Thank you for standing by. My name is Celine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vastned Half Year Result 2024 conference call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to CEO, Reinier Walta. Please go ahead.
Thank you. Dear attendees of this analyst web meeting and webcast. My name is Reinier Walta. I am the CEO of Vastned, and I have the pleasure of hosting this meeting and talk you through our half-year results for 2024. In addition to presenting the half-year results, I will also dedicate time in this call to provide a short overview of the strategic actions which we are currently in the process of executing. I will do this by going through the slides, which are now also made available on our website in the section Investor Relations, Publications, and Reports. After presenting these slides to you, the line will be open for the analysts that follow our stock to ask questions in the Q&A session. In the first half of 2024, Vastned has maintained a strong operational performance.
We have a continued high occupancy rate that is currently at 98.6%, and we have been able to pass through the contracted indexation rates to our tenants. This is reflected in the high level of new rent and rent renewals that on average, have been executed against rents higher than market rent, and on average, the rents were all higher than previous rents. This also indicates the health and resilience of the high street retail landscape and our properties. With a collection rate of 98.4% at the end of the first half-year, we very well succeed in collecting our rents from our tenants.
The stable high occupancy rate, like-for-like rental growth, and positive development of the rent level on our new rents and rent renewals have been offset by higher interest expenses, which brings the direct result for the first half of 2024 at EUR 0.92 per share, which is broadly in line with our direct result of last year. The indirect result is impacted by a decreased value of the property portfolio of 1.1% and the impact of a deferred tax liability as a consequence of the asset sale of Rokin Plaza in April of this year, which I will explain later on in this presentation. In anticipation of the intended merger of Vastned Retail N.V. with and into Vastned Belgium, as per the 1st of January 2025, we shall pay an interim dividend of EUR 1.70 in December 2024. There will be no interim dividend paid in August 2024.
As mentioned on the previous slide, we have delivered stable direct results in line with last year's performance. This year, we see like-for-like gross rental growth across our portfolio, with negative indirect result as a result of lower valuations, which has impacted both our net asset value and EPRA NTA, and a deferred tax liability, which has impacted the net asset value. The impact of the deferred tax liability finds its root in a technical item. In the past, the entity Rokin Plaza was acquired as a company that owned the Rokin Plaza asset, and as a consequence of applied general accounting practices, the acquisition had to be recognized as the takeover of assets. Therefore, the provision for deferred tax liability was not recorded in the balance sheet and disclosed as an off-balance-sheet liability.
After divestment of the asset, the deferred tax liability has to be recorded in the indirect result and added as an on-balance provision. The increase of the average interest rate with 60 basis points from 2.5% to 3.1% compared to one year ago, is a result of the newly agreed long-term loans in Belgium that are locked in against higher rates and marked interest rate increases that impacted the part of the loan portfolio with a floating interest rate. The remaining part of the loan portfolio, which represents 84.6% of the total loan portfolio, has a fixed interest rate. The sharp decline in the loan-to-value is driven by the divestment that we have done. With a loan-to-value of 40.7%, we are moving rapidly in the direction of our long-term goal to operate with a loan-to-value below 40%.
I will now take you into more detail into our operational and financial performance. The occupancy rate remains at a very high level of 98.6%. With all divestments done of properties that were fully let, the divestments have indirectly reduced our occupancy rate. The French portfolio remains fully let in a strong rental market. The Dutch and Belgian occupancy rates remain stable at a very high level of 98.5% and 99% respectively. We have seen some bankruptcies, which include Big Bazar Belgium, Bristol, and Ted Baker. We anticipate the impact to be limited on the overall portfolio as there appears to be good interest for the properties that are affected. We keep a cautious view on the development of bankruptcies, especially of smaller retailers, as their financial resilience appears to be tested more than that of the larger chains.
In the Spanish portfolio, the property in Malaga has been vacant since Q1 of 2024. We expect to let this property soon, and as a result, the Spanish portfolio will again be fully let. After a very busy 2023, the leasing activity in the first half year of 2024 continued to be positive. We are able to realize a positive rental change on average 0.7% on the negotiated 27 leases with an annual rent income of EUR 3.3 million. For quite some time, we have been able to secure new leases and lease renewals significantly above ERV. New leases during the second quarter of 2024 were concluded with Kruidvat on the Oude Gracht in Utrecht, and with Crocs on Calle Fuencarral in Madrid. On the latter, there was a particularly strong demand in the rental market for the well-positioned property.
Lease renewals were done with Carrefour on the Elsensesteenweg in Brussels and the Bredemeijer Group on the Ferdinand Bolstraat in Amsterdam for new multi-year agreements for strong tenants at the right locations. In the case of the lease renewal with A.S.Adventure on Zonnestraat in Ghent, we had to agree on new long-term extensions for a lower rent, but still above market rent. The like-for-like rental growth continues at a level of 2.9% on average for the entire portfolio. This is mainly the result of contracted indexation rates that Vastned can pass through to the tenants. All the countries in which we operate have seen high levels of inflation, the effect of indexation on rents might vary per country based on the generally accepted practices in that country, as well as government regulation in place.
The impact of the indexation on the rents is based on the inflation in the previous period and is usually adjusted once per year. The timing of the indexation date is spread out throughout the year in our portfolio. New lettings and rent renewals against higher rents than previous rents have also contributed to the growth of our like-for-like rents. Increasing yields continue to put pressure on valuations in the first half of 2024. The valuation of the portfolio decreased with EUR 14 million in total, or 1.1% on a total portfolio that amounts to EUR 1,236,000,000 at the end of the first half of 2024. Although Vastned is able to pass on the contracted indexation rents with positive rental development in all main locations, this is not always translated into higher ERVs and consequently, higher values. On this slide, the direct result developed is shown, including its major components.
The like-for-like rental growth has been strong and the lower level of debt has been largely offset by the reduction in rental income as a result of divestments and the higher average interest rates. As a result of the divestments, the loan-to-value ratio decreased sharply from 44.4% at the end of 2023 to 40.7%. This compares to 44.7% at end of the first half of 2023. The amount of available credit facilities increased as a result of a new credit line for Vastned Belgium of EUR 50 million. Proceeds from the divestments have been utilized to pay off floating interest bank loans, resulting in an increase of the share of fixed interest rate loans above 84%. The amount of available credit facilities, excluding the bridge facility, as this is a standby facility that will be utilized to pay off existing facilities in September 2024.
The average interest rate increased slightly with 34 basis points from 2.71% at the end of 2023 to 3.05% during the half year of 2024. The increase is mainly the result of securing new long-term financing in Belgium, which is now locked in at higher rates than previously. With lenders, we are now discussing the post-merger financing structure and looking into securing new unsecured long-term financing for a company that will have the Belgium regulated real estate company status. On this slide, I would like to take you through the trajectory that Vastned has been going through for the strategic reorientation. This started with the publication of our full year 2020 results in February 2023. We then announced to initiate a strategic reorientation in order to address the rising interest rates and upcoming maturities in our debt portfolio.
Increasing yields on real estate companies and the expected abolishment of the FBI regime for listed real estate companies in the Netherlands. When we announced the outcome of our strategic reorientation at the half year 2023 results publication a year ago, it was clear that divesting specific parts of the portfolio would generate the most value for Vastned and its stakeholders. With currently an amount of EUR 131.7 million of the selected divestments all done above or at book value, we have confirmed the value of our portfolio. We have also managed to address our financing needs during the process and locked in long-term financing at attractive rates at Vastned Belgium. In the meantime, Vastned continued to benefit from the attractive rates of locked-in financing from the past.
Last but not least, with the announced intention to merge Vastned Retail NV with and into Vastned Belgium, we have found a structure that fits the size and nature of Vastned. We have thereby delivered on all areas that we aim to address with our strategic reorientation. Vastned is proud of the steps and road taken during which the Vastned team continued to show excellent operational results while taking on significant extra workload to execute the strategic actions. It will result in a simplified company under a stable Belgium REIT regime that, as from initiation on the 1st of January 2025, will have a stronger balance sheet providing the flexibility to act on possible future opportunities as a Belgium company under Belgium management.
In the coming period, the focus will be to maintain these operational results and ensure that the next steps of the process of the announced intention to merge are executed successfully. This brings me to the timetable on the next slide. After the announcement of the intention to merge and a formal signing of the joint merger proposal, there are still several formal steps to be taken. Our next events will be the extraordinary general meetings of shareholders to be organized by Vastned Retail NV and Vastned Belgium NV. These are intended to take place towards the end of September. Upon confirmation that the required thresholds for the merger to take place are satisfied during the EGMs, the next steps can be taken, which includes several interim dividend payments on both companies and ultimately the cross-border legal reverse merger to become effective as of 1st January 2025.
All future announcements about the steps that we take in the process of our intention to merge will be published in special sections of the websites of both companies, where also all relevant documentation can be found. An interim dividend is proposed of EUR 1.70 per share to be paid in December 2024 for Vastned Retail NV. This anticipates for Vastned to have fulfilled the dividend distribution requirement under the FBI regime for the full year 2024, before the company will merge with and into Vastned Belgium NV. After the merger, Vastned Retail NV will disappear as a company and consequently will not be capable of paying out any final dividend distribution over the financial year 2024 in 2025. According to the dividend policy, Vastned would normally pay out 60% of the direct results of the first half year in an interim dividend in August.
Given the announced intention to merge, we deviate from our dividend policy and replace the regular interim dividend in August with a higher interim dividend in December. With respect to the outlook, we expect the strong operational performance to continue this year and therefore, barring unforeseen circumstances, Vastned reiterates its expected direct full year 2024 result of between €1.75 and €1.85 per share. Vastned's focus is firmly on maintaining excellent operational performance and executing its strategic options. When these actions will result in specific transactions or structure changes, we will inform the market at that time. That will bring us now to the Q&A.
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If there's no further questions, I will now turn the conference back over to CEO Reinier Walta for closing remarks.
Are really no questions from anybody?
Your first question comes from the line of Javier Campos with ING. Please go ahead. Hello, Javier Campos. I think your line is on mute.
Yeah, sorry, I was on mute.
Thank you.
Good morning, everybody. Thank you for having my call. Thank you for the presentation. I had just one question regarding valuations. We see initial yields almost at 5% now. Should we expect more? We're starting to see transactions again, maybe we found the market yield. What do you think will go forward with city-centric assets regarding yields?
That's always the good question, Javier, that we don't know. I think if we look back, is that we have mainly seen in countries where we had a bit lower yields, that yields have increased a bit, especially, of course, in our portfolio, France. We see interest rates stabilize. It's going to be interesting to see what's going to happen. Let's see. I think all the factors are stabilizing, and you're right. You also see a little bit more transactions in the market, especially also our own transactions, which were at book value or a little bit above book value. Javier?
Thank you. Yes. Thank you.
Thank you. Is there more? Your next question comes from the line of Ventsi Iliev with Kempen. Please go ahead.
Hi. Good morning. Thank you for taking my questions. Unfortunately, I just joined the call, so I'm not sure if this has been asked yet.
No problem.
First on Spain, of course, there was an early termination at the end of last year. Could you please highlight how reletting is progressing?
Of course. The unit we have, this is a unit we have in Malaga. This unit was a bank unit. The bank wanted to get out of the contract, at the end of last year, they paid us a leaving fee. We are now in discussion with multiple tenants to see whether the unit is interesting. As soon as we can say a little bit more about whether we have found a deal, we will, of course, bring that to the market.
Okay. Second on valuations. If we exclude France, all the other portfolios show flat valuations. Would you say that we have reached the trough for them?
It seems so on the current valuations. We also see, of course, interest rates stabilizing a bit. We see a little bit more transactions, as mentioned just before, we have seen our own transactions also around book value. Let us see in the next half year what is going to happen.
Very clear. Thank you.
If you have dialed in. This next question comes from the line of Amal Aboulkhouatem with Degroof Petercam. Please go ahead.
Yes, good morning. Thank you for the presentation. Just a few questions on the asset revaluation. On the Spanish portfolio, we see a decline of minus 6%. Is it linked to the vacancy or are there any other lease renewal or yield impact that can explain? Another question about disposals. Given the level of disposal you have reached so far, what's your view on H2?
Let's start with the first question. I think in Spain, we have not a negative revaluation. I think what we see in Spain is that we have a little bit higher occupancy, and it all has to do with that one entity that's empty. The valuations in Spain for the first half year were positive. We have one unit empty, and that's also a little bit where we see it in the like-for-like, because the last year we had income coming out of that asset. Your second question is around sales. When we announced strategic reorientation, we said we have a sales program. We have now delivered a huge part of our sales program, but we are still in discussions about some additional sales. As soon as we are able to finalize those ones, we will, of course, also mention that to the market.
We are still focusing to finalize a couple of more sales. It also has to do, of course, with the LTV. We now have an LTV of 40.7%, and one of the requirements we have set ourselves is we want to have an LTV below 40%.
Okay. Thank you. Perhaps just a follow-up question on the sales. Are you still focusing on the Dutch market where you seem to find more liquidity, or are you looking at all your current markets?
We are looking at all our markets, as mentioned before. So far, we have been most successful in the Dutch market. It's also our biggest portfolio, and of course, we sold also a large asset, but we are focusing on and checking all our markets.
Okay. Perhaps just a follow-up question on the.
Yeah.
refinancing discussion. You mentioned that you are discussing with your lenders to extend and renew the debt. You have a quite short debt maturity. Perhaps just are these disposal, let's say, imposed by the lenders? How do you see the cost of financing evolving from where it is now?
I think what we have done, and it, of course, also has to do with the strategic reorientation of the refinancing. We made a decision to take a bridge financing because of the sales process and also because of the merger process. We're now moving forward with the merger. We are also confident that we're going to do the merger so that we. One of the things we also mentioned in the merger is that we then will finance at the Belgian level. We are in discussion with many banks about that. Far, we have seen that we have been able to refinance in Belgium at attractive levels.
What we have also mentioned before is that the cost of debt will increase a little bit. I think that what you have seen with the financings we have done before in Belgium, we are roughly around 4%. Our cost of debt will still increase a bit. Then we are fully at market rates.
Okay. This should be achieved by, let's say, second half of 2025 when everything should be like most of your debt will be refinanced, you think?
We are aiming to get everything refinanced, first now get the merger done, and in the meantime, also discuss with the banks and address, of course, the 2025 maturities.
Okay. I assume that these two processes are quite heavy, but are you managing the two processes in parallel or just the merger and then refinancing?
We are doing both things in parallel. Don't forget, I'm still there. Sven Bosman is there. The next half a year is going to be interesting, and we still have to do a lot of work. That's what we are paid for and that's what we aim for. Our aim is that on the 1st of January, we do the merger and we have a stable platform with a little bit lower LTV, so LTV below 40%, and that we can start to look at the future again.
Okay. Very clear. Thank you very much.
You're welcome.
That concludes our Q&A session. I will now turn the conference back over to CEO Reinier Walta for closing remarks.
I would like to thank everyone. As mentioned before, we are proud of the results we have managed in the first half year, we are working hard to execute all the steps to get the merger in place. Thank you and bye.
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.