NSI.ASNSI.ASAMS
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Martijn Massen: Good morning, everyone. Thank you for joining and welcome to our 2025 Full Year Results Analyst Call. Today, our CEO, Bernd Stahli, accompanied by our CFO, Elke Snijder, will comment on the results presentation published on our website this morning. At the end of the call, you will have the opportunity to ask questions. For now, I would like to hand over to our CEO, Bernd Stahli.
Bernd Stahli: Thank you, Martijn, and good morning, everyone. Welcome to the results presentation. Let's dive straight in. Slide 4 shows you what we stand for. These will be known, but I'll repeat them anyway. We're predominantly invested in Amsterdam. We're open to other sectors than offices. We appreciate that happy customers are key to the long-term success of the business. Sustainability is a must. And if the opportunity is there, we would like to grow into a larger, even better, more resilient business. Looking at 2025, lots of things have moved. For us, the 4 highlights of this year. The redevelopment of HNK Rotterdam Alexander, will talk about that later. All the permits are ready and the contractor is at the point of signing for Vitrum. So that's going to be the story for '26. We've delivered on our asset rotation, and we've exited a few more markets. And we've successfully refinanced EUR 400 million in loans successfully at better terms. Slide 6, we highlight the key performance indicators, some good, some bad. Earnings slightly higher than last year, EUR 2.10. The dividend, therefore, up by EUR 0.01 as a result as well, given that we have got a minimum payout ratio of 75%. Our balance sheet is under control. Our cost of debt remains low. But in terms of vacancy, and we'll talk about that later as well, it has increased. We see it as something that we will be able to address over the coming period, but it's something that we know, we need to address because 9% is not something that we're very happy about. Portfolio performance. If we look at the portfolio that we have today, anyone who was in the call 8 years ago remembers the map of the Netherlands where we had dots in some 72 cities. It's a lot more clean now this map. We're down to 5 cities. We exited Eindhoven, we exited Hoofddorp, which actually is very clear on Slide 9. Three assets sold, Eindhoven, Hooghuisstraat, we actually delivered to the buyer yesterday at 3:00. The 2 assets that you see at the top that were sold at the end of the list -- at the top of the list were sold at an 80% premium to book. The assets in first half of '26, Eindhoven is actually also sold at a similar sort of premium. So the trajectory in terms of asset rotation is good. What you see also on this slide is that we -- it looks like we have not done any acquisitions in '25. That is correct, but that doesn't mean we didn't invest. We actually invested quite heavily in HNK Rotterdam Alexander. And again, in '26, there will be further investments, particularly as Vitrum will start. The vacancy rate on Slide 10 is up. And we've indicated there's a slightly further increase at the start of 2026 as we got another building back in Leiden. So today, the pro forma number is just under 12%, and this is for us the level from which we have to start working it down again. If you look at the vacancy, we basically, over the years, as a result of strong asset management, asset rotation, investments in our assets, we have managed to keep the vacancy low. But obviously, there will always be tenants vacating, moving on. And this year -- last year, 2025 was the year that we actually had some adjustment as a result of it. And with a small portfolio, a vacancy returning to us will have a significant impact on the overall number. It's something that we know we need to address and we are addressing head on. Why, how do we do that? By just continuing to invest in our assets. And HNK Rotterdam Alexander is a very good example of this. This is going to be the best asset in the Alexander submarket of Rotterdam opening on February 9. Due to its quality and service offering, the building has attracted significant tenant interest during the development phase. And as a result, we are now leased 85% ahead of completion with conversations ongoing for most of the remainder of the space. Rents are above our original business case and with costs under control, we look forward to generating an attractive yield on cost of 8.4%. Alexander follows a trend of successful rebrands and upgrades at other HNK as we show on Slide 13. In 2026, we're doing a major rebrand of HNK Houthavens in Amsterdam and of HNK Utrecht Central Station, where we also expect to see good increases in ERV post the upgrades. We know the demand for offices is changing. And what is clear is that if and when you invest in your assets, as long as you're in the right location, it does get recognized in higher occupancy and higher rents. We also see this in how our tenants are using the space. We're getting more and more data on the actual usage of our buildings, and we are now on Slide 14. The actual physical occupational levels are stable at a good level, especially for the buildings that fit modern day tenant demand. We're optimistic that for the portfolio that we have, these occupancy levels will actually continue to improve. Slide 15 shows Vitrum. It's a project that you've seen coming back on our presentation for the last years. It's taken its time, but we're planning to make as much of a success of our development as we have done on some of the other redevelopments in our portfolio. In 2025, we've overcome all the legal hurdles, and we're close to the point now of finalizing and signing the contractor, confirming an actual start date, confirming a delivery date. Anyone that is driving by the location today can see the preparatory works already taking place at this time. It will be a great addition to the portfolio, adding just under 15,000 square meters of high-end space in a highly visible location, and we're optimistic about the leasing prospects as there is not that much comparable space available in the market now or in 2028. All the relevant details you can see on Slide 13. Slide 15 highlights Glass House. We announced in the press release because it's a big vacancy for us that is coming up, that it's going to become vacant in December 2026 after KPN has been there for just over a decade as a tenant. You can actually on the map, see where its location is. It's in terms of location, the best assets in the Sloterdijk area. And it's up to us now to make sure that -- it's also going to be again the best asset in terms of not only location, but in terms of product for this market as and when we deliver the project in probably 18 months' time post the delivery -- the return of that building in end of 2026. We'll make it future-proof. We know how the occupier market has changed. It will be a multi-tenant building, high quality, and we expect it will cost money. We don't yet know how much. But as and when we know the details with respect to the cost of the project, the timing of the project and the returns of this project, we will clarify this to you probably in one of the future presentations for the results. And with that, I would like to hand it over to Elke for the revaluation and the financials.
Elke Snijder: Thanks for the introduction, Bernd. On this slide, you can see that the overall revaluation for the full year was negative. In the second half of the year, we recorded a downward adjustment of EUR 31 million. This was almost entirely driven by the revaluation of Glass House, the building that we just talked about that KPN will be vacating by the end of '26 and to a lesser extent, by Leiden assets following Johnson & Johnson's departure from the lab space on Newtonweg and overall, the change in sentiment in the bioscience industry that there has been lately. On this slide, the left shows the euro amount and the breakdowns between positive and negative full year revaluations. And on the right, we highlight that excluding Glass House and Leiden, our H2 valuations remained pretty much stable. Okay. We wanted to dive a little bit deeper into valuations and ERV. That's why we made the next slide. And here, we take a closer look. We've created this chart for you. And what it illustrates is that the development of both market rents, ERV and asset valuations for our like-for-like portfolio using 2020 as the base year and how that develops. Over a longer period, you would generally expect that if anticipated rental income increases, the corresponding asset values would rise as well. However, the chart shows a disconnect over this time frame, interestingly. While ERV was increased by 20% across our like-for-like portfolio, valuations have declined by 17% over the same period. Moving on to the next slide. You can see that while ERV growth has been slightly lower than inflation, we have seen that our gross rental income does grow ahead of inflation, which, in essence, is good news. Our new leases are signed significantly above ERV, almost 14% in 2024 and 11% in 2025. Okay. Let's now move on to sustainability. I think this is a familiar slide for you, but of course, with updated numbers. As one of our key strategic pillars, sustainability remains an area where we can truly show our commitment and really continue to lead the sector. We assess our progress against multiple indicators, giving us a well-rounded view of our performance. Our EPC continues to stand out. Nearly our entire portfolio is now labeled A or better. And within the A category, we can see further improvement as more assets climb to higher label tiers. On this slide, you can see that reflected on the top right, where the dark blue segment grows significantly in 2025 versus '24. A major focus area is reducing our actual energy use as we believe that, and I've explained this before, together with CO2 impact, this is the most meaningful driver of our sustainability trajectory. We track this through CRREM, targeting improvements in kilowatt hour per square meter per year. And this requires both investing in the technical performance of our buildings, but also supporting our tenants in adopting more energy-conscious behaviors. On the left-hand graph, you can see that we achieved another reduction in energy intensity. This is even more encouraging and now it gets quite interesting given that '25 was relatively cold with 5.7% additional heating days or in Dutch, we call them [Foreign Language]. Pro forma, had conditions been more typical, energy intensity would have likely landed around 105 or 106 for this scope versus the 109 that you see here in the chart. Our performance still remains well ahead of the Paris Proof pathway. And as mentioned, progress will not always be linear, some investments deliver larger steps than others and weather can create year-on-year fluctuations. But the overall trajectory remains strongly positive. Finally, on BREEAM, on the bottom right, you can see that 75% of our portfolio scores is very good or better. But more on that on the next slide. Okay. Here, you can see on the left, our ratings in '24 at the top. Then in the middle, you can see how our ratings would have looked if we wouldn't have done anything with the new certification that we did this year. And in the bottom, you can see how our ratings were finalized in '25. We recertified a large part of our portfolio in December, and this is the result. While we still have roughly 3/4 of the portfolio in very good or better, you can clearly see a shift from excellent in '24 at the top chart to more very good ratings in the bottom chart. At first glance, this might suggest our assets are performing worse, but I'm trying to explain that's not the case. In reality, our assets have continued to improve. However, the thresholds for each BREEAM rating level have become significantly stricter, which means the same level or even better performance may still result in a lower label. Now as for most of you, BREEAM is not day-to-day work, let me explain a little bit about how BREEAM ratings work. They are a moving target, not a static achievement. The assessment framework is regularly updated, and the assets are typically reassessed every 3 years against newly tightened criteria. As a result, the benchmark effectively resets each certification cycle, meaning that simply maintaining your rating usually requires additional investment and efforts. In years with widespread reassessments, for us, '25 was a biggy, it becomes inherently more difficult to maintain previous labels even if the environmental performance of the underlying assets has stayed the same or even improved. Part of what we're seeing was expected as we rolled out extensive planned sustainability upgrades, but some outcomes also stem from methodological updates introduced during the certification process. What does remain unchanged is our commitment. We continue to invest in and further enhance the quality and sustainability and long-term resilience of our assets. Okay. Now let's dive into the financials. EPRA earnings, a familiar chart here. It shows the bridge from GRI to NRI to EPRA earnings. Let me highlight a few points. Service costs not recharged increased as higher vacancy meant a larger share of these costs were not passed on to tenants. OpEx, noticeably higher than in '24 and driven really by 3 main factors. We saw a significant increase in municipal taxes. It was roughly EUR 0.5 million. In '24, but this was a little bit of a minor cost. We had a one-off insurance compensation that, of course, did not come back in '25. And we had higher sustainability-related consultancy expenses, including work tied to the BREEAM recertification. And again, we did a lot of those in '25, and we do not expect those to return in this magnitude in '26. Net financing result improved. I will elaborate on this later. And finally, corporate income tax lands at a direct rate of around 5.5%, comfortably within our guidance range of 5% to 7%. Moving on to EPRA earnings per slide. It's a bridge from '24 to '25. From left to right, the big ones. First, you can see the impact of the Sypesteyn acquisition that came in for December '24. So we have the full year impact in '25, hence, the EUR 0.06 of GRI that you see. Negative impact of disposals consists of full year impact of the '24 disposals. To remind you, that was Binnenhof Den Bosch and Fellenoord Eindhoven and the partial impact of the disposals of '25, and there we see Beukenhaghe Hooghuisstraat that was [ Beukenhaghe ] and Kennedyplein in Eindhoven for December. Like-for-like GRI shows the impact of mainly indexation, as you're familiar with. And as said, service costs not recharged increased due to higher vacancy. OpEx was higher, as explained, mainly due to higher municipality taxes and sustainability consultancy. Financing costs lower, and that was due to mainly on average, lower debt outstanding. Corporate income tax direct is about EUR 0.9 million higher than in '24. That's the EUR 0.04 impact, and that all ties up to an EPS of EUR 2.10, which is EUR 0.01 higher than '24. So I hope everybody is still with me because we're moving on to the EPRA NTA per share from again, end of '24 to end of '25. From left to right, more familiar stuff coming in, so I'll speed up a little bit. Total dividend of EUR 1.57. Over the year, the EPS we just talked about of EUR 2.10. Impact of revaluation comes down to EUR 3.06. And the sold assets in '25, good news, sold above book value, hence, the result on sales. Deferred tax relates to an increase of the deferred tax assets because of the negative revaluation over the year. The effect of stock dividend here is EUR 0.27. Simply put, the denominator of NTA per share has increased and results all in all, in a decrease of the NTA from '24 to '25 of EUR 2.24. Okay. Let's move on to financing. You have been able to read in a recent press release, but we are very pleased to have successfully closed a new EUR 50 million 7-year private placement with MetLife Investment Management. This strengthens our long-term funding profile, and we're happy to do it with an existing partner. Our EUR 40 million Pricoa placement, which matures at the end of this month, well, it's actually that's the end of this week, is being refinanced through this transaction, and we're adding an additional EUR 10 million to support continued investment in our portfolio, and we have investment plans enough planned for '26. Commercial terms are attractive. And as a result, average cost of debt remain well under control, increasing only to 3.2% after closing. Okay. Another sheet on our maturity and hedging profile. On the left side of this slide, you see the pro forma. So after we've paid back the Pricoa private placement loan maturity profile. And we're quite happy with that. It's a well-staggered schedule. No refinancing needs until '28 and also highlights that we still have substantial capacity on our RCF. With the completion of the new private placement, average debt maturity is extended to 4.6 years, which is illustrated on the top right of this slide. Overall, very satisfied with refinancing in '25. Over the past year, we secured the extension of both the term loan and RCF with our bank syndicate before the summer and closed the USPP just last week. Importantly, our entire debt structure remains fully unsecured, preserving maximum financing flexibility. Okay. Last slide for me. Looking at our balance sheet KPIs, a familiar slide again. On the left side, you can see that our cost of debt has remained stable. As mentioned, it will tick up slightly in '26 due to the new private placement. But do remember, this was priced in a very different base rate environment than the Pricoa private placement that expires at the end of this week. LTV, really healthy, well within external covenant thresholds, but also even a bit still below our own internal guidance. And we did share in the press release that pro forma for the Hooghuisstraat asset that's transferred yesterday, our LTV is 32.2%. So well, it provides some room to invest. All the other numbers, I think, are looking healthy. ICR is looking healthy and also net debt-to-EBITDA improved further, supported by the lower net debt position. Okay. So this is it for me now. Back to Bernd for the outlook '26.
Bernd Stahli: Thank you, Elke. That's on Slide 31, the last slide of this presentation. You see the EPRA EPS guidance for 2026 of EUR 1.90 to EUR 2.05. That's middle of the range would be more or less a EUR 0.12 decline in earnings. That is entirely related due to the disposals that we did last year and the full year effect of Hooghuisstraat being sold earlier this month -- or actually yesterday. That underlying the business, actually, we are still getting like-for-like rental growth at the top line level. Obviously, an increase in vacancy diminishes the positive impact on that, but the indexation and like-for-like rental growth, they more or less offset themselves in 2026. If we look at the business more generally, we do see that the outlook for offices is improving. Liquidity is returning to the investment market and tenant demand is healthy for high-quality buildings in prime vibrant locations. People are willing to pay up for being in the best locations. We see more and more evidence of that. Over the years, we've moved to the right locations. And as we continue to invest and are able to provide the high-quality building that the market now wants, we should benefit. 2026 will see us further invest in the portfolio. Vitrum is a clear example. Glass House will be an upgrade and the rebrands of 2 further HNKs, they may be smaller investments, but we'll also make sure that these assets will continue to perform their best over the coming years. Offices are becoming more operational, hands-on assets. We know this. We're prepared for it, and we believe we're firmly on the right side of this transition, and that should ultimately drive future returns for our shareholders. We're optimistic about the outlook, but the vacancy is the key issue that we know we need to address this year, and it's something that the entire team is fully aware of and should be capable on delivering on. Finally, those of you who received the e-mail this morning will see that we've actually also put out a video of Elke, myself. I don't necessarily like to look at myself. But for those who haven't seen it yet, it's an interesting way to see how our communication is going to evolve as an extra add-on. There is an avatar video on the website. Have a look, give us feedback and let us know if you like this sort of thing. We're looking forward to doing more of this. AI is not going to go away. It will impact our business as well. It will impact our tenants. It's something that we're again fully aware of, and it means that we need to continue to deliver the product that the market wants. It will continue to evolve. With that, I would like to hand it back to Martijn for Q&A.
Martijn Massen: Yes. So as this was the last slide of the presentation, we will now be continuing with the Q&A.
Operator: [Operator Instructions]
Martijn Massen: Vincent should be -- Vincent Koppmair from Degroof Petercam should be in the call right now, but I don't think we can hear him.
Vincent Koppmair: Can you hear me?
Martijn Massen: Okay. There we are.
Vincent Koppmair: Apologies I didn't hear any sound effects. Congrats on the results. Apologies for the delay then. I just had maybe 2 quick questions. First of all, you've highlighted, of course, the EPS guidance and let's say, a bit wider range of the guidance. Could you give a little bit of color on what are the underlying assumptions that you're assuming for some of those guidance? And then my second question is, do you consider any further disposals in 2026, given your, let's say, maybe successful disposals at high valuations or above book value that you've done in the past month?
Bernd Stahli: Have more guidance. The range is wider than we normally do. What I indicated is that the middle of the range is EUR 1.98. And there you get basically with the disposals that we did in the back end of '25 and the last one in Eindhoven yesterday. The increase in vacancy as a result of our efforts in Leiden that we had as per the start of this year will have a negative impact on income. That should be more or less offset by this increase in occupancy that will happen in Vivaldi II during this year. Beyond that, obviously, you get some indexation. We've guided for that as well. So we are -- this is the early -- the first EPRA EPS guidance that we give. Hopefully, we can narrow the range in subsequent quarters to give you clarity as to where the number actually will ultimately come out. With respect to further disposals, possibly, yes. We'd rather just do them first and then explain to you why we did what we did. But there are a small number of assets that we are currently preparing for disposal that should not necessarily be the biggest assets, but assets that where we see longer term a trajectory that doesn't fit where we think the office market is going. So assets that may ultimately move to change of use where we don't see a role for ourselves in that change of use. I hope that answers your question.
Vincent Koppmair: It's, clear. I would have 1 follow-up question potentially if I may. The last question would be on the investment plan. So of course, you now have announced the figure and the yield on cost on Vitrum, that's EUR 80 million. But of course, you will also now have the renovation of Leiden and potentially Glass House. Where do you see basically your LTV landing over the next, let's say, 2 years, end of 2027, given the entire, let's say, CapEx plan?
Bernd Stahli: Starting at the pro forma number of EUR 32 million today, assume that we basically get our earnings and that we pay out the dividend and take into account an element of CapEx, then that, by and large, is a wash. The increase in LTV will indeed come from the CapEx of Vitrum, the CapEx -- the remaining CapEx on Alexander and the start of CapEx of Glass House will end up above EUR 35 million but will stay well below EUR 40 million.
Martijn Massen: Our next caller is [indiscernible] from ING.
Unknown Analyst: So I have 2 questions. So first on -- you mentioned that Well House remains challenging in the current market. You also talked about building costs and pre-leasing. Could you maybe elaborate on that, please?
Bernd Stahli: Well House is a wood hybrid structure that is going to be built upon an existing parking garage. That is complicated, expensive and actually takes a lot of time. The entire development period for this project is currently estimated somewhere between 34 and 40 months, where typically you would only probably need 2 years for a project that is basically ground up on a greenfield. Of that period, it's about 14 to 16 months that the excavation of the parking needs to take place. If you take into account that construction period, it means that all your costs capitalize over a period of time that your leasehold costs are quite extensive over that period of time when there is no income forthcoming. So it's actually the lead time before you actually have your building that is making it hard to make the economic stack up. What is a positive is that the rental assumptions are better today than they were 2 years ago, 2.5 years ago when we canceled project. But the rising construction costs that have happened since, partly offset this. The return that we need is slightly higher than average for the very simple reason that -- given the floor plates that this building will have, which is about 1,000 meters per floor, it's not the type of building that you would expect to pre-let where you get one anchor tenant taking 5,000 or 6,000 square meters for the very simple reason that people then want to like to have that space on maybe 1 or 2 floors, not on 6. This is a building that will be multi-tenanted and probably will only lease up towards completion. So we have full conviction of costs and timelines, but less clarity on revenues, and that's a trade-off that we need to square over the coming period to see whether or not we can justify the investment.
Unknown Analyst: Okay. Great. That's very clear. And then a second question on the Bioscience Park. Could you maybe elaborate on the negative sentiment shift? And how would that impact the re-leasing options for the assets and also potentially any impact on other assets you have in that park?
Bernd Stahli: Fair question. The life science cluster in Leiden that we have and the entire area is to a very large extent, driven by Johnson & Johnson as a major tenant in the entire area. Over the last couple of years, there have been some changes with respect to the available funding, venture capital, capital available for start-ups that has sort of become less prevalent as cost of capital generally across the board has gone up. And at the same time, what we also see is that the improvements in AI means that you need less lab space because more of the analysis can be done computer generated. And so the market is shifting. There is a little less confidence than there was 3 years ago about -- over the prospects of this industry. What we know is that it's a very cyclical industry, and we're now at the wrong part of that cycle. It will come back, but it's harder to judge when that will happen.
Unknown Analyst: Okay. Great. And maybe 1 last question, if I may, on Vivaldi II, is there any update on the leasing? Do you see also interest from larger tenants to lease more space?
Bernd Stahli: We got that building back in August. We've basically with our joint partner on this, established a new plan for the upgrade of the ground floor that basically should complete this month. We've had some leasing so far at rent levels above what we were sort of anticipating. But actually, the leasing should really sort of start to pick up from this month onwards. And we indicated at the time that we wanted to go back to a normal occupancy in 18 months. So basically, if we meet that target by the end of this year, we should be at close to 75%, 80%. That's -- if we get that, that we would be okay with. But we're not there yet.
Operator: [Operator Instructions]
Martijn Massen: Given that there are no further questions, I would like to thank everyone for listening and wish you a pleasant rest of your day. Thank you.