Hello, and welcome to the Jasena twenty twenty five Half Year Earnings. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded. And for the duration of the call, your lines will be on listen only mode. However, you will have the opportunity to ask questions at the end of the call.
This can be done by pressing star one on your telephone keypad to register your question. Call.
Presenters. I will now hand you over to your host, Bernard Ortega, to begin today's conference. Thank you.
Good morning, everyone, and thank you for joining us today. The past six months have been both intense and exciting, and we are proud to be delivering a strong performance. Let me begin a bit differently today, taking a step back and looking at the bigger picture. Hybrid working and now the return to the office are more than a trend. It's structural shift that is reshaping workspaces and redefining demand.
Many companies in France, Europe and beyond are placing renewed emphasis on in office collaboration. Paris is definitely standing out as a leader. People here spend three point five days a week in the office. That is 70% of their working time, well ahead of other global cities like Singapore, New York, London or Toronto. And recent data shows that the situation is even improving.
In this context, our clients are clear. In order to encourage the employees to be more at the office, they look for better space, more central, more premium, and more sustainable. And these better square meters are by definition scarce, creating a clear premium for those already well positioned and capable to meet these demands. Our office leadership is based on these clients' expectations. Our long standing strategy is built around these needs to align our portfolio with what matters most to them.
It's been plus 16 points shift towards central locations since 2010, with nearly 80% now in Paris and The EU, plus 30 points increase in office exposure over the same period. More than half of the portfolio has been refurbished in the last decade. Fully serviced real estate now covers 9,000 square meters of offices and 70% of our Parisian residential assets. On the CSR front, Tracina has been ahead of the curve, minus 60% in carbon emissions and minus 31% in energy consumption since 2019. And at the same time, we have delivered financially, plus 25% in earnings per share growth over five years, strong profit on cost from redevelopments, while keeping a solid ATV that gives us room to accelerate.
Our footprint lies in markets with the most solid fundamentals. Paris Saint Louis, for example, represents less than 20% of total office supply, yet they capture nearly half of the demand. Vacancy remains low, especially for new and refurbished assets where it drops to just 0.6%. Prime rents in the CBD have risen by 34% over the past five years, and recently, we were proud to set a new benchmark with an headline deal on ICON at €1.2 per square meter for the old building. The upward momentum is such that even in our best led assets, we have significantly reversionary potential as leases will be mark to market.
One more perspective to understand the market and our positioning. As you can see on the left side on the slide, major deals above 5,000 square meters in Paris region signed or expected in 2024 and 2025, all concentrated around the best business locations in the very central areas where our portfolio is focused, obviously Paris, but also Boulon Nissy and La Defense. Our assets are therefore located where clients now want to be. As a consequence, we can share today our strong leasing performance during H1. Nearly 95,000 square meters led, pre let or renewed across all geographies, of which two stand out pre leasing: twenty seven Canal, 74% pre led to the digital division of a leading French sports retailer ahead of its delivery later this year in a submarket where pre leasing is real And the 162 Fobos Santonoi, 3,300 square meters fully pre let at prime CBD rents, with an 87% uplift to a consulting company.
In Paris CBD, we achieved a 29% rental uplift and in just six months, that's EUR48 million of annual rents secured on seven years in average. While market data often focuses on Paris region averages, this leasing performance illustrates how the right assets in the right location with the right teams can make a difference. Rental income remained robust at 3.8% like for like, driven by indexation, though we are now seeing it decelerate as inflation normalizes in Europe. Beyond indexation, two quick drivers support rental growth income: strong rental uplift on new leases, plus 9% on office in average, plus 14% on housing in Paris and occupancy improvement, plus 60 bps since year end 2024. On a current basis, rental income growth is even stronger, plus 4.9%, thanks to the large 2024 pipeline fully pre let assets.
This strong operational performance continued to drive robust cash flow growth, a key metric for us. We applied daily discipline across the P and L, from rental income, property charges, optimization to G and A and financing structure. Notably, G and A as a percentage of rental income has improved by 170 bps over three years. At the same time, digital initiatives help to streamline back office operations and refocus teams on client services, engineering and development expertise to offer better service to our clients. As a result, we are delivering another solid plus 6.4% EPS growth.
On the valuation front, we are seeing encouraging signs in the investment markets with renewed liquidity for large transactions and the return of international capital. Values are up 1.6% over the last six months on a like for like basis, and the portfolio reaches EUR17 billion before factoring in the Roche Vivien acquisition closed yesterday. Taking a broader view, values have already rebounded plus 2.3% since N23 trough, confirming a clear trend of recovery. This reflects the ongoing market bifurcation, with consistent gains in Paris and New York, supported by solid rental growth, more than offsetting adjustments as well. What's also striking is that the inflection point in the direct market is now clear, yet still not fully priced in by listed equity markets.
Looking ahead on the investment front, let me come back to the key decisions we made in H1 twenty twenty five, totaling €1,300,000,000 First, we completed over €750,000,000 of disposals of mature residential assets, including our student housing portfolio. Second, we acquired a large prime office complex in Paris CBD for €435,000,000 reinforcing our central position. Third, we reinvested close to €100,000,000 in our flagship office pipeline, I'll return to that in a moment, another step towards prime office leadership after heavy disposals and investment in our accretive pipeline those last three years. It also showcases Jacina's in house expertise, from sourcing and executing transactions, reinvesting to create future value. Importantly, even during those challenging years, we maintain a disciplined focus on asset quality and location, and we keep a strong balance sheet.
One illustration of this strategy is our recent acquisition of Cerftis in Paris CBD. So what's the plan? This acquisition involves two buildings adjacent to our existing seven Madrid property right in the heart of Paris CBD. We want to transform this site into a 45,000 square meter premier office destination, benefiting from a unique location 50 meters from the best transportation hub, Paris, Canada. We plan a EUR40 million CapEx program to unlock the full potential of the asset.
The real estate fundamentals are strong, like unique large floor plates in such a location since the asset was fully refurbished or rebuilt in 2013. And we will leverage those strengths to create a rare set of amenities only possible with social sites, from rooftops with amazing views, wide range of food offer, fitness, auditorium, meeting rooms, large bike park, jet lag rooms, etcetera, available in the future for the three assets connected to this business hub. Delivery is scheduled for N26, and we are already actively working on the leasing so that it contributes to rental growth starting in 2027. Once again, this is a value driven initiative with a projected year on cost of 6.3% and an expected profit on cost in the range of 35 to 40%. Taking a step back to look at the broader development pipeline, four projects are key drivers of future rental growth beyond 2027 with €80,000,000 to €90,000,000 of annual rents.
We are currently advancing on those four major flagship projects, the Roche division, just mentioned, Gorter, Les Arts, Lucara and Mirabeau, all located in highly desirable areas with magnificent architecture, strong service offering and excellent connectivity. With €500,000,000 to be invested by 2027, targeting a 5.7% yield on cost, these projects reflect a deliberate strategy to make our portfolio more central, more prime and more sustainable. Always anticipating what's next, we are working at the same time closely with our client Engie to prepare the future of the assets. The current lease runs until June 2027, but should the client seek early flexibility, an exit would be possible, subject obviously to a termination fee based on the remaining lease term. In parallel, we are advancing plans to reposition the tower as a prime office asset, leveraging on its strong fundamentals: large floor plates, excellent TSR performance, no asbestos, and a central location near the transportation hub of La Defense.
In a context where no major new or refurbished prime office space is expected in La Defense before 2027 or 2028, we anticipate a more favorable supplydemand dynamics than now. While average vacancies still are in La Defense, take up has been strong in the recent period. La Defense is attracting a growing mix of corporates with a take up of 60% in 2024 versus the previous year. And vacancy on new and refurbished surfaces represents 4% of La Defense stock, confirming tenant preference for upgraded space. Once repositioned, even if it's a challenging task, we are confident the tower will be led at the right price to value.
Meanwhile, and it's important, our ESG strategy continues to deliver solid and measurable results. Here again, our ambition is clear: to pursue CSR excellence on a daily basis, working closely with our clients to maximize impact. Since 2019, we achieved a 31% reduction in energy and a 60% cut in carbon emission. This momentum is ongoing, with an estimated additional 3.7% reduction in the first half of twenty twenty five, in line with our midterm goals. Maybe a standout example of this is 37 Boise that we recently delivered and now backed by eighteen months of operational data.
What makes this asset truly exemplary is that the ambitions set during the design phase, particularly around energy efficiency and CSR, have been fully materialized in real life. The teams have achieved a 63% reduction in energy consumption against the old assets, significantly outperforming market benchmarks. It's a clear demonstration that what we design, we deliver. Now moving to the balance sheet. All of this is obviously possible because we manage debt with the same discipline as the asset side.
Our strong and agile financial structure provides control, with a well managed loan to value at 33.6%. Visibility, backed by best in class A- and A3 credit ratings a long term debt maturity of six point four years one of the lowest cost of debt at 1.2% and a robust hedging strategy. Controlled visibility but also flexibility, thanks to our 100% corporate debt structure, high liquidity and access to a wide range of financing instruments. And 100% of our financing includes the CSR component. Based on all these strong fundamentals, we raised the guidance to the upper half of the initial range.
Earnings per share are now predicted between $6.65 to $6.7 I would like to thank all our teams and partners for their efforts to align our strategy with clients' expectations for central, prime and sustainable real estate. And during H1, as a summary, we achieved a record high leasing performance, strong rental uplift and improved occupancy. We delivered consistent cash flow growth. We unlocked future value creation in R and A through our investment decision and maintained a strong balance sheet that is ready to operate and face growth opportunities. Thank you for your attention, and we are now ready to answer your questions.
Thank press star one on your telephone keypad or click on ask a question button to post your questions via the webcast. We'll pause for a brief moment to allow them to queue for questions. Thank you. Take our first question from Stephanie Dossmann of Jefferies. Your line is open. Please go ahead.
Hello, Benyat and Nicolas. I would have three questions, please. The first one on the top line, we calculated that the highlight should lend to something like 0.8% by year end. And I was wondering what is your assumption for indexation for '26? The second one would be on the CapEx for the MG Tower.
It looks a bit higher than for the Roche building per square meter, I would say. So could you please give us a bit more color on the what kind of works, the difference in the works compared to Roche, for instance, and what kind of yield on cost you expect to achieve? And maybe the last one on the announcement earlier today, What is the rationale of launching a tender on your 26, 27 bonds and issue a new one now? I mean, I feel it's a bit early. And so do you expect interest rates to increase or maybe your your spread to increase due to the situation in politics in France, economy and so on? Or what is the rationale there, please?
Hi, Stephanie. Thank you for your questions. Obviously, yeah, inflation is decreasing over time. There is always a lag effect on the impact of indexation in our cash flow. So yeah, the last index for ILAT was 1.6%, so we should progressively converge on that target during the year 2026.
On CapEx T1, obviously, We are a bit early in the process, so we wanted to give you a bit of view on what we were planning, but we are still working on the CapEx program. What we see, like I said, is that might be significantly lower supply for prime space in La Defense. Most of the towers delivered between 2021 and 2022 are now fully let. And we have not seen any new major redevelopment or new sites for La Defense. So that's what we are assessing right now, how deep we need to go for renovation to be considered as the best tower in La Defense, and therefore leading to a smoother releasing process.
Having in mind that the works in a tower in France are more expensive. Fire safety regulation is a bit tougher. Lifts, obviously you cover 35 floors of height. Lifts typically are more expensive than in a classical building inside the city. So yeah, there is a CapEx.
The good news, like I said last time, is that the facade is highly performing. So we don't need to change the facade. So it will be mainly decoration, improving the amenities, and making an upgrade on technical installations. Maybe the last point on the rationale of the tender, Nicolas?
Yes, sure. You're right. In fact, when you look at our financing maturities and our level of liquidity, we had, of course, no need to issue a new bond. But we saw that, as always, anticipating things is the best way to get the best conditions. So it's much more to be seen as an opportunistic approach considering that today the yields and the spreads on the Jussina bonds is quite attractive for us.
For a ten year maturity, we should be below 100 bps, which is somewhere, I think, a good signal for the market in terms of activity and risk attached to the GCN asset nature. And so we wanted just to take a chance to secure this level of spread. The deal with tender offers on the '27 and '28, which were quite high level of issuance because you remember that the '27 is a EUR700 million bond and the €28 is €800,000,000 So it's also a way for us to start to repay and decrease these maturities. So always with the same mood, which is anticipated things.
Thank you very much. Thank
you. We will now take our next question from Veronik Martens of Wenlundskott Campan. Your line is open. Please go ahead.
Thank you very much for taking my questions and presentation. Two questions from my side. Maybe first on capital recycling. Obviously, you've already been very active in the student housing and also deploying the capital. But given that the the first signals of the investment market in Paris opening up for larger transactions, are you actively looking to some dispose some lower yielding assets in the portfolio as well?
And then secondly, I think usually you split your like for like rental growth was between indexation and reversion. I think I couldn't find it this time, and I was just wondering, you mentioned a 9%, I think, reversion on your on your relettings, but looking at the actual like for like, it doesn't really show, I believe. So if you could give some more color on that split in like for like rental growth. Thank you.
Capital recycling, you're right. The market is progressively reopening for Central Paris. I was referring in one slide also on the embedded reversionary potential for some assets which are recent and where we still have reversion. So I think we are assessing, as always, the future return on capital IR of all of our assets. And we are deriving our investment and disposal strategy based on the future growth and future value creation of our assets.
Yes, like always, you've seen that we have been one of the most active REITs to deploy and redeploy capital. So we will continue, but no specific update on that on top of what we have already done. On your question on like for like, yes, I think we have a bit the same split like previous years. Indexation is decreasing obviously, and we are still above indexation based on the two aspects. Have in mind that most of the evolution of a quarter or a semester is based more on the previous year than on the actual.
Typically occupancy should play a role but more later than previously. But yes, it's a bit the same split like last year.
Okay. Thank you.
Thank you. And we'll now move on to our next question from Florent Laroche Juve of ODDO BHF. Your line is open. Please go ahead.
Good morning, Bernard. Good morning, Nicolas. Thank you for this presentation. I would have maybe one question on your leasing activity. So you have been very active in H1.
So what should we expect in H2? Have you any view on that? And maybe could you make maybe more give us more colors on the situation in Boulang? So how shall we expect the occupancy to evolve in the coming months, Azer? Thank you very much.
Yes. It's always tough to project our leasing activity. We depend on client decisions somehow. For the timing, the pipeline of leasing is not bad, but I don't want to give you more color on that. At least H1 was excellent.
On Boulogne, I think Boulogne played a part in our leasing activity We signed a lease with a large car manufacturing company on Aurizon. We have already re led two thirds of our sources of project. So it's progressing well. Sources typically we have two tenants, pharmaceutical companies leaving the assets.
They are leaving by year end, and we have already pre let twothree of it. So when we have the right asset and the right strategy and the teams are super active, we can deliver. So first half was not bad in Poland.
Okay.
Okay. You. Thank you. And we'll now take our next question from Michael Finn of Green Street. Your line is open. Please go ahead.
Yes. Hi there.
I'm actually just curious if you could comment on the size of the of the assets that you possibly have that you could acquire in the eight, similarly to the one that you just bought that would meet your that would meet the cost of capital that you currently have?
You were referring about cost of capital?
Yes. Yes. Yes. So I'm just curious if you could comment on the opportunity set of similar assets to the one that you just bought in the eight.
Yeah. In Paris, there is a reasonable number of assets which are eligible in terms of quality and location. The challenge, and that's what we have done with that Roche division acquisition with Deca, is to find the right spot between a seller willing to sell, maybe some work that maybe our teams can do better than others, and our return on capital that we expect to be accretive for NAV, for return on capital and for cash flow growth. So there are, but we are selective, so there is no rush on that. But we are, like you saw, we are active on screening the market, discussing, finding in the past we did some swaps when people didn't really want to sell, but wanted to swap between core assets and to be redeveloped assets.
I think we have a range of ways, in fact, to try to get market shares in the best parts of Paris.
Okay. Brilliant. Thank you.
Welcome.
Thank you. We currently have no questions coming through. Thank you. And we'll now move on to our next question from Amal Aboukhotem of Degroof Betacam. Your line is open. Please go ahead.
Yes. Good morning, everyone. Thank you for taking my question. Just a follow-up on the investment strategy and especially the development pipeline size. You have a development pipeline that looks quite sizable at this stage.
How do you look at it going forward? When you look at new investment opportunities, do you think that you should go for perhaps more cash yielding assets going forward? Or do you think there is still room for perhaps non cash yielding assets that have to be refurbished immediately? How do you look at the risk profile and the cash cash flow generation that the investment target should
Managing the rate is looking at several different aspects of the company. Like you say, we try to manage both the balance sheet, the cash flow production, value creation on NAV and so on. When we looked at the Roche division acquisition, we also try to not to have too many assets to be leased at the same time exactly on the right same spot and the right asset quality. So typically what we like there was, in fact, we decreased significantly our pipeline in Paris CBD after leasing Mondo, after leasing 30 five Capucine, after leasing Icon. So we felt that we have room, in fact, to accept some risk on Paris CBD.
So it's all those criteria that play a role. So yes, it's a significant leading challenge for us, that pipeline, but should deliver over time. We are confident because assets are excellent and location are excellent also. So we look at more the returns than for the time being more than returns against what we said, against our marginal cost of debt and marginal cost of capital, more than really just cash flow using or non cash flow using short term. We have demonstrated over the last three, four, five years that we were capable, one, to save prime opportunities, invest in prime locations, at the same time as keeping cash flow growing and not leveraging the company additionally.
So that's what we will try to continue to do.
Okay. So that means that we shouldn't be surprised perhaps if you go into more value add investments going forward?
You should not. Like you saw, we opportunistic in what we buy, opportunistic in what we sell, because we don't need that much, But we won't.
Thank you very much. Thank you.
Thank you. And we'll now move on to our next question from Jonathan Conator of Goldman Sachs. Your line is open. Please go ahead.
Good morning. Thank you for taking my question. Just wanted to get a bit more color on the leasing and reversion and how it's evolving. Obviously, still strong in Paris to a bit weaker in areas. You mentioned leases in Bologna as well.
So it would be good to get a bit of color on the reversion that you were able to capture or the negative reversion on this pre listing. And also, how do you see it evolving given, I think, good conditions that you're outlining in terms of demand? Thank you.
I will say the same like you said. Obviously, it's highly positive inside the city and negative, and sometimes double digit negative elsewhere. And it's a bit still the same. Think pragmatically, we mark to market the rents. Good stuff is that in average, it's still positive at 9%.
And I'll be mindful that in the resi portfolio, are at 14% reversion rate, reversion uplift in rates this quarter. Yes, there are conditions I think tenant demand is very focused on quality these days, with a different BA on pricing depending on the location. But clearly, they are trying to focus on the best spots, access to transportation hubs and qualitative buildings. So we try to continue what we do having our clients satisfied by what we do.
And can you be maybe a bit more specific, like in Paris CBD, you obviously had a record leasing, but are you able to maintain that strong reversion? Or is it coming down a bit? And in the Alps area, similar question.
The Paris CBD, I think in average, it was 29% this first half, at least. And in the rest, it was minus 10%, I would say. For the whole Paris, I think it's in the range of 20%, at least, in average. So it's quite different from a place to another. What we see for the best prime offices, like we did for both Saint Denore assets, we are significantly north of €1,000 per square meter.
So when we compare the underwriting that we did for that smaller renovation a year on a half ago, we have raised our target by 25%, 30% in terms of face rents. So for the time being, we still see a good market momentum on rents for the best spots and the best assets.
Okay. Very clear. Thank you.
Thank you. And we'll now take our next question from Nadir Rahman of UBS. Your line is open. Please go ahead.
Hello. Good morning. Thanks for the presentation. The question I had was on a comment you made on Slide 10, which is that the inflection is not yet priced in by equity markets. So what's I guess, which metrics are you looking at to have made that statement?
Is it the price to NAV discounts? And also, what level of equity metrics would you look at to, in your view, see the equity markets, therefore, pricing in that inflection? And how long do you think that will take? Thank you.
I think how long it will take, it's more on your side to assess. We were mentioning, in fact, that point on two elements. One is we disposed more than €2,000,000,000 of assets above NAV. So obviously the discount to NAV. We could have seen our previous disposal based on our own capacity to dispose while the market was quiet.
But obviously now that it's not only JACINA capable to sell at excellent prices, but the whole market that sustains a bit now even more than in the past. And the second aspect is on cash flow and dividend yields, where in fact we continue to post significant cash flow growth. And obviously, the multiples applies to those very solid and growing cash flow and dividend seems a bit underpriced against what we see on the direct markets where investors are buying assets at pretty tight yields now. So it's on both aspects of the way to evaluate a company like us.
That's well understood. And just a quick follow-up. What catalysts do you think you will need to achieve, or what the market generally need to achieve, in order to draw investors to prescribe what you think is a sensible, like a justified value for your share price?
Can you just rephrase your question? I'm not sure to have understood.
Of course. Yes. Sorry. So if you're saying that the inflection has not been yet priced in by the equity markets, what catalyst do you think investors need to see in order to see that valuation reach what you think is a justified level?
I'm a steady CEO, so I think we need to continue to prove. Like you saw typically for shopping center evaluation in the last eighteen months, I think we need to continue to deliver. So it's back on us. I never like to comment market somehow. I'm just saying that we will try to continue to deliver.
Buying right, selling expensive and growing our rents and our cash flow. So I think it's back on us to consistently delivering our strategy and reassuring the market.
Understood. Thank you.
Thank you. And we will now take our next question from
Just a quick one for me. If I look at your disposals and acquisition of your H1, you've most of your disposal were in residential. And as a result, the share of offices has increased quite significantly. And I was wondering if we should read anything into that in terms of your future strategy in exiting residential or non office segment, let's say? Thank you.
Thank you, Larry, for your question. What we wanted to say there is that we are now, based on the markets we see and the opportunities we have, we are more focused on investing in prime office than investing in housing assets based on yields. And what we see on the disposal side, having disposals which are as low dilution as possible. And on the other side, where we can find the best yields and best So that's what we have done this quarter. We did a bit that also in the past.
So we are now trying to, in fact, focus on prime office because this is where we see better growth. I remind that in 2023, we sold some office assets, small ones at super tight yields. So again, in fact, we try to deliver growth, deliver capital growth for our shareholders and we adjust to market situations. For the time being, we keep both activities. We are, like you saw, transforming both with the same DNA, more services, more dynamic leasing.
We signed 700 leases this first half against 800 in a normal year. So we should have a more dynamic leasing on the resi side. So we apply the same DNA for both activities and we are very proud of that. And then we try to navigate to deliver better shareholder return.
Thank you.
You're welcome.
Thank you. There are no further questions in queue. I will now hand it back to Daniel Tortega for closing remarks.
Thank you for your questions and listening this call today. And we should see you soon in different meetings. Thank you all.
Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.