Wereldhave N.V.

Good morning, everyone. This is Ruud Van Maanen of Wereldhave.

Welcome for those of you that are here present in the room or on the telephone line or available through the webcast. Today, Wereldhave presents its strategy update and its full year 2019 results.

This procedure is as follows: Give the presentation, first, we will start with a strategy update, presented by our CEO, Matthijs Storm; immediately followed by the second part, which is the full year 2019 results, presented by Dennis de Vreede. And thereafter, there will be an option for Q&A, and we will provide you with the instructions at that moment in time.

Matthijs, please go ahead.

Yes. Thank you, Ruud, and an honor for me to present to you today.

Before we go into the slides, a short piece for myself. Retail experienced about 20, 30 years of a golden age, in my view, where our rents grew strongly, where we've noticed significant yield compression.

And in our view, these times are over. The retail industry needs to be prepared for more active management, spending more CapEx, and probably most importantly, making clear choices and broadening the relationship with our tenants.

But also if you think about it, retail will become like any other sector. These are things that we know from other property types or other property sectors, so it's also not new, but we have to adjust to this new reality.

We also believe that the sector will polarize further. And that's why taking the right decisions will clearly separate the winners from the losers.

With the plan that we will be presenting today, we decided to act and move forward. We will transform the company, the portfolio and the assets.

And our conclusion is that we have a right to win in the Benelux. We have a strong market position, and we also have excellent teams.

And I think when Dennis later will go through the 2019 results, you will also notice that, particularly from an operational perspective, the results were actually quite good. I think the 95% occupancy rate that we have reported is underpinning that.

In addition to that, we still need to transform. And this all comes together in our strategic plan to transform our assets into what we call Full Service Centers.

And the plan itself, we call LifeCentral, and this is a term that we will refer to more frequently in this presentation but also in the future. It's the name for our transformation plan.

Why Full Service Centers? Because we believe the successful shopping center of the future is not just about shopping.

In our new strategy, we deal with the oversupplied retail markets and very important, we restore the retail balance. I'll get back to that later.

We create relevant and exciting centers that are of optimal use of everyday life of the consumer. And in reality, this means we will be transforming 25%, on average, of traditional retail space and other users.

The plan comes with certain consequences, of course. We need to invest.

And in order to fund this, we focus on phasing out our French operations as well as divest assets that we cannot transform into full-service centers or assets that do not meet our IRR criteria. We've gone through our portfolio asset-by-asset.

And again, if we cannot transform an asset or if the IRR threshold is not met, we will sell those assets. By executing this plan, Wereldhave will become the leader in the Benelux on Full Service Centers.

And by being the first mover on this, I think we have all the advantages. With that, I'd like to move on to the presentation to Slide number 2, the first transformation strategy in European retail real estate.

There's 3 main items to mention. We will actively transform our assets into full-service centers.

I think we're the first European retail real estate company to transform. Of course, you've seen bits and pieces of alternative users already in different shopping centers.

But I think for the first to present a very comprehensive, quantified and actionable plan, again, which we call LifeCentral. We will restore the retail balance in some shopping centers.

Some of our centers are oversized convenience centers, for example. We admit that in some cases, we have too much retail in a certain location, and we will fix that.

That's restoring the retail balance. Next to that, we will add new functions and users.

Strengthening the balance sheet. We communicate today target LTV, loan-to-value, of 30% to 40% going forward.

Dennis will mention in his financial results presentation, our loan-to-value is 44.8% as per December 31, 2019. So we need to act, and this is something we will do.

We will phase out France. Phase out means that we will do it in steps.

There is no rush or need to go in quick steps, but we will phase out France. And we'll get back to that.

In addition to that, and I've already mentioned that, certain assets will be sold that we cannot transform into Full Service Centers or they do not meet the IRR criteria. Lastly, we are building on very strong local teams in the Benelux.

I've already mentioned the decent operational results that we achieved in 2019 in these 2 countries. But in addition to that, that's also the foundation and the basis for Full Service Centers because in shopping centers, but also in full-service centers, one of the most important things is that you have in-house, on the ground, strong management platforms.

And that's actually also one of the key findings from my first 90 or 100 days when people ask me. We have strong local teams in place, which is encouraging, I think.

If we flip on to Slide number 3, I think some of you might wonder why Wereldhave? And why Wereldhave is transforming shopping centers into Full Service Centers and not somebody else?

And I think there are 4 key reasons why that is the case. First of all, if you analyze our locations, in the Netherlands and in Belgium, purely the quality of the location.

And again, we'll get back to that. But you'll find that we're typically in attractive, densely populated, well-connected locations.

And I think that's the basis. That's the foundation also for different users.

It means that you can do more than just retail. Again, in some cases, we have the wrong asset in that location, for example, an oversized convenience shopping center, true.

We need to act on it, but the location is strong. Second of all, we have rental levels that allow us to convert to different users, while still deploying an economically sensible business model.

Our average rent in the portfolio is €188 per square meter, that's the lowest amongst all the European retail peers. There are some companies at €400-plus.

Of course, there's a lot of ifs and buts and comes about this, but it does tell you the story that we are in a good position to transform our assets while still making money. Thirdly, skill and scale.

The size of our portfolio also allows us to make this transformation. And in addition to that, the local market knowledge that we have in the Benelux as well.

Lastly, we are moving, and this is important, to a total return strategy. It's not only about earnings and dividends in 2020, it's about the longer term.

If you want to transform, if you want to adapt to the new reality, you have to look at also from an investment point of view at 2021 and '22 and so on. That's a long-term strategy.

That's about long-term value creation. That's about both income and capital value return.

Likewise, we have, from now on, a total return strategy. On Slide number 4, we are mentioning that we're also dealing with some of the market concerns.

We have been, over the past month, in quite extensive outside-in road show. We've asked many of you questions about Wereldhave, about the markets, about opportunities and also about risks.

And these are the main outcomes. Clear positioning.

One of the investors asked us, "What is your raison detre?" , in French.

Very good question. And I think as of today, we have a clear answer on that.

Our ambition is to become the market leader in Full Service Centers in the Benelux. Second of all, dividends.

Not sustainable, true. €2.52 in 2019, is not sustainable.

We expect the dividend to trough as well as earnings in 2022, followed by growth. In addition to that, the payout of the dividend, 75% to 85% of EPRA earnings per share is maintained.

So this is unchanged. Of course, we also look at underlying AFFO if this previous payout and ratio does match our underlying AFFO, so there's no reason to change it.

Of course, because earnings will fall in the coming years, the dividend will fall at the same path. Thirdly, high leverage.

Our LTV post December 31 revaluation is 44.8%. That's too high.

We aim for 30% to 40%. However, and we clearly state that here, that we are not planning an equity or a rights issue.

Disposals will allow us to delever. We've already sold our first assets a book value in the Netherlands, and there's more to follow, with about €100 million-plus in different stages of negotiations.

We are writing this down because we're confident that disposals will materialize. Likewise, there's no equity issue needed.

France, we're phasing out France. I think I've mentioned that, and the other point, stuck in the middle, make you stop and not walk and also the too much orientation on EPRA EPS.

I think I touched those points. Slide number 5.

We hit the ground running. Three main items.

We're executing already on the transformation of assets. We've launched the LifeCentral program.

And in addition to that, we have started the transformation of Belle-Ile in Liege in Belgium and shopping center, the Vier Meren in Hoofddorp in the Greater Amsterdam area, to Full Service Centers. Strengthening the balance sheets.

I've already mentioned this. We sold 1 Dutch assets at €26 million.

This is an asset at a till of our portfolio. It's a co-owned shopping center in Eindhoven with more than 40 different owners, very complicated.

We acknowledge that we take very serious hits in terms of book values in the Netherlands in 2019. We think it's encouraging that we can sell these assets at this price.

In addition, the €100 million-plus disposals in different stages of negotiation. And also very encouraging, we signed a partnership with Amvest, which is very well-known and also very large Dutch housing developer and investor.

And together with Amvest, we will unlock the residential value that we have in our portfolio. We're exploring this already for a couple of months with, together with Amvest.

We are not giving too many details today. We will do that going forward.

At the end of the day, we did zoning and approval from municipalities to build housing. So that's why in the transformation, in the plan and also in the numbers that we present today, there is no upside included from this partnership.

Any upside that materializes will come on top of reported and expected returns. Thirdly, building capabilities.

We've already launched our first app, which is called flow, to better serve the communication with our tenants. And we've launched internally a new customer experience team and a new digital transformation team.

With that, I'd like to move on to the 3 main parts of my presentation, the Wereldhave strategy, the implications of that strategy and also the execution. So if we move on to Slide number 8, our strategy in a nutshell.

There's 3 steps that we are going to take. Of course, first, we're going to transform our assets, LifeCentral program, deliver a track record, first with Belle-Ile and Vier Meren.

Also from a sustainability perspective, important, completed 2 degrees roadmaps with the aim to operate at net zero carbon by 2030. Secondly, expand, acquire under-managed assets, of course, assets that fit our criteria of being able to convert to a Full Service Center, but also the return criteria.

What's also important to mention is that we will only acquire if the expected IRR on the asset exceeds our public market implied cost of capital. We think it's important to state this.

What I also want to note here is that in Belgium, we have a different cost of capital than in the Netherlands because we have a separate listing. And we will also take this into account when we look at potential acquisitions.

The third step, scale. If we want to be the market leader in Full Service Centers in the Benelux, we also need certain scale to leverage the potential synergies.

If we then move on to Slide number 10. Our mission: Help consumers fulfill every life, everyday life needs.

It's a framework, and it's the philosophy of adding mixed-use to a shopping center. We see in the market that some of the other participants are also adding a dentist or a cinema to a shopping center, but we think it's important to have a framework and the philosophy, and it's based on the 4 key customer needs: fixing the basic, self-expression, enjoying life and well-being.

This is how we look at each individual shopping center. Close your eyes for what you have today, but look at how it should look like in 2025.

And this research is based on about 4,000 occasions of everyday life related to our centers, which is quite extensive research. What we see is there's a shift from self-expression to enjoying life and well-being, and this is the opportunity.

I'll get back to that, what that means for our centers. In simple words, by better balancing these 4 customer needs, we create more alibis for people to come to our centers.

And I think that's one of the most important things. Moving on to Slide number 10.

Showing you that at the heart is our Full Service Center. Around it, you will see the 4 customer needs.

But here you'll see already more concrete examples what that means. You also see that we're not just looking at our own assets, but we'll also look at the entire area.

This is a more holistic view. Slide number 11 is, I think, a very practical example of how a Full Service Center should look like?

What it should look like? On the left-hand side in the chart, you see a traditional shopping center.

This is hypothetical, that's important to mention but I think it's also a good example. And on the right-hand side, you see a full-service center with a much better balance of different users.

What I think is interesting is also this part that we right-size. I've mentioned this already previously.

In some cases, we will re-zone part of the shopping center to build, for example, offices or residential or any other potential alternative use. If we move on to the next slide, in words, not in pictures.

What is a Full Service Center? In a Full Service Center, we balance the 4 customer needs.

It's in a densely populated location with decent accessibility. We will add digital services for our tenants and customers.

I've already mentioned to be able to have a flow app, but there's more to come. And we will develop concepts and partnerships.

The partnership with Amvest is the first, a concrete example. But in addition to that, we will also launch concepts, and this is the task of the customer experience team for food and beverage, for entertainment, for health care, not just adding a couple of F&B tenants to the center, but we will start developing, and we have started that already our own F&B concept, our own health care concept.

So we have good reasons to tempt these tenants to come to our centers. Moving on to Slide number 13.

The capabilities that we need in-house, consumer understanding, asset development, concepts and partnerships, marketing and data management. I will not go into too much detail for now, but we thought it would be important to mention.

Then we'll move on to Slide number 14. Step number 2, as you can see in the top right of the strategy expands.

What are the criteria when you're going to buy assets in the Benelux size? There's a sweet spot between 15,000 to 50,000 square meters.

The criteria for the area, for the location, I've already mentioned. Also important to mention is the IRR.

We have a hurdle of 6% unlevered IRR. Keep this in mind because we'll get back to that.

Slide number 15 is the last step in the strategy. We want to achieve scale in the Benelux.

I think this slide also shows you why we're taking steps in France. On the left-hand side, you see that in the Netherlands and Belgium, we're at 7%, 11% market share, but the ambition to grow, but you also see that in the French market, we currently have 1% market share.

Scale is one of the key reasons why we're leaving this country. Operational cost, same picture, pretty efficient in the Netherlands and in Belgium, but less efficient in the French market.

And we think there's more upside from operational synergies to be achieved when we are able to create more scale in the Benelux. Last, but not least, if we look at our 3 markets, the Netherlands, Belgium and France, what you'll see is that in the Netherlands and in Belgium, these markets are less of a shopping center market.

In many cases, we're not competing with other shopping centers, but we are competing with high streets, with inner-city centers. And that's better and easier competition for us because in those locations, it's very difficult to manage, it's difficult to transform, it's very difficult to right-size, as many of you know, in the high streets of various Dutch and Belgian cities.

In France, that's a completely different picture. There, we are competing with a lot of professional shopping center owners in our catchment.

Call it, the Champions League, maybe in Europe, of shopping centers. And I think that's also another good reason to focus on the Benelux, where I think we clearly have the right to win.

Let me move on to Slide number 17, the implications from the strategy. A lot of information on this Slide number 17, and I can imagine, you cannot read all of this, but we wanted to show this why we took 6, 7 months to go through our whole analysis.

We've done a lot of research. Also, for example, in terms of new space, and we can have the ambition in a certain location to add co-working or a medical center.

But is there demand? What are the rental levels?

So how much CapEx do you spend? We've investigated all of this.

This is why we have a clear, actionable and quantified plan today. Next to that, based on top-down trends, but also based on the local situation, we've done what we call a red flag analysis.

What percentage of your shopping center would be vacant if you do nothing and the trends that we forecast materialize? Some shopping centers came out with 50% red flags.

It can be quite serious. But this is the reality, and this is why we're acting on it.

In the third step, we produced a blueprint for each individual asset. Again, the blueprint is based on the 4 customer needs that I mentioned.

And last, but not least, we put all this information into a spreadsheet and calculated, in a consistent way, for each individual asset, a one-dimensional, consistent framework, what's the unlevered IRR. Sometimes, it's a fantastic opportunity to convert into a full-service center, but if the IRR is 4%, then we're not going to do it and then we'll sell it.

Moving on to Slide number 18. There, you'll see the outcome for the Dutch portfolio.

On the left-hand side, you'll see the bars: The current situation, our portfolio, retail, a little bit of mixed-use and some vacancy. In the middle bar, you'll see what would happen without LifeCentral.

I've already mentioned that. There would be vacancy in the portfolio.

And on the right-hand side of the bar, you can see what mixed-use is going to add to the portfolio. It's about 20%.

And about 4% of the portfolio will be right-sized. I've already mentioned those examples, I think.

Important to mention fashion. I think the category that's most under pressure today, will decrease from 23% to 17% in the Dutch portfolio.

If you compare this to our peers, it's a very low percentage. Will fashion go to 0?

No, not at all. Why not?

Because I think certain parts of the fashion industry, like, for example, the fashion discounters, but also the brand stores have a perfect place in our portfolio. Also in some situations, the local heroes.

But the percentage has to come down. From 23% to 17% is a decline of about 25% of all the fashion square meters in the portfolio.

And this is aligned if you look at the appendix with the trends that we forecast. We think about 20% of the fashion square meters in the Netherlands will disappear.

Lastly, on the right-hand side. I'm not going to go through all this, but you can see that we're adding plenty of new users.

F&B is quite interesting. It goes from 5% to 10%.

Call it the low-hanging fruit in our portfolio. I'm aware, and also in my previous job, I've seen many companies increasing F&B in the portfolio.

For us, this is clearly low-hanging fruit. If you have only 5%, there's clearly room for upside and we should explore this.

Then for the Belgian portfolio, similar situation. If you look at the bars, the right one, also 20% mixed-use, quite interesting.

But here, you see the right-size in green because we're actually extending some of the shopping centers. So sometimes rightsizing means increasing the size, particularly in Belle-Ile, which is a development project that we're announcing today.

Also in the Belgium portfolio, you'll see F&B increasing from 8% to 11%. If we then move on to Slide number 20.

This is important, the KPIs of the LifeCentral transformation program, because I can imagine that you wonder how we're going to measure success of transformations. Well, this is our answer.

First of all, financially, I think that's also the most important one, unlevered asset IRR above 6%. Secondly, in a customer-centric strategy, you also need to rate your customer feedback.

We do that through the Net Promoter Score. NPS should be above 20.

Many of you work in the service industry, so you're probably familiar with the score. But I think as a real estate company, it is also an interesting metric.

Then in feedback. We already, for a number of years, have an external company producing tenant satisfaction scores through surveys for us.

So score between 1 and 10. We aim to score above 8.

And in terms of the retail balance, at least 20% mixed use. If you then look at Slide number 21.

There, you'll see the example of Belle-Ile in Liege. I'm not going to mention all the information on the slide, of course.

But what's important to mention is that this is a significant opportunity for us. This is the leading shopping center in Liege.

I think the city center of Liege is a perfect example what happens if you do not manage retail vacancy as a city, but an opportunity for us. You can see, in the bottom left, that the asset IRR that we target is 8%.

It's actually above 8%, very interesting, and that's unlevered. And you also see in the pie charts on the bottom right-hand side that we will have 71% traditional retail going forward.

In other words, 29% mixed use. Then as an example, about Vier Meren in Hoofddorp.

But in terms of time, I think I'll let you read that example yourself, but that will be the first Dutch transformation. Slide number 23, quickly about right-sizing.

Why this works? We use our shopping center In de Bogaard in Rijswijk that probably most of the Dutch people know because it's a shopping center that has been mentioned a lot in the past in the press as a shopping center with a lot of vacancy.

It's a co-owned shopping center. It's interesting because we see a great opportunity for this shopping center.

Why? You'll see that on the right-hand side in the location scores.

We score locations, and if you're in the bottom left of the 2-dimensional chart, you're in a poor location and if you're on the top right, you're in a strong location. The left location score is scoring the shopping center as a regional mall, so we have a very large catchment area.

You're competing with the city center of The Hague. And in the future, you would be competing with the Mall of the Netherlands.

However, if you right-size this shopping center, you have a different location score because you have a different catchment area. And then all of a sudden in the methodology that we use, In de Bogaard is a perfect location.

Is the asset already perfect? No.

You'll see that on the left-hand side, although other people are solving our problems there because they are re-zoning their retail to residential. If we take our steps, this could be, in the future, a very interesting Full Service Center.

And it shows that right-sizing, even though for some people it might feel painful, can be a very interesting thing to do. If we then flip on to Slide number 24.

We talk about numbers again. But I think this is important to mention because when I start talking about mixed-use, one of the first comments I hear is, "Mixed-use generates lower rents than traditional retail."

I've already mentioned that we're at an average level of €188 per square meter. So that means that the pain for us is less than maybe for some other people, but we admit that in some cases, and we see that the rent will be lower.

Let's go through this example. On the left-hand side, you see our current shopping center, on the right-hand side, the conversion into a Full Service Center.

The ERV goes down from 7% to 6.7%. So yes, it will decrease.

However, and this is important in terms of underwriting the Full Service Center philosophy and the business model. We think a Full Service Center deserves a lower discount rate.

And second of all, we think there's more long-term rental growth potential in the asset. Why is that?

If you look at the right-hand side under 3, restored retail balance means the retail in the shopping center, in the full-service center is imbalance again. So demand and supply are balanced.

So that could be future rental growth, which, in this case, we've set at inflation. In addition to that, there's increased footfall, dwell time, basket size by adding new users.

You're giving people more alibis to come to your center, and that should be beneficial for the turnover of the center. In addition to that, the new users that we are adding should also grow inflation like in terms of France.

This is why the IRR for the asset, even though we're spending €18 million of CapEx in this example, goes up from 5.6% to 6.91%. If we then move on to the next slide, Slide number 25.

There, we've done the analysis for all the centers. We set the threshold again at 6%.

Above 6%, we will invest 11 centers. There are 5 centers between 5% and 6%.

We call that the hold category. Sometimes there are little things that you can do, maybe we can recalculate the CapEx or renegotiate with the contractor.

Plenty of things you can do to push them above 6%. If that's not going to happen in the next couple of years, of course, we will also sell those assets.

And then below 5%, those are the 5 assets that we are selling. We've already sold 1 out of those 5.

Also interesting to mention here, I think, is the Continental European retail average unlevered IRR, which is published by Green Street Advisors, which sits at 5.1% as per their latest Global Property Allocator update. As you can see the footnote, I think we're nicely above that with our 6% threshold.

If we then move on to the next slide, France. I can be quick about this.

It's a matter of scale, and that's basically the story. But we have a balance sheet that needs to be delevered.

We have money to spend into Full Service Centers, so we cannot grow in France, and then you need to choose and our choice is to exit. Slide number 27, about those investments and divestments.

We target to divest on the left-hand side about €1.1 billion in book values. €26 million has already been achieved on the right.

And €100 million plus in different stages of negotiations. We will report on this in the coming periods.

On the right-hand side, the targeted investments into LifeCentral. I think 2 things to mention.

We're moving to less assets, from 27 to 17, but we'll spend more money in those assets, which I think is a great example of a belief in polarization. Second of all, you can see that not all the investments in LifeCentral are committed at this stage, which is also important if disposals would materialize slower than we expect.

Moving on to Slide number 28. What does this mean for the shareholder?

We will focus, from now on, on total returns. I've mentioned that we will lower the financial risk, invest only in assets exceeding the hurdle rates and we will also align remuneration and incentive packages, not just of the board, but also of the key staff of the company.

Then lastly, the execution, Slide number 30. That's important because that is our management agenda.

Going forward, we will get back to that frequently. Some people ask me a long-term strategy.

Why quarterly updates? I think those 2 can go hand-in-hand very well because, I think, given the past, we need to update frequently and be transparent to you as investors and analysts.

But of course, at the same time, we can have a long-term strategy. These are the key items.

The first 3 on Slide number 30, are related to the balance sheet. I think they speak for itself.

And on the right-hand side, in the [indiscernible], you can see the progress. The middle 3 are about full-service centers and the transformation, and the bottom 2 are about the organization.

Last slide, in terms of the strategy. On Slide number 31, numbers again.

We thought it's helpful for you to know where we think profitability will go to. And this is our answer.

For 2020, we expect earnings per share, EPRA earnings per share of €2.35 to €2.45. Post our disposal program, we expect an earnings per share of €1.40 to €1.50, most likely 2022.

After that date, we expect 4% to 6% compounded annual growth rate. This is the transparency that we would like to offer from our plan.

With that, I'd like to move on to Dennis to talk you through the financial results.

All right, Matthijs. Thank you, and good morning to all of you, and let me take you through the results of 2019.

I would suggest we go immediately to Page 5 of the presentation, showing the highlights. I think, in 2019, the direct result per share on a continuing basis increased by 7%.

As you all know, we divested our asset in Finland late 2018, and so we've normalized the results of that for 2018. The €2.81 per share is slightly above our latest guidance, and it's mainly the effect of reduced net debt following the disposal I just mentioned.

What obviously mostly shows in the results here is the effect of the negative revaluations of our portfolio. As you can see, it had an impact on our indirect result, had a negative effect on our EPRA NAV, our total return and obviously, an increasing effect on our loan-to-value, which stands at 44.8% at year-end.

Maybe good to say is that, Matthijs just mentioned, the disposal of our asset in Eindhoven that has an effect of 0.5% on our LTV. So effectively, it's at 44.3%, as we speak.

Another one which is interesting, probably on this slide is a new metric, which is the NPS, that, which is short for a Net Promoter Score. The fact that it's stated here, I think, highlights the importance of customer satisfaction in our new strategy.

Just like total return per share, this will become an important element going forward. Moving to the next slide, Slide 6.

On net rental income, our portfolio shows a slightly negative like-for-like rental growth of minus 1%, including the offices. It's minus 6, minus 0.6% for shopping centers.

This was somewhat better than we guided for at our interim results. In Belgium, the overall growth was supported by the acquisition of 2 retail parks last year in 2018, in Turnhout and Brugge.

In this country, the like-for-like number does include the bankruptcy effect of 5 CoolCat stores. In France, the minus 1% like-for-like rental growth is an improvement versus last year.

This seems good. However, we do want to be transparent, and we'll speak about that a bit later about our outlook, but that the impact of bankruptcies and some negative reversions in 2019 will be more substantial visible in 2020.

The negative effects of our bankruptcies in the Netherlands have been limited, I think, due really to the quick and effective actions taken by the team on, for example, the Intertoys bankruptcy, of which all units are completely occupied. It does take a bit more time to fill in the units of CoolCat, another large bankruptcy; and obviously, also of the Hudson's Bay building in Tilburg, although we are in advanced stages of rethinking what to do with this asset.

Operations, on Slide 8. Our leasing performance shows solid activity in Belgium, uplift in minimal guaranteed rents, slightly above-market rents, a relatively low activity in France.

When looking at the leasing volume, the market conditions for, particularly for the fashion industry have been tough. Also, I think, partly still related to the yellow vest demonstrations.

This is why we have to keep the rents affordable and MGR declines a little bit, but it's roughly in line with the market rents. In the Netherlands, I think the leasing activity has been very strong in terms of volume.

With the continuing number of bankruptcies, we have to make rents a little bit more affordable and bring these more in line with the market rents. In the Netherlands, you can also see that the like-for-like rental growth is at minus 1%.

That does include the Hudson's Bay as vacant. If we would have excluded the Hudson's Bay, Netherlands would have been at 0.3% positive like-for-like rental growth.

Moving forward to Slide 10, net rental income. This has been increasing on a continuing portfolio basis, mainly the effect, again, of the acquisitions of the 2 Belgian retail parks.

In 2019, we have received a few one-off indemnities in Belgium. As you can see, shown here on the slide, and the other element is a mix effect of the, negative impact of the Emmapassage, which is in Tilburg, which is currently being rebuilt following the demolition of 2019.

And again, there are also a positive impact from some other redevelopment projects, as we mentioned in the footnote. Moving on to the EPRA earnings movement schedule.

On this slide, you can see what happened to our EPRA earnings. Of course, again, acquisition of a Belgian [indiscernible] is again visible here.

But here also, a big portion, you can see, has been caused by the reduced interest cost from a lower net debt, when debt could be repaid earlier this year from the proceeds of the disposal of Itis by the end of last year. EPRA NAV.

Our EPRA NAV, not surprisingly, declined to almost €33 per share. Main focus point here, of course, is nearly €11 per share impact from a negative revaluations, which brings me to the next slide, which is all about the details of the revaluations.

The devaluation of the portfolio has been substantial in the Netherlands with minus 23%; followed by France with minus 10%. I think this is a reflection of the state of the investment market, which of having seen not many transactions has increased, has increased in activity, I would say, again, in 2019.

In order to reflect a new and updated view on the markets, we decided to change appraisals also in these countries during 2019. If I zoom into the Netherlands.

I think we've seen a little bit of increased level of investment appetite and transactions during the second half of 2019. We've seen the lower pricing levels in euros per square meter.

A little bit higher initial yields. And again, here, we believe the market is pricing in the lower long-term rental growth and negative reversions also to other users and higher structural CapEx needs.

In France, somewhat higher investment activity seen, but really only focus on the, let's say, inner city Paris area. The yields realized here were lower yields compared to our portfolio.

Hardly any transactional activity in the more regional cities and the devaluation, therefore, I think, reflects the decline in, mostly in the market rents, in line where we are closing rental deals. In Belgium, there's been hardly any transactional activity.

There are a few centers on the market, but it didn't come to a deal yet. So moving to our debt profile on Page 14.

Looking at our debt profile, I think we can see the following highlights. The reduced cash position compared to last year, which is more normal at the end of this year, as we used, again, obviously, to repay the €250 million convertible in May last year, and also to repay about €56 million of U.S.

private placement debt. And obviously, we also funded the development pipeline.

Average interest cost went down to 1.89%. And again here, LTV went up to 44.8%.

In our view, no concern at all as it leaves more than sufficient room within our debt covenants. But again, it's above our desired target range longer-term of 30% to 40%.

On the debt mix, next page. Looking at that without having to read it aloud to you, it clearly shows a shift from that convertible bond which we pay down to the increased level of bank loans.

We still have a balanced debt expiry profile, as you can see at the bottom of the slide. We can still cover our unused credit to cover for the 2020 refinancings, which are limited, but we'll be working on the refinance for 2021 in the next 2 months.

On CSR, Matthijs mentioned that already. It remains an important pillar of our strategy going forward.

We have our leading position, again confirmed in 2019 by several rating agencies, as you can see here on the page. Within our new strategy, we will be taking CSR to the next level, not only because of the world demand it from us, but also because we believe it is the right thing to do.

Then a few highlights on the 3 different countries. I will start with Belgium, I think, which very recently, we sold part of our asset in hand, which is about 2,000 square meters of student housing, at book value.

And for Belgium, it's very good also to highlight that we will start here with the rollout of our LifeCentral program. Matthijs mentioned, Liege, an artist impression of that you'll see on the next slide of Belle-Ile.

Total investment there of the extension is around €47 million, excluding about €13 million of refurbishment for the existing center. The latter is reflected in defensive CapEx budget, which you'll see later in the spec.

By transforming this into a Full Service Center, I think we definitely capture the opportunity, the whole catchment area around the center provides being part both of a residential area, office and working area as well as a park-like environment. A bit more detail on Page 20.

I think it shows a strong performance of our Belgium team. I think the retail market in Belgium is in the stage of polarization.

Our centers here are clearly on the positive side of that equation. Footfall continues, as you can see on the left-hand upper side, to grow strongly, also by the impact of Les Bastions in Doornik.

Retail sales continue to grow, roughly in line with the retail sales overall in Belgium, which includes online sales as well. The outlook for next year, for 2020.

I think despite being on the good side of polarization, I think our portfolio does feel a bit of an impact of our retail market getting more challenging. We expect it to show in the 2000 results a bit where we estimate a 5% decline in NOI.

To a small extent, this is due to like-for-like impact coming from Stadsplein in Genk and the size reduction of some of our, the larger areas. The majority, however, is not driven by organic impact.

There's a few one-offs in 2019 results from indemnity payments and of course, also the disposal impact from the student housing in Gent as I mentioned. Moving on to France, on Page 23.

In France, the overall picture on footfall and tenant sales growth looks quite stable, which is quite good, considering, again, as I mentioned, the yellow vest demonstration impact that was visible mainly during the first half of the year. Footfall growth outperformed the market by close to 1%.

On top of that, the negotiations to fill up the 3,000-square meter Toys"R"Us, former Toys"R"Us unit I would say, in Docks76 in Rouen is well underway. The presence of a foothold concept and a proximity food offer, tenant will certainly improve the profile of this center.

A few highlights on the outlook for France. I would say, on Page 24.

However, the increase in occupancy in France did come at an expense. We have to be realistic on rent levels, which will have an effect on the 2020 rents.

On top of that, we've received several notifications of lease terminations, which will also have a negative effect in 2020, visible here. In France, we expect net rental income to decline by around 13% to 14% in 2020, of which 12% is like-for-like.

With the exception of Rivetoile in Strasbourg, which is better, the like-for-like effect is basically quite evenly distributed over the portfolio. The other 2% decline in NOI relates to some strategic vacancy in the refurbishment of our asset, Saint Sever, also in Rouen.

Moving to the Netherlands, on Page 25. In the Netherlands, as Matthijs was saying before, we're targeting to make the Vier Meren in Hoofddorp, which is in the Amsterdam proximity, the first Full Service Center in the Netherlands.

The transformation will be largely focused on capturing the opportunity of providing strong food and beverage offer. We've not yet committed to this project, but we are in the advanced stages of our design, and our investment proposal is basically almost ready to go.

In the inner city of Tilburg, we are progressing with the construction of Frederikstraat-Zuid, which require the demolition of the Emmapassage I just mentioned. And important milestone for this, and I'd like to emphasize that, this is a signing of a lease with a big fashion anchor early January of this year, which is moving to the Emmapassage.

On the Netherlands footfall and occupancy. Footfall growth was positive, as you can see on Page 26.

Also during the second half of the year, where the market, as a whole, saw a small decrease in visitors. The Dutch organization, I think, the platform show their capabilities and a professionalism and beat the market at about 0.6%.

The main point, obviously, in the Netherlands, in general, was that the market had to deal with a significant number of bankruptcies during the year. Our portfolio recovered strongly from the 13 stores of Intertoys, where all units have been already re-leased.

The 5 CoolCat stores is going a bit slower, 2 already being re-let again. Hudson's Bay in Tilburg, Matthias mentioned, if you look at the occupancy number at year-end, 95.1%.

That is excluding already the Hudson's Bay asset. If we would have reported Hudson Bay as being occupied, the occupation, occupancy rate would have been 96.9%.

However, we just wanted to be transparent here about the effect that we will get the keys back on the first of March 2020. And maybe also good to mention is that we've received the January and February rent in full from Hudson Bay Company.

Starting March 2020, about Hudson Bay, obviously, we will fall back on the parent company guarantee provided by the parent in Canada. In this guarantee, Hudson Bay is obliged to top up the rent level for the coming 7.5 years, approximately.

So we will definitely do everything we can to go after that. From March '22, we will, 2020, we will get the keys back and again, working on multiple scenarios, lower floors probably still be retail.

Upper floors, definitely looking at some other use. It was 2020, we have again seen a few more bankruptcies.

DD, 5 stores, which is about 0.3% of our overall rent roll; PrOmise, 1 store; and Steps, we do not have any exposure. Outlook for the Netherlands in 2020.

The effect of the bankruptcies will be visible in 2020. We do expect a decline in net rental income in the Netherlands of about 10%, about, of that, 7% is like-for-like coming from Hudson's Bay, the renegotiations with H&M and several other mainly fashion retailers.

The remaining 3% decline is from spaces being taken into redevelopment. That is bringing me to the outlook on Page 29.

We project, for 2020, an EPRA EPS range of €2.35 to €2.45. If you look at the decline basically from, the difference from 2019 to 2020, which is about €0.41 per share.

If I take the mid-range for 2020, it mostly relates to the expected decline in net rental income, it's about €0.38 per share, and another €0.03 per share is mostly related to the increase in taxes and obviously, also in our interest cost. Be aware, I just want to make sure everyone is aware that this outlook is based on a constant portfolio basis.

We do expect to be a net seller during 2019. So the actual outcome will definitely depend on the timing, the volume and, obviously, the yield effect of those disposals.

Because this will have a negative impact on our EPRA EPS, we've decided to put our dividend at the bottom end of the range, and applying also the bottom end of the range of our unchanged dividend policy of a payout rate between 75% and 85% of our EPRA EPS. This comes down to a dividend level of €1.76 per share.

The final remarks before we go into Q&A. I'd like to conclude the following: Wereldhave is the first in Europe with a actual transformational strategy in the European shopping center industry.

We will focus our portfolio on Full Service Centers. Our LifeCentral transformation program consists of blueprints for all of our assets that are basically second-to-none.

The plans consist of transforming over 27% of space from traditional retail into other uses that ultimately make everyday life better for our consumers. This will increase relevance, the footfall and result in a better demand-supply balance, which ultimately we count on, will result in growing rents.

We set ourselves the target based on a total return for shareholders. We will focus on assets that can be transformed into Full Service Centers and deliver an attractive, risk-adjusted return for our shareholders.

Those assets that cannot, we will be selling. This way, we will end up with a portfolio of only winning assets.

And with that, I would like to open the floor for questions.

Yes. We will start the Q&A session here, for those people here in the room.

So who can I give the microphone to? Yes?

This is Jaap Kuin, Kempen. I think you've announced the important and necessary step to address the sustainability of the assets you want to end up with.

I guess my first question will be around what are the key requirements to actually execute this plan, the disposal of the French assets, because if you don't get that done, obviously, you would need equity. So maybe can I get your thoughts on the, let's say, process of that disposal, the timing and how you feel about the current book value yields?

For example, which would probably, like, won't be a secret that the investors would probably assume that this is not going to be sold at book value. So maybe we can start there, please.

Sure. Let me start by addressing the first part of your question.

Do you need an equity issue if you do not sell France? I think that we've already gone through this.

There are several options that we have. So if the French disposals would not succeed, there's other ways to create liquidity.

You can think about joint ventures. But there's also other options that we have in the Dutch and in the Belgian portfolio where there is more liquidity.

So I think that's an important statement. The French portfolio will be sold in stages.

We take about 2 years to complete these disposals, which you could also see in the timeline. I think, first of all, you could also see that in operational results, the issue in France is not the portfolio quality.

The Issue in France is just scale. So I think that would help the disposal program.

In addition to that, the quality of the individual assets differs. And this is the reason why we will do it step-by-step.

And I'm confident that we can achieve some results already in 2020.

And can I tempt you to say something about book values or the sustainability of that yields?

It's very difficult to say because if you look at the transactions in France over the second half of 2019, it's an almost empty book. So it's very difficult to make a forecast about yields.

What you see in our valuation result is that we have marked down our values in France, almost purely based on ERVs. So I think they reflect market reality.

But the yields, we'll see.

And maybe as a side question here. Is any of the disposal result tied into a new remuneration plan?

Not for us as a board or for employees in the Netherlands or Belgium now.

Okay. And then maybe moving on to kind of the plan and your outlook of growth.

The example showed kind of a 1% rent CAGR, you're assuming. Is that portfolio wise?

Or how should I see kind of your, the assumptions underpinning kind of your whole business plan about growth? Is that based on the 1% rental growth from 2020 onwards?

It's actually even a bit low. I think you're referring to this business model example that I described there, where we had 1% long-term rental growth.

In reality, it's even a bit lower. We've set it at our long-term inflation expectations.

And on top of my head, that's something like over 75%, that's all in the model. So that's the basis for the numbers.

Yes. Okay.

And then maybe just a question on IRRs. Maybe can you clarify, is the IRR requirements for your kind of buy or sell on your current assets?

Will those also be the same numbers apply to potential acquisitions down the line or would you have a higher hurdle rates for acquisitions?

No, no. It's the same, well, it's a 6% hurdle rate.

So we're not going to buy assets that produce an IRR between 5% and 6%, because that's the whole portfolio, but it needs to be 6%, and of course, well above that. So 6.1% would maybe be a little bit too risky.

So it has to be materially above the hurdle.

So Niko from ABN AMRO. A couple of questions.

Just looking at the disposals commitment. I was wondering afterwards because you just stated that you want to leave France that, whether that was really the wisest thing to do, to make such a strong commitment to dispose a given region?

And how do you think that will have an impact on the potential buyers? And how they will look at your position?

Will they view you as potentially a forced seller? So then, will that have an impact on the pricing that you can get?

Just to get a bit more thoughts from your side on this.

Sure. And this is exactly why we state that we phase out France and not selling it straightaway.

So we take our time, that's one. Secondly, I think also referring to Jaap's question, we have other options if disposals in France were to go slower than we expect.

I think I've mentioned the examples. And I think potential buyers noticed that as well, Dennis has rightly mentioned that our loan-to-value is 44.3% post the disposal because that is completed of our shopping center in Eindhoven.

The covenants are at 60%, so there's plenty of headroom from our side. And I think also if you look at this disposal, in Eindhoven, at book value, at least it confirms that even though the second half valuation result is painful, we can sell assets that are at the bottom of our list, at book value.

So I think we, that brings us in a comfortable position.

Okay. And then to follow-up with Hudson Bay rental guarantee.

I presume the like-for-like figure indeed don't include any rental income from the guarantee for the Dutch portfolio. Did I understand that one correctly?

That's correct, yes. So for 2019, obviously, the rental income was included.

For 2020, we have not included any rental income.

So you have no expectations then?

We have already received 2 months. And for now, we have obviously targeted the Dutch team to move on and move quickly with the alternative uses.

So we have strong interest actually in the property. In fact, we are already working with a few tenants to quickly move in after the 1st of March.

So that is definitely something we are pushing for.

Okay. But what are you currently looking at to do with the guarantee?

Are you hoping to get some sort of a settlement with the lump sum? Is that the case or...

It is, that, we're working on 2 tracks. So first of all, we'll go in full and with full force after the parent in order to obtain the 7.5 years of, let's say, top-up lease income.

But obviously, we will also work on the other side to understand if we can get to some sort of agreement with the parent company, which should be reasonable to us.

Okay. So potentially, your like-for-likes would look better in the Dutch portfolio, assuming you get some sort of a compensation for the 7.5?

That very much depends on the outcome, of course, of the discussions, yes.

Let's see. You want to take it, Herman?

I try to follow some of it. On LTV, the 44%, you still rely heavy on market debt.

I remember the previous management, 40% was sort of threshold not to be crossed. I mean at 44%, don't you expect downgrades?

And how do you see cost of debt going forward? Or are you perhaps stressing more bank debt, like your Belgian peers?

That's my first question. Just to be clear on NAV in the Netherlands.

Do you include already the selling Eindhoven or not yet on the lower NAV? And on the LTV, also is Eindhoven already included or not, just to be clear?

And then I have a last question. I was a bit surprised by the statement, we are not going to issue any equity.

I was wondering why you would not buy back equity at such a bargain, perhaps by issuing equity from your Belgian company that comes with a very small discount, and which is actually issuing equity, a stock dividend a bit. So if you are consistent with yourself on your 360% discount.

Why don't you buy like crazy your own equity?

Thank you, Herman. Let me start with your last question, why we're not buying back shares?

I think a very valid question. If you look at our share price, totally agree.

However, you've already mentioned, our LTV is 44.8% post the disposal of the shopping center; in Eindhoven, it's 44.3%. So with that, I've already answered your second question as well because the disposal in Eindhoven is both reporting dates, and none of the figures you're looking at here is including that disposal.

But if we would buy back shares, obviously, we would go into the opposite direction of our loan-to-value. We think it's important to fix the balance sheet first, that's the biggest priority we have, that's also what you see in the management agenda.

And again, buying back shares would go in the opposite direction. That's the main reason why we don't do it.

Yes. On the debt side, maybe, Herman, and on the credit rating side, I would say, the 44.8% or now 44.3% is indeed higher than where we wanted to be given our midterm to longer-term guidance, between 30% and 40%.

So that's important to understand. Going back to our credit rating.

Last year, we received a Ba2 negative outlook from Moody's. We are currently, actually working very hard to put a bridge financing into place for the next 12 to 18 to 24 months.

So currently working with our core banks to make sure we keep our liquidity profile sufficient. That's one thing.

I think in that, during that period of time, we will need to understand how we're going to be successful on our disposal program, what sort of the outcome will be, the first outcome will be of our new strategy. And then, again, understand what our financing needs are.

And I guess, from that point of view, we'll look into other instruments, we can, we will find out there on the market, including, for example, in EMTN, which we have been updating our documentation, basically, again. So we are, in fact, ready to go.

But at this point in time, we just, we feel it's more conservative to put a bridge financing into place first. Also, maybe I think you asked the question, in terms of NOI.

So like we said before, the guidance we've been giving for 2020 is on a continuing portfolio basis. So any asset we sell will have an effect basically on our guidance.

However, if you look at the, let's say, at the bottom there, we've been building in sufficient headroom to fill up some of those disposals, basically.

All right. Does that conclude everybody?

Just one more question.

Just one more questions from my side. So Niko again from ABN.

Regarding the occupancy figures that you gave, is, are these figures reflecting any temporary leasing of the space? Or what would be the percentage impact from that in your occupancy figures?

If you look at the, leasing, indeed. To give you the exact number, my guesstimate would be roughly around 1.5% to 2%, but I can come back to you on the exact number after the meeting.

The number, the temporary number in that is 2.3% to be exact, Niko.

Okay. That concludes the questions for now, at least here in the room.

I have received 1 question by e-mail from of Jonathan Kownator of Goldman Sachs, who asked, "How much EPS decline for the trough guidance comes from disposals and how much from the rent decline?" I can answer that straight away by looking at Page 31 of the presentation, which states an impact of targeted disposals of €1.28 per share.

And the operational improvements is the combination of everything other than disposals on the EBITDA line of €0.08 per share positive. Then I would like to turn to the operator in order to instruct every people, every person for the Q&A.

Okay. There's here, more, one question in the room.

Yes. Herman from Degroof Petercam again.

On this Slide 31, could you please elaborate on the timing of the target disposals? Is that an amount per year?

And net interest of the 0.25, you could just elaborate on that one?

Yes. On the, so Herman, the targeted disposals, that is the effect, as Mattias was saying before, which is visible on Page 27.

That's basically the €1.75 billion targeted divestments over the next 3 years. That is clearly the effect there you see...

It could split?

Exactly, yes, over the next 3 years, which then results, obviously, in the EPRA EPS guidance of €1.40 to €1.50 by 2022. Bottoming out there as we expect on the net interest side, this will be the effect of refinancing the company basically.

So at this point, we are still benefiting from the proceeds of Itis last year, which was a substantial amount, of course. But going forward, we will need to look into refinancing options, and this will be the effect.

Okay. I see no further questions here also from e-mail.

So I would like to conclude the meeting, and thank everybody, and we'll come back to you in half a years' time.