal program. It's now EUR 300 million executed below 4% yield, a remarkable transaction, the one that we are announcing today on 83 Marceau, about EUR 240 million, in line with appraisal values and good progress in the other fronts related to noncore office products or assets in Madrid, also good progress on the residential divesting. This will be the highlights for today. Now we will enter into the presentation of results. And later on, I will come back with some remarks on the strategic positioning of the company. Now we will go first through the explanation of what's been happening on the operational front. And later on, we will see the consequences of this in the financial KPIs of the company. As usual, we have with me Carmina Ganyet, Chief Corporate Officer of Colonial; and Carlos Krohmer, Chief Corporate Development Officer of Colonial SFL. Please, Carlos, go ahead with the next section on portfolio management.
Carlos Krohmer: Thank you very much, Pedro. We are now on Page #9. When we look how has been the year, we have had an extremely outstanding letting activity and letting performance. We have secured rents for a total annualized value of EUR 64 million. This is 22% higher than the amount that we had the previous year and corresponds to 150,000 square meters. Very important to highlight that 62%, more than half of it are letting up of new spaces of new delivered spaces for Madnum and Haussmann. And the split is equally -- it's well diversified, EUR 24 million in Paris, EUR 22 million in Madrid, EUR 18 million in Barcelona. So very strong activity because this is what we see when we are in the prime asset class market. When we then go into more detail on Page #10, we see that we are signing really at record high prices, setting the prime reference in Paris. We are signing at levels of 1,000 and above EUR 1,000 and with significant growth on ERV on the rural Santo 1,200 in Washington Plaza, several contracts at EUR 1,000. Edward said, several contracts on EUR 1,000. Grenelle, we have really also reached EUR 1,000. This is absolutely a record for this building. Previous year, it was lower, super record price. And then we signed on Champs-Élysées a retail space at a total rent of EUR 3,700 per square meter here. So all of them well above the previous year. So with strong rental growth and at very high absolute levels. So really, our segment is performing extremely well. When we go to the other 2 cities where we operate on Page #11, we see as overall that our activity in Madrid and Barcelona has increased from EUR 32 million to EUR 40 million of total volume of contracts that have been signed in terms of annualized rents that this represent. What is extremely interesting is a lot of square meters, 60,000 square meters in Barcelona. We are seeing a significant acceleration in Barcelona. Just to remind you, last year, it were 35,000 square meters. Now it's almost double. In Madrid, 70,000 square meters. And when we look at the prices, we see very high prices, 26 on the 22 because we are there in the super prime niche on [Diagonal] at 16% growth in ERV, 34 and 28 on the Diagonal and in Madrid levels between 36 and 43. So across the board in our product, that is the best product, we are signing [indiscernible]. When we go and take a perspective year-on-year on Page #12 and look at the overall rental growth, as Pere mentioned at the beginning, we have signed with a ERV growth year-on-year of 7%. What is extremely interesting about this is that in every single city, our portfolio has increased significantly the rental growth that was achieved last year. Last year, we had in Paris, 6% growth in 2024. In 2025, now we have 9% growth. So we've increased by 300 basis points. Madrid also has an acceleration in Barcelona also. And the 7%, just to keep in mind, is more than 400 basis points higher than indexation. So we are really achieving growth above indexation. On the release spread, it remains super strong. We are having an 8% release spread. Barcelona turned from negative to positive. This market is really recovering at a very accelerating pace. Madrid, a 4% release spread and Paris, 16%. If we take into account retail, the pure office release spread is 19%, so at the 20% levels of the previous year. So a very strong pricing performance. When we now look at the project pipeline, we are also progressing well on the letting up of the project. Page 13, the 2 big elements or big assets that we have for letting up and that have been delivered recently are Madnum and Haussmann. In Madnum, we have year-to-date already signed EUR 14 million of rents. It is 74% of the building. We are signing at levels of between EUR 27 and EUR 28 per square meter month. Just to remind you, the initial underwriting when we did this project was at levels of EUR 22. So we are really beating what we were envisaging. On Haussmann, we have already signed and we have in place today EUR 5 million of rents. So we are approaching to the full EUR 13 million. Also here, rental levels quite attractive, EUR 1,000 per square meter a year. The previous tenant pre-project was more at levels of EUR 800. All in all, when we take all this together, we are at an occupancy of 93%, 92% at December, but with the contracts that have been signed in December, but coming force on Madnum because the tenant steps in during the month of January and also the floor signed in Haussmann. We are today, as we speak at this moment, already at a 93% occupancy, so coming quite quickly at very high levels again. And so I will pass over to Carmina to the financial section.
Carmina Cirera: Thank you, Carlos. Now let's cover the financial performance and how this operational outperformance flows through to our financial results and capital structure. Let us start with the rental income performance on Page 16. In 2025, gross rental income reached EUR 299 million representing 8% year-on-year increase on the operational portfolio. This growth is primarily driven by the core portfolio, EUR 21 million, which delivered 6% like-for-like growth, well above market levels. In addition, delivered projects and recent acquisitions contributed a further 2%, EUR 11 million, more than offsetting the temporary negative impact from assets entering refurbishment such as condos sale and Haussmann that will be -- will be in the future rental growth upon completion. So overall, this confirms the strength and resilience of our portfolio and the effectiveness of our leasing strategy. Looking more closely in Page 17 at like-for-like performance, we clearly outperformed the market. Our 6% like-for-like rental growth is driven mainly by 3 key factors: indexation 2.7%, strong rental uplifts on new lettings and renewals, 1.5% and improving occupancy as well, 1.6%. This reflects our pricing power in prime CBD locations, particularly in Paris and demonstrates again, as you can see -- as you have seen during this year in the quarterly results, that growth is not purely inflation driven, but it's driven by operational scarcity of quality product in the market where we operate and by strong demand for prime assets in prime locations. So it demonstrates the quality and prime assets outperformance. This strong operational performance translated directly into earnings growth. In Page 18, you can see EPRA earnings increasing up to EUR 211 million, up to 9% year-on-year. And without considering the disposals, the EPRA earnings would show an increase of 20%. Some specific comments in the project deliveries and acquisition, important impact of Madnum and as Carlos was explaining, this complex has been entering into operation during 2025. And additional comment on the EUR 16 million of the additional financial cost, overheads and others, which is a combination of different concepts, includes contribution of the third-party management fees, a saving in overheads due to the merger and positive impact, very important for the conversion of the 2 subsidiaries, companies in France that were in the past under the general tax regime. And because of the fact that the asset become a yielding asset, we have been converted into SOCIMI regime, which means at the end, a permanently saving cost saving tax for the corporate tax for the future. So consequently, EPRA EPS reached EUR 0.336, which is towards the upper end of our guidance range. So this growth is confirming the robustness of our earnings model and the quality of our cash flows. Turning to the asset value in Page 19. Our portfolio continues to show resilience. Gross asset value increased to EUR 12.2 billion with like-for-like growth of 3% at group level. All geographic -- geographies, sorry, contributed positively, Paris up to 2%, Madrid up to 3.9% and Barcelona up 5.7%. This performance is particularly remarkable in comparison with other peers and reflects the quality, as we have mentioned, the scarcity of the assets of our prime assets and the pricing power on the rents due to the strong demand for this prime office building. Valuation performance in Page 20 and valuation yield is fully supported by transactional evidence, as you can see here in this Page 20. Recent disposals and market transactions in Paris, Madrid and Barcelona have confirmed our appraisal values with pricing at or above book value. So this transaction demonstrates again renewed liquidity in prime markets and reinforced confidence in our reported valuation. As has been already mentioned in Page 21 on capital recycling execution has seen significantly exceeded expectations. Out of EUR 500 million disposal program announced in November 2025, we have already executed EUR 300 million, as Pedro was mentioned previously, representing 60% of the target in just 3 months. Importantly, prices were at or above appraisal values and disposal yields were at or below 4%. We are as well having progress in the disposal of residential portfolio and other nonstrategic assets. So again, this confirms both market [debts] for prime assets and our disciplined capital allocation. As a result of this execution in Page 21, our balance sheet has strengthened materially -- so loan-to-value decreases to 37.1%, less than 100 basis points -- sorry, more than 100 basis points and EPRA loan-to-value to 45.4%, considering all of it as the last execution disposal. So this last EPRA loan-to-value with an improvement of more than 150 basis points. So net debt reduction combined with a strong liquidity, EUR 2.2 billion, debt coverage on debt maturities 1.6x of the maturities for this year and for the next year and competitive cost of debt of 1.9%, positions Colonial SFL in a comfortable zone of solvency as our rating also demonstrates with the sector by S&P and by Moody's. Finally, on Page 23, on financing, we continue to benefit from our proactive hedging strategy and the hedge position taken back in 2021. Our average cost of debt stands at 1.9%, significantly below current market rates and current market cost of debt. Nearly 100% of our debt, as you can see in the chart, is fixed or hedged, providing a strong protection in the following years against interest rate volatility and ensuring earnings visibility over the coming years. So as a conclusion, these results demonstrate a combination of a strong operational growth, resilient asset values, disciplined capital recycling and a solid balance sheet.
Pere Serra: Thank you, Carmina. Now let me jump into the last section, which is about the strategic positioning and a strategic update of Colonial SFL group. I think that we've seen what I consider an excellent set of results for 2025, outstanding letting performance, outstanding rental growth, very differentiated optimal performance in all KPIs, everything related to the positioning of Colonial in the prime CBD market in Paris, Madrid and Barcelona. If we have to give some comments on where does Colonial stand today in terms of our strategic positioning, Page 25 pretends to provide a framework to understand the pillars for Colonial SFL strategic positioning. Colonial SFL strategic positioning is based mainly on 3 pillars. Number one is our positioning in prime CBD operations. This is the bulk. This is the most important part of who we are and what do we do. And here, our game is about delivering pricing power and differentiation, strong reversion in our markets of Paris, Madrid and Barcelona. This is our basic positioning. Second, the strategy of Colonial is based in the additional value coming from the delivery of our Alpha X operations and initiatives, which, as you know, are not isolated. It's called Alpha X because before this 10 initiatives, we've gone through 9 before. This is the main contributor to midterm EPS growth. to project our growth profile, it is very important to go through the understanding of these projects, and we'll try to give you comfort on where we are regarding them and what can we expect from them in terms of superior value creation. And finally, there's additional value coming with the portfolio management and the capital allocation process. There, we are providing additional value by divesting in those assets that are mature and are available to crystallize value. Let's remember that we sold more than EUR 1 billion of assets in the last 3 years. And then there is value coming from the decision of where -- what to do with the money raised from divestments. And in this capital allocation process, there are alternative uses we can do. First of all, protect and strengthen the balance sheet through deleveraging, if necessary; second, extracting value from our prime factory portfolio; third, investing in new investment opportunities, which have to prove that the returns honor the cost of capital in existing market conditions. And last but not least, considering in the absence of new investments that honor this cost of capital, the potential optionality of returning capital to shareholders. I will be pleased to share with you where do we see Colonial regarding this capital allocation process, this portfolio management strategy. But as you know, it's very important to understand that the value of Colonial comes from the 3 pillars. And these 3 pillars execution is what are translated into the EPS and DPS growth profile on the company and on the guidance that we may give on this. And finally, based on this EPS and DPS growth profile. There's also a proposal for shareholder remuneration, which we consider also key to be transparent and crystal clear about it. Let me now walk you through where Colonial SFL is today regarding these 3 pillars and its consequences in EPS and DPS growth and shareholder remuneration. So number one, the basic profile of the company, Prime CBD operations. What is our conviction regarding Prime CBD operations? I think that it's proven the outperformance in absolute and relative terms of our portfolio. We can look at it in different ways. We can look at it in terms of like-for-like growth. I clearly believe that like-for-like growth of 6% growth in terms of GRI for the group, 7% if we talk about Paris or 7% like-for-like growth if we talk about ERV growth, 9% in Paris is very remarkable and unique. And it's between 300 and 400 basis points higher than indexation. So I think that as a value proposition, it's a very strong one. That's the first thing I would like to remark. The second is if we are all put in the same basket, it's very difficult to highlight or identify this value proposition. So it is important to understand that this unique proposition is consistently delivering like-for-like growth that is not only important in absolute terms, but it's higher, as you can see, than our peers within our office sector. So strong conviction on the performance of our prime CBD operations. Let's be more precise about this. Recently, people are wondering about the nature of the Paris market. And it's obvious that we should highlight our convictions and our thoughts regarding where does Colonial SFL stand in this framework of additional uncertainty regarding Paris. Two things or I would say 3 things have been said about Paris. One is take-up is not super strong. Second is not -- there is not a good balance or a good balance as in the past in terms of supply versus demand absorption. Third, there may be questions about rental growth and where do we stand? Where do we see our position? First of all, regarding supply and demand balance, you can see in this Page 27, what's current outlook for the Paris market. There are relevant parts of the Paris market where the absorption of new supply can be 2, 3 years or even more than 3 years in terms of the time you need to absorb the new supply. This is not what is applicable to our company and to our product. Where we are, the current number is 0.6. So it's much less than a year, half a year to absorb the new supply in the prime CBD market. In different words, if we look at the pending completions of new supply, if we talk about CBD from '27 onwards, it's almost irrelevant the remaining supply that remains in the market. I agree that this may not be the case for the wider Paris market as it's the case also in some other European cities. But certainly, there is a difference regarding the prime CBD market. If instead of talking about supply versus demand, we talk about rental growth, where take-up is going, let me emphasize this number. In 2023, the rents signed above 1,000, which is a proxy of the prime CBD leasing market represented 7% of the rental market in Paris. In 2025, it's close to 40% that is telling you that is reinforced market bifurcation and there is a trend that is favoring high-quality product. So we have to distinguish between different markets. And in our case, our performance is significantly better than one could think of. That's about Paris. Of course, Colonial SFL is about France and it's about Spain. A word about Spain. It's remaining and going super strong. It's not only that take-up is reflecting the fact that Spain is today the fastest growth economy in Europe. It's only that other things are happening, which are working in our favor. Because of the pressure on the residential market, because of the super strong demand for new residential product, 1 million square meters of office in Spain have been converted to alternative uses, mainly residential, as I say. So it's not only about take-up being strong, it's about supply disappearing, particularly the supply that cannot make it as an office product. As a consequence of that, the vacancy on Madrid CBD and in Barcelona CBD and particularly more on the Madrid market is super low. And the balance between supply and demand is fantastic. And as a consequence of that, rental growth is being super healthy, particularly for prime product, as you can see in the chart on the right-hand side of the page, in historical terms, current terms and projected terms. So this explains what do we think about our main positioning, which is about prime CBD product. Number two, pillar #2, how can we enhance growth of our company, in particular of EPS. Well, I think it's important to reinforce the major contribution that we expect from our urban transformation initiatives in this aspect, in the aspect of the new projects under the Alpha X umbrella. In these projects, we expect an aggregated EUR 100 million of additional top-up additional GRI, which will be translated in additional EPS that we estimate in the range of additional EUR 0.11. What is the message regarding this layer of strategic positioning? First message, things are going well. There are different projects here. Mainly, we were working with 5 big projects. One of them had to be delivered in 2025. It was, it's Madnum. It went very well. At the beginning of the year, the vacancy was, of course, low. At the end of the year, it's super high. It's a success. Regarding the rest of the projects, they are going according to our plans, and they will deliver according to these numbers. The second message regarding this Alpha X project is the agenda attached to this project means that the most important part of the contribution to EPS growth will be 2027, 2028. So this is not contributing to the EPS today, but is a major source of EPS growth that if not around the corner, it's quite soon, and we believe that it has to be taken into account when evaluating the value proposition for Colonial. That's pillar #2. Pillar number three, what are we doing and what are we going to do regarding portfolio management and capital allocation. First of all, as you know and following previous presentations, we put the focus on the disposal program as the present condition to whatever we may do with the money. Where are we in the disposal program? Very well advanced. Just last November, we were saying we plan to divest EUR 500 million. Today, we are telling you EUR 300 million have been executed in 3 months. We are telling you disposal prices are above appraisal values. We are telling you there's a particular deal just signed in Paris, EUR 240 million at appraisal values, circa 4% yield. In aggregate terms, all of our disposal program is at or below 4%. In the end, we are selling mature assets with further looking on their IRRs below 5% because our business, it's about doing this and then investing at higher returns. I would say that we have good progress on this. And moreover, I would say that it's in the strategic interest to say that there are more disposals to come based on the success of this recent strategy. What do we do with the money? Well, number one, it's enhancing our balance sheet structure, that is deleveraging of Colonial SFL. The immediate consequence of this disposal program is an estimated decrease of more than 150 basis points in the EPRA LTV. That's the main consequence of this portfolio management and capital allocation strategy. Second, do we see other fronts where we'll be or are being active? Are we envisaging new investments? Yes, 2 comments on this, subject to the present condition that they have to provide their IRR of double digit. Second comment, in this respect, we have visibility on accretive deals of around EUR 200 million that may be executed soon. This is how much we want to do now in this framework of a capital allocation strategy. Next, number three, there is quite often the question and what about your science and innovation platform? What are you doing? Where are you going? How much are you spending? Let me start by the latter question. We are not investing anything else, as we said, that what we invested a year ago, number one. We are not investing anything more. That was not the strategy from the beginning. Number two is things are going well. Our IRRs and yields are confirming our business plan in this segment. Third, we would like to build up this platform mainly based or totally based on third-party capital stepping in. News are that a global institutional investor is joining us with an equity contribution expected of EUR 120 million, meaning more than EUR 200 million of additional firepower. So this is going well. This is, as you know, not in the -- at the heart of our strategy. It's a nice complement to our strategy, and it's going as expected without additional efforts expected from our side. Last, what we pretend to do as a company is what any real estate company should be doing, which is doing capital recycling, selling mature assets, investing the proceeds and considering that in the current framework, if there is relevant return attached to share buybacks, include this as an additional tool in this capital allocation strategy. In this framework, we would like to announce that a buyback program has been approved by the Board as I will detail later on in -- with the specific figures. As a result of this strategic positioning, what we are having is a good track record of EPS growth. This has been growing substantially and consistently in recent years. And as I said at the beginning, we confirm for 2025, the EUR 0.336 EPS in terms of cents per share results. For 2026 and bear in mind the profile of our generation of EPS, we are pointing initially at the guidance of 34 to 35% for the year 2026. In terms of remuneration, and I will be more specific, based on the results for 2025, the objective of the Board is to propose to the General Shareholders Meeting EUR 0.32 per share to be paid during the next few months. And in these comments about EPS, let me highlight finally the significant EPS growth acceleration that we foresee in 2027 and 2028. We believe that it will be a good decision to provide as much visibility on this as possible. Therefore, we are announcing a Capital Markets Day for next May 2026, where we'll be pleased to provide the visibility on this EPS growth profile of the company. And of course, EPS growth means also at the other side of the coin, LTV compressing. We envisage a long-term LTV level for the company for 2028 below 40%. My final comment would be on shareholder remuneration. It is obvious that we had a fantastic profile of dividend per share growth in the last 10 years as this chart can explain easily. We would like to announce that our remuneration proposal for this year is to pay EUR 0.32 as dividend per share. But we would like to say that on top of that, 2 things will be happening. First, we will be canceling, amortizing 5 million shares that are now in our treasury stock to enhance the KPIs of the company. And on top of that, the Board will propose or has proposed a EUR 50 million share buyback program that we will start in due course as soon as possible with the objective of these shares being canceled or amortized also as soon as possible. So this is the consequence of everything we said about our strategic positioning. My final remarks, I said at the beginning that today, we wanted to first share with you the results for 2025; and second, provide additional visibility on things that are happening at the company level, recent events and strategic guideline level. Well, I think that as a summary, if we recap on the results of the company, I think it's a good set of results. As I said, letting performance, fantastic in terms of growth, rental growth, amazing in terms of absolute levels, in terms of relative levels. Anybody should agree that this is a real remarkable number. And all of this is translated in very healthy P&L and balance sheet performance. The second part of the story, talking about the strategic positioning. Our strategic positioning is based on this conviction on the superior performance of our prime CBD portfolio now and in the future. We would like to highlight or we want to highlight the major contribution coming from the Alpha X projects. And in terms of capital allocation, we are glad to announce that we are having fantastic progress in our disposal program. In particular, we are announcing a transaction signed today in Paris, which is relevant. And in this respect, we are also guiding you in the direction of using these proceeds to deleverage the company to invest in high-return profile kind of initiatives and also at the EUR 50 million level in enhance our remuneration policy for our shareholders. That's our presentation for today. Let me be specific about the Capital Markets Day. I said May, in particular, save the date, we are talking about 21st of May in Barcelona. Thank you for your kind attention. And now as usual, we are available for your questions. Thank you.
Operator: [Operator Instruction] Now the first question comes from Jonathan Kaiser from Goldman Sachs.
Jonathan Kownator: Three questions, if I may, please. The first one, on the pre-letting of scope, are you having any discussions? I understand I think the deliveries for 2026, if I got that correctly. Perhaps you can also let us know when do you think you will deliver that in 2026? Or yes, I think I got that right. The second -- or maybe that's a start. On the second question on the health care, I think you're saying that your -- innovation, you're saying you're on track in terms of IRRs. Can you elaborate on where the occupancy is for the portfolio currently, if you've been able to improve that already, please? And the last one, I'll probably keep it for later. Let's answer the first 2. And the third one is slightly more technical. So I just want to do that afterwards, please.
Pere Serra: Thank you, Jonathan. Thank you for your questions. Look, on the scope, it's still too soon for us to provide details on this. Probably the third quarter will be the right moment to have real visibility on where we are. On the science innovation platform, I leave it for Carmina to give some visibility on this.
Carmina Cirera: Yes. So thank you, Jonathan. On the occupancy today, you know that out of the 140,000 square meters, there are part of these square meters that are pre-let, but not still building because it's like a sub refurbishment. But we are in the range of 90% occupancy and with high visibility on the pre-lets for the coming square meters that will be into operation during this 2026. So good performance and good occupancy, interesting names of these new tenants. And we state about our stabilized yield on cost in the range as we disclosed in the range of 6%, 6.5%.
Jonathan Kownator: Okay. Not entirely clear, but we can take that offline. So on the scope, it's being delivered in 2026. That's correct, right? Is it delivered towards the end of the year then? Is that what we need to assume? Or is it delivered before?
Pere Serra: Yes, it's delivered by the end of the year. That's what I was saying that maybe the right time to have visibility on the progress on the letting front will probably in the third quarter.
Jonathan Kownator: Okay. Right. The third question was about the like-for-like rent growth. I'm sorry, I'm a bit confused actually by your numbers. So let me just walk you through. Could you -- maybe you have the bridge on Page 16 of the presentation, which shows EUR 21 million like-for-like and EUR 11 million. Maybe can you explain what's included and then you have also obviously Condo sale and Haussmann for EUR 23 million decrease. What is in the EUR 21 million? Is that just transaction on existing space? Or do you have any renovation of floors there or anything like light refurb projects? And also, I'm struggling to reconcile this with the 5% lower occupancy that you have essentially in Paris. So I think the occupancy went from 100% at the end of 2024 to 95% at the end of 2025, which should impact your like-for-like rent growth negatively, but you're still showing 7% increase. So again, I'm confused as to what is included in that 7%, please.
Carlos Krohmer: Look, Jonathan, I will try to explain it as clear as possible in very short words if something remains to be further clarified, we can have then a specific call. But in principle, it should be quite easy to understand. So the 21 is a pure like-for-like EPRA best practice calculation. So it's really comparable spaces. And when we look at the '23 that is non-like-for-like, this is basically concentrated on 2 assets that during 2024 were fully with rents, that is the Condo sale assets and it's the Haussmann asset. Both assets have been during 2025 in a refurbishment mood have been project. And so Haussmann has been delivered during the second half of the -- I think in September it kicked in September. And this is the main element of the increase in occupancy. The increase in occupancy is due to the delivery of Madnum and to the delivery of Haussmann. So the like-for-like occupancy that we've not shown in this presentation remains stable at 96%. That's why the like-for-like growth is positive and totally consistent. So we actually have not really -- the occupancy actually has not gone down in like-for-like. The occupancy is simply a consequence of putting into operation, delivering projects that we are now leasing up. And as you can see already on the data that we show as of today, with the leasing progress that we have had today, we are already coming back. So this is the main elements on the non-like-for-like building block are these 2 assets. There are small here and there are small refurb spaces, but basically, it's this. And what we want to show in this page is if we would not have put these assets into renovation mood that we are doing to create more value and to create more rents because on Condo sale, we're going to double the rents that we initially had the building. Without this, it is just a temporary rotation because we work on the assets. Our business has grown in rents, has grown EUR 21 million like-for-like because the like-for-like occupancy is paying at the same level, and we are starting to have some rents of the project, a little bit of Madnum. And then keep in mind that we bought in June 2024 via the capital increase assets from Criteria that also were just half a year in 2024. Now they are fully in 2025. So this is the explanation. If you need a little bit more details, we can have them in a separate call.
Jonathan Kownator: Yes, maybe that would be helpful. But just as a quick confirmation. So in Paris, the 100% to 95%, so that is Haussmann or is something else?
Carlos Krohmer: Basically, Haussmann.
Jonathan Kownator: Yes, exactly.
Carlos Krohmer: Keep in mind, it's a 12,000 square meter building that at a total rent of EUR 1,000, so this is the EPRA occupancy is in economic terms. So it's a vague. It's an additional -- so you add on the base 12,000 square meters valued at EUR 1,000 per square meter. And this is today as of December -- at not yet fully let. And we have already signed an additional contract in January as we highlight in the presentation, and now we are leasing this up. So it's basically concentrated on business.
Operator: Next question comes from Florent Laroche from ODDO.
Florent Laroche-Joubert: I would have 3 questions. Maybe I can ask them one by one. The first one would be on your guidance. Could you please tell us what you take into account or not take into account in your guidance for 2026 because you are doing some disposals, you are announcing some share buyback and maybe some -- and you have good visibility on future acquisitions. So what should have to take into account in your guidance?
Carlos Krohmer: Well, we are taking into account what we are guiding for. So we are taking into account the disposals and also partially for part of the year if we succeed the potential acquisition. As you can see, It's a net disposal. So we are -- overall, we are in net terms divesting. Yes. Roughly speaking, it's EUR 300 million net disposal. Big assumption.
Florent Laroche-Joubert: Okay that's fair enough. Okay. And no assumption about cancellation of the 5 million shares or no assumption about future share buyback?
Carmina Cirera: Sorry, only 5 million shares and the fact that today, the Board has been approved this [indiscernible] has not been considered yet.
Florent Laroche-Joubert: Yes. Okay. So we don't take into account the cancellation of the 5 million shares for your guidance.
Pere Serra: Yes.
Florent Laroche-Joubert: Okay. And my second question will be on your, let's say, medium-term outlook. So you announced, I think, several things. The first one is that you announced an EPS growth acceleration in 2027 and 2028 and then you announced also the ambition to reduce your LTV and you announced also some future acquisitions and also some share buybacks. So I would like to understand how it works at the end because that's a lot of things. and some of them are not going to the same direction.
Pere Serra: Yes. No, I don't understand. I think the fundamental remark about our, let's say, Alpha X project is that the CapEx are -- most of it is already done or in a relevant part of it. And that means that it's included in all of the considerations coming from the disposals that we are going through. So there's no significant effort in terms of leveraging the company attached to these initiatives. On the other hand, yes, there is a relevant income that we expect from these projects. That's why it's possible to both expect an LTV that remains in healthy levels at the same time that the EPS grows. I have to say that, obviously, in our LTV projections, we are not including any assumptions regarding values going higher because of things happening to yields or nothing like that. It's a simple exercise of projecting what do we know about CapEx and cash flows.
Florent Laroche-Joubert: Okay. And maybe my third question would be on your visibility for your future [indiscernible] for USD 200 million. Could we please ask you if you are looking for buying assets [indiscernible] in your current cities? Or maybe are you looking also only maybe to other capital cities in Europe and Paris, Madrid and Barcelona?
Pere Serra: Yes. I think that regarding new acquisitions, a number of things can be said. First of all, the nature of these acquisitions will remain in the prime territory. So we don't want to change substantially the risk profile of the assets. That's the first thing. Second, the requirement of return, it's relevant. and we look at this more in IRR terms because IRR allows to consider initial yields, but also value coming from our transformational skills. We are assuming on leverage IRRs above 8%. And the third is, yes, we are a little bit agnostic about the geographical profile of where we will be investing. And we may be considering Spain, France, but also some other cities in Europe and particularly in Germany.
Operator: [Operator Instructions] Our next question comes from Valerie Jacob from Bernstein.
Valerie Jacob Guezi: Just one question. I just wanted to ask about your vacancy, occupancy. Your vacancy is quite high at the moment. And you made the point during the presentation that at the moment, less than a year to absorb new supply. So shall we assume that your vacancy is going to be much lower at year-end? Is that what you have in your guidance?
Carlos Krohmer: Look, basically, what we try to explain on Page 14 is that we have a high occupancy in like-for-like terms. So the Prime Paris vacancy is 0.9%. The Prime Madrid Barcelona vacancy is 0.6%, 22 is 1.6% and the rest is at 1%. So basically, a big part of coming back to the levels that you saw in the previous year is letting up the projects that we have delivered that is Madnum and Haussmann basically. And you have seen that we have had strong progress. So occupancy in like-for-like terms has not changed anything. We are at the same levels at the same the previous year, but we have developed projects that we are letting up. And we are quite confident and not just confident, we have delivered significant progress. So as soon as we then have this project let up, we are again at the super high levels. But I insist in like-for-like terms, we are remaining at the super high levels. And this is why we are delivering above-average like-for-like growth.
Operator: Next question, Veronique Meertens from Kempen.
Veronique Meertens: First of all, it's good to see that your CMD during the Kemper conference, but we'll discuss it later. But regarding one question around your adjusted EPRA earnings. I see you make some additional adjustments. And I was just hoping to get some color on that because I think it's roughly now 6% of your adjusted EPRA earnings, where 2 years ago, it was still 0%. So if you could give some explanation on where that growth is coming from.
Carlos Krohmer: We are calculating EPRA earnings regarding to best practice. I don't really understand. But do you refer to when you say there is an adjustment? Maybe provide more color on this because we are not following you.
Veronique Meertens: There's a company-specific adjusted EPRA earnings, and that includes EUR 12 million and that says extraordinary provisions and expenses. So I was wondering what's exactly in that number because it's a deviation from EPRA earnings, how I interpret it.
Unknown Executive: Sorry, I'm not being able now to -- let's go back to you maybe some recovery because I'm not able to identify the specific topic that you are mentioning. I don't know, Carlos, if you want to prefer to come back.
Carlos Krohmer: Well, it's basically -- but it's EPRA earnings. Maybe it's the labeling in the table not precise. Basically, it's recurring earnings. So what is there in the EUR 12 million. It's extraordinary exceptional items costs related to the merger of SFL related to the costs that could be attached to the SNI deal. So it's really exceptional items and it's fully EPRA compliant. Maybe it's not been the right way to show it in that way. But it's -- at the end, it's recurring earnings. So this is basically exceptional costs related to deals to extraordinary deals that nothing has to do with recurring activity. So it's really clear EPRA earnings. This has to be clear. It's not that we are doing some strange adjustments or something like that. It's recurring and then there's extraordinary elements. And this is totally EPRA conformed and it's EPRA earnings. Maybe we should have put it in the line above. And maybe we just put it not totally precisely. But good that you say so we can then also correct.
Operator: Next, Celine Huynh from Barclays.
Celine Huynh: Just one question for me, please. What is your rationale for the share buyback? And why do you think this is the best use of your capital right now?
Pere Serra: Yes. Thank you for this question. I think there's a combination of things. First of all, from a real estate point of view, I think that when you consider or we consider, of course, the implicit real estate quality of what Colonial is, it's something that in the market, you could not find to buy or to sell because it's an implicit substantially super high yield corrected or adjusted for the quality of what we are. So we consider that from a real estate point of view, it's an excellent deal. Second, from a shareholder remuneration perspective, we believe that a number of shareholders will appreciate that on top of, roughly speaking, EUR 200 million of dividends that we are paying, they may receive if they wish, an additional EUR 50 million in terms of share buyback. So it's a combination of financial discipline regarding returns, a judgment on what are we doing in terms of real estate value for our shareholders; and third, shareholder remuneration strategy.
Celine Huynh: Sorry, can I follow up on that because you're trading at 4.5% implied cap rate at the moment. Isn't that a better use of your capital? I mean, you could be investing into the life science and that would yield you something better than 4.5%. So I just don't -- I'm cautious I don't understand why you're doing this.
Pere Serra: Well, I think that maybe the fundamental topic is about the quality attached to the asset. So we all agree that today, whatever yield we may see in the market has to be evaluated related to the nature of the asset. Colonial for me, and maybe I'm not -- I'm a little bit conflicted. It's super, super, super, super top in terms of prime. It deserves the kind of yields that are not consistent with the implicit yield of a share buyback. I understand that this implicit yield, if you would compare with secondary location or any other topic, it could be a number to be reevaluated. But adjusted for the quality profile of the assets, we believe that it's super accretive. And as I said, it's not only this. It's about the dividend strategy and the dividend remuneration. And finally, just another way to look at this, we are consistently disposing assets at appraisal values. I think this has to be taken into account. When we are -- today, just today, we are announcing a relevant disposal in France at appraisal value, there's also many people that do understand that there's an arbitrage here if we are selling at appraisal value and buying a stock price, many people believe that we are doing a combined strategy that is creating value for shareholders. The divestment at certain levels and the investment levels create this. That's my view, Celine.
Operator: Next question, Fernando Abril from Alantra.
Fernando Abril-Martorell: Just a follow-up on the share buyback. So you've initiated a EUR 50 million share buyback, which is probably relatively small. However, should we assume this could be expanded if the discount 22@ persists, as you mentioned, Pere, and further disposals are executed?
Pere Serra: Yes. No, Fernando, first of all, to clarify, there are 2 things happening now. One is, in the past, we've done some share buybacks, but because of different reasons. And as of now, we had an outstanding balance of 5 million shares. in our treasury stock because of past activities. For example, we were buying shares in order to execute long-term incentive plans. Then we know that these shares are not needed. They are, let's say, remaining at our balance sheet level, and we know that they are not needed, okay, then we cancel them and we amortize them. This is the first level, the EUR 5 million. It's not shares that we are going to buy. These are shares that we already own, and we have decided to put them in action in terms of being amortized. Then there's a second level that we're saying. On top of that, from now on, we are announcing a EUR 50 million, 5-0 million share buyback will be executed as usual. Safe haven style in terms of European directive. So we will be active in the market in the way that the legal framework explains usually, this is something that we will be doing. And then your question is and what's next? Yes, I think that -- as I said, the framework is if we can sell mature assets in good pricing, we'll do it. Then with this money, if they are relevant -- going back to Celine's question, if there are relevant investments that adjusted for risk, the returns are there and are substantial, we invest in the market. If the comparable return of buying back some shares is there, then we may put in place a combined strategy. But I would say that, that is a theoretical framework, a general framework, but this is just, I would say, the theory. In practical terms, what we are saying today is let's do this EUR 50 million. It's a nice way of enhancing shareholder return, and that's what we are doing for the next few weeks and months.
Operator: Next question, Christian Ozan from [indiscernible].
Unknown Analyst: You hear me, please?
Pere Serra: Yes.
Unknown Analyst: So the question is about the cycle, I would say. You are one of the most experienced management team in the sector. So you guys know that following bright days, they can be dark days. And the question is this one, why do not use such dynamic in EPS, top line organic growth to much alleviate the balance sheet and to sell assets, I would say, in the coming 2 to 3 years. So the question is why about your conviction, I don't know why. And the question behind the question is probably you read the Srini research report in the past few days. And so continue accelerating in the coming years with a '28 road map is about to consider that the cycle will not switch off, I would say, before the end of the decade. So there are 2 questions in one, I would say. So what's your feeling about that, please?
Pere Serra: Yes. I think it's a very, let's say, complex question to address because when we talk about cycles, we may talk about -- I'm just speaking out loud, we may talk about 3 ways of approaching the cycle. One is to talk about rental cycle. The other is to talk about yield cycle and the other is to talk about capital value cycle. If we talk about the second and the third, I am not sure that we are at the high end of valuations. I think that we could defend easily that looking at the past experience and looking at the premium of IRRs on a comparable benchmark, I would say that we are in low levels of valuation. If we talk about yields and capital values, and we can, of course, discuss much, much further. Regarding rents, I think it's tricky because it's subject to a number of issues happening. I think that on one hand, it's always the result of the supply and demand, depending on how these main key drivers perform, this can lead to a cycle or another. I remember very well, the cycle of 2000 -- the GFC crisis was mainly a cycle provoked by excess supply by far, by far, more than anything else. So -- and it's also a questioning of what may happen to take-up and also a questioning on what happens to rents compared to pricing power of people. There, we have our assumption. It's the product that we are in it's a pity that in our sector, we don't talk about different subsectors so easily as in other asset classes. But we believe that in an asset class, we are in a subsector that the balance between supply and demand, the pricing power that our clients can meet does not give us visibility for a dark period as you were suggesting. So -- of course, we've been around for a while like you, and we look at cycles and we try to provide visibility on what we're doing based on them. But if we went into discussion about the different angles of the cycle, we remain comfortable to a certain extent. In the end, today, there's a 400 bps spread between the returns of our kind of assets and the comparable benchmark. And I think that when you look at history, we are not in the hitting zone. But this is, Christian, my opinion, and I'm happy to discuss further with you any time, okay?
Unknown Analyst: With pleasure. The final thing I keep in mind is that in a nutshell, as far as your assets are concerned, you are -- you stay pretty optimistic, and I like optimistic for the, I would say, 4 to 5 years, I'm right?
Pere Serra: Yes, I agree. But it's not only about animal spirits. I think that when we started with questioning about our asset class a few years ago, we've been vocal about the data. I mean it's -- there are many opinions about what can happen to us. And year after year, we are saying great. I mean we can all have different opinions about this. But why don't we look at the data of our performance in the last few years? Maybe we are overoptimistic as you are saying, but we try to rely on fundamentals and numbers.
Operator: And next [indiscernible].
Unknown Analyst: Just one question, if I can. You're talking about deleveraging here. And if I look at your EPRA LTV, it's up close to 300 bps year-on-year. On a pro forma basis, I appreciate that comes down to 150 bps up since 2024. You're talking about SBB, which obviously reduces that deleveraging. So what metric are we talking about when we talk about deleveraging? That's my question.
Pere Serra: Yes. Thank you. Of course, we are talking basically about LTV reduction. And it's a reduction that's happening even if the SVB is happening. Of course. So we evaluated the scope of this SVB in a framework of a consequence of deleveraging in any case. Regarding the LTV, as you know, our view is that we are very -- or we pretend to be very disciplined in terms of financial strength. At the same time, we believe that sometimes the LTV should be measured further with further attention to the V to the value and what kind of risk profile is attached to the asset value and the cash flow generation. So that's why, in a way, we have always felt decently comfortable, and that's why rating agencies have been in line with this opinion. So we are basically comfortable with where we are, at the same time, providing comfort on this vision of financial discipline and the deleveraging is what we expect to happen as a result of everything that we are doing. And of course, yes, we are including the share buyback in the numbers. And after them, after that, deleveraging is happening anyway.
Unknown Analyst: And can you give us some guidance of what the LTV will be when you finish deleveraging -- because it doesn't look like it's coming down.
Carmina Cirera: Well, as we -- I think we mentioned in the presentation and it's written, our loan-to-value, it will be below 40%. This is the range that we would like to see. But I mean, the pro forma shows this loan-to-value pro forma below -- it's at 37%, so well below 40%. But having said that, we analyze this capital structure holistically, as Pere mentioned, and the rating agency is giving the different metrics. But the fact that we are more net sellers and deleveraging, it's moreover to have growth capacity to invest in the range of this capital, this financial discipline in the loan-to-values below 40%. This is the aim of these disposals with this already committed and with the net disposals or the net seller position gives us additional deleveraging to have these additional growth capacities in the framework of being investment grade as we are today.
Operator: Now that was the last question. And since there are no further questions, I give back the floor to Mr. Pere Vinolas. Please sir, go ahead.
Pere Serra: Just thank you all for your kind attention. It's been a pleasure to share with you this result presentation and looking forward to meeting you soon again. Thank you, and have a nice day.