• Retail Property Portfolio: EUR3.9 billion, comprising 24 shopping centers.
• Like-for-Like Rental Growth: 3.5%, above the 10-year average of 2.8%.
• Net Property Income Uplift: 5.9% increase.
• Average Rental Uplift on Renewals and Relettings: 4.5% on 275 transactions.
• EPRA Vacancy Rate: Reduced to 1.4% by the end of December 2024.
• Occupancy Cost Ratio: 9.8% as of December 2024.
• Retail Sales Increase: 2.7% compared to 2023.
• Net Property Income: EUR197 million, a 5.9% increase.
• Loan-to-Value Ratio: Decreased to 41.3% from 42.5%.
• EPRA NTA per Share: Increased by 5.6% to EUR41.7.
• Dividend Proposal: EUR1.80 per share, a 5.9% increase from the previous year.
• Direct Investment Result: EUR127.9 million for 2024.
• EBITDA: EUR190 million, a 5% increase from the previous year.

• Warning! GuruFocus has detected 9 Warning Signs with FRA:N4SA.

Release Date: March 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Eurocommercial Properties NV (FRA:N4SA) achieved a like-for-like rental growth of 3.5% in 2024, surpassing their 10-year average of 2.8%.
• The company reported a 5.9% increase in net property income, driven by strong operational performance and cost savings.
• The remerchandising projects at Carosello in Italy and Woluwe in Belgium resulted in significant increases in turnover and footfall.
• The company maintained a low EPRA vacancy rate of 1.4% by the end of December 2024, indicating high occupancy levels.
• Eurocommercial Properties NV (FRA:N4SA) successfully executed a share buyback program to avoid dilution from stock dividends, purchasing 640,000 shares.

Negative Points

• The company's loan-to-value ratio, although improved, remains at 41.3%, indicating a significant level of debt.
• Interest coverage ratio decreased from 3.7% to 3.5% due to a EUR5 million increase in interest expenses.
• The company faces potential challenges from geopolitical tensions and macroeconomic uncertainties impacting future performance.
• In France, rental renewals showed a slight decrease, indicating potential challenges in the leasing market.
• Investment expenses doubled in 2024 due to aborted acquisition costs and other factors, impacting financial results.

Q & A Highlights

Q: Can you discuss Eurocommercial's capital allocation plans for the next two years, including CapEx, share buybacks, and potential disposals or acquisitions? A: Evert van Garderen, CEO, explained that capital allocation will focus on remerchandising projects in Italy and Sweden. The company is considering another share buyback to neutralize stock dividend dilution, depending on market conditions. They are open to disposals, particularly of non-core assets, to reinvest in core shopping centers.

Q: What are your expectations for financial costs in 2025? A: Roberto Fraticelli, CFO, stated that financial costs are expected to remain stable, assuming no significant changes in interest rates. The company will continue its hedging strategy to manage interest expenses.

Q: Can you provide insights into the strong organic performance in Italy, particularly regarding rental uplifts and future expectations? A: Roberto Fraticelli highlighted that Italy's strong performance is due to successful remerchandising projects. Carosello, for example, saw rental uplifts above 20%. The company expects continued strong contributions from upcoming projects in Italy.

Q: What are the typical lease incentives offered to tenants, and how have they evolved since the pandemic? A: Evert van Garderen noted that lease incentives often include contributions to tenant fit-out costs and step rents. These incentives have not changed significantly but are more prevalent in remerchandising projects where tenants invest heavily in store upgrades.

Q: How do you view the potential for further rental reversion in Woluwe following the remerchandising? A: Evert van Garderen stated that while there is potential for further rental reversion, it will depend on specific units and tenant sectors. Some units may not achieve current rent levels, but overall, the mall's success should support positive leasing outcomes.

Q: What are your expectations for indexation in 2025 across your markets? A: Evert van Garderen provided indexation expectations: Italy at 1%, Sweden at 1.6%, France at just under 3%, and Belgium at around 2%.

Q: Can you elaborate on the risk of tenant bankruptcies and the impact on your portfolio? A: Evert van Garderen acknowledged a slight increase in tenants under administration but noted that it is not a significant concern. In many cases, rent is still collected, or units are taken over by stronger brands.

Q: What is the outlook for occupancy cost ratios (OCRs), particularly in Italy? A: Roberto Fraticelli explained that while OCRs have ticked up slightly, they remain low, especially in Italy. The company expects OCRs to remain stable, with potential for rent increases as tenant sales improve.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.