Good morning and welcome to the Eurocommercial Properties Half Year 2025 Results Conference. For the first part of this call, all participants will be in listen-only mode. Afterwards, there will be a question and answer session. If you wish to ask a question, please press the pound key five on your telephone keypad. I would now like to hand to Ilaria Vitaloni, Investor Relations Officer of the company.
Good morning, everyone, and welcome. I am Ilaria Vitaloni, Eurocommercial Investor Relations Officer. We are very pleased to have you with us today. This call will be hosted by our CEO, Evert Jan van Garderen, and our CFO, Roberto Fraticelli. Together, they will present the half-year results, covering our operational performance, financial position, and strategic progress. After the presentation, we will open the floor to your questions. With that, I hand over to our CEO, Evert Jan van Garderen.
Thank you, Ilaria. Ladies and gentlemen, good morning and welcome to our Half Year 2025 Results Presentation. It's a pleasure to share with you the progress we have made in the first six months of this year. At Eurocommercial, our strategy is clear and consistent. C reate vibrant shopping destinations, deliver resilient growth, and generate long-term value for our shareholders, tenants, and communities. Today, I will walk you through our operational highlights, leasing activity, remerchandising projects, and sustainability achievements. Afterwards, my colleague Roberto Fraticelli, CFO, will talk about the financial results and the guidance. Let me begin with our operational highlights. In the first half of 2025, we achieved like-for-like rental growth of 3%, supported by healthy leasing demand and resilient retail sales. We signed 296 lease transactions in the first half, with an average uplift of 2.9% on renewals and re-lettings.
Notably, our new lettings, 110 in total, achieved a much higher uplift of 6.6%. This reflects the strong demand from leading retailers to join our centers and expand their formats. As the press release highlights, nearly 20% of lettable units were either renewed or re-let during the period, a remarkable level of activity. Let me be clear. This is not just about numbers. It's about strengthening the tenant mix, securing the most attractive brands, and ensuring our centers remain dominant in their catchments. Occupancy across our portfolio remains extremely high at 98.8%, with a collection rate of 99%, which figure you will find on the next slide, evidence of the strong fundamentals of our asset and the affordability of our rents. Retail sales increased by 2.6%, with notable strength in health and beauty, services, supermarkets, and books and toys.
In July, retail sales increased by around 5%, confirming the positive strength already observed in June, with growth of 4.7%, led by outstanding results in Italy and Belgium. In July, all countries recorded further improvements, with the sole exception of Italy, where sales remained broadly in line with June's strong performance. Our OCR, or our occupancy cost ratio, stands at 10%, which is both sustainable and competitive. This ensures our retailers are profitable and committed to our centers for the long term. We continue to work closely with some of the world's most attractive retailers. Inditex, Primark, MediaWorld, Rituals, Normal, and many others. These partnerships are visible in the 296 deals signed, which included first-time entrants and new formats across Belgium, France, Italy, and Sweden.
For example, Skin's first store in Brussels and Sunrose's first store in a Belgian shopping center, Besson's new format in Les Atlantes in Tours, France, Bershka's new store in Milan, and Uniqlo extensions in Sweden, like the store for Handtacks. Here you see some examples of new arrivals in our shopping centers in Belgium and France. This confirms that Eurocommercial's assets are top priorities for retailers' expansion strategies. Our success also rests on being relentlessly customer-centric. We're not just filling units; we are curating the right mix of fashion, food, health and beauty, and services to meet evolving consumer expectations. As the chart on this slide seven shows, the deals signed span a broad range of categories. 23% in fashion, 18% in health and beauty, 16% in gifts and jewelry, and strong contributors from restaurants, sports, and services.
At the same time, we are modernizing our centers, introducing full-format stores, introducing new brands, and redesigning layouts. This keeps our assets fresh, relevant, and resilient. Our leasing results highlight the strength of demand for space in our centers. In Italy, renewals and re-lettings delivered an average rental uplift of 8.2%. Belgium achieved a 1.9% uplift, while Sweden and France were relatively stable. Overall, the 296 transactions produced an uplift of 2.9%, with particularly strong results in new lettings, where the uplift reached 6.6%. This confirms the ability of our portfolio to capture rental reversion, securing both current income and future growth. Now, let's move to our remerchandising pipeline, which is a critical engine of long-term value creation. In 2025, we launched three major remerchandising projects in Italy: Collestrada, I Gigli, and CremonaPo.
We are reducing the hypermarket here and reconfiguring units to bring in MediaWorld, Zara, H&M, Primark, and Tezenis. This is happening in four phases. With this phased plan stretching to late 2026, this will cement Collestrada as Umbria's leading retail destination. Its unique merchandising mix makes it bulletproof. Tuscany's most visited shopping center is undergoing another wave of remerchandising. The reduction of the PAM hypermarket will result in expanding Zara into a flagship concept store and adding Pull & Bear. This will strengthen I Gigli's dominance and widen its catchment. We see growing visits from more distant areas. A brand new Primark is replacing Unioro, which we have successfully relocated to the adjoining retail park. Primark's arrival at CremonaPo will broaden the offer, extend the catchment to neighboring provinces, and appeal strongly to a younger customer base.
These three projects build on the outstanding results we saw from Carosello and Woluwe, completed in 2024. It is the evidence that value is created. As a result of the remerchandising project at Carosello, retail sales increased by 14.9%, rental uplifts reached 14.5%, and occupancy stands at 100%. Zara, Stradivarius, and Bershka all expanded, reinforcing Carosello's dominance in the eastern Milan region. On top of that, Zara closed stores in competing centers. The remerchandising project has increased its catchment area and has diminished competition. Its activity towards the city of Milan has grown. At Woluwe in Brussels, retail sales rose by 9.8%, footfall increased by 13.8%, and occupancy is virtually full at 99.3%. The remerchandising in Woluwe introduced premium brands, the latest concept of Zara, Massimo Dutti, and CNA, a refurbished inner department store, and a new Carrefour market, making Woluwe a leading premium shopping destination.
These are all powerful examples of how remerchandising creates both short-term growth and long-term competitive advantage. No less important is our commitment to sustainability, which remains central to our strategy. 100% of our centers are now BREEAM-certified, either Excellent or Very Good. We achieved a 62% increase in green loans, secured a five-star GRESB rating, and improved our Carbon Disclosure Project rating to B. In operational terms, solar production is up 41% year- on- year, 87% of landlord-controlled electricity comes from renewable resources, and carbon emissions are down 12% compared to 2023. Importantly, green lease clauses are now included in about 60% of our leases, aligning our tenants with our sustainability objectives. This is not just ESG reporting. In our mind, it's a competitive edge, and more and more retailers and consumers demand sustainable environments, and Eurocommercial is delivering.
Now is the moment to hand over to Roberto Fraticelli to discuss our financial results.
Thank you very much, Evert Jan, and welcome, everybody. As always, thank you for being here. Let's have a look at the financial highlights for today. Here, what we do is we give an idea of the core highlights that we want to discuss, and then we'll go more into detail in the coming slides. As you see, at the end, in H1, we refinanced shopping loans for EUR 415 million, which is a good result. We are making further progress in the loans, which are expiring in the second half of 2026. The loan-to-value ratio is down to 40.5%, which is also a very nice result. As Evert Jan mentioned, we sold the Grand Samarkand for SEK 158 million, which is around EUR 14 million, which is above the book value.
Now, if you look at valuations, it's nice because what we see is that overall, the values are increasing in all the portfolio. What's very interesting is that, of course, this is not coming from the fact that net initial yields are higher. Actually, net initial yields are flat, but it's really sustainable growth because it's growth of the NOI, it's growth of the ERV. The rental income is increasing, and that is the base for the increase in value of our shopping centers. That's healthy growth in all our portfolio in all the countries. If you look at the financial position, what we highlight is, of course, the lower LTV to 40.5%. That's down from the 41.3% we had in December. That's due to two facts.
The first one is, of course, the increase in the value of the portfolio, and that increased, of course, the value of the loan-to-value. The second one is the fact that the net borrowings basically stayed the same. Stable borrowings, higher value, lower LTV. Another thing that we need to highlight here is the long-term loans, which we extended. We're talking about Fiordaliso, which is a EUR 200 million loan, which we extended for five years, and a portfolio for assets in Sweden, which was due to expire in 2027, but we already renewed it and extended. It went from SEK 1.8 billion to SEK 2.4 billion, which is roughly EUR 50 million. We extended that for three years. Good progress is being made on the remaining loans, so we're very positive on that. We will come with further news once we have very good news to tell you about.
If we then go to the next slide, we see, as always, our beautiful EPRA NTA bridge. We started in December from 47- 41.79. We add the indirect investment result. We add the indirect investment result, which is negative, and we'll see it in the next slide. Of course, we do the correction for the fair tax for the value, the market value of the financial instruments. We do have the impact on the dividend. We distribute a dividend of EUR 1.80, and of course, part of this dividend was also done in stock. This is the double effect. We have the effect of the positive effect of the foreign exchange. That's mainly the SEK being higher in value compared to the euro. The other is just a slight effect of the dividend distribution because, of course, not everybody took the EUR 1.80, which we distributed.
You end up to the EUR 41.46. Let's go down to the income statement. As you see, I think rental income increased, and that's also notwithstanding the fact that we, as Evert Jan van Garderen mentioned, had all the remerchandising projects going. There was an important impact, but rental income increased. What's also interesting to see is that the net interest expenses are also unchanged. That's thanks to our hedging policy, of course, because we are still at the 80% hedging policy that we have. We are actually 81%, but that's around the 80% that we want to have. The negative indirect investment result, that's mainly due to the substitute tax that we pay in Italy. Every once in a while, the Italian government is very kind and offers to reduce the tax burden through the payment of some taxes at a discount rate.
What we did in the past, we had done some fiscal evaluation of the assets, which had created reserves. Now we're making this reserve distributable to the entire company, to the entire group. Direct investment results have also increased out by slightly. If we then go to the bridge, which we all like, we see that we start from the EUR 66.28 in December. We add the rental income, which is EUR 330. We have higher corporate income tax compared to last year, and that's mainly in Sweden and in Italy. That's also related to the increase in rental income. We have lower net service charges. That means that we invoice our tenants less than what we used to invoice last year. That's also due to the refurbishment and all the remerchandising that Evert Jan van Garderen mentioned, because as you see, some units are empty when you're moving the different retailers.
That's different than company and other expenses. It's EUR 47, but that's mainly related also because we are comparing it to last year. Last year, we had a positive effect of bad debts. This positive effect was because we had booked too much, so we had to release part of the booking that we had done last year. We do not have this effect this year, so we end up at EUR 66.88. Very important, of course, is the direct investment result guidance. Evert Jan and I and the whole company were very happy with the results. We are quite positive, and we decided to upgrade the guidance that we gave in updates to the guidance that we gave in March 2025. We now believe we'll be at the upper part of the range between EUR 2.40 and EUR 2.45 per share.
Maybe one last slide just to recap on the core missions of Eurocommercial. As Evert Jan said, we are customer-centric. Our growth is focused on our customer. We do a lot of work. Ilaria does a fantastic job in the search and analysis of our customers. What we do is we prepare our assets so that they can offer really the best possible services to our clients and our retailers. Value creation, Evert Jan has given a lot of examples of value creation where we're focusing what we're doing. We are really trying to build the best assets that we can to make them bulletproof. It's always a strong word, to make them very strong also in light of the future. Sustainability, Evert Jan stressed it, how important it is to have sustainability for us. We really believe it builds a competitive advantage also for us.
What's, of course, at my heart, which is the financial discipline and strength, you know, a nice loan-to-value, a nice NOI growth, good refinancing, as well as a stable financial platform. Last but not least, we're hoping to see most of you at the Capital Market Day on September 11th, 2025. With this one, I'll end that. Thank you again. I'll end back here. Thank you for all our guys because we did a fantastic job. Back to the operator.
Thank you. Ladies and gentlemen, we are now ready to take your questions. If you wish to ask a question, please press the pound key five on your telephone keypad. You can also submit a question by typing it underneath the player. Our first question comes from Stephane Afonso from Jefferies. Please go ahead.
Yes. Good morning. Thank you for taking my questions. I have three, if I may. Firstly, could you share the CapEx envelopes for the remerchandising projects and maybe share also the targeted yield and cost? Regarding the guidance, I'm just trying to understand what is driving your decision to not target the upper end of the range. Finally, on refinancing, what has been the average cost of debt achieved so far? Thank you.
Maybe Roberto, you want to start?
I'll start with the finance, but I like it. Let's say the average cost of debt, as you've seen, stayed the same, 3.2%. Of course, let's say the margins are, as you know, Stephane, we do not communicate anything on the margins because we have a confidentiality agreement with the banks. They're really in line with the financing that we currently have. What we're monitoring is the long-term interest rate, where it moves. So far, the refinancing has been a good term. We have a lot of demand for our shopping centers. There was good competition among different banks. We always had at least three to four banks to select from. That really gives a good impression of the value maybe of our asset, but also on the refinancing moment on the market. We're very happy with the discussions that we're having with the banks.
Does that answer your question, Stephane, or?
Okay. Maybe then a few words on the guidance and our update today that we expect to be at the upper end of the range, as indicated by Roberto. I think it's a combination of a couple of factors which we took into account. The first one is the Swedish krona, which is always volatile, but sort of seemed to be a bit more stable and slightly stronger than we had in our budget. That obviously always helps a bit. We also saw the good progress in the projects. Next to that, actually, some vacancy reduction, obviously, again, helping us in the forecast for the full year. All in all, these are the sort of effects which we took into account to bring us to an update of the guidance. Your last question on the CapEx involved in the remerchandising.
I think these are projects which quite differ from case to case. Obviously, we have our building works, but you know we're working in an existing building. That is not immediately triggering a lot of CapEx. Where we do have some CapEx is, for example, fit-out cost, which we have for the tenants. We create, of course, new units. Where we have costs which involve to make a unit relettable, not to this specific tenant, but to a tenant, then it's obviously our bill, our account. Don't see that we have to spend millions and millions to do the remodeling. Of course, there are some amounts involved. They are also spread over, in some cases, more than a financial year, of course. Particular disclosure per project, I cannot give, I'm afraid.
All right, we will continue.
Stefan? Yeah?
We will continue to our next question, which comes from Lynn Hautekeete from KBC. Please go ahead.
Hi. Good morning, everyone. I have two questions. The first one is on Belgium. In Woluwe, your rental uplifts on renewals and re-lettings decelerated in the first half of 2025 versus 2024 from 6.6% to 1.9%. I was wondering if you could give some color on this because I remember the uplifts on new deals were around 6.6% in Belgium in the second half of 2024 after your remerchandising project. I was wondering if you have a figure for this in the first half of 2025.
Yeah, Lynn, thank you very much for your question. I expected the question because you also mentioned it this morning in your report on our numbers. To give a bit more color, what happened in Woluwe is that actually, we did 17 deals in the reporting period. As we always say, renewals, re-lettings is a matter of measuring what is happening 12 months. It's a rollover 12 months. This is from the 30th of June, looking back 12 months, one year. That is where you measure the renewals, re-lettings. Out of those 17 deals, we had only a few. If I look at the list, you could say that there were two deals which were negative, where we replaced a tenant which actually left the center. If I look here, it has to do with Desigual, Yacht, and Superdry.
We got back tenants in the units, which obviously strengthened the whole center. These are really one-off. If I look back at the 6.6%, there were some of the previous deals included and not these ones. It is a matter of just changing one or two tenants out of the 17. The rest is all plus. Of course, an average, in the end, is an average. These two and three deals in a negative territory bring us to the 2%. Again, it's always difficult. I don't think we should read into this the trend that, you know, when we do re-lettings and renewals in Woluwe, that we do that at a lower increase or uplift than in the past. I mean, we're still very pleased with what we can do, including the latest, the Skin, Sandro. These are really nice brands to have in Woluwe.
Obviously, we'll dive a bit more deep into the Woluwe tenant mix and what's happening there when we have our Capital Markets Day on the 11th of September. You're most welcome.
I look forward to it.
Lynn, you had one more question, I think.
I do. About my second question now. You had 1.2% fair value uplift, and the main driver there is obviously the increase in your net operating income. It was also mentioned somewhere that your exit yields were flat or actually went up. I was wondering if you could explain the drivers behind the increase in those exit yields and if it was maybe related to certain assets.
Thank you so much, Lynn. You always have very good questions, unfortunately. No, I mean, as you say, the increase in value was the NOI. That was, of course, different center by center. What we tried to do was to, in discussion with the valuers, what they gave us was their impression on the market and the rest. What they thought was that they did not see any particular transaction which would actually change their mind in a dramatic way from the yields that they published and that they used until now. It's really a minor, maybe for some smaller assets where they increased a little bit the net initial yields or sometimes just the net exit yield. It really depends on the valuers and on the way they value the asset. Really, nothing significant in any of the shopping centers, to be fair.
Okay. Maybe related to that, could your risk premium go up in France in those exit yields given the political situation? Did you already discuss that, or is it too early to tell?
It's too early to tell because you've seen the movements in the markets, interest rates, and property values as well. The value of the shares of all the companies also investing in France. I think it's a bit too early to tell, also because we do not know what the end result will be. At the moment, of course, there is a lot of turmoil, which is never good for the market. I think we need to look at what actually is going to happen in France and see how they come out of it. For once, I can say that I'm happy with the Italian situation.
Okay. That's clear. Thanks for the explanation. See you on the 11th.
Thank you so much, Lynn Hautekeete .
Thank you.
The next question comes from Valerie Jacob from Bernstein. Please go ahead.
Hello, good morning. Can you hear me?
Yes, perfect.
I just have two follow-up questions from what I've been asked. The first one is, you know, on the projects, I understand that every project is different and that you cannot give the detail. Maybe if you could share the overall envelope, like are we talking like a few million? Are we talking tens of millions, or, you know, give us a range? Also, give us a range on the returns you expect from these projects. I think that would be useful. That's my first question. Thank you.
Yeah. Thank you, Valerie, for the question. In terms of the envelope, what we have been doing is, if you look at our overall direct result and the payout we use for the dividend, which is targeted at 75%, there's obviously an amount left, which is sort of our key envelope, which we think we could overall in the portfolio dedicate to CapEx. Obviously, there's a bit of ESG involved as well, but mostly the remerchandising projects do tap out of that envelope. Of course, it's not only one, or we have a few of those. Overall, if you look per project, I think it's more a matter of some millions than a really double-digit amount. There is a spread. At the moment, we're spending a bit more in Italy than in the other countries, as you can imagine. If you come to your next question, what is the return?
I think short term, what we see is, in most cases, a flat operation. Obviously, it's very important for us to think about the medium and the long term, where we do see the benefit. Obviously, when we are stronger against our competitors, when we have new tenants coming in, where we can show that we have a bigger footfall, more turnovers, and therefore tenants are prepared to accept better conditions from our perspective. On top of that, I think where we do see some further and eventual uplift is that with the big brands, there is a component. It's, of course, minimum guaranteed rent. On top of that, the component of turnover rent. We do benefit from their success. I think our expectation is that for the years to come, we will see probably the higher component of turnover rent in our overall rent roll.
That's basically the picture, Valerie.
Okay. Thank you. That's very clear. My second question is on rolling and renewals. You've got some slight negative numbers in France and Sweden. You've just mentioned a couple of negative transactions in Belgium. I was wondering, do you think all these deals were one-off over the past 6 or 12 months, or do you see a trend that overall the market is a bit more difficult now and that your portfolio is, on average, probably fairly rented? Thank you.
Valerie, we just talked about Belgium, and I understand that we're always focusing on negatives or minuses. In Belgium, we had a few, as I said, three, four deals which were negative. I also have deals where we have an uplift of 32%, 23%, 12%, 22%. It is really a case-by-case picture in Belgium. France, I would say, there we obviously still have an effect, and we're not alone there because it has an impact on all the landlords of some of the chains which have gone into bankruptcy. Recently, Claire's, I think everybody, all payers have Claire's, so do we. In the past, it all started a bit with Camaïeu, but we've seen recently Naf Naf again. I think there's an impact of that kind of situation, which we don't have, at least not in our portfolio, let's say in Belgium or in Italy or in Sweden.
France is probably slightly different. If you then have that situation, we think it's important that you get, if a unit becomes available, the good brands back. That means that in some cases, you have to probably accept a lower end. Also, given the fact that in some cases, maybe the sector changes, that you go to another sector where they cannot afford the rent level you got out of that specific unit. I think that sometimes may be an element being forgotten, that if it's all fashion again and you lease to fashion, then you can maybe say, okay, there's a negative trend because of the fashion sector. It is also sometimes the change, which is by definition almost resulting into either a minus or a plus.
Roberto, anything?
Thank you.
I'm in Sweden, of course, as we mentioned in the press release as well. You know, we had a lot of inflation in the past year. When you just look at the renewals, they already absorbed over 23% of inflation in the past year. That was also related to that. In the renewals, you see that there is a strong increase at the + 6.6% remotely.
Valerie, another question?
I don't think Valerie had any more questions. We will go over to our next question, Ariana Terrazzi at Intesa Sanpaolo. Please go ahead.
Good morning, everyone, from my side too, and thanks for your presentation. I had a question on the return you expect from the projects in Collestrada, I Gigli, and CremonaPo when they will come to completion. I think you already covered this topic previously. I have another one on assets disposal. The transaction in Sweden was completed above latest valuation. Should we expect further non-core assets disposal in the coming quarters? Thank you.
Thank you, Ariana, for your questions. Indeed, the disposal we made in the summer was a small transaction, but still relevant for us because we have created that megastore for Eco, leased it out on a 10-year lease, and it opened all very successfully. That was for us good timing to sell that asset. We do have another position in Sweden with a similar big box, which we were absolutely investigating to see whether that could also be a good transaction to consider. The fact is that in Sweden, at the moment, the market is actually quite active for this kind of product. We also did these kinds of sales in the past when we had retail boxes, as we call them, which, of course, are for us nice to have.
Once you have got your tenants in there, you got the long leases, there's not so much you can do, not so much value you can add. That was also in the case of the Grand Samarkand deal. We know that we have that retailer anyhow on our retail zone. It does create the traffic you want, and we can focus on the gallery. That's really where we want to be. There we can add value. There we can work on the tenant mix. We do hope to maybe see one more disposal in, let's say, the coming months. It's the kind of product which, of course, we like to produce, but once it's there, then we could maybe better reinvest it in our galleries.
Thank you, Evert Jan van Garderen.
Our next question comes from Steven Beaumont from ABN AMRO ODDO BHF. Please go ahead.
Good morning, and thank you for taking my questions, of course. I have three. Maybe first, also to clarify some earlier answers where I hope you can quantify the answers a bit better. To start on the remerchandising projects, what is the net annualized rental uplift that we can expect for the three projects combined? Also, as given you say Carosello led to 14% rent uplifts, what was that number for Woluwe?
Let me see here, Stefan. I'm afraid that, let's say, otherwise we would have published it, Stephane, if we would have exactly the net annualized income for the next three years of each of our remerchandising projects. I'm afraid that I cannot comment more than what I said in the call earlier when other colleagues of you asked similar questions. If we look at Woluwe, I think there we do also have a different situation than Carosello, where, of course, in the case of Carosello, we now have the new tenants also up and running. That was already the case a bit earlier in Woluwe. I think in 2025, we can probably be more precise on the numbers. On Woluwe, Stefan, I assume that you will also see us in the Capital Markets Day soon.
If I look at renewals, re-lettings over the last periods, it was 16.6% in December, 10.8% in March, and now it's 4.1%. That's in the re-lettings the case. The average which we gave in Carosello, that's also depending on the deals we did there.
Yeah. Maybe, yeah, Steven, those are always good questions, and it's always great to hear. I'd say on the remerchandising, I think what is important is, you know, some of our peers, they give their expected return. They base that on a series of assumptions, which is then not shared with everybody. I mean, we also have the expected yields, returns that we have on the remerchandising. Those, of course, are, let's say, at least in line with those of our peers. What is interesting for us is that, of course, there are several components of this increase in value. The first one is when the contractor is signing, for example, with very big tenants. You have a component which is the MGR, but there's also the component on turnover rent, which is also a very important component.
We all, as the retailers, have expectations on the turnovers that they're going to realize. Most times what we've seen, and we've seen it with Carosello, we've seen it with Woluwe, the actual turnovers that they realize are beyond their expectations. We're very happy with that. On the second hand, there's also the renewals and re-lettings because, of course, once you've made your center more attractive, then you also have an increase in the number of visitors, and you have an increase in the spend. You know, that's the medium to long-term strategy that we discussed also several times. What we see is a strong increase in what we expect, and we hope to see, is the strong increase in rental income and in visitors and the strong effect on the renewals and re-lettings.
While others are telling you I'm going to have a yield of 8%, 9%, or 10%, we're saying we're doing this, and we are confident that it's a good investment. Please, you know, let us realize these expectations so that we can communicate them. That's also what we did with Carosello and what we did with Woluwe. We did the project, and now we're sharing with you the results that we're getting. It's not that we want to be tricky, or that we are expecting a remerchandise, sorry, a cost return on investment of 2%. On the contrary, we are expecting a good return on investment. It's just that we want to share the real results and not what will be a fantastic expectation on this investment. Does that answer your question, Steven?
Yeah, that provides a lot of clarity. Thank you for that background. If I may, I also have another question. Maybe you can quantify that a bit better. Total CapEx, what do you expect for the, let's say, 2026 for the next year? Maybe categorize it broadly. Maybe also some color on which part is sustainable investments, for example, like solar and heating.
Okay. Let's see, Steven, again, we have our sort of rule of thumb that what we do not pay out is different. That's obviously a cash flow we can use for CapEx spread over the portfolio, but not more than that. Otherwise, you would also see gearing going up or whatever. That's sort of where you should put us. If I look for the next period, obviously, the majority of that will be Italy. If I look at our internal tables, you know that there's not that much happening in Sweden. There is maybe a bit more happening in France, depending on developments there. That's, of course, something we realize ourselves. We can't do all those projects at the same time. It's not only about the CapEx and the availability of that, but it's also about income.
We have to accept that when you're, and that's why we deliberately put some of the photos in the presentation, that we're really doing a lot of work. That means that you cannot lease that space out. Temporarily, you have a revenue which you're missing. You have to plan carefully through the portfolio to make sure overall at group level, obviously, our rental income is still steady or increasing with indexation and other matters. That's what we have to plan very carefully.
Yeah. Steven, I mean, to give you the, as we always discuss, the CapEx, it's around the EUR 40 million, more or less. Of course, we invested a lot in CapEx in ESG, and that's also very important because we want to keep on achieving our targets. We really did some major investments in the past. When we look at the future investment, there is still a lot. There's also a lot of reserve which we can invest in these kinds of projects that we're doing in Carosello, in Woluwe, in I Gigli. There's plenty of opportunities for us. It also depends, as you remember, on the contribution from the government, like in Italy, when we got the contribution if we invested in green refurbishments. As Evert Jan said, this is what we're planning to, those are the resources that we would like to invest.
You know, being careful, are we not doing too much? Are we not doing enough? Always trying to find the balance where we can add the best value to the portfolio. That is prioritized.
Okay. Very clear. My last question, a simple one. Fragrancy is obviously low, but just to push you on the only country with some fragrancy being Sweden, could you provide some color here? Is that mainly from the former ICA in Grand Samarkand? Any comments on what we can expect from the fragrancy in Sweden?
Yeah, Steven, indeed, the vacancy in Sweden is mainly in Grand Samarkand near Växjö, where ICA Maxi moved over the road and built a new big hypermarket. That space has been relet to Coop and Normal. There's still a residual part, which we actually were in Sweden earlier this week to discuss a number of deals which have been on the table. They're all back in Sweden a bit earlier than in the other countries. We do hope that we can fill that, or I should not say fill, but have a nice new tenant for the space. We have a few options, and we just have to see which one will fit the best. It is, of course, a lot of space. It's quite deep. It's not space which is available for a number of tenants. You need some specific tenants who can take up that kind of surface.
We are positively looking at that. If that is happening in the deal, then obviously Sweden is back on the levels where the rest of the countries are. In the other centers, we don't have a lot of vacancy. We're doing some nice lettings in Sweden, also a bit more in the service sector, healthcare sector. In that respect, I think the market in Sweden looks quite nice for the second half of the year.
Great. Thank you so much for the answers. Very helpful.
Thank you.
The next question comes from Rixt Hoekstra from Van Lanschot Kempen. Please go ahead.
Hi. Yes, good morning. Thank you for the presentation. I have one question remaining. If you look at some of your peers, they've been active on the transaction market, and I think investors are appreciative of that. Your LTVs are close to the 40% target. I was just wondering what's your view on adding assets to the portfolio?
Yeah, Rixt, we do have on our agenda the items like indeed what about asset rotation, joint ventures. We've seen some transactions by peers. At least we have now also done a disposal, which I think if you talk about asset rotation is probably the first step you need to do in order to rotate. We're keeping an eye on the market. We do have some, if you look indeed at our balance sheet, it's stronger than it was, LTV down. You know we are in a position where we can look at various options, but don't expect us to jump into any assets which are now coming to the market. I think we do want the good quality we have in the portfolio. Obviously, we're very much focusing on the remerchandising projects. The kind of deal which we would like for our portfolio, we haven't seen. Maybe they're coming.
I think more and more activity in Spain, and maybe that flows over to Italy. Who knows? In Sweden, I think there again, we see more activity. We were one of the deals, of course, which is the effect of lower interest rates. I mean, in Sweden, the STIBOR has come rapidly down. It's now 2%. Maybe one more rate cut there. Therefore, the fundability of assets is much better. We see a lot of appetite among the banks to finance property. We bump into that as well when we, of course, internally discuss it and have our conversation with the banks. I think the lights are more green for transactions in the Nordics as well. Who knows?
Yeah, okay. That's a very clear answer. Thank you.
The next question comes from Michiel Verhagen from ING. Please go ahead.
Yes. Good morning. Thank you for the presentation and taking my questions. I have two questions. The first one, there was a change in ownership of Carrefour in Italy. Could you maybe provide more color on any impact this might have on your Italian assets? The second question, coming back on the portfolio valuation, you already mentioned that the portfolio revaluation is related to the operational performance and not the yield compression. To what extent do you see the remerchandising projects translating into the asset values? Valuations in Italy increased by more than 2%. To what extent is this impacted by the remerchandising of Carosello? Also, what impact would you expect on the valuation of Woluwe as this was only up slightly 0.7%? Thank you.
Michiel, very difficult question, the first one. Let's say, of course, it's third parties, and Carrefour did this deal with New Princess, which is an Italian investor who has acquired plenty of companies in the past years. What's very interesting on his side is, of course, that he has all these products that he is now able to sell through the Carrefour operations in Italy. If you sell cheese, for example, and you only have a very limited amount of space in the supermarkets, if you can double it, that's extremely interesting for your turnovers for the entire company. They reached that agreement. They haven't finalized the transaction yet, which is expected to happen before the end of the year, possibly mid-November. We are, of course, in discussion with Carrefour. We know New Princess, but we haven't got contact with them yet.
With Carrefour, of course, we only have them in one asset, which is Carosello. In Carosello, we have done all this transaction. Per market in Carosello is quite large. It would be nice to reduce. This could offer possibilities. Let us put it that way. For our concerns, your second question is on valuations and how is it taken into consideration the potential value created by the remerchandising efforts that we did. It is in some form because, of course, depending on the value and the way they do the valuation, you know that some of them use the discounted cash flow. If you use the discounted cash flow, you already start taking into account the ERVs, so the expected rental value for the future. In some cases, the value is already taken into consideration, the ERVs for the future.
How they could change, how they could increase, how they could decrease. Those are all assumptions based on the feedback that we could provide them. That is mainly on the timing and when we think that an operation can be finalized, mainly on some of the contracts which have already been signed. On that basis, then he can formulate or she can formulate her or his own hypothesis on what is the future rental income going to be. On that base, then they use the cash flow projections to determine the value that they expect the centers to be. Then, of course, they discount it up. It also depends a lot on the discount rate, which is still very high. The effect that you have, of course, being discounted, it's lower and lower the further in the future you go. Does that answer your question, Michiel?
Yep, that's clear. Thank you.
Our next question comes from Kai Klose from Berenberg. Please go ahead.
Yes, good morning. I've got two quick questions. The first one, after we had a couple of refinancings in Italy and Sweden, could you indicate what the LTV on an asset basis is compared to the group level? Maybe just as an indication, is it marginally higher or lower? If you give me higher or lower, that would be helpful. The second question, you mentioned that in terms for the company and other expenses, there were some passing effects in the first half, which explains the increase. I didn't get that in full. Maybe you could explain that again or give more details. Thank you.
Let's say for concerns, the refinancing in Sweden and in Italy, the loan-to-values really depend on the banks. Usually, they're between the 40%- 50%. That's the range that we usually have. We also have some existing financing which are, of course, at a lower loan-to-value. That's because during the time, you know, the property increased in value and the loan stayed the same. We had a small amortization. There's also where you create a gap. When we refinance, that's what we're looking at, between 40% and 50%. That's where we aim.
No, I think, Kai, in the case of Sweden, because obviously the Swedish krona is a foreign currency to us. If at asset level we could go to 50%, 55%, we would not mind because that gives us a bit more natural hedging. I think for Sweden, we are maybe quite keen on a slightly higher LTV at asset level. Of course, we have to overall bear in mind that, you know, 40% LTV ratio is something where we feel comfortable so that it all adds up. That's, I think, a bit where we are. Sorry.
No, no, no, absolutely true.
The last one is the bad debts. Let's say what we had last year, we had accrued, I'm just making up a number, EUR 2 million for bad debts because there were several retailers which were facing difficulties. We thought, you know, let's be prudent and accrue for these possible potential bad debts. After a year, we had to realize that actually the agreements that we had reached, some of those tenants then were perfectly fine. There was no need for the accrual. With some others, we actually agreed a bad debt which was lower than the one we had provided for. We had a correction. Instead of having a - EUR 2 million for the bad debts, you had a + EUR 1 million for bad debts because we actually had accrued too much. Is that helpful or?
Yeah, I've got it. No, I got it. Many thanks and see you on the process.
Thank you, Kai Klose.
Thank you. I see that we have one written question. Evert Jan, do we still have time for that?
Yeah. No, sure. I can read out the question, and then we will also provide an answer. The question is, please, could you provide some color on why like-for-like sales for food and beverage and sport are negative, having been among the best categories in recent years? No, thank you for this question. I think the short answer is that in this case, these sectors were impacted by the works when we introduced the new operators. It's, of course, just a temporary thing. You measure against the previous, whether you measure against the last year, one month, or three months, or six months. You see it varying. We expect this to improve again. It's a temporary effect, but it all has to do with where the particular works in the malls are happening at the moment.
All right. That was our last question. I will hand the call back over to Mr. Evert Jan van Garderen for any closing remarks.
Thank you so much to all the participants today who listened in, and of course, all the analysts who asked questions. Thank you for asking these questions, which makes it, of course, a very interactive and hopefully interesting conference call. We look forward to our Capital Markets Day, mentioned before, in Brussels, on the 11th of September, on a Thursday, where we will, of course, show Woluwe, what happened there, and also go into some more detail on this particular remerchandising project. For now, I would like to thank everybody for participating. Of course, not last but not least, all our colleagues who worked very hard behind the scenes too.
Get all those numbers and presentations ready, and I wish you a pleasant Friday. Thank you so much.