Warehouses De Pauw

Good morning, everybody. Welcome to our H1 update.

I'm very pleased to report that WDP delivers once again on its promises, a clean sheet across the board, an EPS of EUR 0.75, plus 6% year-on-year, fully in line with expectations. And the full year guidance of EUR 1.53 can also be confirmed.

All of this supported by a strong balance sheet with liquidity and auto financing in place. We continue to demonstrate the strength of our commercial platform.

300,000 square meters of new leases signed across existing portfolio, ongoing pipeline and new developments and occupancy of 97.3%, even slightly above expectations with all maturities in '25 resolved, 90% renewed and 10% re-leased or in current vacancy rate. So '25 is done.

And above that, an investment activity of EUR 440 million, bringing the total investment pipeline in execution to EUR 800 million at an NOI yield of 6.7% and 85% pre-leased. So now we have all the building blocks in place to realize BLEND27 and confirm our '27 guidance of EUR 1.7.

Now we have to build the house with the blocks we have. And this means executing and letting.

And even more important, for those who doubt, let us be clear, BLEND27 is not the end. It's not the finish.

Our ambitions to create profitable growth with strong total return goes far beyond '27 based on the following foundations: a solid long-term fundamental -- solid long-term fundamentals of the logistics real estate sector and internal value creation, especially to the in blend extracting value out of the portfolio, the land bank, rent reversion, indexation and so on. But yes, the one million dollar question, is demand still there?

And we can confirm absolutely. 300,000 square meters of new leases, a balanced 150,000 per quarter.

This proves that there is still demand and more importantly WDP can capture this across all the segments and the countries in the existing portfolio, in the pipeline in execution and in new developments. This in a stabilizing European market with today, of course, still lower than normal activity due to clients postponing decisions.

But the good thing is that the European economy is ready to recover and just wait for more clarity on the geopolitical and macroeconomical environment. As an example, for the first time since quite a long, we see some big new tenders again.

And yes, we have also new positive strategic talks with our big clients about their future needs and strategies. The question is, of course, when will they be concluded.

But those signs, they are the early birds we like to see. Let's hope that we get clarity on the tariffs soon.

But in any way, we are ready to capture that demand. So Alexander, it's now time for Q&A.

[Operator Instructions] We have a first question in line coming from Marios Pasou from Bernstein.

Thank you for the additional comments as well regarding the occupier demand. So taking those comments and also the comments in the release itself, you mentioned current soft demand, cautious decision-making.

It feels incrementally weaker compared to your comments for the first quarter. Are you seeing a step change in your discussions with occupiers?

And then secondly, your retention rate back in line with prior averages for 2025. Can you maybe comment on how discussions are progressing for 2026?

And maybe any risks to maintaining that retention that we should be aware of?

Let's say, on the retention, so there we are up to the normal level again. And we just finalized '25, but it's too early to say something about '26 because, let's say, those discussions just start now.

And you can look 6 months ahead. And now everybody finalized '25, and we are just starting discussions with our clients about '26.

So -- but there are no signs that, let's say, that fundamentally, there are changing things, but it's too early to say something about that. And indeed, about the demand and the difference between Q1 and Q2, I think there, we are not more cautious.

There we said, yes, there was a little bit less activity in Q2. But let's say, we were able as WDP to get the same result as in Q1.

But the difference is that we see, let's say, in the future, we have, again, positive talks with our clients about new consolidations, new opportunities. But of course, everybody waits for the recovery of the European economy.

And indeed, their clarity on the tariffs would help that recovery. But let's say, if you compare it to last year, then indeed now everybody is -- there is again positivity in Germany, in France, you feel that European spirit again.

But yes, I think there some clarity on the tariffs would help us. And there we wait for the recovery of the European economy.

The next question is coming from Vivien from Degroof Petercam.

A couple of questions, if I may ask them one by one. Just coming back on the demand, I do understand your comment on demand and the 300,000 square meter, but there was quite some driven by Romania.

Can you maybe just give a bit of color on your view on the different trends between what you see in Romania versus what you see in Western Europe because in that polarization is increasing. So I just wanted to get your view there.

Let's say, indeed, the spread is very well across -- let's say, it is really about everything in all the countries in the existing portfolio, in the development pipeline in new developments. But yes, let's say, and that was indeed one of the reasons where we went to Romania more than 15 years ago, there is always a complementarity between regions.

And yes, there is a complementarity between the regions and Romania is still more in a growing mode. So there, you see some more new developments.

And here, you see then rents in the existing portfolio and in the projects in execution. But let's say, in general, it is well spread over all the countries and all the segments.

Segments meaning clients and how big they are. So it's well spread, and there is no real one element jumping out of that portfolio.

And let's say -- so no, well spread, but indeed, the European -- the Romanian economy is in, let's say, a different mode and in a different phase of its growth.

Clear. Then moving to the occupancy rate.

So indeed, a bit better than what you guided, so slightly above. I also see that you commented that all the leases that were to mature in 2025 were either renewed, relet or part of the lower occupancy rate.

Does that mean that you are still confident about improving this ratio by year-end? I think that your guidance assume 97%, but it seems that there is some potential to beat expectation there.

Yes. But let's say, there perhaps indeed the 97% what we mentioned before.

But indeed, today, let's say, without, of course, a client going bankrupt or any accident, let's say, there everything is included and the occupancy should stay where she is now.

And it's difficult. We can outperform, but the thing is that we say that there is still unclarity about the direction of the European economy.

But therefore, in the short term, we say this is now a floor at 97%, and we feel comfortable in releasing by -- within the next 18 months to be income generating again by '27. And that's the big scheme of things to achieve the EUR 1.70, and that's we feel confident in.

All right. One final question, I leave the floor to the others.

Just on your ambition for Germany, I think that with now a team in place, just wanted to get your view, is this -- I would say, the acquisition of a core platform no longer the preferred route? Is there yields too low for that one?

And therefore, you're shifting into sourcing like core plus value-add and development. Can you comment maybe on your ambition in Germany because I think that was quite interesting that you have put a team now there.

I think our strategy in Germany is no different than in the other countries. Other country managers, let's say, starts at 1st of September, and he has also a specific development knowledge.

So -- and let's say, we are looking to Germany like the other countries. And indeed, we want to create value.

And then, let's say, buying at 5 or 5.3, let's say, that is not generating value. So that we don't need.

So we have that now with the team, and then we will look indeed value add or with add-on potential or new developments. But let's say, we have time and we want to do it in a value-creative way.

The next question is from John from Vanlanschot Kempen.

Just on the -- you mentioned that you're seeing clients back at the table to talk about strategic investments. So what exactly has changed in their minds?

And just how often do they actually talk about tariffs in your discussions? Or is it more about the path to economic recovery?

It's more -- let's say, it's more about economic recovery than tariffs, certainly most of our clients and most of the activities in our portfolio in our, let's say, warehouses is for the European economy and the European distribution more than just the transnational and the transatlantic business. But indeed, let's say, tariffs would, let's say, will give some confidence that -- and some confidence that economy can grow, but it is more, let's say, it is about the recovery of the economy and they are preparing the future.

While, let's say, a year ago, everybody was looking and thinking, okay, how will I get, let's say, through the end of the cycle. And now people are preparing the future, saying, okay, this is how we now see our growth.

We want to grow there on specific locations. And let's say, they are looking and talking with us where we can help them.

So they are also preparing the future, which was not the case, let's say, during 1 year and which is now recently from, I would say, from June, like on the big logistics conference in Munich in June, their clients starts to talk about the future and the possibilities how we can cooperate together.

Okay. That's clear.

Could you also maybe provide some color on what square meter size now we're talking about for these discussions? And what type of customers are essentially you're talking about?

There we are, let's say, talking more today to the 3PLs who are, let's say, where for them, it is also a core business. And on the end users, they are doing first business and then looking for warehouses.

This is now, let's say, here we talk -- if we speak about those talks, then it is with the big 3PLs who are preparing the future. And the sizes are, let's say, again, the normal sizes, not only, let's say, I would say, in the 10,000 to 20,000 square meter area, but more around the -- depending on the countries, of course, Belgium is almost there with France.

And if you say 50,000 in Belgium, then it is probably even the double in France. But let's say, also again, about the bigger number of square meters, let's say, give or take 50,000 square meters.

I will first cover a few questions from the live chat coming from Frederic Renard from Kepler. Frederic, some of them are already covered on tariffs versus European economy.

Just to follow up on his question is reading the press release, it seems that your comment was softer than Q1. Do you still call the H1 as a trough in terms of tenant demand?

Or would you revise that comment right now? Appreciating that, of course, there is no crystal ball.

Yes. I think, let's say, it's not more -- the question was?

We are trough in terms of tenant...

I think we are still at the trough, but at that lower level, I think is stabilizing. We are not more negative than Q1.

I would say, forward-looking even more positive. But indeed, we are stabilizing and let's say, we did not -- that's the economy stayed in wait notice.

So we stay, let's say, at the bottom. But for me, the message was, let's say, and the idea is to give the same -- to say that Q2 was, let's say, the same as Q1, but indeed still at the bottom and indeed now waiting for a recovery.

But even, let's say, in a quarter where there was even a little bit less activity, we could be important there was that we could capture the same amount of square meters, and we could realize the same activity, which is also very important.

And he has another follow-up question on tenant demand in terms of we have seen Amazon being more active in the U.K. Anything specific on online players in Europe that you might have seen recently?

I think in general, it's the same. Yes, we also have Amazon signed also a smaller unit in Belgium as a subtenant in one of our existing buildings in Q2.

There is also -- so indeed, there are small things, but I would say it's in the same line than the 3PLs. It's not that there is a difference in e-commerce versus other, let's say, physical retailers.

But they are also -- they stay active.

Then we have a next live question in the queue from Pierre-Emmanuel from Jefferies.

Can you hear me well?

Yes.

So very quick one to start with. So what has been the reversion achieved in H1?

It was 10% on the new leases. So all new leases within 300,000 square meters have been signed at ERV and that's a combination of rents in the existing pipeline, rents -- new rentals in the -- on the land bank and then the rentals in the existing portfolio.

So everything at ERV and where you have a real comparison with before, of course, is with plus 10% for the new leases signed for the vacant ERVs.

On acquisition, so it was reported that you have been shortlisted to acquire the Nest logistics portfolio from the French developer RSM for EUR 330 million and you offered shares to finance the deal. So if you can give us more color on this deal and what proportion of shares have been offered to RSM, it would be useful.

As mentioned earlier, we have to sign NDAs. And I think some parties don't have to sign that because they say all kind of things in journals, but we have to sign NDAs on all files where we are looking at so I cannot comment on any -- on this or any other specific deal.

But in general, I can confirm that today, WDP is not looking into detail or negotiating any detail in all of our markets of, let's say, the amounts you mentioned. So those kind of files, we are not negotiating for the moment.

That's a clear answer.

Okay. And a follow-up question on your capital allocation.

So your LTV is slightly above your target. You have a pipeline to finance, and you are still willing to be dynamic to remain dynamic on acquisitions.

So how should we see the debt evolving towards the end of the year and in 2026? And do you think that the current share price is a decent level to raise equity today or not?

First of all, on your target LTV. So our overarching metric is net debt to EBITDA, which we target around 8x.

That's the most important metric. And on the LTV, we say it should be structurally whatever happens at all times below 50%, which then in reality translates to that you operate as a company between 35% and 45%.

We have said that we have guided for that, that in the execution of the growth plan, it would be broadly capital structure neutral EBITDA with EUR 1 billion investments at the start of the year with -- again, EUR 600 million of equity coming in and EUR 400 million of debt, a bit more debt loaded in the beginning and then equity loaded in the second part. Where will LTV move from here?

Well, actually, the good thing is when you take big picture, the numbers from the investment pipeline, that's EUR 800 million investment pipeline. Costs to come of EUR 650 million.

I deduct the battery project, which is only CapEx in '28, then you end up around EUR 600 million of CapEx to be spent in the course of the growth plan from now till end '27. And in that exact same period, we will have the EUR 600 million of retained earnings and scrip dividend coming in, which is then fully equity funded for -- apart from quarterly differences, of course.

But the remainder of the growth plan, that EUR 600 million CapEx to finalize is again, is fully equity funded. And that alone will bring down our LTV by the end of '27 automatically from 7.7x now to 7x and our LTV below 40% and it will then be at the end of this year, LTV should be around 40% and net debt to EBITDA around 7.5x.

So that's a bit on where we are headed for. But what is the underlying message is that do not underestimate the size of the balance sheet and the strength of the cash flow because if we each year have EUR 200 million of retained earnings and scrip dividends coming in, plus each year, a couple of smaller contributions in bank like we do already for more than a decade each year, then each year, we have an investment capacity of EUR 500 million without impacting our capital structure.

So I think that's a clear answer on the potential. And then there was one last part of the question.

Can you repeat that?

Yes. So it was about the level of the current share price.

Does it make sense today for you to raise equity if there is a very nice opportunity arising in the market?

Well, I can -- you know that we are always very much focused on good, strong fundamental total returns on each project, generating strong risk-adjusted return and on aggregate, generating earnings per share growth. So we are very conscious of at each moment in the cycle of our cost of capital and our marginal cost of capital, debt and equity combined is now between 5.5% to 6%.

So then you know the minimum NOI we need to generate to achieve earnings per share growth. We will report our cost of capital and the capital discipline in allocating.

The next question in line is coming from Steven from ABN.

I have 3 questions on the future investments and developments. So first, to start on the rent potential bridge, do you expect the rent potential to grow materially in H2 or remain flat like this quarter?

So can we take one by one.

Sorry, we'll do one by one.

Your exact question is, will we improve the rent potential in H2?

Yes, indeed.

This is depending on new developments, of course, but that's too early to comment on. It's a dynamic figure, and we update it each quarter and our goal is to continuously replenish what we finalize, and we have also capacity -- balance sheet capacity to grow further.

Okay. And maybe also a second one on the bridge.

You added the letting activity potential in the long-term potential. What do you mean exactly with that, so on the right?

Yes. We added that because before, our occupancy rate was at around 99% in the past and now the rental bridge, the big like it's on the slide, the orange blocks are calculated from the starting basis from the contractual rent, which is there.

And then so including -- so after deducting, of course, the vacancy and we added that as the potential also that there is also potential now in the portfolio to relet existing vacant space, and that is a theoretical full potential of the portfolio, nothing specifically behind it. It to be mathematically correct.

And of course, there is a certain relating assumption in the '27 guidance, which is bringing the occupancy back again where it was at the start of the growth plan.

Okay. Clear.

And the last one, do you have any update on the permit in Dunkerque?

No, not specifically. Still wait.

We still have to wait and it takes a long time. No specific updates.

Then the next question in line is coming from Suraj from Green Street.

I appreciate your comments on Germany, but you're 1.5 years on from communicating your BLEND 2027 program and your desire to allocate capital towards France and Germany. I understand the dynamics have been different between the 2 leading to acquisitions in France or more acquisitions in France rather.

But would you say your hurdle rate has increased for German acquisitions? Or would you say you're less constructive on German fundamentals as a whole?

Because I would have thought that the industrial economy is seeing tailwinds given the lifting of the debt break and result an increase in defense and infrastructure spending. Keen to hear your thoughts a bit about the dynamics there, especially between the 2 countries.

Let's say, in a perfect world, we should have invested in both markets, a portfolio up to EUR 500 million, but it went more in France and less in Germany, but that was not intended. It is just because, let's say, the market in France was faster, open and liquid at the right prices and Germany was longer, closed and their prices stays very high.

Indeed, I think there is, again, a positivism about Germany and let's say, with the basis we have there, we hope we can participate to that, but it needs to be in a value-accretive way. And we will not buy even when, let's say, the economy or the atmosphere about Germany is more positive than 1 year ago.

This does not mean that we will buy a 5% yield. So it's all about value creation.

And yes, so we take the opportunity where it comes. But for us, it are the same markets with the same priority.

Then we have a next question in line coming from Ana from Morgan Stanley.

Maybe something a little bit more specific on Germany, even if you have already commented a lot about what's going on there. But recently, in the PMIs, we've seen that manufacturing employment has gone up significantly.

And we are hearing companies willing to expand their production capacity in the country. This Made for Germany initiative announced earlier this week.

Is that something that you are seeing? And is that something that is reflected already in tenant demand or you are not getting any impact from this yet?

I think the, let's say, the more positive is the higher production in Germany, let's say, therefore, they use, let's say, the idle space in production that was there, there was idle space in production. And if you hire your production, you don't need, let's say, directly more warehouses.

It's about the production. It's about throughput in the factory, and there is no impact yet on, let's say, real new demand.

It's -- for the moment, it's about throughput in factories. But it is positive in general for the European industry and the German engine, let's say, starts turning again, that's positive for European subcontractors for European.

So that will help later on and it will help the European industry. And so then as a second derivative also the European economy.

Now we have a few more questions in the live chat. Many of them have been covered.

So I'm just going to focus on those that are not covered just yet. So a question coming from Ashitha from Deutsche Bank.

So we commented already on the rental uplifts over the first half, which was plus 10% on re-leasing in the existing portfolio and for new developments or in the ongoing development pipeline that was at ERV. A follow-up question on that was, do we see any softness in the re-leasing rent uplifts going ahead from here on?

No, it's -- everything is at ERV. That's the discussion is not about the price, the discussion is about when does the client sign.

And if we can, in this volatile and uncertain climate, still postpone a decision, then we will do it. It's about really converting the clients and getting the signature.

Then another question coming from Frederic from Kepler on the like-for-like, the change from Q1 to Q2, is that purely driven by occupancy rate? And is there any revised guidance on that?

Yes, it's a bit of technical comment, so I'll try to make it clear. So the big picture for the year is that for the full year, we guide for a like-for-like growth of 2%.

And there, the building blocks are unchanged versus the start of the year. It is 2.6% indexation, 40 bps coming from the rent reversions we signed last year and then that 3%, minus around 1% for the average drop in occupancy from -- which is consistent with the guidance on occupancy rate, we're making a trough at 97%.

So on average, 1% lower, which translates into 2% for the full year. And that is still intact.

What you're seeing the difference between like-for-like Q1, which was then a bit softer than Q2, which was a bit better. These are really temporary differences between the quarters in terms of frictional vacancy relating to tenant movement.

So yes, it was -- it needed to be allocated, Frederic, to the movements in occupancy. But on average, we will generate like-for-like growth this year of 2%.

Then we have one more question on the marginal cost of financing, which is currently at 2.3% and a 5-year debt maturity. What would be the incremental cost of debt if you were to take new financing?

Well, for a 5-year loan or bond, it would be around 3.25%, let's say, 3.25% or a bit higher.

And there is one more question from Wim from KBC Securities on the pre-letting in the development pipeline. Is that -- does that have anything to do with the brownfields in the pipeline?

Not specifically, Wim. Let's say, the pipeline in execution is a combination of greenfield and brownfield, and there is no difference in pre-letting if it is a brownfield or a greenfield.

Let's say, it's just about the location and the moment when the building is ready, but not about if it's green or brownfield.

Yes. The difference is that the pre-lettings were in the buildings which are already there or in finalization and they were less during the course of the development.

That's the big difference.

There are currently no other questions in line. So with that said, I will give the word back to you, Joost.

Thank you. And let's say, as concluding remarks, I just want, let's say, to repeat our forward-looking long-term strategic pitch.

Yes, we are fully on track to create a EUR 10 billion plus logistic real estate developer and investor in Western Europe with an add-on in complementary Romania, which is, like we said before, it is good for investors, the big safe liquid play in Western Europe and good for our clients where we were able to offer more cross-border solutions. And it's like we mentioned more than once in this call, it's not about growth, but it's about profitable growth.

And yes, we can grow organically, but we want to do it in a profitable way. And today, you have still a very interesting entrance point of a 7.5% earnings yield with a foreseen 15% growth in EPS.

And all of this is indeed only possible, thanks to the long-term good fundamentals of the logistics real estate sector, which we always and also wanted to stress in this call. And yes, there is a limited cyclicality in our business as usual, but we can handle that.

And we have shown again that we can do that. But in the meantime and in all the discussions on the geopolitical level, the importance of the worldwide supply chain infrastructure came above every day again.

So supply chain is key and will stay key, future-proof within the continentalization and important there even beyond '27. And we go further and we can create value further than '27.

Thank you. Enjoy your summer.

And if you still have any question afterwards, Alexander is still available to answer all your questions. Thank you, and enjoy the summer.

Thank you.

Bye-bye.