Good day, good day and welcome. Good day and welcome to the Eurocommercial Full- Year Results 2022 Conference Call. This meeting is being recorded. At this time, I'd like to hand the call over to Luca Lucaroni, Investor Relations Director. Over to you, sir.
Good morning to everybody. My name is Luca Lucaroni, Investor Relations Director, and I'm happy to be on this call with Evert Jan van Garderen, our CEO, Roberto Fraticelli, our CFO, and Peter Mills, our CIO, to present Eurocommercial results for the year 2022. The agenda for this conference call is presented on this slide. Evert Jan van Garderen will talk about the operational result of the company, including the leasing activity during the year. Peter Mills will talk in more detail about the property portfolio and ESG, followed by Roberto Fraticelli, who will discuss in more detail the financial result. We open the call for any question and suggestion you may have.
Thank you, Luca, for introducing us and presenting the agenda for today. Good morning, everyone, and thank you for joining us this morning. I will start with an overview of the operations of Eurocommercial during the financial year 2022. We'll finish this presentation later with some remarks on the acquisition of the minority interest in Woluwe Shopping, the dividend proposal, and the guidance for 2023. The business of the company showed a strong performance in 2022. We will discuss various operational metrics in this presentation, and we are pleased to see that in 2022, consumers have continued to visit and spend in our shopping centers despite the difficult environment caused by inflation and in particularly the higher energy prices.
In January and February of 2023, the turnovers in the stores of our centers have continued to be better than in 2022 and better than in the pre-COVID period in 2019. We will discuss these results in more detail during this presentation. The diversification over four countries and the quality of the EUR 3.8 billion shopping centers portfolio have again been key to the performance of the company during 2022. We have 24 shopping centers in our property portfolio, split between 45% allocated to our five flagship centers and 55% allocated to our suburban shopping centers focused on everyday goods and anchored by hypermarkets and supermarkets. 62% of the space in these shopping centers is dedicated to essential and everyday goods.
Our five flagship centers have more exposure to discretionary retail due to their different function, still have 41% exposure to essential and everyday retail. After the sales of two French properties in the first quarter of 2022, the portfolio comprises only shopping centers. The spread over our four countries is as follows: Belgium 15%, France 21%, Sweden 21%, and Italy 43%. Next to a good diversification over four countries, our shopping centers are again well spread in those countries and are located in wealthy areas like, for example, northern Italy or close to the Swiss border near Geneva or in the wealthy catchment of Woluwe Shopping in Brussels. This slide provides the maps of the four countries showing where our 24 shopping centers are.
In my introduction, I said that the company showed a strong operational performance, and here you see an overview of all the important operational metrics for the year which underpin that statement. I will comment in more detail on each of these metrics in the remainder of this presentation. The sales in the stores of our shopping centers in 2022 have been very strong compared to 2021, but also compared to the pre-pandemic period in 2019, with Belgium and France just above the levels of 2019, but Italy and Sweden well above these levels. We are very encouraged by the latest available turnover numbers in our stores, which are the January and February 2023 numbers, showing even an overall increase of 14% for the portfolio compared to the January and February numbers for 2022.
Compared to the pre-pandemic levels of 2019, the increase was 10%. If we look at the various sectors and compare the turnovers for 2022 to 2021 and also 2019, we see that nearly all sectors have at least achieved their 2019 levels, with some clear winners, which are food and beverage, health and beauty, gifts and jewelry, sports, home goods, and books and toys. We are very pleased to see that all sectors increased their turnovers compared to last year. We are now able again to report a like-for-like rental growth for the portfolio and for the four countries, as we always calculate these growth percentages on the basis of 12-month data. We compare the tenancy schedule as per the December 31st, 2022 with the tenancy schedule as per December 31st, 2021.
We compare two photographs. The reported figures include the impact of indexation, turnover rents, vacancies, and the leasing activity, but exclude the impact of acquisitions, disposal, development projects, and COVID-19 rent concessions. You will not be surprised to hear that the driver for the rental growth was indexation. The indexation for 2023 is for most countries clear, and we are applying the indexation figures included in the table for 2023, which we show on this slide. Although the indexation differs among our countries, the average indexation for the entire portfolio is assessed at 8.7%. In Italy, the indexation is the highest with 11.3%, followed by Sweden at 10.9%.
For Belgium, it is more difficult to calculate the indexation for 2023 as every month those leases which started in that particular month are indexed using the index for that month. In that case, we only know by the end of the year what the indexation invoiced and to be invoiced was. We used an estimate of 3% based on our expectations about what the index will be for the rest of 2023. The main difference with the average indexation applied in 2022 was, which was 5.6%, is the fact that in 2023 the index to be used will be clear of energy prices. This is the result of a rule introduced by the government of the Brussels region in December 2022.
In France, the indexation is also somewhat regulated as the government introduced a cap at 3.5% for small-sized companies which will be applicable for about 10% of the tenants of our French portfolio. We therefore expect to apply a blended 4.2% for indexation in France. The indexation is expected to contribute to the rental income for 2023 for a maximum amount of approximately EUR 14 million, taking into account the restrictions and rules and regulations which I referred to. As the occupancy cost ratios for our tenants are low in comparing it to the industry and on average well below 10%, the rents will remain affordable also including the indexation. For France and Sweden, the indexation for the first quarter 2023 has already been invoiced and collected.
In Italy, most of the billing of the indexation for the 1st quarter will take place in the 2nd quarter of 2023. So far, we have not received any pushback from tenants on the indexation bill, but we cannot exclude that there may be cases later this year. As you can see, the company is in principle a natural hedge against inflation thanks to the indexation. We are still well-positioned to lease our retail space to attractive tenants under sustainable conditions and at affordable rent levels. Introducing new tenants and new concepts of existing tenants will ensure that our shopping centers remain attractive for their customers and continue to have their purpose and stay relevant in their catchments. We are proud to be able to report that on 255 relettings and renewals, an average rental uplift of 5.4% was achieved.
These lease transactions reflect 13% of the Minimum Guaranteed Rent of the portfolio. We were able to attract new tenants with our 81 new lettings achieving an uplift of 6.9%. These new deals were concluded under normal lease conditions and lease terms, so there were no short-term leases. This leasing activity is continuing with already 37 new leases signed in the first two months of 2023, achieving an average uplift of around 6.4%. Low vacancy is usually a good indicator of the quality of the properties. Over the last 10 years, we have reported vacancy rates in our property portfolio ranging between 0.3% to 1.8%, and we continue to do so. The average for the last 10 years was 1%.
The EPRA vacancy rate remained very low at 1.5% in December 2022. That was for the entire portfolio and the same vacancy rate we had in June 2022. Now that turnovers have normalized and rent concessions are not applicable anymore, we can also report the occupancy cost ratios for all countries and for the entire portfolio. The company has always been known for its low occupancy cost ratios, and we are therefore pleased to report a 9.2% occupancy cost ratio for our portfolio as per 31st December 2022. This percentage is still one of the lowest in the industry and implies that the rents are affordable for our tenants.
If we look back some years before the pandemic, we reported in 2015 8.1% for the portfolio, just before the pandemic started, we reported 8.9%. Our current overall OCR is almost at pre-pandemic levels. The rent collection is back to normal, which is evidenced by a rent collection rate of 98%. That's 98% of the invoice rent for 2022, which is much better than the rent collection levels for 2021. The rent collection for the first quarter of 2023, which already stands at 94% of the invoiced rent, is also evidencing that the rent collection is back to normal, bearing in mind we're still in the first quarter. Please also note that we have returned back to invoicing quarterly in advance in most cases, and are using direct debits to collect the rents.
Monthly payments and payments in arrears are only applicable in individual cases where we wish to help struggling tenants. After the pandemic, we have been very active to expand the food and beverage sector with a range of new brands, concepts, and formats. You will find on this slide the projects which we completed in Fiordaliso and Carosello in Italy and in our Shopping Etrembières shopping center close to Geneva. You can see also the ongoing project in our shopping center Valbo in Sweden, which will be completed in the autumn of 2023. The pandemic was also a catalyst for the rapid growth in lifestyle fashion, including important brands such as adidas, Nike Store, JD Sports, Foot Locker, Courir, and Snipes. Gyms and fitness centers took units in France and Sweden and are expected to be introduced in three of our Italian shopping centers.
Another leasing trend is the value retail sector, not surprising with household budget under pressure from rising inflation and increasing energy costs. This discount sector is an important part of the tenant mix inside shopping centers, and spread over a number of sectors like home goods, health and beauty, and fashion. On the slide, we list a number of brands we recently introduced in our centers. There is a wide range of other brands which entered into our shopping centers recently, and here you will see some examples. This is the moment to hand over to Peter Mills, who will discuss in more detail our property portfolio and will report on our environmental, social, and governance strategy and performance.
Thank you, Evert Jan. Well, overall, the property valuations decreased by 0.3% compared to December 2021. Although the portfolio generated higher net operating income, the marginal decrease in valuation was due to the adoption by the valuers of higher initial yields or exit yield, depending on methodology and higher discount rates. The higher yields were a reflection of an uncertain economic outlook, higher interest rates, accelerating inflation, and the war in Ukraine, which together resulted in an investment market with a reduced level of shopping center transactions, particularly in the second half of the year. Although there was more consistent activity in other retail segments, particularly external retail parks and retail property with a significant grocery component. As a result, the overall EPRA Net Initial Yield has increased from 5.1%-5.5% over 12 months.
We have again provided this valuation split, separating our five flagship shopping centers, which are illustrated here grouped together. These assets are located in their respective countries' capital or main economic cities and are all important shopping centers in their national context. I Gigli outside Florence is one of Italy's largest shopping centers by footfall, while Fiordaliso and Carosello are two of Milan's three dominant shopping centers. Passages du Havre is a prime established central Paris gallery, while Woluwe Shopping in Brussels is still regarded by the market as one of the best shopping centers in Belgium as it has been over the last 50 years since it first opened. These flagships increasingly attract a broad international tenant base, and together represent around 45% of the portfolio at a much larger assets with an average individual value of over EUR 400 million.
They are lower yielding at around 5.2%. The remaining 19, mainly suburban hypermarket- anchored shopping centers, have different and more defensive characteristics with over 60% of their floor space devoted to a broad range of essential and everyday retail, including groceries and an increasing range of services supporting their more local communities. They're strategically located in important provincial towns and cities with wealthy primary catchments, and they have a strong representation of national, regional, and local tenants in all sectors, including the growing value retail sector or discount sector. These assets comprise around 55% of the portfolio and are smaller assets with an average individual value of around EUR 100 million. They are higher yielding at 5.8% overall.
During Q1 2022, we sold Les Grands Hommes in Bordeaux for a price of EUR 22.5 million, and our 50% ownership of the office and residential parts of Passages du Havre in central Paris to our joint venture partner, AXA, for a price of EUR 57 million. We remain the asset manager and owner of 50% of the retail gallery in the main building of Passages du Havre, with its GLA of 14,000 sqm , including the main anchor, Fnac, and around 40 tenants. These sales were completed at or very close to their latest valuations and formed the final parts of the company's EUR 200 million disposal program.
Our only current and committed project is in Sweden, where we are completing the final phase of a project at Valbo, located outside Gävle, the last of the seven Swedish shopping centers we acquired in 2018. The objective of the project has been to improve and broaden the tenant mix, upgrade the property and its installations to a modern standard, while improving customer flow by creating a single loop and a new entrance from its main car park. The project has been executed in three phases due to the complexity of keeping the center open and in full operation during the works. The first two phases are already completed and provide new stores for tenants including H&M, New Yorker, NORMAL, Hemtex, Rituals, INTERSPORT, and Deichmann, and included the refurbishment of the malls and the public areas.
The last phase is well underway and will provide a new main entrance, new facades, signage, and seven shops, which will open in the autumn this year and are all pre-let to further national brands in F&B and consumer electronics. At Woluwe Shopping in Brussels, we resubmitted our planning application last year for a 7,800 square meter retail extension and apartments above, following some modifications to the scheme in consultation with the municipality and region. The indications are that we should get planning consent from the region during the first half of this year. Meanwhile, the 47,000 square meter shopping center with its 130 shops continues to perform very well, and its tenant mix was further strengthened last year with the summer openings of Fnac, Mango, and A.S.Adventure.
Our ESG and business strategies remain carefully aligned so that business decisions can be approached with a long-term view in order to evaluate both their environmental and social economic impact and the future demands and expectations of our customers, tenants, and employees. Our approach is articulated around these three strategic pillars shown on the slide, Be Green, Be Engaged, Be Responsible. The company has been externally recognized by third parties on its ESG strategy and performance, and maintained its global real estate sustainability benchmark four-star rating, improving its GRESB score compared to 2021, while maintaining its A GRESB disclosure score for the ninth consecutive year. The company was awarded the EPRA Financial Best Practice and Sustainability Best Practices Recommendations Gold Awards in 2022 based on the review of its 2021 annual report.
Effective from September last year, the company is also now included in both Euronext's AMX and AEX ESG indices. Be Green forms the foundation of our operations and provides us with the opportunity to make changes that will reduce both our imprint and operational costs as we focus on the transition to a low carbon economy with the target to operate carbon neutral by 2030. To reduce our carbon emissions, we have set a reduction target for our Scope 1 and two emissions to achieve zero emissions by 2030 by improving the environmental quality of our shopping centers and by implementing standards and technologies to improve energy and water efficiency and waste recycling. This includes reducing energy consumption, procuring renewable electricity, and where possible, generating energy ourselves on-site through further solar panel installations, rock heating, and groundwater heating and cooling.
As part of our environmental policy, the company uses a comprehensive range of environmental criteria incorporated in the BREEAM certification process in order to standardize and improve the sustainable quality of our buildings and their management. In February last year, we completed our initial certification program with all our 24 shopping centers being BREEAM certified three years ahead of the original target date of 2025, and with 23 receiving the scores very good or excellent. Last year, the company took proactive measures to assess the risks associated with climate change. We conducted an extensive analysis of the impact of climate-related risks and opportunities on our business and operations with the help of both internal workshops and external technical advisors. Our analysis included a comprehensive evaluation of both physical and transition risks, and we will be incorporating the findings into our business plans.
Moving forward, we will be providing greater transparency by aligning our communications on climate change risk with the TCFD guidelines. Our 2022 annual report will provide further information on our climate change risk assessment and how these risks will be addressed within the context of the evolving geopolitical landscape, inflation and rising costs. Our teams also took out several initiatives in conjunction with its tenants to reduce energy consumption costs in the shopping centers over the year. That included reducing indoor temperature, reducing operating hours of heating, reducing light use and intensity, and improved use of timers and motion sensors. We remain fully engaged with our customers and tenants, and our shopping centers continue to form an integral part of their local communities, bringing improved social and environmental values.
The company aims to create shopping centers that go beyond just being retail destinations, but rather serve as social spaces that are essential to the local communities in which they are situated. By meeting the everyday shopping needs of our customers and their communities, we provide a safe, enjoyable, and service-orientated experience. We engage regularly with our tenants, customers, and communities, taking into account their feedback to ensure that our centers remain relevant and adapt to the changing retail landscape. Through constructive engagement with our tenants, we exchange ESG ambitions, targets, and responsibilities, including green lease documentation, which is being increasingly used in all our markets. Last year, the company also further expanded its Eurocommercial Retail Academy, working together with our retailers to improve sales technique and customer service, and therefore the overall shopping experience.
The Retail Academy is already well established in all seven Swedish shopping centers and the 3,600 staff employed within. Tenant response has been very positive, and therefore the academy will be rolled out in Italy and France with the objective to have it fully established in at least 15 shopping centers by the end of 2023. Eurocommercial is also making further progress with its sustainable finance goals, formalizing its green finance framework. As part of its core aims, the company is entering into new green and sustainability-linked loans, replacing its expiring borrowings. The existing EUR 159 million loan financing the shopping center and retail park of Fiordaliso has recently been qualified as a green loan as the relevant proceeds are used to finance this green asset.
The company has so far entered into five sustainability-linked loans for a total amount of EUR 216 million. Three of these loans, for a total of EUR 117 million, are also green loans. The company has in total four green loans for an amount of EUR 386 million. I will now hand over to Roberto Fraticelli for the financial review.
Thanks, Peter. Hello, everybody. Let's start with financial performance. This slide gives you a quick overview of our performances here. You can see the income statement, the financial position in values and also per share. As you can see, both net property income and direct investment result increased significantly compared to 2021. This is mainly due to the increase in rental income, thanks to the indexation and the renewals and relettings, and thanks to the elimination of the COVID-19 concessions which were granted in 2021, which we'll see more in detail in the next slide. Net interest expenses were slightly lower than 2021. That's mainly thanks to the sale program, which led to a reduction of the borrowings. Moving to our financial position, property investments have not changed that much.
The lower investment values were mainly related to the sales and to the effects of a weaker Swedish krona. This is also reflected in the reduction in net borrowings. The results per share show how notwithstanding the 5.6% increase in the number of shares, value has held up pretty well. The significant uplift in the total investment results, going up from EUR 2.06 per share to EUR 3.82 per share is mainly attributable to an increase in both the direct investment result and indirect investment result. The increase in the indirect investment result is mainly related to a EUR 111 million increase in the value of the derivatives, compared to the same period last year, which was partially offset by EUR 21 million increase in the deferred tax position compared to the same period last year.
In the financials, here you see an overview of the most important financial data. The total value of the net borrowings at 31st of December 2022 decreased by EUR 130 million to EUR 1.55 billion from EUR 1.68 billion at the 31st of December 2021, thanks to the property sales and the weaker Swedish krona. As you can see, our loans are spread among more than 15 banks in different countries, with Dutch, German, and Italian banks shares above 20% each. In April 2022, we entered into a new 5-year loan of sixty-six and a half million euros with ING to refinance two existing loans on the Curno shopping center in Italy.
In June 2022, we entered into a new three-year loan of EUR 50 million with ABN AMRO Bank, refinancing existing loan of the Cremona shopping center in Italy. These new loans qualify as green loans and also sustainability-linked loans. In May 2022, the Italian joint venture, Galleria Verde, which is 50% owned by Eurocommercial, signed a new five-year mortgage loan of EUR 21.5 million with Banca Popolare di Milano to finance the recently completed gallery extension at the Fiordaliso shopping center in Milan. The available resources at the 31st of December 2022 were EUR 71 million in cash and EUR 161 million in available facilities.
Of the loans maturing in 2023, we have already refinanced an amount of 1.2 billion SEK, which is around EUR 110 million with a three-year green loan with Nordea Bank Abp on three properties in Sweden. We have also started discussions for the refinancing of the remaining long-term loan maturing end of September 2023, which is around EUR 62 million. What concerns long-term loan maturities, as you can see from the table, most loan repayments are foreseen in the years 2025 and 2026. In 2024, we have maturities EUR 484 million. The overall interest rates, including margins at December 2022, increased slightly to 2.4%, also thanks to our conservative hedging policy, which we are gonna see now.
Almost 86% of our interest costs are hedged, mostly through interest rate swaps, but also through a number of fixed interest coupon loans. The average interest rate swap hedging term is over five years. An increase of 100 basis points in interest rates would therefore only cause a limited increase in interest expenses of around two and a half million euros. The Loan- to -Value ratio, on the basis of proportional consolidation at the 31st of December, after deducting purchases costs, decreased to 40.4% compared to 42.3% at December 2021. Please remember that the group covenant Loan- to-V alue ratio agreed with the reference bank is 60%.
For comparison purposes, our Loan- to -Value ratio adding back purchases costs as per 31st of December 2022 was 39.4%, and our Loan- to-V alue ratio, adding back purchases cost and using the IFRS consolidated balance sheet was 37.9%. ITR. Thanks to the finalization of the sale program and the increase in EBITDA, the Net debt- to- EBITDA ratio decreased from 10.3 in 2021 to 8.9 in 2022. While the Interest Coverage Ratio increased from 3.7 in 2021 to 4.1 in 2022. The direct investment result for the 12 months to December increased significantly to EUR 119 and a half million, compared to EUR 110.6 million for the same period in 2021.
The higher net property income compared to 2021 is mainly related to higher rental income from the properties, thanks to indexation renewals and relettings, and that's around EUR 8.4 million. The acquisition of the remaining 50% share of Etrembières. The net contribution of EUR 1.3 million, which more than compensated the loss of rent derived from the asset disposal program. Net amount of around EUR 6.6 million. An important contribution was also given by the EUR 7.3 million lower COVID-19 rent concessions to retailers and by the EUR 1.8 million lower bad debt provision. Please remember that these numbers already include all the residual COVID-19 rent concessions to which IFRS 16 was applied, an extra EUR 4.1 million.
The other expenses mainly refer to a higher shortfall on service charges for around EUR 1.2 million and higher company expenses for around EUR 1.1 million. Last but not least, our beautiful EPRA NTA bridge. This slide gives you a quick look at the relative changes in the EPRA Net Tangible Assets per share from the EUR 40.1 at the end of 2021 to the current EUR 38.6. The two major movements, besides of course, the direct and indirect results, are related to the EUR 1.50 dividend per share in cash and to the EUR 0.55 effect of the mandatory scrip dividend in July 2022.
Moreover, we have a variance of EUR 2.91 per share, which is related to the adjustment of the fair value of the financial instrument, which is included in the indirect investment result, but has to be excluded from the NTA calculation. Thank you very much. Now back to Evert Jan.
Thank you, Roberto, for presenting all the figures. AG Insurance very recently exercised their put option under the shareholders agreement we have with them since September 2019, when they contributed part of the Woluwe Shopping into our Belgian subsidiary, who is the owner of the Brussels Shopping Center, and they did that in exchange for a minority stake of 25.6%. We will acquire this minority stake in April 2023, so that we will own 100% of Woluwe Shopping. The price to be paid is the exercise price of the put option and is based on the current net asset value of the shares in the Belgian subsidiary. The price amounts to EUR 69.6 million and will be funded by available cash and credit lines.
This acquisition will allow us to create, in due course, a 50/50 joint venture for Woluwe Shopping with a long-term partner. In the press release, we included the dividend proposal, which we will table at a general meeting scheduled for Tuesday, June 13th, 2023 , for approval by the shareholders. Last year, we introduced a new dividend policy for the company, which implies the payment of an interim dividend in January and the payment of a final dividend in July. For the interim dividend, we aim to pay 40% of the total cash dividend paid in the previous financial year. The new dividend policy also has a clear payout ratio range and a payout ratio target for cash dividend. The company's payout ratio for cash dividends will range between 65% and 85% of the direct investment result, but with a target of 75%.
A mandatory scrip dividend may still be distributed if that is necessary to maintain the company's tax status in the Netherlands, the FBI regime, and/or its tax status in France, the so-called SIIC regime. Today, the company's results are not directly affected by the war in Ukraine and the sanctions against Russia, but that could still change would the conflict escalate further. In particular, short term interest rates have spiked in the last couple of months and this could affect consumer spending in due course. If consumer spending would start to subdue, some tenants could be hit in their business and in that case, we cannot exclude some insolvencies. We therefore have to remain cautious and propose to increase the total dividend from EUR 1.50 paid in 2022 to a total dividend to be paid in 2023 amounting to EUR 1.60.
We sit at the lower end of the payout ratio range, which is in fact at 70%. This proposal implies a final cash dividend of EUR 1 per share. We will also offer the shareholders the option to elect for a dividend in shares instead of the cash dividend of EUR 1. As these shares will be charged to the fiscal share premium reserve, there is no Dutch dividend withholding tax due, which may be attractive for those shareholders who cannot obtain a reduction or a credit for the 15% Dutch dividend withholding tax. The ex-dividend date will be Thursday, 15th June 2023, and the dividend distribution date will be Friday the 7th of July 2023.
Assuming no major deterioration of the macroeconomic environment and in particular further spikes in interest rates, we expect the direct investment result for the year 2023 to be between EUR 2.25 and EUR 2.35 per share. I would like to conclude this presentation with a statement that as management board, we are truly thankful to all our teams in the various countries for their hard work and their continuing commitment to our company. I will now hand over to the operator for questions.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. If you wish to cancel your request, please press star two. Please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. You may also submit your question via the webcast. Just type in your question and send and click send. We will pause for just a moment to assemble the queue. Our first question comes from Inna Maslova from Bank Degroof Petercam. Please go ahead. Apologies, we are experiencing some technical issues. One moment, please. Inna, we can't hear you. We'll move to Francesca Ferragina.
One moment, please. Apologies. We are experiencing some momentary technical issues on the call. Please hold on. Inna Maslova, please go ahead. Your line is open.
Hi. Good morning. Can you hear me?
We can hear you, Inna. We can hear you.
Excellent. Thanks. Good morning everyone, and thank you for taking my questions. A couple of them, if I may. The first one on your 2023 guidance. I'm just trying to piece some things together because your guidance effectively implies either a small decline for 2023 or an increase of up to 3%. If I look at it all together, in terms of the remaining impact of disposals from Q1, the upcoming acquisition of the stake in Woluwe, as well as the indexation that you're guiding for, could you perhaps give us a little bit more of a color on how your guidance is constructed? Because I—w ell, on the basis of the numbers you have provided, I would have expected a stronger year-on-year increase.
Well, thank you, Inna, for this question. Let's say the main uncertainties, I think which we all face today is where will interest rates be? Of course, we are hedged for considerable percentage, but we still also have floating debt. Seeing the recent spikes, and of course, we have to see what the ECB does further. We cannot rule out, of course, that short-term rates could go up further. Then there is an effect. The other effect, it's really again an external factor, is the Swedish krona. We saw this year, or let's say last year, 2022, a decline in value, a weaker Swedish krona, almost 8.5% it was.
Of course, that can rebound, but it can also maybe temporarily weaken further. Taking that into account, we ended up with this guidance, Inna. It is particularly the external factors which made us maybe then if from your perspective a bit more cautious, but that's the reason.
Okay. Thank you. Just maybe a follow-up question on that. In terms of indexation, if I, if I recall correctly, most of the contracts you are indexing on the first of January. Is that, is that correct to say?
That is correct. Belgium is different, as you know. The other countries, it is all happening first of January. We also explained a bit how it works in the different countries. Basically, France and Sweden, we already index in the billing. Obviously, every quarter you also have billed this extra piece of indexation. Italy, we're about to—
Invoice.
Bill— to invoice, because there we have the index, formal index number a bit late. It's not possible to already take the indexation into account when you bill the first quarter. That is now happening together with the second quarter.
In terms of the feedback that you have so far, so more specifically then for the markets where you passed on higher indexation, like Sweden, there has been no pushback from tenants so far in terms of paying that amount.
No, I mean, Sweden is actually a very good example, given also the very high collection rate that the indexation is paid. There we don't have pushback, reflected by payments. Of course, there are sometimes individual cases where in the intersection of both parties, and you could say, well, maybe we can do with a commercial transaction whereby you might say, "Okay, this indexation, we accept a bit lower, but then in exchange for a longer lease," or something like that. These are really only a few cases where it makes sense for both of us to then agree an extension. No, all the indexations being billed and being paid in Sweden.
Okay. Clear. Maybe, just a couple of questions on Woluwe, and I will pass on my turn. Would you mind telling us what the implied yield is? Because you have mentioned that the acquisition of the 25% stake happens at the latest NAV.
Yeah.
What is actually the implied yield on the acquisition of that stake?
Well, let's say it is the net asset value of the share. It's not a property transaction. As you can imagine, when we entered into the shareholders' agreement in 2019, it is an agreement which you, yeah, basically see a lot in the case of a joint venture. We said, you know, if there is the exercise of a put or an exercise of a call, we also had a call, then we will just use the net asset value of the shares, which obviously implied the net asset value and the fair value of the property, but also the other items on the balance sheet. That's a price formula. Let's say there is no yield in this case applicable.
roughly speaking, if we compare, because at the time when you closed the transaction in January. The acquisition yield was around 4%, and it is now in the books at a net yield of 4.6%.
Yeah.
Roughly speaking, would you say it's more in line where the current valuation of the asset is?
Yeah. Yeah. Because let's say that's reflected, the fact that the value of Woluwe is now different from what it was in 2019. That obviously has an impact on the price of the shares in the end as well. Yeah, the fair value of Woluwe today has an impact on the price of the shares. That is correct.
Okay. Then last question, just on Woluwe. Considering the fact that the cost of financing is rapidly changing, what is kind of the minimum yields on that you are still looking to do on the extension of Woluwe, assuming all permits are, of course, cleared and you can commence construction relatively quickly?
Yeah. Let's say, we have, of course, learned from being in Brussels that you have to be patient. Our position at the moment is we are, as Peter said, you know, we are expecting to receive the permit. Let's see and then take the next step. Once we have it, I think then we are in a position to look at all the ingredients for the extension, which obviously means construction costs, but also means, you know, appetite, pre-letting, etc. The timeline, I mean, we, as you know, in Brussels, if you have a permit, there is still the possibility for certain parties to oppose, to appeal.
I think what we learned from Brussels, it's step by step, and that's probably all I can say for now. We first have to see what is exactly possible once we have the permit, I think.
Very clear. Thank you very much, Evert Jan.
You're welcome, Inna.
Thank you. Now we'll take the question from Francesca Ferragina from ING. Please go ahead.
Cool. Can you hear me?
Yes, we can. Please go ahead.
We can hear you, Francesca.
Looking at the first months of 2023, you mentioned rent collection of 94%. I was wondering, how is this rate compared to a normal pre-COVID year, for example? So far, looking at the first months of 2023, have you noticed any sign of weakness from any particular category of tenants? Any request for rescheduling the payment timing? Have you noticed any different payment behavior? You mentioned some insolvency risk during the call. What type of tenants do you expect to suffer the most in the coming months?
Well, Francesca, on the rent collection, yeah, for this quarter, we're still in this quarter, we actually see absolutely a normal pattern which we had before the pandemic. Of course, let's say we still, as I said, there are also always maybe some individual cases where you said, you know, to help you can pay monthly or there is maybe a payment in arrears. It's a normal pattern, so I don't expect anything unusual when this quarter is behind us, which is still one half week to go. And in terms of, I probably have to say, and then I look at Roberto and Luca.
In Italy, obviously, we don't have the full test yet because we Well, we are invoicing, but let's say, the second quarter will be an interesting quarter because there, of course, yeah, let's say Italian tenants could respond to that. I mean, Roberto.
No, that's true. I mean, Francesca, as you know, let's say in Italy, we invoice the indexation in Q2 related to Q1. That's because, of course, the indexation is known only on the 16th or thereabout of January. What we have seen so far, the tenants have paid regularly. What's also an important moment is the service charges reconciliation. I think that's maybe a positive because, of course, we had accrued for a higher amount of service charges that we actually believed would have to be charged to the tenants. Unfortunately, let's say the final prices that were paid for the energy were lower, let's say, than the expectation. That gives also a little bit of space in the financial situation of our tenants.
To be fair, I mean, we see that, of course, also in the turnovers, there has been an important increase in turnovers for the tenants, so there should be liquidity. Of course, as you know, we Italians like to have a little fight. There will be some negotiations when we start invoicing the Q2 2023, which then includes part of the indexation for the Q1 2023. We do not expect anything outside the normal range, to be fair. You know, there will be usual negotiation, but not expecting a war. I'd say that was maybe clear, Luca, when we had the discussions also at the with the Italian authorities.
You know, at the beginning, we were expecting measures as they were taken in France and Belgium, to reduce the indexation to be applied. There was nothing of that. There were three or four articles in the Italian news. For the rest, there was really no uproar or people shouting or crowing or yelling that, you know, it was impossible to pay the rent. We'll see.
Yeah. Francesca, your question about tenants and insolvencies, I mentioned that because so far what we have seen is a few examples in France, really. You know, it's not that we are foreseeing this to happen also in other markets, but in France, and that has hit the newspapers, of course. Had the sort of mid-market fashion retailers who have a difficult time. Some of these are in bankruptcy or being sold by the administrators. That kind of tenants we have experienced to struggle. We only have a few units really, where—t herefore the exposure is very limited. That's something which we have noted and therefore I mentioned it in my speech.
Still talking about inflation, do you think that the inflation that you will pass through for 2023 will also drive some change in the tenant mix?
Well, let's say so far, it hasn't in Sweden. I don't think. Let's say Belgium is also an interesting one because we see the inflation in Belgium, it's still too high, but coming down quite rapidly. As you can see in our sort of estimate, you know, we now have penciled in 3% only, which you could say is actually relatively low compared to other countries. I don't see that, you know, the indexation and also given the forecast that, you know, inflation should come down, that by our indexation, we kick tenants into the wrong direction or tip them over the wall so that they get bankrupt.
Of course, we also like the fact that, yes, there is now a one-off, which you could say is nice, that it is in some cases double-digit indexation, therefore quite an substantial increase in rent. I think it is much more healthier for the market if there is some indexation, but not at the levels we have seen for this year. I do hope that, you know, we get in a bit more normalized situation, which also will probably help us then on the interest expense side, because obviously, had the current very high interest rates. Short term, it is all very unusual. I mean, we are looking constantly at an inverse interest rate curve, both for the euro and for the Swedish krona.
Thinking that the latest re-letting and the new leases that you have recently signed, is anyone with passing of the contract, for example?
Sorry, Francesca, you were fading in your last two sentences. Could you repeat it, please?
Thinking of the latest contract that you signed.
Yeah.
A term of the negotiation, of the conversation that you had with tenants, for example.
Yeah. What sort of are the themes, the items to be discussed with tenants? I mean, Peter, I think in the latest deals we're doing and it's probably still—
I mean, to give you an example, I mean, in Sweden, just since December, so that they were in the update, we've just provided the 6% uplift we've achieved on new lettings. That included six leases we signed with Stadium, the number one sports retailer, in that country. Where we've extended the term and got a nice little re-rental uplift with them. I think in terms of tenant mix and changes, I mean, what we saw in the numbers last year we gave was there was nothing too obvious in terms of the new lettings we did, which was about 56% of those deals a re-merchandising mix, there was some conversion of fashion, mainly to expanding health and beauty, home goods, gifts and jewelry.
From a sector point of view, food and restaurants has recovered very well. We saw that in the slides, with the development of many new concepts and brands and expansions of existing ones. That's been a growth area for us. I think we've really, because under the circumstances, we've really tried to improve tenant mix, turning them into sectors, expanding sectors, and using the opportunity to do so where the lease is renewed. I don't think there's been an enforced change. I think it's been an active change from the leasing teams that has been the theme.
Of course, in the first two months of this year, I'll just add what we have seen and was in Evert Jan's presentation, there was a substantial increase, which you mentioned in terms of retail sales, both compared to the two months of last year, which was slightly Omicron affected, but 10% up compared to January, February of the pre-pandemic 2019. At a time where footfall has also been increasing this year, which you didn't mention. Our footfall has gone from 90%-93% of 2019 levels and was 10% up on the same two months last year. It's both footfall and sales that have been developing even in the first two months.
We haven't seen March yet, and we won't get March until the middle of next month. We've got full visibility of January and February, and so far, no indications of stress.
That's clear. Many thanks.
Thank you.
Thank you, Francesca.
Our next question comes from Rob Virdee from Green Street. Please go ahead.
Morning, everybody. Quick couple of questions. First one's on the secured debt market and how bank financing is at the moment. Just wondering what the spreads you're seeing are to risk-free and how those conversations have changed or how much those spreads have moved in the last few weeks, given everything that's happening.
Rob, you're very mean. I mean, that's absolutely a great question. Let's say what we actually did is yesterday, we signed the refinancing with Nordea of the SEK 1.2 billion. What we're seeing is the discussion with the banks is still normal, meaning that the message that we receive is, you know, "You are a long-term client, we are happy to deal with you, so we're happy to go on. You know, we can renew the facilities. There is space, if you need some more." New clients, that's maybe a bit of a different story, because of course it's a different proposal that has to be brought to the committees. That's if you want a bit the feeling that we are having at the moment.
Of course, there's been a deterioration in the past weeks. I'd say this deterioration has not officiated yet the discussions that we're having with the banks. Let's say as far as we can tell now, let's say it's sort of business as usual. What's very interesting to see is how this will develop in the coming months because of course, you know, is this the start of a banking crisis or is that just something we just finished? You know, it's a bit of a question and, you know, it would be great to have a crystal ball to see the effect. If you talk about margins, I mean, margins have picked up a little bit from last year, but in the order of 30, 40 basis points.
If you go to the market now, I mean, in these coming months, I think that'd be a bit more complicated. Still really depends from bank to bank. You know, some of them have a completely different approach. Some banks look at it like, it's Armageddon, and other banks say, "Well, you know, it's an interesting market for us to continue to do business." Is that an answer to your question, Rob, or?
No, of course it is. I appreciate you don't have that crystal ball. It's just very interesting how it's moving. That answers sufficiently, or as much as you can do.
Rob, I think it's fair to say that in the deal we just announced in Sweden, you know, we have worked on that already for some time, Roberto and his team. In principle, you know, we, I think in terms of pricing, we agree that actually, already, again, in principle, before the year end. Since then, you know, despite all what happened, you know, we didn't have to sort of look again at the pricing or renegotiate. It was a very stable journey, which is good. One of the things Roberto is doing is, we're not waiting until the last minute to sort of start talking about an extension or renewal. We're, of course, very conscious of our maturity schedule. It just also takes more time within the bank. You better start on time.
Completely agree. The second question was more on the operations. Obviously, we can see that you've told us that indexation is being passed through with much, without much pushback. I'm more wondering about how you see your tenants' margins. Are they managing to push on that inflation themselves, or are they being squeezed? This just comes back to your one comment about potential of some more insolvencies maybe. How are tenant margins?
Well, I think, Rob, we always, and we have a big database and monitor the turnovers of the tenants very closely. We have them on a monthly basis. Obviously, that doesn't tell you the margin. So that's a more complicated analysis. All what we can say so far is obviously the turnovers together with footfall, together also with collection rates, is probably a good sort of points to have on your dashboard to see what's going on. Again, let's say in our experience so far, hardly any pushback, but that could change. I mean, we don't know what.
Therefore, it's also interesting to see how the consumers will behave further in the year, now that the interest rates are higher. All what we can see probably a bit is that, because then you look really at turnovers, that, let's say in areas like the groceries and also food and beverage, the restaurants, that they're really, you know, the prices are higher and apparently those tenants are able to pass the inflation on to the consumers. I think we all experience that when we do our everyday shopping, Rob, or eat at a restaurant.
Of course. And just one final one, if I may. Just with indexation so high, I'm hearing some continental retailers or landlords are structuring their contracts slightly differently with floors and caps instead of just a normal indexation. Is that something that you guys are considering or are doing at the moment?
No. We're actually in the lease negotiations, you know, it's all about, of course, rent levels do matter, but it's not that we suddenly have a new element, caps on them, you can talk about caps on rent, caps on service charge or what have you. No, I think it's a normal lease negotiation, Roberto.
That's true, Rob. I mean, I think it also depends on the quality of the shopping centers. I mean, as a negotiation, you always try to introduce caps. You know, at the end, when you then finalize the negotiation, if you have a weaker position, because maybe your shopping center or your store is not providing for great footfall and allowing great turnovers, then maybe it's a more difficult negotiation. So far, you know, we've had some requests, but we thank them for proposing this suggestion, but then we went on with the normal contract.
I think, Rob, that, you know, retailers, are probably more interested if they can achieve that, and that's not the case with us so much. You know, that they want to sort of, turnover only rent. That's probably still what they're looking for more than trying to introduce caps or so. Anyhow, it's not something we experience. I mean, Peter, comment on lease—
Well, one or two retailers in Sweden, the big food retailers, each in particular, have always had a percentage of the indexation 75%-90%. That's really the only exception. One or two are on a turnover rent only clause. We have some H&M examples, Clas Ohlson also in one in Sweden, which obviously has a different effect. No, I mean, generally, the index is there are very few caps.
All very clear and helpful. Thank you.
You're welcome, Rob.
Our next question comes from Steven Boumans from ABN AMRO ODDO. Please go ahead. Your line is open.
Hi, thank you for taking my questions, of course. I have a couple of questions on Woluwe and next on Sweden. First, the Woluwe stake acquisition. Do I understand it correctly that the acquisition was regarding the entity primarily holding the department store, and it was at the initiative of the seller? I was wondering why they would execute a put option now. Lastly, could you please comment on the performance of department stores in Belgium and specific within Woluwe given, yeah, the department stores elsewhere are having difficulties.
No, thank you, Steven, for for the questions. On Woluwe, yes, let's say the minority stake of AG, that was the result of their contribution in September 2019 of the part of Woluwe Shopping which where, you know, department store is renting the space. That is correct. Let's say they exercise their put. They were entitled to do so under the shareholders' agreement. An exit is always normal when you, when you have a JV at some point. To have people should have the opportunity to exit if they want to do that. In this case, there was a put, as I said before, in this conversation.
We also had a call, and it was, let's say their decision to exercise the put and therefore we take over their share in April. That's fine with us because obviously, it complicated a bit the total accounting for us with the minority stake to report. You know, we have to share the income with them in Woluwe. There was a price formula which we discussed before, I think, when there were some other questions which basically takes into account, you know, the fair value of Woluwe today. You know, that's different than it was when we started. No, for us, it's fine to take it on board and it's then a much more clearer position.
We have 100% of Woluwe, we can talk to interested parties for a long-term joint venture. Clearly also when there is the permit as well on the table, then I think we have a much cleaner proposition for long-term investor on Woluwe than than it was. In terms of your question about department stores and how they're doing, let's say, of course, we can't see what the INNO stores are doing overall in Belgium, but I think Woluwe is still a nice location for them. It's in their top three or five stores in Belgium. Of course, we also read the newspapers and, you know, they're part of a bigger group of department stores.
Yes, you know, the future of the, you know, department stores in Belgium is an interesting question because I don't know, maybe that group might be sold to other parties or whatever. Yeah, that's for us, of course, not something we can really comment on because we don't know more than you know, reading the papers.
Okay, clear. Like you say, the, you know, within Woluwe that's doing fine. That's now a day you don't see any risks there.
Let's say, of course, you always have to bear in mind that if your tenant is part of a group, you have the shop can maybe do very well. That doesn't necessarily mean that you're safe as a landlord. If the group has a problem and therefore may have to close overall or stop business, then obviously we are also affected. If you look at store level performance, then, you know, we're happy.
Okay, fully clear. A question on Sweden. Could you comment on consumer spending year to date there? Second question on Sweden, could you help me with your Swedish krona hedging policy? I don't know if that's in place there.
Yeah. maybe Sweden on consumption, Peter.
Yeah. No, I think retail consumption remains very strong. I mean, there's clearly been a lot of government support, both for businesses and private individuals. The private individuals receive their subsidies in February. They'll get further subsidies in May. No, I think consumption remains very healthy. They've had very strong growth numbers both last year, which you've seen in the figures and which we've just confirmed for January and February. I don't see any signs of weakness. I mean, clearly there have been concerns about the housing market and high personal debt.
I mean, we tend to see that more perhaps in the very big cities and our provincial portfolio, I think was probably less impacted in that direction, if that was what was leading your question. There was nothing so far. On the hedging policy?
We have a natural hedging, Steven. Let's say it's a balance between assets and loans, and that balance is also interest expenses and rental income. You can think about 35%-40%, which is hedged in that way naturally. Yeah. We have not put in place any extra hedges on the krona.
Yeah, Steven, I can actually just add there that, if you want to also hedge that kind of exposure, we always have accepted, let's say 10, to maximum 50% of the total portfolio, as a currency risk for already for many years. My, let's say our experience is if you want to start hedging the currency, it's one of the most difficult things to do, and you're probably in 50% of the cases right, in the other 50 wrong. We said, "Well, why bother?" We. It's an open exposure, and last year, the krona weakened.
It's probably fair to say if there is a bit more turmoil in markets, et cetera, currencies of smaller countries like Sweden, but also Denmark and Norway probably suffer a bit more in the totality. I'm sure that the Riksbank is very aware of the fact that with this weak Swedish krona, they import a lot of inflation. They will definitely do whatever they can to keep the krona at least in a certain range and prevent the krona for not further weakening.
Okay. That's completely clear. Thank you.
Thank you, Steven.
Thank you.
Thank you. As a reminder, to ask a question over the phone, please signal by pressing star one. We'll now take our next question from Jaap Kuin from Kempen. Please go ahead.
Hi, good afternoon.
Hi, Jaap.
Hello. Hi. I guess the first question, on guidance, I think two sub-questions. So, just to get this straight the guidance includes t he acquisition of the Woluwe stake and can you confirm if there's no disposals or other kind of capital rotation included in the guidance?
The guidance is based on indeed, head of portfolio as it is today and also including, you know, the acquisition of the minority stake, which basically that's quite a marginal effect there because on the one hand of course we have to fund it, huh? This price. On the other hand, clearly the minority stake had also a return on the shares in the Belgian SIR. It is a marginal effect, but it is included in how we see 2023.
All right. The second leg of the guidance, obviously you showed around, I think EUR 3 million of cost increases, year-on-year. Thinking about, you know, inflation still being at peak levels, what type of SG&A and operating expenses increases did you, roughly, pencil in for this year?
We just, let's say, went with the estimate of inflation that we used also for the, for the rental income. Let's say this is based on, you know, what we believe would be, of course, the reflection of the— on the costs of inflation. That's more or less, let's say, what we used. Of course, there is also an impact.
Okay.
Jaap, as you know, in the service charges, huh? The service charges income, service charges expenses, and then there is a delta of the service charges which are for our own costs. That, that's also an effect, you know, related to the inflation.
Sure. Yeah. Okay. Clear. Thanks. One clarification. One, you stated margins 30, 40 bits higher. Could you just remind us about the kind of what, where that leaves the margin on an absolute level?
That's, of course, still, sensitive information, Jaap.
Sensitive. Yeah.
I mean, we are always in discussion with banks, always talking about pricing. I think As Roberto rightly did, he gave a relative comment, but absolute levels, I think that's still a bit in-house knowledge which we'd rather not share.
Of course.
It's not a big increase. No.
Sure. Then maybe more generally speaking then, I mean, if you would give me an estimate of your what we should put in our models from, let's say, the incremental cost of debt for the entirety of 2023. I mean, what can you indicate what the ballpark should be?
Well, I think it's probably much more relevant to look really at market interest rates. I don't think that, you know, the pricing of banks will make a big difference in the totality of expenses. It is absolutely the market interest rates which now make the difference.
Yeah.
No, that's true. That's also the comment before from Rob. I mean, if you look at the average interest rate, that we had, in 2022, it must have been around zero, and just to give you a number. Will the average interest rate be in 2023? Will it be around 2.5% to 3%? This is the really big impact that we're looking at.
Last summer, Jaap, we were looking at a three-month Euribor of -50 pips still. Today it is 3%. That's a huge spike in absolute terms, but relatively, unheard of, I think, in the Eurozone, or at least even if you go back maybe to the Gilts period. I think that's the game changer really.
Yeah, of course. Of course. No. All right. I'll get back to that offline. If you look at a capital allocation. Obviously, there's no secret. You longer term you plan to JV or partner up on Balexert. In terms of timing, obviously, current markets are kind of closed. Is this something really we should forget about for 2023 or 2024 or in your planning, what would be the relevant timing for such an event?
Well, I think, as I said before, it's important that we also have more clarity on the permit. First of all, that we have it finally. Secondly, you know, can we use it? That is probably in Brussels also a very relevant question. Together with 100% ownership and also I think it's fair to say, you know, we are very active in Woluwe with the leasing. Last year we did some nice leasing deals also on the mix of that, and we're working on a further improvement of the mix and the overall attractiveness of the mall.
I think, during 2023, all those kind of actions and preparations are really aimed to look for and make it more attractive for a long-term partner so that he also has more, let's say, security, less uncertainties about stepping into Woluwe for the longer term. I think that is our job to make it really understandable. I think there's still a market for this kind of nice long-term institutional investment in property. I mean, it's a first-class property. It has a very good reputation. I think that's something we have to work on. If you ask us, you know, will you JV this already before the summer? The answer is no.
Yeah. I mean, there are some forward-looking investors, you know, that would surprise us.
Yeah.
All right. Yeah, it makes a lot of sense. Maybe finally, also, as you're giving, somewhat more disclosure on your ESG targets, can you already put a number on the total ESG related CapEx, required on your portfolio until 2030?
Let's say if we look at it, yeah. Let's say we've been investing in ESG now for the past three years at least. It also depends on several things, which is, let's say, the national legislation, for example. That can have an impact in several ways. I mean, if the European guidelines are implemented in a more stricter way, then of course there is a higher cost. Also, and that's also the example that we saw in Italy and we saw also in some other countries, you also have a contribution by the government. For example, 65%-75% of the investment is then supported by the state because you are putting your asset more green and all of this. In some cases, you know, you can think of solar panels or other stuff.
You know, it is an investment which then gives you an important yield also for the long term, because of course, you're switching from service charges tenants pay on electricity costs to electricity, which is basically provided for free, whereby the only cost is then the amortization of the plants that you have installed. There are several cases. At the moment, I mean, we have made an estimate of the ESG interventions for the coming years. It's not huge. It's not a big amount. As said, it depends also the timing of the investment, depends also on the authorizations that you need to have from the local authorities to go ahead with certain investments.
Sometimes where you are in co-ownership, for example, with an hypermarket, you also need to agree with the hypermarket, the investment, when and how much. It's a lot of variables which we, you know, for so far we have seen. I mean, it all goes smoothly 'cause we all have to go into that direction. The amount of investment so far has not been a huge amount. As you've seen, we have already been certified in all our centers.
All right. Thank you very much.
Thank you.
Thank you. It appears that we have no other questions in the phone queue. With this, I'd like to hand the call back to our speakers for any web questions. Thank you.
Yep. Yep. We have a few questions here.
Can we see them on the screen?
Hmm?
Can we see them on the screen?
Okay. Yeah. There are a number of questions on Woluwe, but I think about the extension, et cetera.
Yeah.
That is something we talked about.
Yeah.
Yeah.
There's one also about the solar panels, that's from our investor, Ans van der Kooy. Let's say, I'll read the question out.
Yep.
Solar panels. In Sweden, we have quite a few solar panels. In France and Italy, the yield of solar panels is much higher compared to Sweden due to more and more intensive hours of sunshine. In addition, solar energy can in France and Italy also be used in summer for air conditioning. Why is the investment in solar panels in France and Italy lagging behind compared to Sweden?
Yeah, perhaps a simple answer to of that is, I mean, well, first, in terms of ownership, we own 100% of the centers, so we don't actually have the complication that Roberto mentioned with the with the hypermarkets. You're right, we did get on with it. Legislation is in favor of doing it. We have solar panels on every roof of the Swedish shopping centers, and it produces around 10% of the energy consumption in those centers. Picking up on Jaap's earlier question, very little actually in terms of direct capital expenditure because the energy companies take it themselves. That sort of confirms Roberto's point in terms of the low CapEx. No, you're correct. We have been able to get on, and do it very efficiently in Sweden.
No, that's correct. In Italy, as we discussed, because we discussed this already, I mean, and in France, we are late with the legislation. Let's say it's cumbersome, it's not clear. What we are trying to do with the new government is also to try and get a legislation which streamlines the possibility of becoming greener. That includes also the possibility of producing electricity and consume electricity within a certain area or a group of investors. There are steps which are being put forward. Unfortunately, there, let's say we do not have control on this. We are waiting, hopefully, and I'm looking to Luca because Luca is our man in Havana.
Let's hopefully by the end of June, we might have some good feedback on the legislation, and that would enable us to go ahead. I mean, we've already done all the pre-studies and all the rest, so that's all work which has been prepared. As for concerns now, we are implementing what can lawfully be implemented. Of course, we hope that the legislation change will be picked up soon. We have.
I think, yeah, there is a question on the return on the additional investment when we buy this minority stake. Basically, what will happen is that where we today have to report the minority stake in our books and also have the share of the direct result, for example, also the indirect result, which is going to the minority stakeholder. We disclose that every period. That share is actually our return. I think that's the way to look at it. It's not that we are buying a certain property and then get a certain rent. We already, you know, have the totality of Woluwe in our books and whatever Woluwe is producing, a 25% share of that is going to the minority shareholder, and that's no longer the case.
We get that now. It's up to us to improve that return further, for the near future. I think there are a few more questions from other investors to also-
Rental incoming Gerben.
Yeah.
Yeah.
Yeah.
If you go, that is the rental income.
Yeah.
If you can click on that, I can look at the question.
Yeah.
The Gerben Hobbel.
Mr. Hobbel.
Yeah. No. That one, yeah.
This one.
There is a question from Mr. Gerben Hobbel, and that's about— I'll read the entire—
Yes, yes.
Rental income Q4 Italy is EUR 2.1 million lower than in Q3. What explanation is there for this? The explanation is concerns, it's quite technical, and it concerns the IFRS 16 that was applied in Italy. You might remember when we gave rent concessions related to the COVID-19 measures. In our countries like Belgium and France and Sweden, we were able to use IFRS 9, that allowed us to take the full cost within the fiscal year. While in Italy, since it was forward-looking concessions that we gave, we had to apply the IFRS 16 measures. This IFRS 16. That meant that only part of the cost was included in the accounts of the financial year 2020 and 2019, 2020.
The rest had to be amortized over the length of the contracts. What we then had was that we were supposed to have this amortization of the cost for the coming X years. We said, "Well, let's do something nice, and that's let's take the entire cost in this year." What you see, the difference of 2.1 reflects a lower amount of a higher cost, let's say, related to an extra amortization of the COVID-19 concessions of around EUR 4.1 million for concerns IFRS. That's within that EUR 4.1 million, you see the lower point, lower EUR 2.1 million in rentering. I hope that answers the question. Yeah. Sort of final sweet date.
We have a question also from Jean- Pascal Rolland. Here could you update us on your developments and extensions of your two shopping centers around Geneva, please?
Yes. Well, in terms of Etrembières is a very easy one. We've done it. We opened in June, the two restaurants which are in a separate building adjoining the shopping centers. They've opened well and trading very well. There's no further extension possibilities at Etrembières. It's a very tight site with the river and the motorway. We wish we could do more, but it's trading well. Migros is doing well and we've done some nice tenant changes there. Balexert, we're continuing to investigate carefully, both in terms of cost and timing.
The phase one, which will be the perhaps the closest to a realization is it would be the move of Leroy Merlin from the existing older building they have adjoining the shopping center into a site we acquired some years ago, and we're looking very hard at that. Particularly the costs which have moved materially. I think there'll be a decision on that phase one during the course of this year. The bigger project where there are some quite significant prelettings as well is going to be more challenging, both technically, but also in terms of planning and just what else is happening in commercially in the area before we take that decision.
There's quite a big cost, particularly in underground car park, and we don't have a generous site there. The center is trading very well. I think that if you hear further news from us, it's likely to be a possible transfer of the Leroy Merlin, and the phase one of that project.
Yeah. Okay. We have the EPRA NTA question. I see. Where is it? Okay.
Yeah.
Gero, that's a question from Paul Arkwright. I hope I speak it correctly. Gero, could you please just detail the negative fair value effect of financial instruments on your EPRA NTA? Shouldn't the opposite with interest rate going up? Thanks a lot. Well, that's in the definition of the EPRA NTA, we have to exclude the effect of the fair value financial instrument. That you see, for example, at Page 20 of our press release. You see the effect, for example, the fair value financial instrument. It went from, let's say, a negative, therefore a positive correction in 2021 of EUR 90 million into a negative correction of EUR 48.7 million. That's where you see the effect.
I mean, in that table, we try and give a clear explanation, let's say, of the effects and the calculation of the EPRA NTA. Thank you.
Yeah.
Then, we have a question from Niko Levikari.
Niko.
What are you seeing at the moment in terms of financing covenants for new facilities? Can you give some indications of the levels you see for covenants like cash traps? I don't think we have cash traps, Roberto.
No, I mean, not yet. Fortunately. What we do see, it's the increasing interest in green loans. When we are discussing with banks they're asking, you know, can we introduce some measures, it may still introduce to KPIs, to make your finance green because that's also as important for their classification within their own classification of the assets that they, that they have in their books. That's a bit what we're seeing. Other financing covenants at the moment, we haven't seen. I'm just checking with everybody, you know. That's, that's mainly the thing that we're seeing so far. Just focus, more focus on the green than there was before.
That's a positive impact, also because our, as we mentioned before, the assets are green. That makes it easier for us to enter into green loans and facilities, and that's a positive development. Yeah.
Okay. Well, I think also being conscious of time, there are a few more very small but rather detailed questions which we probably can deal with by email. Is there anybody else who will ask a question over the telephone? No, I don't think so, huh? Yeah, I think we therefore can conclude this conference call, and thank everybody for participating.
Yeah.
Thank you very much.
Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.